**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-K**

 

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| **(Mark One)** |
|----------------|
|           |   |   |
| **x**          | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 or 15(d) OF THE SECURITIES   EXCHANGE ACT OF 1934** |
|           |   |   |
|           |   | **For The Fiscal Year Ended December 31, 2007** |
|           |   |   |
|           |   | **or** |
|           |   |   |
| **o**          | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934** |

** **

**For the Transition period from              to               **

 

### **COMMISSION FILE NUMBER333-122935-03**

### ** **

**REEFGLOBAL ENERGY VIII, L.P.**

(Exact name of registrant as specified in itscharter)

** **

| **Nevada**                                                       | ** ** | **20-5209097**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) | * *   | (I.R.S.  Employer  Identification No.) |

 

| **1901 N. Central Expressway, Suite 300,  Richardson, TX 75080-3610** |
|----------------------------------------------------------------------------|
| (Address of principal executive offices  including zip code)               |
|                                                                       |
| **(972)-437-6792**                                                         |
| (Registrant’s telephone number, including  area code)                 |

 

Securities registered pursuant to Section 12(b) ofthe Act:  **None**

 

Securities registered pursuant to Section 12(g) ofthe Act:

 

**General and Limited Partnership Interests**

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act. 

Yes o No x

 

Indicate by check mark if the registrant is not required to filereports pursuant to Section 13 or Section 15(d) of the Act.

Yes  oNo x

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer,”and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o      Accelerated filer o         Non-accelerated filer  o        Smaller reporting company  x

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).   Yes o  No x

 

No market currently exists for the limited and general partnershipinterests of the registrant.

 

As of March 31, 2008, the registrant had 32.425 units of generalpartner interest held by the managing general partner, 520.793 units ofadditional general partner interest and 95.283 units of limited partnerinterest outstanding.

 

##### Documents incorporated by reference: None

 

 

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REEF GLOBAL ENERGY VIII, L.P.

FORM 10-K

TABLE OF CONTENTS

 
| **Part I**   |                                                                                                               |       |
|-------------------|--------------------------------------------------------------------------------------------------------------------|------------|
| ** **        | ** **                                                                                                         | ** ** |
| Item 1.           | Business                                                                                                           |       |
| Item 1A.          | Risk Factors                                                                                                       |       |
| Item 1B.          | Unresolved Staff Comments                                                                                          |       |
| Item 2.           | Properties                                                                                                         |       |
| Item 3.           | Legal Proceedings                                                                                                  |       |
| Item 4.           | Submission of Matters to a Vote of Security  Holders                                                               |       |
|              |                                                                                                               |       |
| **PART II**  |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 5.           | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities |       |
| Item 6.           | Selected Financial Data                                                                                            |       |
| Item 7.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                        |       |
| Item 7A.          | Quantitative and Qualitative Disclosures  About Market Risk                                                        |       |
| Item 8.           | Financial Statements and Supplementary Data                                                                        |       |
| Item 9.           | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure                              |       |
| Item 9A(T).       | Controls and Procedures                                                                                            |       |
| Item 9B.          | Other Information                                                                                                  |       |
|              |                                                                                                               |       |
| **PART III** |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 10.          | Directors, Executive Officers and Corporate  Governance                                                            |       |
| Item 11.          | Executive Compensation                                                                                             |       |
| Item 12.          | Security Ownership of Certain Beneficial  Owners and Management and Related Stockholder Matters                    |       |
| Item 13.          | Certain Relationships and Related  Transactions, and Director Independence                                         |       |
| Item 14.          | Principal Accounting Fees and Services                                                                             |       |
|              |                                                                                                               |       |
| **PART IV**  |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 15.          | Exhibits and Financial Statement Schedules                                                                         |       |
|              | Signatures                                                                                                         |       |

 

2

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**PART I**

 
| **ITEM 1.** |   | **BUSINESS** |
|-------------|--------|--------------|

 

**Introduction**

 

Reef Global Energy VIII, L.P. (the Partnership) is the third in aseries of four Nevada limited partnerships comprising a program called ReefGlobal Energy Ventures II (the Program). The Partnership was formed in thestate of Nevada on August 14, 2006. The Partnership purchases working interests in oil and natural gasprospects and participates in the drilling of wells on those prospects. Theprimary objectives of the Partnership are to generate revenue from theproduction of oil and natural gas, distribute cash to the partners, and providetax benefits. Reef Oil & Gas Partners, L.P. (Reef) is the managinggeneral partner of the Partnership.

 

The Partnership was formed to drill, complete and own working interestsin oil and natural gas wells located onshore in the continental United States.The Partnership purchased working interests in three developmental prospectslocated in Terrebonne Parish, Louisiana, Glasscock County, Texas, and EddyCounty, New Mexico upon which it has drilled eighteen wells. The Partnershippurchased working interests in three exploratory prospects located in LavacaCounty, Texas and Iberville and St. Mary Parish, Louisiana upon which it hasdrilled three wells. At December 31, 2007, seventeen wells had completeddrilling operations, and the remaining four wells completed drilling operationsduring the first quarter of 2008. The Partnership has no plans to purchaseworking interests in additional prospects. Additional wells may be drilled onthe Partnership’s Sand Dunes prospect in Eddy County, New Mexico.

 

Other partnerships formed as a part of the Program also own workinginterests in some of the prospects owned by this Partnership. Reef has alsopurchased working interests in certain partnership prospects for some of theother partnerships it manages. In such cases where the percentage ownership ofthe Partnership and Reef-affiliated entities in a prospect has been largeenough, Reef Exploration, L.P. (RELP) has served as operator of the prospect.RELP serves as operator of two developmental Partnership prospects. RELPoperates eight successful wells located on one developmental prospect, andoperates eight wells on the Partnership’s Sand Dunes developmental prospect,four of which are undergoing extended testing and evaluation in order todetermine their potential commercial productivity, and four of which aretemporarily shut-in due to the high cost associated with salt water disposaland generator rental.  Inthis Annual Report on Form 10-K (Annual Report), we use the term “successful”to refer to wells that are drilled, tested, and either capable of or actuallyproducing in commercial quantities. We use the term “unsuccessful” to refer towells that do not meet one or more of these criteria.

 

The attainment of the Partnership’s business objectives, including thegeneration of revenue from Partnership operations, the distribution of cash tothe partners and the provision of tax benefits, will depend upon many factors,including:

 
| · |   | Reef’s ability to select productive prospects;                                         |
|--------|--------|---------------------------------------------------------------------------------------------|
| · |   | the drilling and completion of wells in an economical manner;                               |
| · |   | the successful management of prospects;                                                     |
| · |   | the level of oil and natural gas prices in the future;                                      |
| · |   | the degree of governmental regulation over the production and sale of  oil and natural gas; |
| · |   | the future economic conditions in the United States and throughout the  world; and          |
| · |   | changes in the U.S. Internal Revenue Code of 1986 (the Code).                               |

 

Accordingly, there can be no assurance that the Partnership willachieve its business objectives.  Inaddition, distributions to partners will decrease over time because oil andnatural gas wells are depleting assets, and production rates will decline overthe life of an individual well. Distribution levels will also be highly dependent upon oil and naturalgas prices. Distributions will be partially sheltered by the percentagedepletion allowance.

 

3

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**Acquisition and Drilling ofUndeveloped Prospects**

 

The Partnership purchased working interests in two developmentalprospects internally sourced by RELP, and one developmental and threeexploratory prospects generated by and purchased from third parties. A“prospect” is generally defined as a contiguous oil and gas leasehold estate,or lesser interest in a leasehold estate, upon which drilling operations may beconducted. A prospect may be characterized as “exploratory” or “developmental”based upon the type of well to be drilled on the prospect.  A development well is a well drilled within aproved area of an oil or gas reservoir to the depth of a stratigraphic horizonknown to be productive. Generally an exploratory well is any well that is not adevelopment well, including wells drilled to find and produce oil or gas in anunproven area, wells drilled to find a new reservoir in a field previouslyfound to be productive of oil or gas, or wells drilled to extend a knownreservoir.

 

Prospects were evaluated utilizing data generated by RELP or providedby unaffiliated third parties to RELP. This data included well logs, productionrecords from other area wells, seismic, geological and geophysical information,and such other information available and considered useful. Prospects in whichthe Partnership purchased an interest were evaluated by petroleum engineers,geophysicists, geologists, and other technical consultants employed by or retainedby RELP on the Partnership’s behalf.

 

The Partnership prospects were acquired pursuant to an arrangement inwhich the Partnership purchased part of the working interest. A workinginterest bears a specified portion of the costs of development, operation andmaintenance of a prospect.  A workinginterest is subject to landowners’ royalty interests and may be subject toother royalty interests payable to unaffiliated third parties. Where thePartnership acquired less than 100% of the working interest, costs were reducedproportionately. The Partnership’s limited partnership agreement (thePartnership Agreement) prohibits Reef or any of its affiliates from retainingany overriding royalty interest, that is, any royalty interest that would bepaid out of the Partnership’s working interest, in any working interestpurchased by the Partnership. The Partnership is a non-operator workinginterest owner in all prospects purchased by the Partnership. RELP serves asoperator for two developmental prospects purchased by the Partnership.

 

**Consulting Agreements forProspect Acquisitions**

 

Reefentered into, and allowed to expire, an agreement (the CMI North Sea Agreement)with Challenger Minerals Inc. (CMI), a subsidiary of GlobalSantaFe Corporationand a screener of oil and gas prospects in the North Sea region. The CMI NorthSea Agreement provided Reef the opportunity to review and selectivelyparticipate in exploratory and developmental prospects in the North Sea eitheroriginated or previewed by CMI. Reef paid CMI for the geological andgeophysical services provided by CMI under the CMI North Sea agreement. Theagreement expired in November, 2006.

 

Reefalso entered into an agreement with Access Exploration Corp. (AEC), a screenerof domestic oil and gas prospects both onshore and in the Gulf of Mexico. Thisagreement provided Reef the opportunity to review and selectively participatein exploratory and developmental prospects previewed by AEC. Reef paid AEC forthe geological and geophysical services provided by AEC under this agreement.This agreement expired in October 2007.

 

Prospectsapproved for acquisition by Reef under these agreements could be assigned tothis Partnership as well as other limited partnerships formed as part of theProgram. Each partnership formed as a part of the Program paid Reef, on a prorata basis, a portion of the fees paid by Reef under these agreements duringthe term of the Program. Total reimbursements to Reef by the partnershipsformed as a part of this Program were equal to the actual fees paid by Reefunder these agreements. The Partnership paid Reef $104,545 as its pro ratashare of these fees. This amount has been capitalized as geological andgeophysical costs in accordance with the full cost method of accounting for oiland gas properties.

 

**Drilling and Completion Phaseof Operations**

 

RELP is currently the operator of two developmental prospects, andserves as operator of sixteen wells in which the Partnership has a workinginterest. As a well operator, RELP receives operator fees during the drillingand production phase of each well at the competitive rate in the geographicalarea where the prospect is located. These fees are charged as a monthly fee per well as agreed to in anoperating agreement signed by the Partnership and participating third partiesin the well. The wells are subject to a model form operating agreement issuedby the American Association of Petroleum Landmen and an accounting procedurefor joint operations issued by the Council of Petroleum Accountants Societiesof North America.

 

4

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RELP contracted the drilling of all operated wells to an independentthird party, and the resulting costs of the wells to the Partnership weredetermined by the actual third party costs, plus RELP’s monthly charges forsupervision, engineering, geology, accounting and other services at acompetitive rate for the geographical area where the wells are located.

 

Wells drilled that fail to result in the discovery of oil or naturalgas, or that are determined to be unable to produce oil or natural gas incommercial quantities, are plugged and abandoned in accordance with applicableregulations.

 

Of the eight Sand Dunes prospect wells, fourwells are undergoing extended testing and evaluation in order to determinetheir potential commercial productivity. The Partnership estimates that it maytake between 90 and 120 days from the date of this Annual Report to finish thetesting and evaluation process. Following initial short-term tests which confirmedthe presence of oil and natural gas, the remaining four Sand Dunes prospectwells were temporarily shut in due to the high cost associated with salt waterdisposal and generator rental.

 

Currently, generators have been rented topower the four producing Sand Dunes prospect wells undergoing the evaluationprocess, and salt water produced is being trucked off-site by an independentvendor.  In order to reduce overallcosts, installation of electric service to the well-site locations isproceeding, and a more cost effective method of salt water disposal is beingexplored. To date, RELP, the operator of these wells, has been unsuccessful inlocating a long-term economic solution for disposing of produced salt water;however, RELP is currently evaluating its options for salt water disposal, andestimates that it will be at least 90 to 120 days from the date of this AnnualReport for the Sand Dunes prospect to have electricity and efficient salt waterdisposal capability in place.

 

**Production Phase of Operations**

 

For any well capable of producing quantities of oil and/or natural gasin commercial quantities, production operations commence once the well has beencompleted by installing all surface equipment necessary to control the flow ofproduction or to shut down the well, and by installing any storage facilities,gathering lines, or sales lines required to produce and sell the oil and/ornatural gas production from the well. The Partnership drilled eight successfuldevelopmental wells and one successful exploratory well, all of which are stillproductive.  In addition, the Partnershiphas drilled one successful developmental well which it expects to becomeproductive during the first half of 2008. One developmental well and twoexploratory wells were dry holes and have been plugged and abandoned.

 

The Partnership sells oil and/or natural gas production from its wellsto refineries, industrial users, gas brokers, interstate pipelines or localutilities.  In many cases the Partnershiphas elected to sell its production under marketing arrangements entered into bythe operator of the well. The Partnership sells the oil and/or natural gasproduced from successful wells on a competitive basis at the best availableterms and prices.  Domestic sales of oilare at market prices. Generally, purchase contracts for the sale of oil arecancelable on 30 days’ notice, but purchase contracts for the sale of naturalgas may have a longer term.  ThePartnership sells natural gas discovered by it at negotiated prices domestically,based upon a number of factors, such as the quality of the gas, well pressure,estimated reserves, prevailing supply conditions and any applicable priceregulations promulgated by the Federal Energy Regulatory Commission (FERC).

 

Historically,the oil and gas market has experienced significant price fluctuations. Pricesare impacted by local weather, supply in the area, availability and price ofcompetitive fuels, seasonal variations in local demand, limited transportationcapacity to other regions, and the worldwide supply and demand balance forcrude oil.

 

ThePartnership has not engaged in commodity futures trading or hedging activities,and has not entered into derivative financial instrument transactions fortrading or other speculative purposes. Accordingly, the Partnership is at riskfor the volatility in commodity prices inherent in the oil and gas industry,and the level of commodity prices has a significant impact on the Partnership’sresults of operations.  See “Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.”

 

The Partnership’s share of revenue from productive wells is burdened byand/or subject to royalties and overriding royalties, monthly operatingcharges, and other operating costs. These items of expenditure involve amounts payable solely out of, orexpenses incurred solely by reason of, production operations.  The Partnership deducts operating expensesfrom the production revenue for the corresponding period.

 

5

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**Major Customers**

 

ThePartnership sells crude oil and natural gas on credit terms to refiners,pipelines, marketers, and other users of petroleum commodities. Revenues arereceived directly from these parties or, in certain circumstances, paid to theoperator of the property who disburses to the Partnership its percentage shareof the revenues. During the year ended December 31, 2007, two marketersaccounted for 79.3% and 20.1% of the Partnership’s oil and natural gasrevenues, respectively. As of December 31, 2006, the Partnership had nooil and gas production and, therefore, had no customers. Due to the competitivenature of the market for purchase of crude oil and natural gas, the Partnershipdoes not believe that the loss of any particular purchaser would have amaterial adverse impact on the Partnership.

 

**Insurance**

 

The Partnership is a named insured under blowout, pollution, publicliability and workmen’s compensation insurance policies obtained by RELP. Suchinsurance, however, may not be sufficient to cover all liabilities.  Each unit held by general partners representsan open-ended security for unforeseen events including, without limitation,blowouts, lost circulation, and stuck drill pipe that may result in unanticipatedadditional liability materially in excess of a general partner’s initialinvestment in the Partnership.

 

The Partnership is a named insured under various insurance policies andintends to maintain such policies subject to its analysis of their premiumcosts, coverage and other factors.  Inthe exercise of Reef’s fiduciary duty as managing general partner, Reef hasobtained insurance on behalf of the Partnership to provide the Partnership withsuch coverage as Reef believes is sufficient to protect the partners other thanthe managing general partner (the investor partners) against the foreseeablerisks of drilling and production.  Reefreviewed the Partnership insurance coverage prior to commencing drillingoperations and periodically evaluates the sufficiency of insurance. In no eventwill the Partnership maintain public liability insurance of less than two timesthe Partnership’s capitalization.****Subjectto the foregoing, Reef may, in its sole discretion, increase or decrease thepolicy limits and types of insurance from time to time as Reef deemsappropriate under the circumstances, which may vary materially.

 

Reef will notify all investor general partners of the Partnership atleast 30 days prior to any material change in the amount of the Partnership’sinsurance coverage.  Within this 30-dayperiod and otherwise after the expiration of one year following the closing ofthe offering of the Partnership, investor general partners have the right toconvert their units into units of limited partnership interest by giving Reefwritten notice of their intent to convert. At any time during this 30-dayperiod, upon receipt of the required written notice from an investor generalpartner of his intent to convert, Reef will amend the Certificate of LimitedPartnership of the Partnership and will file the amendment with the State ofNevada prior to the effective date of the change in insurance coverage.  This amendment to the Certificate of LimitedPartnership of the Partnership will effectuate the conversion of the interestof the former investor general partner to that of a limited partner.  Effecting conversion is subject to theexpress requirement that the conversion will not cause a termination of thePartnership for federal income tax purposes. Investor general partners willhave limited liability as a limited partner for any Partnership operationsconducted after their conversion date, effective upon the filing of anamendment to the Certificate of Limited Partnership of the Partnership.However, even after an election of conversion, the investor partner willcontinue to have unlimited liability regarding partnership activities thatoccurred while he was an investor general partner.

 

**Competition**

 

There are thousands of oil and natural gas companies in the UnitedStates.  Competition is strong among personsand entities involved in the exploration for and production of oil and naturalgas.  Reef expects the Partnership toencounter strong competition at every phase of business.  The Partnership competes with entities havingfinancial resources and staffs substantially larger than those available to it.

 

The national supply of natural gas is widely diversified, with no oneentity controlling over 5% of the supply. As a result of deregulation of the natural gas industry enacted byCongress and FERC, natural gas prices are generally determined by competitivemarket forces.  Prices of crude oil,condensate and natural gas liquids are not currently regulated and aregenerally determined by competitive market forces.

 

6

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There is competition among operators for drilling equipment, goods, anddrilling crews. Such competition may affect the ability of the Partnership todevelop prospects suitable for development by the Partnership once they areacquired.

 

**Markets**

 

The marketing of oil and natural gas produced by the Partnership isaffected by a number of factors that are beyond the Partnership’s control andwhose exact effect cannot be accurately predicted.  These factors include:

 
| · |   | the amount of crude oil and natural gas imports;                                                                                                                      |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · |   | the availability, proximity and cost of adequate pipeline and other  transportation facilities;                                                                       |
| · |   | the success of efforts to market  competitive fuels, such as coal and nuclear energy and the growth and/or  success of alternative energy sources such as wind power; |
| · |   | the effect of United States and state regulation of production,  refining, transportation and sales;                                                                  |
| · |   | other matters affecting the availability of a ready market, such as  fluctuating supply and demand; and                                                               |
| · |   | general economic conditions in the United States and around the  world.                                                                                               |

 

The supply and demand balance of crude oil and natural gas in worldmarkets has caused significant variations in the prices of these products overrecent years.  The North American FreeTrade Agreement eliminated trade and investment barriers between the UnitedStates, Canada, and Mexico, resulting in increased foreign competition fordomestic natural gas production.  Newpipeline projects recently approved by, or presently pending before, FERC aswell as nondiscriminatory access requirements could further substantiallyincrease the availability of gas imports to certain U.S. markets.  Such imports could have an adverse effect onboth the price and volume of gas sales from Partnership wells.

 

Members of the Organization of Petroleum Exporting Countries (OPEC)establish prices and production quotas for petroleum products from time to timewith the intent of affecting the global supply of crude oil and reducing, increasingor maintaining certain price levels. Reef is unable to predict what effect, if any, such actions will have onthe amount of or the prices received for oil produced and sold from thePartnership’s wells.

 

In several initiatives, FERC has required pipelines to developelectronic communication and to provide standardized access via the Internet toinformation concerning capacity and prices on a nationwide basis, so as tocreate a national market.  Paralleldevelopments toward an electronic marketplace for electric power, mandated byFERC, are serving to create multi-national markets for energy productsgenerally.  These systems will allowrapid consummation of natural gas transactions. Although this system may initially lower prices due to increased competition,it is anticipated to expand natural gas markets and to improve theirreliability.

 

**Regulation**

 

The Partnership’s operations will be affected from time to time invarying degrees by domestic and foreign political developments and by federaland state laws and regulations.

 

*Production.* In most areas of operations within the United States the production ofoil and natural gas is regulated by state agencies that set allowable rates ofproduction and otherwise control the conduct of oil and natural gas operations.Among the ways that states control production is through regulations thatestablish the spacing of wells or limit the number of days in a given monthduring which a well can produce.

 

*Environmental.* The Partnership’s drilling and production operations are also subject toenvironmental protection regulations established by federal, state, and localagencies that may necessitate significant capital outlays that, in turn, wouldmaterially affect the financial position and business operations of thePartnership. These regulations, enacted to protect against waste, conservenatural resources and prevent pollution, could necessitate spending funds onenvironmental protection measures, rather than on drilling operations. If anypenalties or prohibitions were imposed on the Partnership for violating suchregulations, the Partnership’s operations could be adversely affected.

 

7

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*Natural Gas Transportation and Pricing.*  FERC regulates the rates for interstatetransportation of natural gas as well as the terms for access to natural gaspipeline capacity. Pursuant to the Wellhead Decontrol Act of 1989, however,FERC may not regulate the price of gas. Such deregulated gas production may besold at market prices determined by supply and demand, Btu content, pressure,location of wells, and other factors. Reef anticipates that all of the gasproduced by the Partnership’s wells will be considered price-decontrolled gasand that the Partnership’s gas will be sold at fair market value.

 

*Proposed Regulation.*Variouslegislative proposals are being considered in Congress and in the legislaturesof various states, which, if enacted, may significantly and adversely affectthe petroleum and natural gas industries. Such proposals involve, among otherthings, the imposition of price controls on all categories of natural gasproduction, the imposition of land use controls, such as prohibiting drillingactivities on certain federal and state lands in protected areas, as well asother measures. At the present time, it is impossible to predict whatproposals, if any, will actually be enacted by Congress or the various statelegislatures and what effect, if any, such proposals will have on thePartnership’s operations.

 

**Employees**

 

The Partnership has no employees, and is managed by its managinggeneral partner, Reef. RELP employs a staff including geologists,geophysicists, petroleum engineers, landmen and accounting personnel whoadminister all of the Partnership’s operations. The Partnership reimburses RELPfor technical and administrative services at cost.  See “Item 11. EXECUTIVE COMPENSATION.”

 

**FORWARD-LOOKINGSTATEMENTS**

 

This Annual Report contains forward-looking statements that involverisks and uncertainties.  You should exerciseextreme caution with respect to all forward-looking statements made in thisAnnual Report.  Specifically, thefollowing statements are forward-looking:

 
| · |   | statements regarding the Partnership’s  overall strategy for acquiring prospects, including its intent to diversify  the Partnership’s investments;                                                                                                           |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · |   | statements estimating any number or  specific type or size of prospects the Partnership may acquire or size of the  interest the Partnership may acquire in such prospects;                                                                                             |
| · |   | statements regarding the state of the oil  and gas industry and the opportunity to profit within the oil and gas  industry, competition, pricing, level of production, or the regulations that  may affect the Partnership;                                             |
| · |   | statements regarding the plans and  objectives of Reef for future operations, including, without limitation, the  uses of Partnership funds and the size and nature of the costs the  Partnership expects to incur and people and services the Partnership may  employ; |
| · |   | any statements using the words “anticipate,” “believe,” “estimate,”  “expect” and similar such phrases or words; and                                                                                                            |
| · |   | any statements of other than historical fact.                                                                                                                                                                                                                           |

 

Reef believes that it is important to communicate its futureexpectations to the partners. Forward-looking statements reflect the current view of management withrespect to future events and are subject to numerous risks, uncertainties andassumptions, including, without limitation, the risk factors listed in Item 1Aof this Annual Report captioned “RISK FACTORS.” Although Reef believes that theexpectations reflected in such forward-looking statements are reasonable, Reefcan give no assurance that such expectations will prove to have beencorrect.  Should any one or more of theseor other risks or uncertainties materialize or should any underlyingassumptions prove incorrect, actual results are likely to vary materially fromthose described herein.  There can be noassurance that the projected results will occur, that these judgments orassumptions will prove correct or that unforeseen developments will not occur.

 

Reef does not intend to update its forward-looking statements.  All subsequent written and oralforward-looking statements attributable to Reef or persons acting on its behalfare expressly qualified in their entirety by the applicable cautionary statements.

 

8

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| **ITEM 1A.** |   | **RISK FACTORS** |
|--------------|--------|------------------|

 

**Ourbusiness activities are subject to certain risks and hazards, including therisks discussed below. If any of these events should occur, it could materiallyand adversely affect our business, financial condition, cash flow, or resultsof operations. The risks below are not the only risks we face. We mayexperience additional risks and uncertainties not currently known to us or, asa result of developments occurring in the future, conditions that we currentlydeem to be immaterial may also materially and adversely affect our business,financial condition, cash flow, and results of operations.**

** **

**Oil andnatural gas prices are volatile, and fluctuate due to a number of factorsoutside of our control.**

 

Thefinancial condition, results of operations, and the carrying value of our oiland natural gas properties depend primarily upon the prices received for ouroil and natural gas production. Oil and natural gas prices historically havebeen volatile and likely will continue to be volatile given currentgeopolitical conditions. Cash flow from operations is highly dependent upon thesales prices received from oil and natural gas production. The prices for oiland natural gas are subject to a variety of factors beyond our control. Thesefactors include:

 
| · |   | the domestic and foreign supply of oil and natural  gas; consumer demand for oil and gas, and market expectations regarding  supply and demand; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|
| · |   | the  ability of the members of OPEC to agree to and maintain oil price and  production controls;                                                |
| · |   | domestic  government regulations and taxes;                                                                                                     |
| · |   | the  price and availability of foreign exports and alternative fuel sources;                                                                    |
| · |   | weather  conditions, including hurricanes and tropical storms in and around the Gulf  of Mexico;                                                |
| · |   | political  conditions in oil and natural gas producing regions, including the Middle  East, Nigeria, and Venezuela; and                         |
| · |   | domestic  and worldwide economic conditions.                                                                                                    |

 

Thesefactors and the volatility of the energy markets make it extremely difficult topredict price movements. Also, oil and natural gas prices do not necessarilymove in tandem. Declines in oil and natural gas prices would not only reducerevenues and cash flow available for distributions to partners, but couldreduce the amount of oil and natural gas that can be economically produced fromsuccessful wells drilled by the Partnership, and, therefore, have an adverseeffect upon financial condition, results of operations, oil and gas reserves,and the carrying value of the Partnership’s oil and natural gas properties.Approximately 54.4% of the Partnership’s estimated proved reserves were oilreserves and 45.6% were gas reserves at December 31, 2007. As a result,the Partnership’s financial results are sensitive to fluctuations in both oiland natural gas prices.

 

ThePartnership, while not prohibited from engaging in commodity trading or hedgingactivities in an effort to reduce exposure to short-term fluctuations in theprice of oil and natural gas, has not engaged in such activities. Accordingly,the Partnership is at risk for the volatility in oil and natural gas prices,and the level of commodity prices has a significant impact upon the Partnership’sresults of operations.

 

**Oil andnatural gas well drilling is a speculative activity involving numerous risksand substantial and uncertain costs which could adversely affect thePartnership.**

 

Drillingoil and natural gas wells involves numerous risks, including the risk that nocommercially productive oil and/or natural gas reserves will be discovered.There can be no assurance that wells drilled by the Partnership will beproductive or recover all or any portion of the investment in such wells.Drilling and completion costs are substantial and uncertain, and drillingoperations may be curtailed, delayed, or cancelled due to a variety of factorsbeyond our control, including shortages or delays in the availability ofdrilling rigs and crews, unexpected drilling conditions, title problems,pressure or irregularities in formations, equipment failures or accidents,adverse weather conditions, and compliance with environmental and othergovernmental regulations. Our drilling activities may not be successful and, ifunsuccessful, will have an adverse effect on the Partnership’s results ofoperations and cash flow available for distribution to the partners.

 

9

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**We are subject to substantial operating risks that may adversely affectthe results of operations.**

 

Thereare numerous hazards involved in the drilling and operation of oil and naturalgas wells, including blowouts involving possible damages to property and thirdparties, bodily injuries, mechanical failures, explosions, uncontrollable flowsof oil, natural gas or well fluids, fires, formations with abnormal pressure,pollution, releases of toxic gas and other environmental hazards and risks. ThePartnership could suffer substantial losses as a result of any of these risks.The Partnership is not fully insured against all risks inherent to the oil andgas business. Uninsured liabilities would reduce the funds available to thePartnership, may result in the loss of Partnership properties and may createliability for the general partners. Although the Partnership maintainsinsurance coverage in amounts Reef deems appropriate, it is possible thatinsurance coverage may be insufficient. In that case Partnership assets mayhave to be sold to pay personal injury and property claims and the cost ofcontrolling blowouts or replacing damaged equipment rather than for drillingactivities.

 

**Continuedinability to dispose of produced salt water may limit production on our oil andnatural gas properties.**

 

Currently,the Partnership does not have an economically efficient manner in which todispose of the salt water produced from the eight Sand Dunes prospectwells.  The Partnership anticipates itwill be at least 90 to 120 days from the date of this Annual Report for theSand Dunes prospect to have efficient salt water disposal capabilities inplace. The Partnership will be unable to obtain full production from each welluntil a long-term economic solution for the disposing of produced salt water isdetermined and implemented.  If the SandDunes prospect wells are determined capable of producing in commercialquantities prior to implementation of such long-term economic solution, therewill be significant delays in obtaining full production from each well and aswell as significant delays in the receipt of production distributions by theinvestor partners.

 

**Wecannot control activities on non-operated properties.**

 

ThePartnership has limited ability to exercise influence over and control therisks associated with operations on properties not operated by RELP. Thefailure of an operator of our wells to adequately perform operations, anoperator’s breach of the applicable agreements, or an operator’s failure to actin ways that are in our best interest could reduce our production and revenues.The success and timing of drilling and development activities on propertiesoperated by others depends upon a number of factors outside of our control,including the operator’s

 
| · |   | timing  and amount of capital expenditures;             |
|--------|--------|---------------------------------------------------------|
| · |   | expertise  and financial resources;                     |
| · |   | inclusion  of other participants in drilling wells; and |
| · |   | use  of technology.                                     |

 

Inaddition, the Partnership could be held liable for the joint interestobligations of other working interest owners, such as nonpayment of costs andliabilities arising from the actions of the other working interest owners. Fulldevelopment of prospects may be jeopardized in the event other working interestowners cannot pay their share of drilling and completion costs.

 

**Oil andnatural gas reserve data are estimates based upon assumptions that may beinaccurate and upon existing economic and operating conditions that may differfrom future economic and operating conditions.**

 

Securitiesand Exchange Commission (SEC) rules require the Partnership to presentannual estimates of reserves. Reservoir engineering is a subjective and inexactprocess of estimating underground accumulations of oil and natural gas thatcannot be measured in an exact manner, and is based upon assumptions that mayvary considerably from actual results. Accordingly, reserve estimates may besubject to upward or downward adjustments. Actual production, revenues andexpenditures with respect to reserves will likely vary from estimates, and suchvariances could be material.

 

10

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You should not assumethat any present value of future net cash flows from our producing reservesshown in this Annual Report is the market value for our estimated oil andnatural gas reserves. The estimated discounted future net cash flows from ourproved reserves are based upon prices and costs in effect at the end of theperiod held constant and discounted at 10%. Actual future prices and costs maybe materially higher or lower. Further, actual future net cash flows will beaffected by factors such as the amount and timing of actual developmentexpenditures, the rate and timing of production, and changes in governmentalregulations and tax rates.

 

**Reef and its affiliates havesponsored ventures in the past that have produced dry holes and abandonedwells.**

 

Reef Global Energy VenturesII is the second public drilling program sponsored by Reef as the managinggeneral partner, and Reef Global Energy VIII, L.P. is the third limitedpartnership offered under that Program. Reef and its affiliate, OREI, Inc.(OREI), have sponsored 68 ventures from 1996 to the present. Among theseventures, (i) eight were dedicated almost exclusively to the purchase ofinterests in already producing reserves, (ii) one was dedicated primarilyto the purchase of interests in already producing reserves but has the abilityto use up to 20% of capital raised for development purposes, and (iii) threewere dedicated to both the purchase of interests in producing wells and the useof up to 50% of capital raised for development of proven reserves.  We refer to the programs described in clause (i) inthe preceding sentence as “income fund” ventures and to the programs describedin clauses (ii) and (iii) as “income and development fund” ventures.Reef and its affiliates have also sponsored 52 drilling ventures, three 3-Dseismic ventures, and one salt water disposal venture since 1996. Together,these ventures have drilled 132 wells (104 by drilling ventures and 28 byincome fund and income and development fund ventures). Of the wells drilled byReef and its affiliates’ ventures, 63 were exploratory wells and 69 were developmentalwells. Forty-nine of the wells drilled were dry holes, and three wells werecompleted but were non-commercial. Of the 80 wells that were commercial, 60 arestill owned by Reef or its affiliates’ ventures and are currently producing,eighteen have been plugged and abandoned or sold essentially for salvage value,one has been sold, and one is currently used as a salt water disposal well.Using this data, approximately 60.6% of the wells drilled by these ventureswere completed as commercially producing and 39.4% were dry holes (includingthe three wells that were completed but failed to become commercial producers).Approximately 13.6% of the wells drilled by our ventures were subsequentlyabandoned or sold essentially for salvage value prior to abandonment.

 

**ThePartnership Agreement limits Reef’s liability to each partner and thePartnership and requires the Partnership to indemnify Reef against certainlosses.**

 

Reefwill have no liability to the Partnership or to any partner for any losssuffered by the Partnership, and will be indemnified by the Partnership againstloss sustained by it in connection with the Partnership if:

 
| · |   | Reef  determines in good faith that its action was in the best interest of the  Partnership; |
|--------|--------|----------------------------------------------------------------------------------------------|
| · |   | Reef  was acting on behalf of or performing services for the Partnership; and                |
| · |   | Reef’s  actions did not constitute negligence or misconduct.                            |

 

**Drillingexploratory wells is riskier than drilling developmental wells.**

 

Manyof the wells drilled by Reef and its affiliates since 1996 have beenexploratory wells. Drilling exploratory wells involves greater risks of dryholes and loss of the partners’ investment than the drilling of developmentalwells.  Drilling developmental wellsgenerally involves less risk of dry holes, although sometimes developmentalacreage is more expensive and subject to greater royalties and other burdens onproduction. The Partnership purchased working interests in three exploratoryprospects upon which three exploratory wells were drilled. Two exploratorywells were unsuccessful, and one exploratory well was successful and beganproduction operations during December 2007.

 

**Theproduction and producing life of Partnership wells is uncertain.**

 

Productionwill decline. It is not possible to predict the life and production of anywell. The actual life could differ from that which is anticipated. Sufficientoil or natural gas may not be produced for a partner to receive a profit oreven to recover his initial investment. In addition, production from thePartnership’s oil and natural gas wells, if any, will decline over time, anddoes not indicate any consistent level of future production. This productiondecline may be rapid and irregular when compared to a well’s initialproduction.

 

11

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**Extremeweather conditions may adversely affect production operations and partnerdistributions.**

 

ThePartnership conducts operations in the coastal regions of Louisiana and Texas.This area is susceptible to extreme weather conditions, especially thoseassociated with hurricanes. In the event of a hurricane and related stormactivity, such as windstorms, storm surges, floods and tornados, Partnershipoperations in the region may be adversely affected. The occurrence of ahurricane or other extreme weather may harm or delay the Partnership’soperations or distribution of revenues, if any.

 

**Our dependence on third parties for the processingand transportation of oil and gas may adversely affect the Partnership’srevenues and, consequently, the distribution of net cash flows to investorpartners*.***

 

We rely on third parties to process and transport the oil and gasproduced by the Partnership’s successful wells. In the event a third party uponwhom we rely is unable to provide transportation or processing services, andanother third party is unavailable to provide such services, the Partnershipmay have to temporarily shut-in successful wells, and revenues to thePartnership and distributions to investor partners related to those wells maybe delayed.

 

**Highdemand for drilling contractors, field services and equipment, and the abilityof suppliers to meet demand may limit our ability to drill and produce our oiland natural gas properties.**

 

Due tocurrent industry demands, drilling contractors, well service providers andrelated equipment and personnel are in short supply. This is causing escalatingprices, delays in drilling and other exploration activities, and thepossibility of poor service coupled with potential damage to downholereservoirs and personnel injuries. Such pressures will likely increase theactual cost of services, extend the time to secure such services, and add costsfor damages due to any accidents sustained from overuse of equipment andinexperienced personnel.

 

**We facestrong competition within the energy industry.**

 

Theoil and gas industry is highly competitive. Competition is encountered in allaspects of Partnership operations, including the requisition of drilling andservice contractors. Many of our competitors are larger, well-establishedcompanies with substantially larger operating staffs and greater capitalresources than those of the Partnership, Reef and its affiliates. We may not beable to conduct our operations successfully, obtain drilling and servicecontractors, consummate transactions, and obtain technical, managerial andother professional personnel in this highly competitive environment.Specifically, larger competitors may be able to pay more for competentpersonnel than the Partnership, Reef and its affiliates. In addition, suchcompetitors may be able to expend greater resources on the existing andchanging technologies that will be increasingly important to success. Suchcompetitors may also be in a better position to secure drilling and oilfieldservices, as well as equipment, more timely or on more favorable terms.Finally, oil and gas producers are increasingly facing competition fromproviders of non-fossil energy, and government policy may favor thosecompetitors in the future.

 

**ThePartnership has limited external sources of funds, which could result in ashortage of working capital.**

 

ThePartnership intends to utilize substantially all available capital for thedrilling and completion of wells and acquisition of the prospects. ThePartnership only has nominal funds available for partnership purposes untilthere are revenues from Partnership operations. The Partnership Agreement permits the Partnership to borrow money forfuture development of prospects drilled by the Partnership with the originalavailable Partnership capital.  Anyfuture requirement for additional funding will have to come, if at all, fromthe Partnership’s revenues or from borrowings. Reef cannot assure the partnersthat Partnership operations will be sufficient to provide the Partnership withnecessary additional funding.  Reefcannot assure the partners that the Partnership will be able to borrow fundsfrom third parties on commercially reasonable terms or at all.

 

**ThePartnership may be required to pay delay rentals to hold properties, which maydeplete Partnership capital.**

 

Oiland gas leases generally require that the property must be drilled upon by acertain date or additional funds known as delay rentals must be paid to keepthe lease in effect.  Delay rentalstypically must be paid within a year of the entry into the lease if noproduction or drilling activity has commenced. If delay rentals become due on any property the Partnership acquires,the Partnership will have to pay its share of such delay rentals or lose itslease on the property.  These delayrentals could equal or exceed the cost of the property.  Further, payment of these delay rentals couldseriously deplete the Partnership’s capital available to fund drillingactivities when they do commence.

 

12

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**ThePartnership may incur liability for liens against its subcontractors.**

 

AlthoughReef will try to determine the financial condition of nonaffiliatedsubcontractors, if subcontractors fail to timely pay for materials andservices, the properties of the Partnership could be subject to materialmen’sand workmen’s liens.  In that event, thePartnership could incur excess costs in discharging such liens.

 

**Other partnerships Reef sponsorswill compete with the Partnership for equipment, contractors, and personnel.**

 

Reefplans to offer interests in other partnerships to be formed for substantiallythe same purposes as those of the Partnership. Therefore, a number ofpartnerships with unexpended capital funds, including those partnerships to beformed in future oil and gas programs sponsored by Reef, may exist at the sametime.  Due to competition among the partnershipsfor equipment, contractors, and Reef’s personnel, the fact that otherpartnerships organized by Reef and its affiliates may still be purchasingprospects and drilling and completing wells when the Partnership is attemptingto drill and complete wells on its prospects may make such activities of thePartnership more difficult.

 
| **ITEM 1B.** |   | **UNRESOLVED STAFF COMMENTS** |
|--------------|--------|-------------------------------|

 

None.

 
| **ITEM 2.** |   | **PROPERTIES** |
|-------------|--------|----------------|

 

**Drilling Activities and Productive Wells**

 

Partnershipprospects are located onshore in Louisiana, Texas, and New Mexico. ThePartnership purchased working interests in three developmental prospects. ThePartnership drilled eight successful developmental wells on the Cole Ranchprospect in Glasscock County, Texas. The Partnership drilled one successful andone unsuccessful developmental well on a prospect located in Terrebonne Parish,Louisiana.

 

The Partnership has participated in the drilling of eight developmentalwells on the Sand Dunes developmental prospect in Eddy County, New Mexico. Ofthe eight Sand Dunes prospect wells, four wells are undergoing extended testingand evaluation in order to determine their potential commercial productivity.The Partnership estimates that it may take between 90 and 120 days from thedate of this Annual Report to finish the testing and evaluation process.Following initial short-term tests which confirmed the presence of oil andnatural gas, the remaining four Sand Dunes prospect wells were temporarily shutin due to the high cost associated with salt water disposal and generatorrental.

 

Currently, generators have been rented to power the four producing SandDunes prospect wells undergoing the evaluation process, and salt water producedis being trucked off-site by an independent vendor.  In order to reduce overall costs,installation of electric service to the well-site locations is proceeding, anda more cost effective method of salt water disposal is being explored. To date,RELP, the operator of these wells, has been unsuccessful in locating along-term economic solution for disposing of produced salt water; however, RELPis currently evaluating its options for salt water disposal, and estimates thatit will be at least 90 to 120 days from the date of this Annual Report for theSand Dunes prospect to have electricity and efficient salt water disposalcapability in place.

 

ThePartnership purchased working interests in three exploratory prospects, locatedin Lavaca County, Texas and St. Mary and Iberville Parish, Louisiana. As of December 31,2007, drilling had been completed on all three prospects. The well located inLavaca County, Texas was successful and began production operations in December 2007.The two Louisiana wells were unsuccessful and have been plugged and abandoned.

 

13

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Theunproved properties owned by the Partnership at December 31, 2007 consistof un-drilled leasehold interests (11 potential drilling locations) in the SandDunes prospect. The Partnership does not have available capital to drill thesepotential locations. The Partnership may sell all or a part of these leaseholdinterests to third parties or other Partnerships managed by Reef.Alternatively, the Partnership is permitted to borrow funds or utilize cashflows from existing productive properties in order to conduct futuredevelopmental drilling on this prospect. Partner approval would not need to beobtained for borrowing activity, as the estimated additional cost is not inexcess of 25% of the Partnership’s original aggregate capital contributions.Until such time as the productive capability of the eight wells already drilledcan be fully analyzed (see Note 9 to the Partnership’s financial statements),it is unknown whether the Partnership will drill additional wells on the SandDunes prospect or sell all or a portion of the acreage. The estimated cost tothe Partnership of participating in future drilling operations at its currentworking interest ownership is approximately $150,000-$200,000 per location.

 

ThePartnership currently has nine successful productive wells and one successfulwell which is expected to begin production during the second quarter of 2008,and is continuing its extended testing and evaluation of four Sand DunesWells.  The remaining four Sand Dunesprospect wells are temporarily shut in due to the high cost associated withsalt water disposal and generator rental.

 

**ProvedOil and Gas Reserves**

 

ThePartnership uses an independent petroleum engineer to prepare its year endestimate of net proved oil and natural gas reserves. Net proved oil and naturalgas reserves as of December 31, 2007 have been estimated by GleasonEngineering, of Arlington, Texas. The quantities of proved oil and gas reservesdiscussed in this section include only the amounts which we reasonably expectto recover in the future from known oil and gas reservoirs under the currenteconomic and operating conditions. Proved reserves include only quantities thatwe expect to recover commercially using current prices, costs, existingregulatory practices, and technology. Therefore, any changes in future prices,costs, regulations, technology or other unforeseen factors could materiallyincrease or decrease the proved reserve estimates. The Partnership had noproved reserves at December 31, 2006. The estimated net proved oil andnatural gas reserves at December 31, 2007 are summarized below.

 
| ** **                                        | ** ** | **Oil (BBL)** | ** ** | **Gas (MCF)** | ** ** |
|---------------------------------------------------|------------|---------------|------------|---------------|------------|
| Net proved reserves as of  December 31, 2007 |       | 74,932        |       | 376,991       |       |

 

Thestandardized measure of discounted future net cash flows as of December 31,2007 is computed by applying year-end prices, costs, and legislated tax ratesand a discount factor of 10% to net proved reserves. The standardized measureof discounted future net cash flows does not purport to present the fair valueof our oil and natural gas reserves.

 
| Standardized measure of  discounted future net cash flows as of December 31, 2007 |   | $ | 4,381,920 |   |
|----------------------------------------------------------------------------------------|--------|---|-----------|--------|

 

Duringthe year ended December 31, 2007, the Partnership recorded propertyimpairment costs totaling $8,031,060 as a result of the net capitalized costsof oil and gas properties exceeding the standardized measure of discountedfuture net cash flows.

 

**Title to Properties**

 

ThePartnership’s interests in producing and non-producing acreage are in the formof assigned direct interests in leases held by the Partnership or by Reef onbehalf of the Partnership. Such properties are subject to customary royaltyinterests and could be subject to liens incident to operating agreements, liensfor current taxes and overriding royalty interests and other burdens.  The Partnership believes that none of theseburdens will materially interfere with the use of such properties in theoperation of the Partnership’s business and that it has or will obtainsatisfactory title to all of its leases. Title will be held by the Partnershipor by Reef on behalf of the Partnership.

 
| **ITEM 3.** |   | **LEGAL PROCEEDINGS** |
|-------------|--------|-----------------------|

 

The Partnership is not, and has not been, a party to anylegal proceedings.

 

14

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| **ITEM 4.** |   | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS** |
|-------------|--------|----------------------------------------------------------|

 

None.

 

**PART II**

 
| **ITEM 5.** |   | **MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES** |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------|

 

Asof December 31, 2007, the Partnership had one managing general partner, 92limited partners, and 442 additional general partners. Reef holds a total of32.425 general partner units and the investor partners hold 520.793 generalpartner units and 95.283 limited partner units. No established trading marketexists for the units.

 

Cashwhich, in the sole judgment of the managing general partner, is not required tomeet the Partnership’s obligations is distributed to the partners at leastquarterly in accordance with the Partnership Agreement. The Partnership beganmaking monthly cash distributions to the partners of interest income and netoil and natural gas revenues in April 2007. The Partnership expects thatinterest income will decline in 2008. Cash distributions are distributed 15.45%to the managing general partner (based upon the 11% interest not represented byunits and the 4.45% interest represented by Partnership units) and 84.55% toinvestor partners.

 

Investorlimited and general partner interests are transferable, subject to certainrestrictions contained in the Partnership Agreement; however, no assignee of aunit in the Partnership can become a substituted partner without the writtenconsent of both the transferor and Reef.

 

ThePartnership has adopted a unit repurchase program. Under the terms of theprogram, the managing general partner is obligated to purchase up to 5% of theunits in the Partnership per year during the period set forth in thePartnership Agreement unless changes in oil and gas pricing meet certaincriteria specified in the prospectus supplement, dated July 14, 2006.However, the managing general partner’s obligation to purchase units is limitedto $500,000 per year in the aggregate for all partnerships previously orsubsequently organized by the managing general partner or its affiliates. ThePartnership did not repurchase any units in 2007.

 

**Use of Proceeds**

 

Inconnection with the Registration Statement filed on form S-1 (No. 333-122935)and declared effective July 7, 2005, Reef filed a final prospectus for theProgram on July 8, 2005. On July 14, 2006, Reef filed a prospectussupplement describing the Partnership and commenced the offering of units inthe Partnership. All sales of Partnership units were made through the Program’sdealer-manager, Reef Securities, Inc., and a number of soliciting dealers.The offering terminated December 29, 2006. Under the terms of theoffering, a minimum of 40 Partnership units at a price of $25,000 per unit wererequired to be sold in order to form the Partnership. Upon meeting thisrequirement, the Partnership was formed on August 14, 2006.

 

ThePartnership registered a total of 400 units of limited partner interests and1,600 units of general partner interests. The aggregate offering amountregistered was $50,000,000. During the offering period that terminated on December 29,2006, the Partnership sold 616.076 units to investor partners, consisting of95.283 units of limited partner interest and 520.793 units of additionalgeneral partner interest. Reef purchased 32.425 general partner units, equaling5.00% of the total Partnership units sold. The Partnership did not sell theremaining registered units. Total offering proceeds were $16,090,928. Reef isobligated to contribute 1% of all leasehold, drilling, and completion costs asincurred. At December 31, 2007, Reef had contributed $110,965 and accrued$11,660 as a payable to the Partnership in connection with this obligation.

 

Allunits except those purchased by Reef paid a 15% management fee to Reef to payfor the Partnership organization and offering costs, including salescommissions. These costs totaled $2,310,285, leaving capital contributions of$13,903,268 available for Partnership oil and gas operations. As of December 31,2007, the Partnership had expended $13,303,390 on property acquisitions andprepayments and $46,355 on general and administrative expenses. . ThePartnership will expend additional funds on the drilling and completion of fourwells during the first and second quarters of 2008, and may expend funds onsalt water disposal facilities for the wells located on the Sand Dunes prospect.Expenditures in excess of available capital, if any, will be deducted fromPartnership distributions during 2008.

 

15

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| **ITEM 6.** |   | **SELECTED FINANCIAL DATA** |
|-------------|--------|-----------------------------|

 

Thefollowing table sets forth selected financial data. The selected financial datapresented below has been derived from the audited financial statements of thePartnership.

 
| ** **                                       | ** ** | **Year ended  December 31,****2007** | ** ** | **Period from  inception (August  14, 2006) to  December 31,****2006** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
|                                             |       |                                      |       |                                                                        |       |
| Oil and gas sales revenue                        |       | $                                         | 1,213,154  |                                                                        | $          | — |   |
| Interest income                                  |       | 233,093                                   |       | 76,702                                                                      |       |
| Costs and expenses                               |       | (9,184,540                                | )          | (56,693                                                                     | )          |
| Partnership net income  (loss)                   |       | (7,738,293                                | )          | 20,009                                                                      |       |
|                                             |       |                                      |       |                                                                        |       |
| Allocation of net income  (loss):                |       |                                      |       |                                                                        |       |
| Managing general partner                         |       | (352,799                                  | )          | 10,816                                                                      |       |
| General partner units                            |       | (6,243,247                                | )          | 7,771                                                                       |       |
| Limited partner units                            |       | (1,142,247                                | )          | 1,422                                                                       |       |
| Net income (loss) per  managing partner unit     |       | (10,880.45                                | )          | 333.58                                                                      |       |
| Net income (loss) per  general partner unit      |       | (11,987.96                                | )          | 14.92                                                                       |       |
| Net income (loss) per  limited partner unit      |       | (11,987.96                                | )          | 14.92                                                                       |       |
|                                             |       |                                      |       |                                                                        |       |
| Total assets                                     |       | 6,225,728                                 |       | 16,268,841                                                                  |       |
| Distributions to managing  general partner       |       | 156,586                                   |       | —                                                                      |       |
| Distributions to investor  partners              |       | 856,914                                   |       | —                                                                      |       |
| Distributions per general  partner unit          |       | 1,390.92                                  |       | —                                                                      |       |
| Distributions per limited  partner unit          |       | 1,390.92                                  |       | —                                                                      |       |
| Distributions per managing  general partner unit |       | 4,829.18                                  |       | —                                                                      |       |
|                                             |       |                                      |       |                                                                        |       |
| **Operating Data**                               | ** ** | ** **                                | ** ** | ** **                                                                  | ** ** |
| Annual sales volume:                             |       |                                      |       |                                                                        |       |
| Gas (MCF)                                        |       | 22,974                                    |       | —                                                                      |       |
| Oil (BBL)                                        |       | 12,330                                    |       | —                                                                      |       |
|                                             |       |                                      |       |                                                                        |       |
| Average sales price:                             |       |                                      |       |                                                                        |       |
| Gas (per MCF)                                    |       | $                                         | 10.62      |                                                                        | $          | — |   |
| Oil (per BBL)                                    |       | $                                         | 78.61      |                                                                        | $          | — |   |

** **
| **ITEM 7.** |   | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|--------|-------------------------------------------------------------------------------------------------|

** **

Thefollowing discussion will assist you in understanding the Partnership’sfinancial position, liquidity, and results of operations. The informationshould be read in conjunction with the audited financial statements and notesto financial statements contained herein. The discussion contains historicaland forward-looking information.

 

Fora discussion of risk factors that could impact the Partnership’s financialresults, please see Item 1A of this Annual Report.

 

16

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**Critical Accounting Policies**

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesrequires us to make estimates and assumptions that can affect the reporting ofassets, liabilities, equity, revenues, and expenses. We base our estimates onhistorical experience and various other assumptions that are believed to bereasonable under the circumstances. Actual results may differ from theseestimates under different assumptions or conditions. We are also required toselect among alternative acceptable accounting policies. See Note 2 to thefinancial statements for a complete list of significant accounting policies.

 

**Oil and Gas Properties**

 

ThePartnership follows the full cost method of accounting for crude oil andnatural gas properties. Under this method, all direct costs and certainindirect costs associated with acquisition of properties and successful as wellas unsuccessful exploration and development activities are capitalized.Depreciation, depletion, and amortization of capitalized crude oil and naturalgas properties and estimated future development costs, excluding unprovedproperties, are based on the unit-of-production method using estimated provedreserves.  Proved gas reserves areconverted to equivalent barrels at a rate of 6 Mcf to 1 Bbl. Net capitalizedcosts of crude oil and natural gas properties, as adjusted for asset retirementobligations, are limited to the lower of unamortized cost or the cost ceiling,defined as the sum of the present value of estimated future net revenues fromproved reserves based on prices in effect at the end of the period heldconstant and discounted at 10 percent, plus the lower of cost or estimated fairvalue of unproved properties, if any. Pursuant to full cost accounting rules,the Partnership performs a ceiling test quarterly as of the balance sheet dateon its proved oil and natural gas properties. Excess capitalized costs arecharged to property impairment expense. No gain or loss is recognized upon saleor disposition of crude oil and natural gas properties, unless such a salewould significantly alter the rate of depletion and amortization. During theyear ended December 31, 2007, the Partnership recognized propertyimpairment expense of proved properties totaling $8,031,060.

 

Unprovedproperties consist of undeveloped leasehold interest. Investments in unprovedproperties are not depleted pending determination of the existence of provedreserves. Unproved properties are assessed for impairment quarterly as of thebalance sheet date by considering the primary lease term, the holding period ofthe properties, geologic data obtained relating to the properties, and otherdrilling activity in the immediate area of the properties. Any impairmentresulting from this quarterly assessment is reported as property impairmentexpense in the current period, as appropriate. During the year ended December 31,2007 and the period from inception (August 14, 2006) to December 31,2006, the Partnership recognized no impairment of unproved properties.

 

The estimate of proved oil and natural gas reserves used todetermine property impairment expense, and also utilized in the Partnership’sdisclosures of supplemental information regarding oil and natural gas producingactivities, including the standardized measure of discounted cash flows, hasbeen prepared by an independent petroleum engineer at December 31, 2007.The Partnership had no proved reserves at December 31, 2006. Reservoirengineering is a subjective and inexact process of estimating undergroundaccumulations of oil and natural gas that cannot be measured in an exactmanner, and is based upon assumptions that may vary considerably from actualresults. Accordingly, reserve estimates may be subject to upward or downwardadjustments. Actual production,revenues and expenditures with respect to reserves will likely vary fromestimates, and such variances could be material.

 

The determination of depreciation,depletion and amortization expense recognized in the financial statements isalso dependent upon the estimates of proved oil and natural gas reserves andwill be computed using the units-of-production method based upon this estimateof proved reserves. During the year ended December 31, 2007, thePartnership had depreciation, depletion, and amortization expense totaling$840,172. The Partnership had no productive oil and gas properties as of December 31,2006.

 

The Partnership follows Statement ofFinancial Accounting Standards No. 143, “Accounting for Asset RetirementObligations,” for all productive oil and gas wells drilled by the Partnership. Assetretirement costs and liabilities associated with future site restoration andabandonment of long-lived assets are initially measured at fair value whichapproximates the cost a third party would incur in performing the tasksnecessary to retire such assets. The fair value is recognized in the financialstatements as the present value of expected future cash expenditures for siterestoration and abandonment. Subsequent to the initial measurement, the effectof the passage of time on the liability for the net asset retirement obligation(accretion expense) and the amortization of the asset retirement cost arerecognized in the results of operations. Uponsettlement of the obligation a gain or loss is recognized to the extent actualcharges are less than or exceed the liability recorded. During the year ended December 31,2007, the Partnership recognized $103,092 of asset retirement obligations andadditional capitalized cost in connection with successful wells drilled by thePartnership.  The Partnership had noproductive oil and gas properties at December 31, 2006.

 

17

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**Recognitionof Revenue**

 

The Partnership has entered into salescontracts for disposition of its share of oil and natural gas production fromproductive wells. Revenue is recognized based upon the metered volumesdelivered to those purchasers each month. Any significant over or underbalanced gas positions are disclosed in the financial statements. As of December 31,2007 and 2006, the Partnership had no material gas imbalance positions.

 

**Overview**

 

Reef Global Energy VIII, L.P. is a Nevada limitedpartnership formed to acquire, explore, develop, and produce crude oil, naturalgas, and natural gas liquids for the benefit of its investor partners. ThePartnership’s primary purposes are to generate revenues from the production ofoil and gas, distribute cash flow to investors, and provide tax benefits toinvestors. The majority of the Partnership’s proceeds have been used topurchase prospects and drill oil and natural gas wells upon those prospects.

 

The Partnership raised capital from the sale ofPartnership units to investor partners and Reef, and has used those funds forthe purchase of working interests in prospects and for drilling operations andadministrative costs during its drilling phase of operations. The Partnershipdid not borrow funds during the drilling phase of operations, and interestincome and oil and gas revenues from successful wells, net of expenses, arebeing distributed to the partners. The Partnership is allowed to borrow fundsin accordance with the Partnership Agreement, or utilize cash flows fromsuccessful wells in order to drill additional development wells and constructfacilities on prospects where successful wells were drilled during the drillingphase of operations. The Partnership completed its drilling phase of operationsduring the first quarter of 2008.

 

The Partnership does not operate in any otherindustry segment. The Partnership has expended approximately $585,000 for thepurchase of working interests in three developmental prospects, which includesapproximately $153,000 for 11 un-drilled locations on its Sand Dunes prospect,and expended approximately $201,000 for the purchase of working interests inthree exploratory prospects.  ThePartnership has three prospects in Louisiana, two in Texas, and one in NewMexico, all of which are located onshore. The Partnership has drilled eighteendevelopmental and three exploratory wells on these prospects, seventeen ofwhich were drilled during 2007, and four of which completed drilling during thefirst quarter of 2008. The Partnership currently has nine successfuldevelopmental wells, eight of which are currently productive and one expectedto begin production activity during the second quarter of 2008, and one unsuccessfuldevelopmental well. The Partnership currently has one successful exploratorywell and two unsuccessful exploratory wells. The Partnership also has participated inthe drilling of eight wells on its SandDunes prospect.  Of the eight Sand Dunes prospectwells that have been drilled, four wells are undergoing extended testing andevaluation in order to determine their potential commercial productivity. ThePartnership estimates that it may take between 90 and 120 days from the date ofthis report to finish the testing and evaluation process. Following initialshort-term tests which confirmed the presence of oil and natural gas, theremaining four Sand Dunes prospect wells are temporarily shut-in due to thehigh cost associated with salt water disposal and generator rental. Up to 11additional wells may be drilled on the Sand Dunes prospect.

 

Should the Partnership elect to borrow monies foradditional development activity on the Sand Dunes prospect, it will be subjectto the interest rate risk inherent in borrowing activities. The Partnership ispermitted but is not expected to engage in commodity futures trading or hedgingactivities, and therefore is subject to commodity price risk.   See “Item 7A. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.”

 

During the fourth quarter of 2007, the Partnershipcompleted and placed on production its successful exploratory well. Drillingoperations were continuing on the sidetracking of an unsuccessful developmentalwell. These drilling operations were successfully completed during February 2008,and the well is currently being completed and expected to begin productionduring the second quarter of 2008. The Partnership completed drillingoperations on five Sand Dunes prospect wells during the fourth quarter, anddrilling operations that were in progress on three additional Sand Dunes wellsat December 31, 2007 were completed during the first quarter of 2008.

 

18

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**Liquidity and Capital Resources**

 

ThePartnership was funded with initial capital contributions totaling $16,090,928.Reef purchased 32.425 general partner units, or 5% of the total units sold, for$689,032. Investor partners purchased 520.793 general partner units and 95.283limited partner units for $15,401,896. As of December 31, 2007, Reef hasalso contributed $110,965 and accrued $11,660 in connection with its obligationto pay 1% of all leasehold, drilling, and completion costs. Organization andoffering costs totaled $2,310,285, leaving capital contributions of $13,903,268available for Partnership activities. The Partnership was formed on August 14,2006 and the last partner was admitted to the Partnership on December 29,2006.

 

Unlessthe Partnership uses the net cash flow from successful wells or borrowsadditional funds in accordance with any limitations set forth in the PartnershipAgreement, the $13,903,268, plus any additional contributions made by Reef inconnection with the 1% obligation mentioned above, is the total amountavailable to the Partnership for the purchase of prospects and for drilling andadministrative costs.  As of December 31,2007, the Partnership had expended $13,303,390 on property acquisitions andprepayments and $46,355 on general and administrative expenses. The Partnershipwill expend additional funds on the drilling and completion of four wellsduring the first and second quarters of 2008, and will also expend funds onsalt water disposal facilities for the wells located on the Partnership’s SandDunes prospect during 2008.

 

Althoughthe Partnership is permitted to use interest income and net cash flow fromsuccessful wells for the purchase of prospects and for drilling andadministrative costs, currently the Partnership distributes such income andcash flow to the holders of Partnership interests. However, should final costsexceed available Partnership capital contributions, the excess costs will bededucted from Partnership distributions during 2008.

 

Pleasesee Item 1A of this Annual Report on Form 10-K for a list of risk factorsthat could impact the Partnership.

 

Thetable below summarizes Partnership drilling expenditures during the drillingphase of operations by type and classification of well:

 
| ** **              | ** ** | **Leasehold  Costs** | ** ** | **Drilling,  Completion  and Facilities  Costs** | ** ** | **Total Costs** | ** ** |
|-------------------------|------------|----------------------|------------|--------------------------------------------------|------------|-----------------|------------|
| Developmental wells     |       | $                    | 584,900    |                                             | $          | 9,650,729       |       | $ | 10,235,629 |   |
| Exploratory wells       |       | 200,525              |       | 2,867,236                                        |       | 3,067,761       |       |
| Total                   |       | $                    | 785,425    |                                             | $          | 12,517,965      |       | $ | 13,303,390 |   |
|                    |       |                 |       |                                             |       |            |       |
| Successful wells        |       | $                    | 318,080    |                                             | $          | 8,103,562       |       | $ | 8,421,642 |   |
| Unsuccessful wells      |       | 202,415              |       | 3,178,302                                        |       | 3,380,717       |       |
| Wells under development |       | 111,600              |       | 1,236,101                                        |       | 1,347,701       |       |
| Unproved properties     |       | 153,330              |       | —                                           |       | 153,330         |       |
| Total                   |       | $                    | 785,425    |                                             | $          | 12,517,965      |       | $ | 13,303,390 |   |

 

ThePartnership had working capital of $894,196 as of December 31, 2007, whichincludes interest income and net revenues available for distribution topartners, and $100,053 of deferred organization and offering costs.

 

Theunproved properties owned by the Partnership at December 31, 2007 consistof un-drilled leasehold interests (11 potential drilling locations) in the SandDunes prospect. The Partnership does not have available capital to drill thesepotential locations. The Partnership may sell all or a part of these leaseholdinterests to third parties or other Partnerships managed by Reef. However, thePartnership is permitted to borrow funds or utilize cash flows from existingproductive properties in order to conduct future developmental drilling on thisprospect. Partner approval would not need to be obtained for borrowing activity,as the estimated additional cost is not in excess of 25% of the Partnership’soriginal aggregate capital contributions. Until such time as the productivecapability of the eight wells already drilled can be fully analyzed (see Note 9to the Partnership’s financial statements), it is unknown whether thePartnership will drill additional wells on the Sand Dunes prospect or sell allor a portion of the acreage. The estimated cost to the Partnership ofparticipating in future drilling operations at its current working interestownership is approximately $150,000-$200,000 per location.

 

19

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ThePartnership expects to utilize substantially all of its available capital inconnection with the twenty-one wells that had been drilled or were drilling at December 31,2007.

 

**Resultsof Operations**

 

**Yearended December 31, 2007 compared to the Period from Inception (August 14,2006) thru December 31, 2006**

 

During2007, the Partnership incurred a net loss of $7,738,293, compared to net incomeof $20,009 for the period from inception (August 14, 2006) to December 31,2006.

 

ThePartnership began operations in August 2006. During the period between August andDecember 2006, the Partnership purchased working interests in fourprospects, and began drilling two wells on those prospects. At December 31,2006, the Partnership had no productive wells, and the sole source of income tothe Partnership during 2006 was the interest income earned from the investmentof unexpended partner capital contributions. This interest income of $76,702was offset by organization costs of $50,000 (a one-time expense), and bygeneral and administrative costs of $6,693, producing net income of $20,009 forthe period from inception (August 14, 2006) to December 31, 2006.

 

During 2007, the Partnership completed the drilling of seventeen wells,including the two in progress at December 31, 2006, and had four wells inprogress on which drilling was completed during the first quarter of 2008. ThePartnership drilled eight successful developmental wells on the Cole Ranchprospect in Glasscock County, Texas. Six Cole Ranch wells began productionoperations during the second quarter of 2007, and two began productionoperations during the third quarter of 2007. One Partnership developmental wellwhich was drilling at December 31, 2007 is currently being completed andis expected to begin production operations during the second quarter of 2008.The Partnership drilled one successful exploratory well in Lavaca County, Texasthat began production operations in late December 2007. The Partnershipdrilled three unsuccessful wells. ThePartnership also has participated in the drilling of eight wells on its Sand Dunes prospect,three of which completed drilling operations during the first quarter of2008.  Of the eight Sand Dunesprospect wells, four wells are undergoing extended testing and evaluation inorder to determine their potential commercial productivity. The Partnershipestimates that it may take between 90 and 120 days from the date of this AnnualReport to finish the testing and evaluation process. Following initialshort-term tests which confirmed the presence of oil and natural gas, theremaining four Sand Dunes prospect wells were temporarily shut in due to thehigh cost associated with salt water disposal and generator rental.

 

Oiland natural gas sales revenues and barrels of oil equivalent (BOE) sold byquarter are detailed below. The Partnership had no comparative oil and naturalgas revenues for 2006.

 
| ** **                               | ** ** | **1st Quarter** | ** ** | **2nd Quarter** | ** ** | **3rd Quarter** | ** ** | **4th Quarter** | ** ** |
|------------------------------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| 2007 Oil and Natural Gas  Sales Revenues |       | $               | —     |            | $          | 107,135         |       | $               | 599,788    |   | $ | 506,231 |   |
|                                     |       |            |       |            |       |            |       |            |       |
| Barrels of Oil Equivalent  (BOE) Sold*   |       | —          |       | 1,642           |       | 8,524           |       | 5,993           |       |
|                                          |            |                 |            |                 |            |                 |            |                 |            |  |  |  |  |

 

----

*BOE (Barrels of oil equivalent (6 MCF of natural gas equals 1 BOE))

 

Productionexpenses totaled $202,743 during the year ended December 31, 2007, and aredetailed on both an overall and a BOE basis by quarter below. There were nocomparable expenses during 2006.

 

20

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| ** **                   | ** ** | **1st Quarter** | ** ** | **2nd Quarter** | ** ** | **3rd Quarter** | ** ** | **4th Quarter** | ** ** |
|------------------------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| 2007 Production expenses     |       | $               | —     |            | $          | 22,589          |       | $               | 79,288     |   | $ | 100,866 |   |
|                         |       |            |       |            |       |            |       |            |       |
| Production expenses per  BOE |       | $               | —     |            | $          | 13.75           |       | $               | 9.30       |   | $ | 16.83 |   |

 

The increase in production expenses on a BOE basis during the fourthquarter of 2007 relates directly to the eight wells on the Cole Ranch prospect.Oil and natural gas sales revenues from these eight wells declined by 16.8%during the fourth quarter of 2007 to $499,274, as compared to $599,788 duringthe third quarter, while production expenses increased from $79,288 to $99,527.The Partnership reduced the estimated reserves it expects to recover from theCole Ranch prospect wells in the third quarter of 2007 because peak productionfrom the wells was less than originally anticipated and recorded propertyimpairment expense of $534,900. The declining production rates and increasingproduction expenses during the fourth quarter have led to additional reductionsin the estimated recoverable reserves from these eight wells, and resulted infourth quarter property impairment expense totaling $5,993,951. The Partnershiphad earlier recorded property impairment costs totaling $1,502,209 during thefirst two quarters of 2007 as a result of two unsuccessful wells, for a total2007 property impairment expense of $8,031,060. The Partnership had noimpairment expense during 2006 because the Partnership had not completed thedrilling of any wells as of December 31, 2006.

 

Generaland administrative costs totaled $105,748 during 2007 as compared to $6,693during 2006. Administrative costs paid to Reef were $35,397 during 2007compared to $0 during 2006. These costs were directly related to thePartnership having seventeen drilled wells at December 31, 2007 comparedto none at December 31, 2006. Legal, accounting, and printing costsrelated to the Partnership’s required SEC filings rose from $5,594 for theperiod from inception (August 14, 2006) to December 31, 2006 to$63,979 during 2007. The 2006 fees pertained to one Quarterly Report on Form 10-Q(Quarterly Report) filed with the SEC, while the 2007 fees covered three suchQuarterly Reports plus the Annual Report filed with the SEC.

 

Theproperty impairment expense of $8,031,060 was the primary factor in the net lossof $7,738,293 for 2007.

 

**Off-Balance Sheet Arrangements**

 

The Partnership does not participate in transactionsthat generate relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structure finance or specialpurpose entities (SPEs), which would have been established for the purpose offacilitating off-balance sheet arrangements or other contractually narrow orlimited purposes.  As of December 31,2007 and 2006, the Partnership was not involved in any unconsolidated SPEtransactions or any other off-balance sheet arrangements.

 

**Contractual Obligations Table**

 
| ** **                   | ** ** | **Payment due by period** | ** ** |
|------------------------------|------------|---------------------------|------------|
| **Contractual  obligations** | ** ** | **Total**                 | ** ** | **Less than 1   Year** | ** ** | **1-3 Years** | ** ** | **3-5 years** | ** ** | **More than 5  Years** | ** ** |
| Purchase obligations*        |       | $                         | 220,053    |   | $ | 120,000 |   | $ | 100,053 |   | — |   | — |   |
|                              |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |

 

----

* The 15% management fee due Reef fororganization and offering costs, including sales commissions, is payable in twoparts. Reef initially received an amount, not to exceed 13.5%, to recoveractual commissions and organization and offering costs. As of December 31,2007, the Partnership is obligated to pay Reef $220,053 representing theportion of the management fee in excess of actual commissions and organizationand offering costs, from the oil and gas cash flows available for partnerdistributions at a rate not to exceed $1 million per year. The Partnershipbegan paying this balance at a rate of $10,000 per month beginning in January 2008.

 

21

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| **ITEM 7A.** |   | **QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK** |
|--------------|--------|-----------------------------------------------------------------|

 

**Interest Rate Risk**

 

The Partnership has not borrowed any funds to date. The PartnershipAgreement allows borrowings from banks or other financial sources of up to 25%of the aggregate capital contributions to the Partnership without investorapproval, provided the lender agrees it will have no recourse againstindividual investor partners, and allows borrowings in excess of 25% of theaggregate capital contributions to the Partnership with the consent of investorpartners. Should the Partnership elect to borrow monies for additionaldevelopment activity on Partnership properties, it will be subject to theinterest rate risk inherent in borrowing activities. Changes in interest ratescould significantly affect the Partnership’s results of operations and theamount of net cash flow available for partner distributions. Also, to theextent that changes in interest rates affect general economic conditions, thePartnership will be affected by such changes.

 

**Commodity Price Risk**

 

The Partnership has not and does not expect to engage in commodityfutures trading or hedging activities or to enter into derivative financialinstrument transactions for trading or other speculative purposes. The Partnershipsells a vast majority of its production from successful oil and gas wells on amonth-to-month basis at current spot market prices. Accordingly, thePartnership is at risk for the volatility in commodity prices inherent in theoil and gas industry, and the level of commodity prices has a significantimpact on the Partnership’s results of operations.

 

Assuming the production levels we attainedduring the year ended December 31, 2007, a 10% change in the pricereceived for our crude oil would have had an approximate $97,000 impact on ouroil revenues, and a 10% change in the price received for our natural gas wouldhave had an approximate $24,000 impact on our natural gas revenues.

 
| **ITEM 8.** |   | **FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA** |
|-------------|--------|-------------------------------------------------|

 

The Partnership’s financial statements and supplementary data are setforth in a separate section to this Annual Report, beginning on page F-1.

 
| **ITEM 9.** |   | **CHANGES IN AND DISAGREEMENTS WITH  ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE** |
|-------------|--------|-------------------------------------------------------------------------------------------|

 

None

** **
| **ITEM 9A(T).** |   | **CONTROLS  AND PROCEDURES** |
|-----------------|--------|------------------------------|

** **

**Evaluation of Disclosure Controls and Procedures**

 

As the managing generalpartner of the Partnership, Reef maintains a system of controls and proceduresdesigned to provide reasonable assurance as to the reliability of the financialstatements and other disclosures included in this Annual Report, as well as tosafeguard assets from unauthorized use or disposition. The Partnership, underthe supervision and with participation of its management, including theprincipal executive officer and principal financial officer of the Partnership’smanaging general partner, Reef Oil & Gas Partners, L.P., evaluated theeffectiveness of its “disclosure controls and procedures” as such term isdefined in Rule 13a-15(e) under the Securities Exchange Act of 1934,as amended (the Exchange Act), as of the end of the period covered by thisAnnual Report. Based on that evaluation, the principal executive officer andprincipal financial officer of our managing general partner have concluded thatthe Partnership’s disclosure controls and procedures are effective to ensurethat information required to be disclosed by the Partnership in reports that itfiles or submits under the Exchange Act is recorded, processed, summarized, andreported within the time periods specified in Securities and ExchangeCommission rules and forms, and includes controls and procedures designedto ensure that information required to be disclosed by us in such reports isaccumulated and communicated to our management, including the principal executiveofficer and principal financial officer of our managing general partner, asappropriate to allow timely decisions regarding financial disclosure.

 

22

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**Management Report on Internal Control OverFinancial Reporting**

 

Management ofthe Partnership is responsible for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in ExchangeAct Rule 13a-15(f). Our management conducted an evaluation of the effectivenessof our internal control over financial reporting based on the framework inInternal Control – Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Based on this evaluation under theframework in Internal Control – Integrated Framework, management of thePartnership concluded that the Partnership’s internal control over financialreporting was effective as of December 31, 2007.

 

Thisannual report does not include an attestation report of the Partnership’sregistered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by thePartnership’s registered public accounting firm pursuant to temporary rules ofthe SEC that permit the Partnership to provide only management’s report in thisannual report.

 

**Changes in Internal Controls**

 

Therehave not been any changes in the Partnership’s internal controls over financialreporting during the fiscal quarter ended December 31, 2007 that have materiallyaffected, or are reasonably likely to materially affect, the Partnership’sinternal control over financial reporting.

 
| **ITEM 9B.** |   | **OTHER INFORMATION** |
|--------------|--------|-----------------------|

 

None.

 

**PART III**

 
| **ITEM 10.** |   | **DIRECTORS, EXECUTIVE OFFICERS, AND  CORPORATE GOVERNANCE** |
|--------------|--------|--------------------------------------------------------------|

 

The Partnership has no directors or executive officers. Its managinggeneral partner is Reef Oil & Gas Partners, L.P.

 

**Reef Oil & GasPartners, L.P. and Reef Exploration, L.P.**

 

The Manager, officers and key personnel ofthe managing general partner, their ages, current positions with the managinggeneral partner and/or RELP, and certain additional information are set forthbelow:

** **
| **Name**                       | ** ** | **Age** | ** ** | **Positions and Offices Held**                                                       |
|--------------------------------|------------|---------|------------|--------------------------------------------------------------------------------------|
| Michael J. Mauceli             |       | 51      |       | Manager of Reef Oil & Gas Partners  GP, LLC;Chief Executive Officer of RELP |
| Kellam Colquitt                |       | 60      |       | Chief Operating Officer of RELP                                                      |
| H. Walt Dunagin                |       | 50      |       | Vice President—Land Manager of RELP                                             |
| Lawrence J. Harrison, Jr. |       | 57      |       | Vice President—Business Development of RELP                                     |
| Byron H. Dean                  |       | 58      |       | Manager of Acquisitions and Divestitures of  RELP                                    |
| Daniel C. Sibley               |       | 56      |       | Chief Financial Officer of Reef and of RELP                                          |
| David M. Tierney               |       | 55      |       | Controller—Reef Global Energy Ventures II                                       |

 

**MichaelJ. Mauceli**is the Manager and a member of Reef Oil & Gas Partners, GP, LLC, whichis the general partner of Reef, as well as the Chief Executive Officer of RELP.Mr. Mauceli has been the principal executive officer of Reef since itsformation in February 1999. He has served in this position with RELP sinceJanuary 2006 and has served in this position with its predecessor entity,OREI, since 1987.  Mr. Mauceliattended the University of Mississippi where he majored in business managementand marketing as well as the University of Houston where he received hisCommercial Real Estate License. He entered the oil and natural gas business in1976 when he joined Tenneco Oil & Gas Company.  Mr. Mauceli moved to Dallas in 1979,where he was independently employed by several exploration and developmentfirms in planning exploration and marketing feasibility of privately sponsored drillingprograms.

 

23

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**KellamColquitt**joinedRELP as Chief Operating Officer on February 14, 2006. Mr. Colquitthas over thirty-five years of experience in the oil and gas industry. Prior tojoining RELP, Mr. Colquitt served as Vice President-Exploration of VintagePetroleum, Inc. in Tulsa Oklahoma from 2001-2006. He also served as theGeneral Manager-Exploration of Vintage Petroleum, Inc. from 2000-2001.Prior to that, Mr. Colquitt was employed from 1995-2000, first as VicePresident-International Exploration Western Hemisphere and later as VicePresident-U.S. Operations for Ranger Oil Limited. He is a 1971 graduate ofTexas A&M University with a degree in geology. He is a member of theAmerican Association of Petroleum Geologists, the Houston Petroleum Club, theTulsa Geological Society, and the Houston Geological Society.

 

**H.Walt Dunagin**is Vice President – Land Manager of RELP. He has held this position since January 2006and has served in this position with its predecessor entity, OREI, since 1990.He is responsible for all contracts with other industry partners and all landactivities required for exploration, development and production, includinglease acquisition, title opinions, curative, permitting, unitization,rights-of-way and environmental issues. A graduate of the University ofMississippi in 1969 with a B.B.A. degree, Walt’s career has also involved landwork for ExxonMobil, ChevronTexaco, UNOCAL, Santa Fe Energy and Oryx Energy(now Kerr-McGee). Walt is a member of the Dallas Association of PetroleumLandmen and the Association of International Petroleum Negotiators.

 

**LawrenceJ. Harrison, Jr.**is Vice President – BusinessDevelopment of RELP. He joined RELP in October 2006 following fourteen yearswith The Oil & Gas Asset Clearinghouse, a leading acquisition anddivestiture advisory firm. Mr. Harrison has served as an independentlandman verifying title ownership and acquiring leases and other agreements insupport of clients drilling programs. He worked for Mobil Oil Corporation andseveral other companies before joining The Clearinghouse. Mr. Harrison isa 1972 graduate of the University of Southern Mississippi with a Bachelor ofScience degree in Communications. Mr. Harrison is a past president of theHouston Association of Professional Landmen and a past member of the AmericanAssociation of Professional Landmen Executive Committee. He is currently aDirector of the Louisiana Oil & Gas Association (LOGA) and a member ofthe ADAM Energy Forum and the Independent Petroleum Association of America.

 

**ByronH. (Howard) Dean**is Manager – Acquisitions and Divestitures of RELP and isresponsible for solicitation and technical evaluation of acquisition anddevelopment opportunities for Reef. A registered petroleum engineer, Mr. Deanhas over 30 years of industry experience with oil and natural gas operationsand reservoir engineering, both domestic onshore and offshore. Prior to joiningRELP, Mr. Dean was Senior Petroleum Engineer and Acquisition and DivestitureSpecialist for PLS, Inc. and Noble Royalties, Inc. He is a 1974graduate of the University of Texas at Arlington with a Bachelor of Sciencedegree in Civil Engineering. Mr. Dean is an active member of the Societyof Petroleum Engineers, the Society of Petroleum Evaluation Engineers, ADAMEnergy Forum, and Texas Independent Producer and Royalty Owners Association.

 

**DanielC. Sibley**becameChief Financial Officer of Reef in December 1999. He has served in thesame position for RELP since January 2006, and has served in this positionwith RELP’s predecessor entity, OREI, since 1998. Mr. Sibley was employedas a Certified Public Accountant with Grant Thornton from 1977 to 1980. From1980 to 1994, he was involved in the private practice of law. He received aB.B.A. in accounting from the University of North Texas in 1973, a law degree(J.D.) from the University of Texas in 1977, and a Master of Laws-Taxationdegree (L.L.M.) from Southern Methodist University in 1984.

 

**DavidM. Tierney**has been employed by RELP since January 2006 and was previously with itspredecessor entity, OREI, since March 2001.  Mr. Tierney is the Controller of theReef Global Energy Ventures and Reef Global Energy Ventures II partnerships. Mr. Tierneyreceived a Bachelor’s degree from Davidson College in 1974, a Masters ofBusiness Administration from Tulane University in 1976, and is a TexasCertified Public Accountant. Mr. Tierney has worked in public accounting,and has worked in the oil and gas industry since 1979. From 1992 through 2000he served as controller/treasurer of an independent oil and gas explorationcompany.

 

24

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**Audit Committeeand Nominating Committee**

 

Because the Partnership has no directors, itdoes not have an audit committee, an audit committee financial expert or anominating committee.

 

**Code of Ethics**

 

Because thePartnership has no employees, it does not have a code of ethics.  Employees of the Partnership’s managinggeneral partner, Reef, must comply with Reef’s Code of Ethics, a copy of whichwill be provided to any person, without charge, upon request made to Reef Oil &Gas Partners, L.P., 1901 N. Central Expressway, Suite 300, Richardson,Texas 75080, Attention: Daniel C. Sibley.

 
| **ITEM 11.** |   | **EXECUTIVE COMPENSATION** |
|--------------|--------|----------------------------|

 

The following table summarizes the items ofcompensation to be received by Reef as the managing general partner from the Partnership.

 
| **Recipient**                                | ** ** | **Form of Compensation**                                                                        | ** ** | **Amount**                 |
|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|----------------------------|
| Managing General Partner                     |       | Partnership interest (excluding any  partnership interest resulting from the purchase of units) |       | 10% interest               |
| Managing General Partner                     |       | Management fee                                                                                       |       | 15% of subscriptions       |
| Managing  General Partner and its Affiliates |       | Direct and administrative costs                                                                      |       | Reimbursement at cost      |
| Affiliate of the Managing General Partner    |       | Operator’s per-well charges                                                                     |       | Competitive prices         |
| Managing General Partner and its Affiliates  |       | Payment for equipment, supplies, marketing, and other services                                       |       | Cost or competitive prices |

 

Reef’s “partnership interest,” as described in the table above, refersonly to its interest as managing general partner and does not include theinterest Reef has as the result of its purchase of units in the Partnership, orthe 1% interest Reef has as the result of its payment of 1% of all leasehold,drilling, and completion costs.  Reefpurchased 5.00% of the outstanding Partnership units. Reef received a 10%interest as managing general partner of the Partnership and a 1% interest as aresult of Reef’s payment of 1% of all leasehold, drilling, and completion costs,for a total of an 11% interest.  This 11%interest is not represented by partnership units.  Reef has a total interest in the Partnershipof 15.45%.

 

Reef is entitled to receive a management fee equal to 15% of thePartnership subscriptions exclusive of the units purchased by Reef. From thisamount Reef pays all of the Partnership’s organization and offering costs,including sales commissions. The management fee is payable to Reef in twoparts. Reef initially received an amount not to exceed 13.5% to cover actualsales commissions and actual organization and offering costs. The remainder ofthe management fee is paid to Reef from the net cash flow available for partnerdistributions, at a rate not to exceed $1 million per year. The totalmanagement fee owed Reef is $2,310,285. The Partnership recorded $2,260,285 ofthis amount as offering costs, and $50,000 as organization costs. Of thisamount, $2,085,232 has been paid to Reef to cover actual sales commissions andorganization and offering costs, $5,000 has been paid to Reef from net cashflow, and $220,053 has been accrued at December 31, 2007 as an accountpayable to be paid to Reef from future net cash flows of the Partnership.

 

Reef will be reimbursed for direct costs and all documentedout-of-pocket expenses incurred on behalf of the Partnership, includingadministrative costs. During the year ended December 31, 2007 and theperiod from inception (August 14, 2006) to December 31, 2006, thePartnership reimbursed Reef $735,744 and $36,343, respectively, for technicalservices costs which have been capitalized as project costs, and $35,397 and$0, respectively, for administrative costs included as general andadministrative expenses.

 

25

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As a well operator, RELP receives operatorfees during the drilling and production phase of each well at the competitiverate in the geographical area where the prospect is located.  These fees are charged as a monthly fee per wellas agreed to in an operating agreement signed by the Partnership andparticipating third parties in the well. During the year ended December 31,2007, the Partnership paid operator fees totaling $50,961 to RELP. No operatorfees were paid to RELP during the period from inception (August 14, 2006)to December 31, 2006. RELP serves as operator for one Partnership prospectupon which eight successful wells have been drilled, and for the Sand Dunesprospect, where the Partnership has participated in the drilling of eightwells. Four of these wells are undergoing extended testing and evaluation inorder to determine their commercial productivity. Following initial short-termtests which confirmed the presence of oil and natural gas, the remaining fourSand Dunes prospects were temporarily shut in due to the high cost associatedwith salt water disposal and generator rental.

 

**Compensation Committee**

 

Because the Partnership has no directors, it does not have acompensation committee.

 
| **ITEM 12.** |   | **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS** |
|--------------|--------|-----------------------------------------------------------------------------------------------------|

 

Thefollowing table sets forth information as of December 31, 2007 concerningall persons known by Reef to own beneficially more than 5% of the interests inthe Partnership. Unless expressly indicated otherwise, each partner exercisessole voting and investment power with respect to the interests beneficiallyowned.

 
| **Person or Group**                         | ** ** | **Number of Units  Beneficially  Owned** | ** ** | **Percent of Total  Partnership Units  Outstanding** | ** ** | **Percentage of   Total Partnership  Interests   Beneficially   Owned** | ** ** |
|---------------------------------------------|------------|------------------------------------------|------------|------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| Reef  Oil & Gas Partners, L.P. (1) |       | 32.425                                   |       | 5.00                                                 | %          | 4.45                                                                    | %          |
| Reef  Oil & Gas Partners, L.P. (1) |       | —                                   |       | —                                               |       | 11.00                                                                   | %          |

 

----

(1) Reef Oil & Gas Partners, L.P.’s address is 1901 N.Central Expressway, Suite 300, Richardson, Texas 75080.

 

Themanaging general partner received a 10% interest in the Partnership ascompensation for forming the Partnership, and also holds a 1% interest in thePartnership as a result of paying 1% of all leasehold, drilling and completioncosts. In addition to this 11% interest not represented by Partnership units,Reef purchased 5% of the 648.501 Partnership units and, therefore, holds 5% ofthe 89% interest in the Partnership (4.45%) held by the unit holders.

 
| **ITEM 13.** |   | **CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS, AND DIRECTOR INDEPENDENCE** |
|--------------|--------|--------------------------------------------------------------------------------|

 

The Partnership ismanaged by a managing general partner and does not have directors. Reef is themanaging general partner of the Partnership. Along with its affiliates, Reef has entered into agreements with, and receivedcompensation from, the Partnership for services it performs for thePartnership.  See “Item 11. EXECUTIVECOMPENSATION.”

 
| **ITEM 14.** |   | **PRINCIPAL ACCOUNTING FEES AND SERVICES** |
|--------------|--------|--------------------------------------------|

 

The Partnership incurred professional audit and tax fees from itsprincipal auditor BDO Seidman, LLP, as disclosed in the table below:

 
| ** **          | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit fees          |       | $        | 45,079     |     | $          | 3,700 |   |
| Audit  related fees |       | —   |       | —   |       |
| Tax fees            |       | 866      |       | 615      |       |
| All other  fees     |       | —   |       | —   |       |
|                     |            |          |            |          |            |  |  |

 

26

----

 

Tax fees are for review of the Partnership’s tax return.

 

As indicated in Item 10 above, the Partnership does not have anydirectors or an audit committee.

 

**PART IV**

 

**ITEM 15.**                   **EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES**

 
| (a)    |   | 1. Financial  Statements                                 |   |   |
|--------|--------|----------------------------------------------------------|--------|--------|
|   |   |                                                     |   |   |
|   |   | Report of Independent Registered Public Accounting  Firm |   | F-1    |
|   |   | Balance Sheets                                           |   | F-2    |
|   |   | Statements  of Operations                                |   | F-3    |
|   |   | Statements of Partnership Equity                         |   | F-4    |
|   |   | Statements  of Cash Flows                                |   | F-5    |
|   |   | Notes to Financial Statements                            |   | F-6    |
|   |   |                                                     |   |   |
|   |   | 2. Financial Statement  Schedules                        |   | None   |
|   |   |                                                     |   |   |
|   |   | 3. Exhibits                                              |   |   |

 

A list of the exhibits filed or furnished with this Annual Report (orincorporated by reference to exhibits previously filed or furnished by us) isprovided in the Exhibit Index in this Annual Report.  Those exhibits incorporated by referenceherein are indicated as such by the information supplied in the parentheticalthereafter. Otherwise, the exhibits are filed herewith.

 

27

----

 

**SIGNATURES**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
| Date:  | April 15, 2008 | **REEF GLOBAL ENERGY VIII, L.P.**      |
|--------|---------------------|----------------------------------------|
|   |                |                                   |
|   |                |                                   |
|   |                | Reef Oil & Gas Partners, L.P. |
|   |                | Managing General Partner               |
|   |                |                                   |
|   |                | By:                                    | Reef Oil & Gas Partners, GP, LLC |
|   |                | General Partner                        |
|   |                |                                   |
|   |                |                                   |
|   |                | By:                                    | /s/ Michael J. Mauceli |
|   |                |                                   | Michael J. Mauceli |
|   |                |                                   | Manager (principal executive officer) |
|        |                     |                                        |  |  |

 

28

----

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

 
| **Signature**          | ** ** | **Title**                                                          | ** ** | **Date**            |
|------------------------|------------|--------------------------------------------------------------------|------------|---------------------|
| ** **             | ** ** | ** **                                                         | ** ** | ** **          |
| /s/ Michael J. Mauceli |       | Manager and Member of the general partner of Reef                  |       | April 15, 2008 |
| Michael J. Mauceli     |       | Oil & Gas Partners, L.P. (*Principal  Executive Officer*) |       |                |
|                   |       |                                                               |       |                |
| /s/ Daniel C. Sibley   |       | Chief Financial Officer (*Principal Financial  Officer*            |       | April 15, 2008 |
| Daniel C. Sibley       |       | *and Principal Accounting Officer*)                                |       |                |

 

29

----

 

Reef Global Energy VIII, L.P.

 

Financial Statements

 

For the Year EndedDecember 31, 2007 and the Period from Inception (August 14, 2006) to December 31,2006

 

**Contents**

** **
| Report of  Independent Registered Public Accounting Firm | F-1    |
|----------------------------------------------------------|--------|
|                                                     |   |
| Audited  Financial Statements                            |   |
|                                                     |   |
| Balance Sheets                                           | F-2    |
| Statements of  Operations                                | F-3    |
| Statements of  Partnership Equity                        | F-4    |
| Statements of Cash Flows                                 | F-5    |
| Notes to  Financial Statements                           | F-6    |

 

----

 

Report ofIndependent Registered Public Accounting Firm

 

The Partners

Reef Global Energy VIII, L.P.

 

We have audited the accompanying balance sheets of Reef Global EnergyVIII, L.P. as of December 31, 2007 and 2006 and the related statements ofoperations, partnership equity, and cash flows for the year ended December 31,2007 and  the period from inception (August 14,2006) to December 31, 2006. These financial statements are theresponsibility of the Partnership’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Partnership isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. An audit includes consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Partnership’s internal control overfinancial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Reef Global EnergyVIII, L.P. at December 31, 2007 and 2006, and the results of itsoperations and its cash flows for the year ended December 31, 2007 and theperiod from inception (August 14, 2006) to December 31, 2006, inconformity with accounting principles generally accepted in the United Statesof America.

 
| /s/ BDO Seidman, LLP |   |
|----------------------|--------|
|                 |   |
|                 |   |
| Dallas, Texas        |   |
| April 10, 2008  |   |

 

F-1

----

 

**Reef Global Energy VIII, L.P.**

**BalanceSheets**

 
| **December 31,**                                                 | ** ** | **2007**      | ** **    | **2006**       | ** ** |
|-----------------------------------------------------------------------|------------|---------------|---------------|----------------|------------|
| ** **                                                            |       |          |          |           |       |
| **Assets**                                                            |       |          |          |           |       |
|                                                                  |       |          |          |           |       |
| **Current assets:**                                                   |       |          |          |           |       |
| Cash and cash equivalents                                             | ** ** | **$**         | 1,678,818     | ** **     | **$**      | 11,294,514 | ** ** |
| Accounts receivable from affiliates                                   |       | 11,660        |          | 468,831        |       |
| **Total current assets**                                              | ** ** | **1,690,478** | ** **    | **11,763,345** | ** ** |
| ** **                                                            | ** ** | ** **    | ** **    | ** **     | ** ** |
| **Oil and gas properties, full cost method of  accounting:**          |       |          |          |           |       |
| Proved properties, net of accumulated  depletion of $8,871,232 and $0 |       | 4,381,920     |          | —         |       |
| Unproved properties                                                   |       | 153,330       |          | 1,328,081      |       |
| **Net oil and gas properties**                                        | ** ** | **4,535,250** | ** **    | **1,328,081**  | ** ** |
|                                                                  |       |          |          |           |       |
| **Other assets:**                                                     |       |          |          |           |       |
| Prepaid drilling costs                                                |       | —        |          | 3,177,415      |       |
| **Total other assets**                                                | ** ** | **—**    | ** **    | **3,177,415**  | ** ** |
|                                                                  |       |          |          |           |       |
| **Total assets**                                                      | ** ** | $             | **6,225,728** | ** **     | $          | **16,268,841** | ** ** |
|                                                                  |       |          |          |           |       |
| **Liabilities and partnership equity**                                |       |          |          |           |       |
|                                                                  |       |          |          |           |       |
| **Current liabilities:**                                              |       |          |          |           |       |
| Accounts payable                                                      |       | $             | —        |           | $          | 20,000 |   |
| Accounts payable to affiliates                                        |       | 796,282       |          | 1,877,927      |       |
| **Total current liabilities**                                         | ** ** | **796,282**   | ** **    | **1,897,927**  | ** ** |
|                                                                  |       |          |          |           |       |
| **Long-term liabilities:**                                            |       |          |          |           |       |
| Asset retirement obligation                                           |       | 107,909       |          | —         |       |
| Accounts payable to affiliates                                        |       | 100,053       |          | 506,981        |       |
| **Total long-term liabilities**                                       | ** ** | **207,962**   | ** **    | **506,981**    | ** ** |
|                                                                  |       |          |          |           |       |
| **Commitments and contingencies (Note 6)**                            |       |          |          |           |       |
|                                                                  |       |          |          |           |       |
| **Partnership equity**                                                |       |          |          |           |       |
| General partners                                                      |       | 4,149,260     |          | 11,116,890     |       |
| Limited partners                                                      |       | 759,136       |          | 2,033,914      |       |
| Managing general partner                                              |       | 313,088       |          | 713,129        |       |
| **Partnership equity**                                                | ** ** | **5,221,484** | ** **    | **13,863,933** | ** ** |
| ** **                                                            | ** ** | ** **    | ** **    | ** **     | ** ** |
| **Total liabilities and partnership equity**                          | ** ** | **$**         | **6,225,728** | ** **     | **$**      | **16,268,841** | ** ** |

 

*Seeaccompanying notes to financial statements.*

 

F-2

----

 

**Reef Global Energy VIII, L.P.**

**Statementsof Operations**

 
| ** **                                           | ** ** | **Year ended  December 31, 2007** | ** **     | **Period from  inception (August  14, 2006) to**

**December 31, 2006** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------------|----------------|-------------------------------------------------------------------------------------------------------|------------|
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| **Revenues**                                         | ** ** | **$**                                            | **1,213,154**  | ** **                                                                                            | **$**      | **—** | ** ** |
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| **Costs and expenses:**                              | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| Lease operating expenses                             |       | 139,153                                          |           | —                                                                                                |       |
| Production taxes                                     |       | 63,590                                           |           | —                                                                                                |       |
| Depreciation, depletion and amortization             |       | 840,172                                          |           | —                                                                                                |       |
| Property impairment                                  |       | 8,031,060                                        |           | —                                                                                                |       |
| Accretion of asset retirement obligation             |       | 4,817                                            |           | —                                                                                                |       |
| General and administrative                           |       | 105,748                                          |           | 6,693                                                                                                 |       |
| Organization expenses                                |       | —                                           |           | 50,000                                                                                                |       |
| **Total costs and expenses**                         | ** ** | **9,184,540**                                    | ** **     | **56,693**                                                                                            | ** ** |
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| **Loss from operations**                             | ** ** | **(7,971,386**                                   | **)**          | **(56,693**                                                                                           | **)**      |
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| **Other income:**                                    | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| Interest income                                      |       | 233,093                                          |           | 76,702                                                                                                |       |
| **Total other income**                               | ** ** | **233,093**                                      | ** **     | **76,702**                                                                                            | ** ** |
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| **Net income (loss)**                                | ** ** | **$**                                            | **(7,738,293** | **)**                                                                                                 | **$**      | **20,009** | ** ** |
| ** **                                           | ** ** | ** **                                       | ** **     | ** **                                                                                            | ** ** |
| Net income (loss) per general partner unit           | ** ** | **$**                                            | **(11,987.96** | **)**                                                                                                 | **$**      | **14.92** | ** ** |
| Net income (loss) per limited partner unit           | ** ** | **$**                                            | **(11,987.96** | **)**                                                                                                 | **$**      | **14.92** | ** ** |
| Net income (loss) per managing general  partner unit | ** ** | **$**                                            | **(10,880.45** | **)**                                                                                                 | **$**      | **333.58** | ** ** |

 

*See accompanying notes to financial statements.*

 

F-3

----

 

**Reef Global Energy VIII, L.P.**

**Statementsof Partnership Equity**

 
| ** **                                    | ** ** | **General partners** | ** ** | **Limited partners** | ** ** | **Managing general  partner** | ** ** | **Total**  | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|---------------------------|------------|------------------------------------|------------|------------|------------|
| ** **                                    | ** ** | **Units**                 | ** ** | **Amount**                | ** ** | **Units**                          | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** |
| Partner  contributions, net of offering costs |       | 520.793                   |       | $                         | 11,109,119 |                               | 95.283     |       | $          | 2,032,492 |   | 32.425 |   | $ | 702,313 |   | 648.501 |   | $ | 13,843,924 |   |
| Partner  distributions                        |       | —                    |       | —                    |       | —                             |       | —     |       | — |   | — |   | — |   | — |   |
| Net income                                    |       | —                    |       | 7,771                     |       | —                             |       | 1,422      |       | — |   | 10,816 |   | — |   | 20,009 |   |
| Balance at  December 31, 2006            |       | 520.793                   |       | 11,116,890                |       | 95.283                             |       | 2,033,914  |       | 32.425 |   | 713,129 |   | 648.501 |   | 13,863,933 |   |
|                                          |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Distribution  amount per partnership unit     |       |                      |       | —                    |       |                               |       | —     |       |   |   | — |   |   |   |   |   |
|                                          |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Balance at  December 31, 2006            |       | 520.793                   |       | 11,116,890                |       | 95.283                             |       | 2,033,914  |       | 32.425 |   | 713,129 |   | 648.501 |   | 13,863,933 |   |
| Partner  contributions                        |       | —                    |       | —                    |       | —                             |       | —     |       | — |   | 109,344 |   | — |   | 109,344 |   |
| Partner  distributions                        |       | —                    |       | (724,383                  | )          | —                             |       | (132,531   | )          | — |   | (156,586 | ) | — |   | (1,013,500 | ) |
| Net loss                                      |       | —                    |       | (6,243,247                | )          | —                             |       | (1,142,247 | )          | — |   | (352,799 | ) | — |   | (7,738,293 | ) |
| Balance at  December 31, 2007            |       | 520.793                   |       | $                         | 4,149,260  |                               | 95.283     |       | $          | 759,136 |   | 32.425 |   | $ | 313,088 |   | 648.501 |   | $ | 5,221,484 |   |
|                                          |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Distribution  amount per partnership unit     |       |                      |       | $                         | 1,390.92   |                               |       |       | $          | 1,390.92 |   |   |   | $ | 4,829.18 |   |   |   |   |   |

 

*See accompanying notes to financial statements.*

 

F-4

----

 

**Reef Global Energy VIII, L.P.**

**Statementsof Cash Flows**

 
| ** **                                                                                | ** ** | **December 31,  2007** | ** **    | **Period from  inception  (August 14,  2006) to  December 31,  2006** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-----------------------------|---------------|-------------------------------------------------------------------------------------------|------------|
| **Operating Activities**                                                                  |       |                        |          |                                                                                      |       |
| Net income (loss)                                                                         |       | $                           | (7,738,293    | )                                                                                         | $          | 20,009 |   |
| Adjustments for non-cash transactions:                                                    |       |                        |          |                                                                                      |       |
| Depreciation, depletion and amortization                                                  |       | 840,172                     |          | —                                                                                    |       |
| Property impairment                                                                       |       | 8,031,060                   |          | —                                                                                    |       |
| Accretion of asset retirement obligation                                                  |       | 4,817                       |          | —                                                                                    |       |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |       |                        |          |                                                                                      |       |
| Changes in operating assets and  liabilities:                                             |       |                        |          |                                                                                      |       |
| Accounts receivable                                                                       |       |                        |          |                                                                                      |       |
| Accounts payable                                                                          |       | (20,000                     | )             | 20,000                                                                                    |       |
| Accounts payable to affiliates                                                            |       | 15,177                      |          | —                                                                                    |       |
| **Net cash provided by operating activities**                                             | ** ** | **1,132,933**               | ** **    | **40,009**                                                                                | ** ** |
| ** **                                                                                | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| **Investing Activities**                                                                  | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| Property acquisition and development                                                      |       | (9,464,870                  | )             | **—**                                                                                | ** ** |
| Prepaid drilling costs                                                                    |       | —                      |          | (3,177,415                                                                                | )          |
| **Net cash used in investing activities**                                                 | ** ** | **(9,464,870**              | **)**         | **(3,177,415**                                                                            | **)**      |
| ** **                                                                                | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| **Financing Activities**                                                                  | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| Partner capital contributions                                                             |       | 566,515                     |          | 15,635,378                                                                                |       |
| Offering costs                                                                            |       | (836,774                    | )             | (1,203,458                                                                                | )          |
| Partner distributions                                                                     |       | (1,013,500                  | )             | —                                                                                    |       |
| **Net cash provided by (used in) financing  activities**                                  | ** ** | **(1,283,759**              | **)**         | **14,431,920**                                                                            | ** ** |
| ** **                                                                                | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| **Net increase (decrease) in cash and cash  equivalents**                                 | ** ** | **(9,615,696**              | **)**         | **11,294,514**                                                                            | ** ** |
| Cash and cash equivalents at beginning of  period                                         |       | 11,294,514                  |          | —                                                                                    |       |
| **Cash and cash equivalents at end of period**                                            | ** ** | **$**                       | **1,678,818** | ** **                                                                                | **$**      | **11,294,514** | ** ** |
| ** **                                                                                | ** ** | ** **                  | ** **    | ** **                                                                                | ** ** |
| Non-cash investing transactions                                                           |       |                        |          |                                                                                      |       |
| Property additions included in accounts  payable to affiliates                            | ** ** | **$**                       | 661,105       |                                                                                      | $          | 1,328,081 |   |
| Property additions and asset retirement  obligation                                       | ** ** | **$**                       | 103,092       |                                                                                      | $          | — |   |
| Non-cash financing transactions:                                                          | ** ** |                        | ** **    | ** **                                                                                | ** ** |
| Managing partner contributions included in  accounts receivable from affiliates           | ** ** | **$**                       | 11,660        |                                                                                      | $          | 468,831 |   |
| Offering costs included in accounts payable  to affiliates                                | ** ** | **$**                       | 120,000       |                                                                                      | $          | 549,846 |   |
| Offering costs included in non-current  accounts payable to affiliates                    | ** ** | **$**                       | 100,053       |                                                                                      | $          | 506,981 |   |

 

*See accompanying notes to financial statements.*

 

F-5

----

 

Reef Global EnergyVIII, L.P.

Notes to Financial Statements

December 31, 2007

 

**1. Organization and Basis of Presentation**

 

Reef Global Energy VIII, L.P. (the “Partnership”) is the third in aseries of four Nevada limited partnerships comprising a program called ReefGlobal Energy Ventures II (the “Program”), pursuant to an S-1 RegistrationStatement declared effective by the Securities and Exchange Commission (the “SEC”)on July 7, 2005. In order to be formed, each partnership was required tosell a minimum of 40 partnership units at $25,000 per unit, including unitspurchased by the managing general partner. Each partnership formed as a part ofthe Program offered a minimum of 1,000 and a maximum of 2,000 units for sale.The Program was authorized to sell up to 1,600 limited partner units and 6,400general partner units during the period beginning July 8, 2005 through July 7,2007. The Partnership offered 2,000 units for sale ($50,000,000), consisting ofup to 400 limited partner units and up to 1,600 general partner units. Investorfunds were held in escrow and were subject to reimbursement with interest ifthe minimum number of units was not sold. The Program filed a prospectussupplement with the SEC on July 14, 2006 describing the Partnership, andcommenced offering units in the Partnership. Upon reaching the minimumsubscription level, the Partnership was formed on August 14, 2006. ThePartnership offering closed December 29, 2006, with sales to outsideinvestors totaling 520.793 general partner units and 95.283 limited partnerunits, and sales to the managing general partner totaling 32.425 generalpartner units.

 

The Partnership is a Nevada limited partnership formed under the NevadaUniform Limited Partnership Act. Reef Oil & Gas Partners, L.P. (“Reef”)serves as the Partnership’s managing general partner. Partnership interests areheld by the managing general partner and investor partners who are general andlimited partners (“investor partners”). The managing general partner received a10% interest in the Partnership as compensation for forming the Partnership,and also holds a 1% interest in the Partnership as a result of paying 1% of allleasehold, drilling and completion costs. This 11% interest is not representedby Partnership units. In addition, Reef purchased 5% of the Partnership unitsand, therefore, holds 5% of the 89% interest in the Partnership (4.45%) held bythe unit holders. The Partnership purchased working interests in exploratoryand developmental drilling prospects and drilled oil and gas wells locatedonshore in the continental United States. Other partnerships formed as a partof this Program, as well as other partnerships managed by Reef also owninterests in some of the prospects purchased by this Partnership. In instanceswhere Reef-affiliated entities own a majority working interest in a prospect,wells drilled on that prospect may be operated by Reef Exploration, L.P. (“RELP”),an affiliate of Reef.

 

During the year following completion of the drilling phase of thePartnership, all investor general partner units will be converted into limitedpartner units. Limited partners do not have any rights to convert their unitsto general partner units.

 

Under the terms of the partnership agreement, certain income and expenseitems are allocated differently between the managing general partner and theinvestor partners. Allocations of income and expense to the managing generalpartner and investor partners are made quarterly based upon the number and typeof partnership units held at the end of the quarter.

 

F-6

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

Organization and offering costs are allocated 100% to investorpartners, as the managing general partner purchases its units net of the 15%fee for organization and offering costs. Monthly cash distributions to partnersare based upon the number and type of partnership units held at the close ofthe prior month. Cash distributions to partners of the net cash flow frominterest income and oil and gas sales revenues, less operating, general andadministrative, and other costs are distributed 15.45% to the managing generalpartner (based upon the 11% interest not represented by units and the 4.45% interestrepresented by Partnership units) and 84.55% to investor partners.

 

**2. Summary of Accounting Policies**

 

**Use of Estimates**

 

The preparation of financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the amounts reportedin the financial statements and accompanying notes. Actual results could differfrom these estimates.

 

**Cash and Cash Equivalents**

 

The Partnership considers all highly liquid investments with maturitydates of no more than three months from the purchase date to be cashequivalents. Cash and cash equivalents consist of demand deposits and moneymarket investments invested with a major national bank. The carrying value ofthe Partnership’s cash equivalents approximates fair value.

 

**Risks and Uncertainties**

 

Historically, the oil and gas market has experienced significant pricefluctuations. Prices are impacted by local weather, supply in the area,availability and price of competitive fuels, seasonal variations in localdemand, limited transportation capacity to other regions, and the worldwidesupply and demand balance for crude oil.

 

The Partnership has not engaged in commodity futures trading or hedgingactivities and has not entered into derivative financial instrumenttransactions for trading or other speculative purposes. Accordingly, thePartnership is at risk for the volatility in commodity prices inherent in theoil and gas industry, and the level of commodity prices has a significantimpact on the Partnership’s results of operations.

 

F-7

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**Organization and Offering Costs**

 

Organization and offering costs total 15% ofinvestor capital contributions, except for units purchased by the managinggeneral partner, which are purchased net of the 15% cost. Partnershiporganization costs totaling $50,000 have been expensed in the financialstatements for the period from inception (August 14, 2006) to December 31,2006. Offering costs represent costs incurred in conjunction with the offeringof partnership units. These costs, totaling $2,260,285 during 2006, have beenrecorded as a reduction of the proceeds of the offering.

 

# **Oiland Gas Properties**

# ** **

The Partnership follows the full cost method of accounting for crudeoil and natural gas properties. Under this method, all direct costs and certainindirect costs associated with acquisition of properties and successful as wellas unsuccessful exploration and development activities are capitalized.Depreciation, depletion, and amortization of capitalized crude oil and naturalgas properties and estimated future development costs, excluding unprovedproperties, are based on the unit-of-production method using estimated provedreserves.  For these purposes, proved gasreserves are converted to equivalent barrels at a rate of 6 Mcf to 1 Bbl. Netcapitalized costs of crude oil and natural gas properties, as adjusted forasset retirement obligations, are limited to the lower of unamortized cost orthe cost ceiling, defined as the sum of the present value of estimated futurenet revenues from proved reserves based on prices in effect at the end of theperiod held constant and discounted at 10 percent, plus the lower of cost orestimated fair value of unproved properties, if any. Pursuant to full costaccounting rules, the Partnership performs a ceiling test quarterly as of thebalance sheet date on its proved oil and natural gas properties. Excesscapitalized costs are charged to property impairment expense. No gain or lossis recognized upon sale or disposition of crude oil and natural gas properties,unless such a sale would significantly alter the rate of depletion and amortization.During the year ended December 31, 2007, the Partnership recognizedproperty impairment expense of proved properties totaling $8,031,060.

 

Unproved properties consist of undeveloped leasehold interest.Investments in unproved properties are not depleted pending determination ofthe existence of proved reserves. Unproved properties are assessed forimpairment quarterly as of the balance sheet date by considering the primarylease term, the holding period of the properties, geologic data obtainedrelating to the properties, and other drilling activity in the immediate areaof the properties. Any impairment resulting from this quarterly assessment isreported as property impairment expense in the current period, as appropriate.During the year ended December 31, 2007 and the period from inception (August 14,2006) to December 31, 2006, the Partnership recognized no impairment ofunproved properties.

 

F-8

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

# **Restoration,Removal, and Environmental Liabilities**

# ** **

The Partnership is subject to extensive Federal, state and localenvironmental laws and regulations. These laws regulate the discharge ofmaterials into the environment and may require the Partnership to remove ormitigate the environmental effects of the disposal or release of petroleumsubstances at various sites. Environmental expenditures are expensed orcapitalized depending on their future economic benefit. Expenditures thatrelate to an existing condition caused by past operations and that have nofuture economic benefit are expensed.

 

Liabilities for expenditures of a non-capital nature are recorded whenenvironmental assessments and/or remediation is probable, and the costs can bereasonably estimated. Such liabilities are generally undiscounted values unlessthe timing of cash payments for the liability or component is fixed or reliablydeterminable.

 

The Partnership accounts for its asset retirement obligations in accordancewith Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accountingfor Asset Retirement Obligations” (“SFAS No. 143”). Asset retirement costsand liabilities associated with future site restoration and abandonment oflong-lived assets are initially measured at fair value which approximates thecost a third party would incur in performing the tasks necessary to retire suchassets. The fair value is recognized in the financial statements as the presentvalue of expected future cash expenditures for site restoration andabandonment. Subsequent to the initial measurement, the effect of the passageof time on the liability for the net asset retirement obligation (accretionexpense) and the amortization of the asset retirement cost are recognized inthe results of operations.

 

The following table summarizes the Partnership’s asset retirementobligation for the year ended December 31, 2007.

 
| ** **                            | ** ** | **2007** | ** ** |
|---------------------------------------|------------|----------|------------|
| Beginning asset retirement obligation | ** ** | **$**    | **—** | ** ** |
| Additions related to new properties   |       | 103,092  |       |
| Accretion expense                     |       | 4,817    |       |
| Ending asset retirement obligation    | ** ** | **$**    | 107,909    | ** ** |

 

**Recognition of Revenue**

 

The Partnership enters into sales contractsfor disposition of its share of oil and natural gas production from productivewells. Revenues are recognized based upon the Partnership’s share of meteredvolumes delivered to its purchasers each month. The Partnership had no materialgas imbalances at December 31, 2007 and 2006.

 

F-9

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**Income Taxes**

 

The Partnership’s net income or loss flows directly through to itspartners, who are responsible for the payment of Federal taxes on theirrespective share of any income or loss. Therefore, there is no provision forfederal income taxes in the accompanying financial statements.

 

As of December 31, 2007, the tax basis of the Partnership’s assetsexceeds the financial reporting basis of the assets by approximately $186,000,primarily due to the difference between property impairment costs deducted forfinancial reporting purposes and intangible drilling costs deducted for incometax purposes.

 

**Fair Value of Financial Instruments**

 

The carrying amounts of the Partnership’s short-term financialinstruments, including cash equivalents, accounts receivable and accountspayable, approximate their fair values based on the short maturities of thoseinstruments.

 

**Reclassifications**

 

Certain information provided for prior years has been reclassified toconform to the current year presentation adopted as of December 31, 2007.

 

**3. Transactions with Affiliates**

 

The Partnership settles its balances with Reef and RELP on a quarterlybasis.

 

Reef, as managing general partner, contributes 1% of all leasehold,drilling, and completion costs when incurred. In addition, Reef purchased 5% ofthe units and pays 5% of the 99% of these costs paid by the unit holders(4.95%). In connection with the 1% obligation, Reef owed the Partnership$11,660 and $12,996 at December 31, 2007 and 2006, respectively. ThePartnership also had a receivable from Reef at December 31, 2006 relatedto its capital contribution. The balance due consisted of $455,835 for thepurchase of 21.451 Partnership units.

 

The Partnership has no employees. RELP employs a staff includinggeologists, petroleum engineers, landmen and accounting personnel whoadminister all of the Partnership’s operations. The Partnership reimburses RELPfor technical and administrative services at cost. During the year ended December 31,2007 and the period from inception (August 14, 2006) to December 31,2006, the Partnership incurred technical services and administrative coststotaling $771,141 and $36,343, respectively. Of these amounts $735,744 and$36,343 represent technical services costs capitalized as project costs, and$35,397 and $0 represent administrative costs included as general andadministrative expenses. At December 31, 2007 and 2006, the Partnershipowed RELP $85,138 and $36,343, respectively, for technical and administrative services.

 

F-10

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

RELP processes joint interest billings and revenue payments on behalfof the Partnership. At December 31, 2007 and 2006, the Partnership owedRELP $591,144 and $1,187,193, respectively, for net drilling costs in excess ofrevenues processed by RELP.

 

Accounts payable to affiliates as of December 31, 2007 and 2006also includes $220,053 and $1,056,827, respectively, for the unpaid portion ofthe 15% management fee due Reef for organization and offering costs, includingsales commissions. The management fee is payable in two parts. Reef initiallyreceived an amount not to exceed 13.5% to recover actual commissions and organizationand offering costs. The portion of the management fee in excess of actualcommissions and organization and offering costs is paid to Reef from oil andgas cash flows available for partner distributions, at a rate not to exceed $1million per year. At December 31, 2006, $549,846 of the balance duerepresented recovery of actual costs, and this amount was paid to Reef duringthe first quarter of 2007. During 2007, the Partnership paid Reef $281,928representing actual commissions and organization and offering costs, and $5,000representing the portion of the management fee in excess of actual commissionsand organization and offering costs. Beginning in January 2008, thePartnership is reimbursing the $220,053 to Reef at a rate of $10,000 per month.As such, $120,000 of this amount has been classified as a current liability,and the remaining $100,053 has been classified as a long term liability toaffiliates at December 31, 2007.

 

Reef entered into, and allowed to expire, an agreement (the “CMI NorthSea Agreement”) with Challenger Minerals Inc. (“CMI”), a subsidiary ofGlobalSantaFe Corporation and a screener of oil and gas prospects in the NorthSea region. The CMI North Sea Agreement provided Reef the opportunity to reviewand selectively participate in exploratory and developmental prospects in theNorth Sea either originated or previewed by CMI. Reef paid CMI for thegeological and geophysical services provided by CMI under the CMI North SeaAgreement. The agreement expired in November, 2006.

 

Reef also entered into an agreement with Access Exploration Corp. (“AEC”),a screener of domestic oil and gas prospects both onshore and in the Gulf ofMexico. This agreement provided Reef the opportunity to review and selectivelyparticipate in exploratory and developmental prospects previewed by AEC. Reefpaid AEC for the geological and geophysical services provided by AEC under thisagreement. This agreement expired in October 2007.

 

Prospects approved for acquisition by Reef under these agreements couldbe assigned to this Partnership as well as other limited partnerships formed aspart of the Program. Each partnership formed as a part of the Program paidReef, on a pro rata basis, a portion of the fees paid by Reef under theseagreements during the term of the Program. Total reimbursements to Reef by thepartnerships formed as a part of this Program were equal to the actual feespaid by Reef under these agreements. At December 31, 2006, thisPartnership had a payable to Reef of $104,545 in connection with this obligation,which was paid to Reef during the first quarter of 2007. The payment has beencapitalized as geological and geophysical costs in accordance with the fullcost method of accounting for oil and gas properties.

 

F-11

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

If an affiliate of Reef serves as operator of a Partnership prospect,then operator fees will be payable to the affiliate. Under such circumstances,such affiliate will receive fees at the competitive rate in the geographicalarea where the prospect is located during the drilling and production phase ofoperations. These fees are charged as a monthly fee per well as agreed to in anoperating agreement signed by the Partnership and other participating workinginterest owners in the well. During the year ended December 31, 2007, thePartnership paid drilling overhead fees totaling $28,086 and operating overheadfees totaling $22,875 to RELP.  No feeswere paid during the period from inception (August 14, 2006) to December 31,2006.

 

**4. Prepaid Drilling Costs**

 

At December 31, 2006, the Partnership had prepaid $3,177,415 inconnection with intangible drilling costs to be incurred on wells in which thePartnership has a working interest and which were drilling at December 31,2006, or drilled during the first quarter of 2007.

 

**5. Major Customers**

 

The Partnership sells crude oil and naturalgas on credit terms to refiners, pipelines, marketers, and other users ofpetroleum commodities. Revenues are received directly from these parties or, incertain circumstances, paid to the operator of the property who disburses tothe Partnership its percentage share of the revenues. During the year ended December 31,2007, two marketers accounted for 79.3% and 20.1% of the Partnership’s oil andnatural gas revenues, respectively. As of December 31, 2006, thePartnership had no oil and gas production and, therefore, had no customers. Dueto the competitive nature of the market for purchase of crude oil and naturalgas, the Partnership does not believe that the loss of any particular purchaserwould have a material adverse impact on the Partnership.

 

**6. Commitments and Contingencies**

 

The Partnership is not currently involved in any legal proceedings.

 

**7. Partnership Equity**

 

Sales of Partnership units began on July 14, 2006. Proceedsreceived were placed into an interest bearing escrow account until thePartnership reached the minimum subscription level of 40 units. The Partnershipwas formed on August 14, 2006 and the sale of Partnership units was closedon December 29, 2006. The Partnership raised $15,401,896 from the sale of616.076 Partnership units to investor partners. Reef purchased 32.425 units(5%) for $689,032. Reef paid $233,197 to the Partnership during 2006, and paidthe additional $455,835 to the Partnership in February 2007. Reef alsocontributes 1% of all leasehold, drilling, and completion costs when incurred,in addition to paying its pro rata share (4.95%) of the leasehold, drilling,and completion costs paid by the Partnership. In connection with thisobligation, Reef paid $110,680 and $285 during the year ended December 31,2007 and the period from inception (August 14, 2006) to December 2006, andhas accrued an additional $11,660 at December 31, 2007, which was paid tothe Partnership during the first quarter of 2008.

 

F-12

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

All units, except those purchased by Reef, paid a 15% management fee toReef to pay for Partnership organization and offering costs, including salescommissions. These costs totaled $2,310,285, leaving net capital contributionsof $13,903,268 available for Partnership oil and gas activities. Of the $2,310,285management fee, offering costs were $2,260,285 and organization costs were$50,000. The Partnership has drilled seventeen wells at December 31, 2007and has four wells where drilling is in progress at December 31, 2007. ThePartnership will substantially complete its drilling operations during thefirst quarter of 2008.

 

Reef exclusively manages and controls all aspects of the business ofthe Partnership. The Partnership agreement prohibits participation by investorpartners in the Partnership’s day-to-day business decisions.

 

**8.Partnership Prospects**

 

Asof December 31, 2007, the Partnership owns working interests in threedevelopmental prospects and three exploratory prospects, upon which a total ofseventeen wells have been drilled and four wells are drilling. All four of thewells drilling at December 31, 2007 completed drilling operations duringthe first quarter of 2008. Three of these wells, located on the Partnership’sSand Dunes prospect, are currently shut-in (see Note 9), and the fourth well,located on another prospect, is undergoing completion operations and isexpected to begin production operations during the second quarter of 2008.

 

The Partnership has drilled nine successful developmental wells,including the well currently being completed, and one successful exploratorywell. The Partnership has drilled one unsuccessful developmental well and twounsuccessful exploratory wells. The Partnership has participated in thedrilling of eight wells on its Sand Dunes prospect (see Note 9). Five wellslocated on the Partnership’s Sand Dunes prospect in Eddy County, New Mexicocompleted drilling operations during 2007, and three of the five tested for thepresence of hydrocarbons in December 2007. Also, in December 2007,the Partnership began drilling three additional wells on the Partnership’s SandDunes prospect, and completed drilling during the first quarter of 2008. ThePartnership has expended substantially all of its available capital in thedrilling of these wells.

 

The unproved properties owned by the Partnership at December 31,2007 consist of un-drilled leasehold interests (11 potential drillinglocations) in the Sand Dunes prospect. The Partnership does not have availablecapital to drill these potential locations. The Partnership may sell all or apart of these leasehold interests to third parties or other Partnershipsmanaged by Reef. However, the Partnership is permitted to borrow funds orutilize cash flows from existing productive properties in order to conductfuture developmental drilling on this prospect. Partner approval would not needto be obtained for borrowing activity, as the estimated additional cost is notin excess of 25% of the Partnership’s original aggregate capital contributions.Until such time as the productive capability of the eight wells already drilledcan be fully analyzed (see Note 9), it is unknown whether the Partnership willdrill additional wells on the Sand Dunes prospect or sell all or a portion ofthe acreage. The estimated cost to the Partnership of participating in futuredrilling operations at its current working interest ownership is approximately$150,000-$200,000 per location.

 

F-13

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**9. Subsequent Events**

 

ThePartnership has participated in the drilling of eight wells on the Sand Dunes prospectlocated in Eddy County, New Mexico, five of which were drilled during 2007 andthree of which completed drilling operations during the first quarter of 2008.Three of the five Sand Dunes prospect wells drilled in 2007 tested for thepresence of hydrocarbons during short-term testing in 2007.  The remaining five wells were completed andunderwent short-term testing during the first quarter of 2008. All eight wellstested for the presence of hydrocarbons.

 

Of the eight Sand Dunes prospect wells four wells are undergoingextended testing and evaluation in order to determine their potentialcommercial productivity. The Partnership estimates that it may take between 90and 120 days from the date of this report to finish the evaluation process.Following initial testing which confirmed the presence of oil and natural gas,the remaining four Sand Dunes prospect wells were temporarily shut in due tothe high cost associated with salt water disposal and generator rental.

 

Currently, generators have been rented to power the four producing SandDunes prospect wells undergoing the evaluation process, and salt water producedis being trucked off-site by an independent vendor. In order to reduce overallcosts, installation of electric service to the well-site locations isproceeding, and a more cost effective method of salt water disposal is beingexplored. To date, RELP, the operator of these wells, has been unsuccessful inlocating a long-term economic solution for disposing of produced salt waterhowever, RELP is currently evaluating its options for salt water disposal, andestimates that it will be at least 90 to 120 days from the date of this reportfor the Sand Dunes prospect to have electricity and efficient salt waterdisposal capability in place.

 

Inaddition to the three Sand Dunes prospect wells drilling at December 31,2007, a fourth well on a different prospect was drilling at December 31,2007. The well finished drilling operations during February 2008, iscurrently being completed, and is expected to begin production during thesecond quarter of 2008.

 

F-14

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**10. Supplemental Information on Oil & Natural Gas Explorationand Production Activities (unaudited)**

 

**Capitalized Costs**

 

Thefollowing table presents the Partnership’s aggregate capitalized costs relatingto oil and gas activities at the end of each of the years indicated:

 
| **December 31,**                                  | ** ** | **2007**       | ** **    | **2006**      | ** ** |
|--------------------------------------------------------|------------|----------------|---------------|---------------|------------|
| ** **                                             | ** ** | ** **     | ** **    | ** **    | ** ** |
| **Oil and natural gas properties:**                    | ** ** | ** **     | ** **    | ** **    | ** ** |
| Unproved properties                                    | ** ** | **$**          | 153,330       | ** **    | **$**      | 1,328,081 | ** ** |
| Proved properties                                      |       | 13,253,152     |          | —        |       |
| **Total oil and gas properties**                       | ** ** | **13,406,482** | ** **    | **1,328,081** | ** ** |
| Less:                                                  | ** ** | ** **     | ** **    | ** **    | ** ** |
| Accumulated depreciation, depletion, and  amortization |       | (840,172       | )             | **—**    | ** ** |
| Property impairment                                    |       | (8,031,060     | )             | **—**    | ** ** |
| **Total**                                              | ** ** | **$**          | **4,535,250** | ** **    | **$**      | **1,328,081** | ** ** |

 

**Costs Incurred**

 

Thefollowing table sets forth costs incurred in oil and gas exploration anddevelopment activities during the year ended December 31, 2007 and theperiod from inception (August 14, 2006) to December 31, 2006:

 
| ** **                          | ** ** | **2007**   | ** **     | **2006**   | ** ** |
|-------------------------------------|------------|------------|----------------|------------|------------|
| ** **                          | ** ** | ** ** | ** **     | ** ** | ** ** |
| **Oil and natural gas properties:** |       |       |           |       |       |
| Exploration                         | ** ** | **$**      | 2,607,831      | ** ** | **$**      | 466,836 | ** ** |
| Development                         |       | 9,470,570  |           | 861,245    |       |
| **Total**                           | ** ** | **$**      | **12,078,401** | ** ** | **$**      | **1,328,081** | ** ** |

 

**Results of Operations**

 

**The following table sets forth results of operationsfrom oil and gas producing activities for the year ended December 31,2007. There were no oil and gas producing activities during the period frominception (August 14, 2006) to December 31, 2006.**

 

F-15

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 
| ** **                                            | ** ** | **2007**   | ** **     |
|-------------------------------------------------------|------------|------------|----------------|
| ** **                                            | ** ** | ** ** | ** **     |
| **Oil and gas producing activities:**                 | ** ** | ** ** | ** **     |
| Oil sales                                             | ** ** | **$**      | 969,233        | ** ** |
| Natural gas sales                                     |       | 243,921    |           |
| Production expenses                                   |       | (202,743   | )              |
| Accretion of asset retirement obligation              |       | (4,817     | )              |
| Depreciation, depletion and amortization              |       | (840,172   | )              |
| Property impairment expense                           |       | (8,031,060 | )              |
| **Results of producing activities**                   | ** ** | **$**      | **(7,865,638** | **)** |
| Depletion rate per BOE                                | ** ** | **$**      | 51.99          | ** ** |
| BOE = Barrels of Oil Equivalent (6 MCF  equals 1 BOE) | ** ** | ** ** | ** **     | ** ** |

 

**Oil and Natural Gas Reserves**

 

The following information describes changes during the year andbalances of proved oil and natural gas reserves as of December 31, 2007.The definitions used are in accordance with applicable Securities and ExchangeCommission regulations.

 

Proved oil and gas reserves are the estimated quantities of crude oil,natural gas and natural gas liquids which geological and engineering datademonstrate with reasonable certainty to be recoverable in future years fromknown reservoirs under existing economic and operating conditions, that is,prices and costs as of the date the estimate is made.

 

Prices include consideration of changes in existing prices provided bycontractual arrangements, but not escalations based upon future conditions.Additional development costs required to recover these proved reserves areestimated at approximately $248,093 as of December 31, 2007. ThePartnership had no proved reserves at December 31, 2006. All of thePartnership’s reserves are located in the United States.

 
| ** **                                                    | ** ** | **Oil  (BBL) (1)** | ** ** | **Gas  (mcf)** | ** ** | **BOE (2)** | ** ** |
|---------------------------------------------------------------|------------|-------------------------|------------|----------------|------------|------------------|------------|
| Net proved reserves for properties owned by  the Partnership: | ** ** | ** **              | ** ** | ** **     | ** ** | ** **       | ** ** |
| Reserves at December 31, 2006                            | ** ** | **—**              | ** ** | **—**     | ** ** | **—**       | ** ** |
| New discoveries                                               |       | 87,262                  |       | 399,965        |       | 153,923          |       |
| Production                                                    |       | (12,330                 | )          | (22,974        | )          | (16,159          | )          |
| Reserves at December 31, 2007                            | ** ** | **74,932**              | ** ** | **376,991**    | ** ** | **137,764**      | ** ** |

 

----

(1)     Oilincludes both oil and natural gas liquids

(2)     BOE(barrels of oil equivalent) is calculated by converting 6 MCF of natural gas to1 BBL of oil. A BBL (barrel) of oil is one stock tank barrel, or 42 U.S.gallons liquid volume, of crude oil or other liquid hydrocarbons.

 

F-16

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**Standardized Measure of Discounted Future Net Cash Flows**

 

As required by the Financial Accounting Standards Board, thestandardized measure of discounted future net cash flows is computed byapplying year-end prices, costs and legislated tax rates and a discount factorof 10 percent to net proved reserves.

 

Changes in the demand for oil and natural gas, inflation, and otherfactors make such estimates inherently imprecise and subject to substantialrevision. This table should not be construed to be an estimate of the currentmarket value of the Partnership’s proved reserves.

 
| **December 31,**                                     | ** ** | **2007**      | ** **    |
|-----------------------------------------------------------|------------|---------------|---------------|
| Oil and natural gas properties owned by the  Partnership: |       |          |          |
| Future cash inflows                                       | ** ** | **$**         | 9,270,671     | ** ** |
| Future production costs                                   |       | (3,589,920    | )             |
| Future development costs                                  |       | (248,093      | )             |
| Future net cash flows                                     | ** ** | **5,432,658** | ** **    |
| Effect of discounting net cash flows at 10%               |       | (1,050,738    | )             |
| Discounted future net cash flows                          | ** ** | **$**         | **4,381,920** | ** ** |

 

**Changes in the Standardized Measure of DiscountedFuture Net Cash flows Relating to Proved Oil and Natural Gas Reserves**

 
| **December 31,**                                     | ** ** | **2007**   | ** **    |
|-----------------------------------------------------------|------------|------------|---------------|
| Oil and natural gas properties owned by the  Partnership: | ** ** | ** ** | ** **    |
| Standardized measure at beginning of period               |       | $          | —        |   |
| Extensions and discoveries                                |       | 5,387,514  |          |
| Sales net of production costs                             |       | (1,005,594 | )             |
| Net increase                                              |       | 4,381,920  |          |
| Standardized measure at end of year                       | ** ** | **$**      | **4,381,920** | ** ** |

 

F-17

----

 

Reef Global Energy VIII, L.P.

Notes to Financial Statements (continued)

 

**11. Supplementary Quarterly Financial Data (unaudited)**

 
| **Period from Inception  (August 14, 2006 to  December 31, 2006)** | ** ** | **3rd Qtr** | ** ** | **4th Qtr** | ** ** | **Totals** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------|------------|
| Total oil and natural gas sales                                                                       | ** ** | **$**            | **—** | ** **       | **$**      | **—** | ** ** | **$** | **—** | ** ** |
| Loss from operations                                                                                  |       | (50,991          | )          | (5,702           | )          | (56,693    | )          |
| Net income (loss)                                                                                     |       | (46,304          | )          | 66,313           |       | 20,009     |       |
| Net income (loss) per managing general  partner unit                                                  |       | 17.62            |       | 315.96           |       | 333.58     |       |
| Net income (loss) per general partner unit                                                            |       | (74.24           | )          | 89.16            |       | 14.92      |       |
| Net income (loss) per limited partner unit                                                            |       | (86.17           | )          | 101.09           |       | 14.92      |       |
|                                                                                                       |            |                  |            |                  |            |            |            |  |  |  |

 
| **Year ended December 31,  2007**     | ** ** | **1st Qtr** | ** ** | **2nd Qtr** | ** ** | **3rd Qtr** | ** ** | **4th Qtr** | ** ** | **Totals** | ** ** |
|------------------------------------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------|------------|
| Total oil and natural gas sales                      | ** ** | **$**            | —     | ** **       | **$**      | 107,135          | ** ** | **$**            | 599,788    | ** ** | **$**      | 506,231 | ** ** | **$** | 1,213,154 | ** ** |
| Loss from operations                                 |       | (655,815         | )          | (871,594         | )          | (375,911         | )          | (6,068,066       | )          | (7,971,386 | )          |
| Net loss                                             |       | (556,377         | )          | (800,839         | )          | (339,045         | )          | (6,042,032       | )          | (7,738,293 | )          |
| Net income (loss) per managing general  partner unit |       | (742.30          | )          | (1,159.29        | )          | 931.21           |       | (9,910.07        | )          | (10,880.45 | )          |
| Net loss per general partner unit                    |       | (864.03          | )          | (1,238.89        | )          | (599.34          | )          | (9,285.70        | )          | (11,987.96 | )          |
| Net income (loss) per limited partner unit           |       | (864.03          | )          | (1,238.89        | )          | (599.34          | )          | (9,285.70        | )          | (11,987.96 | )          |
|                                                      |            |                  |            |                  |            |                  |            |                  |            |            |            |  |  |  |  |  |

 

Property impairment expense included in the above amounts is asfollows:

 

1st quarter   —  $651,500, 2nd quarter —   $850,709, 3rd quarter  —  $534,900, 4th quarter —  $5,993,951

 

F-18

----

 

**EXHIBIT INDEX**

 
| 3.1        |       | Certificate  of Limited Partnership (incorporated by reference to Exhibit 3.1 to  Form 8-A, SEC File No. 000-52541, as filed with the SEC on  March 30, 2007).                                                                                              |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                      |
| 3.2        |       | Form of  Limited Partnership Agreement (incorporated by reference to Appendix A to the  prospectus filed as part of Post-Effective Amendment No. 2 to  Registration Statement on Form S-1, SEC File No.333-122935, as filed  with the SEC on July 7, 2006). |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                      |
| 10.1       |       | Letter  Agreement, dated November 7, 2001, by and between Reef Partners LLC and  Challenger Minerals Inc. (incorporated by reference to Exhibit 10.2 of  the Report on Form 10-K of Reef Global Energy Ventures as filed with the  SEC on March 5, 2002).   |
|       |       |                                                                                                                                                                                                                                                                            |
| 23.2       | *          | Consent of Gleason Engineering.                                                                                                                                                                                                                                                 |
| ** ** | ** ** | ** **                                                                                                                                                                                                                                                                      |
| 31.1       | *          | Certification of Principal Executive Officer pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934.                                                                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                            |
| 31.2       | *          | Certification of Principal Financial Officer pursuant to  Rule 13a-14(a) under the Securities Exchange Act of 1934.                                                                                                                                                   |
|       |       |                                                                                                                                                                                                                                                                            |
| 32.1       | *          | Certification of Principal Executive Officer pursuant to 18 U.S.C.  §1350.                                                                                                                                                                                                 |
|       |       |                                                                                                                                                                                                                                                                            |
| 32.2       | *          | Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350.                                                                                                                                                                                                  |

 

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*      Attached herewith

 

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