**UNITEDSTATES**

**SECURITIES AND EXCHANGECOMMISSION**

**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, 2006** |
| ** **                                       |       | ** **                                                                                    |
| **OR**                                           |
|                                             |       |                                                                                          |
| **o**                                            | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For theTransition period from                    to**

### **COMMISSION FILENUMBER 333-122935-03**

**REEF GLOBAL ENERGY VIII, L.P.**

(Exact name of registrantas specified in its charter)

** **

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

 

**1901 N. Central Expressway, Suite300, Richardson, TX 75080-3610**

(Address ofprincipal executive offices including zip code)

**(972)-437-6792**

(Registrant’stelephone number, including area code)

Securities registeredpursuant to Section 12(b) of the Act:  **None**

Securitiesregistered pursuant to Section 12(g) of the Act:

 

**Generaland 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  o  No  x

Note – checking the box above will not relieve any registrant requiredto file reports pursuant to Section 13 or 15(d) of the Exchange Act from theirobligations under those sections.

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch 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, or a non-accelerated filer. See the definition of"accelerated filer and large accelerated filer" in Rule 12b-2 of theExchange Act.

Large accelerated filer  o     Accelerated filer  o        Non-accelerated filer  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 30, 2007, the registrant had 32.425 units held by themanaging general partner, 520.793 units of additional general partner interestand 95.283 units of limited partner interest outstanding.

Documents incorporated byreference:  None

 

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REEF GLOBAL ENERGY VII,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.     |       | Controls and  Procedures                                                                                            |       |
| Item 9B.     |       | Other Information                                                                                                   |       |
|         |       |                                                                                                                |       |
| **PART III** |       |                                                                                                                |       |
| Item 10.     |       | Directors and Executive  Officers of the Registrant                                                                 |       |
| 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                                                                     |       |
| Item 14.     |       | Principal Accounting  Fees and Services                                                                             |       |
|         |       |                                                                                                                |       |
| **PART IV**  |       |                                                                                                                |       |
| Item 15.     |       | Exhibits and Financial  Statement Schedules                                                                         |       |

 

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**PART I**

**ITEM 1.****                             BUSINESS.**

**Introduction**

ReefGlobal Energy VIII, L.P. (the Partnership) is the third in a series of Nevadalimited partnerships comprising a program called Reef Global Energy Ventures II(the Program). The Partnership was formed in the state of Nevada on August 14,2006.  The Partnership purchases workinginterests in oil and natural gas prospects and participates in the drilling ofwells on those prospects. The primary purposes of the Partnership are togenerate revenue from the production of oil and natural gas, distribute cash tothe partners, and provide tax benefits. Reef Oil & Gas Partners, L.P.(Reef) is the managing general partner of the Partnership.

ThePartnership was formed to drill, complete and own working interests in oil andnatural gas wells located primarily onshore in the continental United States.However, the Partnership may acquire interests in drilling prospects in suchlocations as its managing general partner deems advisable. To date, thePartnership has acquired interests in five prospects upon which it expects todrill 12 wells.  These prospects arelocated in Texas and Louisiana. The Partnership expects to drill approximately15 wells in total with its available capital. The Partnership will acquire working interests primarily in onshoreprospects generated by Reef Exploration, L.P. (RELP), an affiliate of Reef, andwill also purchase working interests in oil and natural gas prospects generatedby third parties. The Partnership will generally purchase a minoritynon-operated working interest in the prospects it purchases from third parties.Working interests acquired may be assigned to other public partnerships in thisProgram, to private drilling partnerships managed by Reef, and to thirdparties. Reef may also retain, for its sole benefit, a working interest in aprospect and participate in the drilling and development of the prospect on thesame basis as the Partnership.  In suchcases where the percentage ownership of the Partnership and Reef affiliatedentities is large enough in a prospect, RELP may be elected as operator of theprospect.  As of the date of this report,RELP operates one Partnership prospect upon which eight wells are expected tobe drilled.

Theattainment of the Partnership's business objectives, including the generationof revenue from Partnership operations, the distribution of cash to thepartners and the provision of tax benefits, will depend upon many factors,including:

·                  Reef'sability to select productive prospects;

·                  thedrilling and completion of wells in an economical manner;

·                  thesuccessful management of prospects;

·                  thelevel of oil and natural gas prices in the future;

·                  thedegree of governmental regulation over the production and sale of oil andnatural gas;

·                  thefuture economic conditions in the United States and throughout the world; and

·                  changesin the Internal Revenue Code (the Code).

Accordingly,there can be no assurance that the Partnership will achieve its businessobjectives.  In addition, distributionsto partners will decrease over time due to the fact that oil and natural gaswells are depleting assets, and production rates will decline over the life ofan individual well.  Distribution levelswill also be highly dependent upon oil and natural gas prices. Distributionswill be partially sheltered by the percentage depletion allowance.

**Acquisition and Drilling ofUndeveloped Prospects**

ThePartnership will acquire interests in prospects internally generated by RELP,or generated by and purchased from third parties. To date, the Partnership hasacquired interests in five prospects. A "prospect" is generallydefined as a contiguous oil and gas leasehold estate, or lesser interest in aleasehold estate, upon which drilling operations may be conducted. A prospectmay 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. Generally an exploratory well is anywell that is not a development well, including wells drilled to find andproduce oil or gas in an unproven area, wells drilled to find a new reservoirin a field previously found to be productive of oil or gas, or wells drilled toextend a known reservoir.

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Prospectsare evaluated utilizing data generated by RELP or provided by unaffiliatedthird parties to RELP. This data may include well logs, production records fromRELP's and others' wells, seismic, geological and geophysical information, andsuch other information as may be available and useful. Partnership prospectsare evaluated by petroleum engineers, geophysicists, geologists, and othertechnical consultants employed by RELP on the Partnership's behalf.

ThePartnership prospects are acquired pursuant to an arrangement in which the Partnershippurchases part of the working interest. A working interest bears a specified portion of the costs ofdevelopment, operation and maintenance. A working interest is subject to landowners' royalty interests and maybe subject to other royalty interests payable to unaffiliated third parties. Atits discretion, the Partnership may acquire less than 100% of the workinginterest provided that costs are reduced proportionately.  The Partnership's limited partnershipagreement (the Partnership Agreement) prohibits Reef or any of its affiliatesfrom retaining any overriding royalty interest, that is, any royalty interestthat would be paid out of the Partnership's working interest, in any workinginterest purchased by the Partnership. The Partnership will be a non-operatorworking interest owner in all prospects purchased by the Partnership. Workinginterests in prospects purchased by the Partnership may also be owned by otherpublic partnerships in this Program or by private drilling partnerships managedby Reef. Reef may, for its sole benefit, also retain a portion of the workinginterest in a prospect and participate in the drilling and development of theprospect on the same basis as the Partnership. If the total working interest inany prospect either retained or sold to this Partnership or other affiliatedpartnerships is large enough, RELP may be elected operator of the prospect.RELP serves as operator for one of the five prospects which have been purchasedby this Partnership.

Inacquiring interests in leases, the Partnership may pay such consideration andmake such contractual commitments and agreements as Reef deems fair, reasonableand appropriate.  The term"lease" means any full or partial interest in:

·                  undevelopedoil and gas leases;

·                  oiland gas mineral rights;

·                  licenses;

·                  concessions;

·                  contracts;

·                  feerights; or

·                  otherrights authorizing the owner to drill for, reduce to possession and produce oiland gas.

Leaseswill be acquired by the Partnership directly from unaffiliated persons or fromReef or its affiliates. All leases that are transferred to the Partnership fromReef or its affiliates will be transferred at cost, unless Reef has reason tobelieve that cost is materially more than the fair market value of suchproperty, in which case the price will not exceed the fair market value of theproperty.

Theactual number, identity and percentage of working interests or other interestsin prospects to be acquired by the Partnership will depend upon, among otherthings, available partnership capital, the latest geological and geophysicaldata, potential title or spacing problems, availability and price of drillingservices, of tubular goods and of services, approvals by federal and statedepartments or agencies, agreements with other working interest owners in theprospects, farm-ins, and continuing review of other prospects that may beavailable. The Partnership attempts to minimize drilling risk to the partnersby the diversity created from participating in numerous drilling opportunities.This Partnership expects to participate in the drilling of approximately 15wells in total with its available capital.

**Consulting Agreements forProspect Acquisitions**

Reef had entered into, and has allowed to expire, an agreement (the CMINorth Sea Agreement) with Challenger Minerals Inc. (CMI), a subsidiary ofGlobalSantaFe Corporation and a screener of oil and gas prospects in the NorthSea region. Pursuant to the terms of the CMI North Sea Agreement, for theperiod between December 1, 2003 and November 30, 2006, Reef could acquire up to5% of the interest made available to CMI in all offshore prospects located inthe North Sea region that were identified and initially reviewed by CMI duringthe term of the CMI North Sea Agreement. Reef paid CMI a fee of $75,000 per year, or a total of $225,000 over thethree-year term under the CMI North Sea Agreement.  CMI was not obligated to present Reef with aspecific number of prospects under the 

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CMI North Sea Agreement, and under certain circumstances further describedin the CMI North Sea Agreement, Reef could be excluded from participation incertain prospects. Reef allowed this agreement to expire effective November 30,2006.

Reef has also entered into an agreement with Access Exploration Corp.(AEC) for the period from October 1, 2004 thru October 2, 2007. Under terms ofthe agreement, Reef has the option to participate for up to 10% of the interestmade available to AEC in any Gulf of Mexico developmental project screened byAEC, and to participate for up to 12.5% of the interest made available to AECin any Gulf of Mexico exploration project screened by AEC. There is no minimumnumber of prospects which AEC is required to screen and present to Reef forparticipation. As part of this agreement, AEC will make available to Reef 5% ofthe interest made available to AEC in all projects outside the Gulf of Mexico.Reef will pay AEC the sum of $100,000 per year during the three year term ofthis agreement for the services rendered by AEC.

Reef may enter into additional agreements with other third partyconsultants to screen exploration and development projects in areas where suchconsultants have expertise in an effort to provide the Partnership with accessto the highest quality prospects, thereby reducing overall risk to thePartnership.

Projects approved for acquisition by Reef under these agreements willbe assigned to this Partnership as well as other limited partnerships formed aspart of the Program. Initially, each partnership formed as a part of theProgram will reimburse Reef a portion of the actual consulting fees paid on anestimated basis. Upon the completion of the Program's offering in 2007, theactual consulting fees paid during the period by Reef will be allocated to eachpartnership formed based upon total capital contributions, and each partnershipformed will either receive an additional assessment or refund of fees. Under nocircumstances will the partnerships reimburse any amount in excess of theactual fees paid by Reef and affiliates as consulting fees under these and anyfuture agreements entered into during the term of the Program. The Partnershiphad accrued a $104,545 estimated payment to Reef as of the end of December2006. This amount has been capitalized as geological and geophysical costs inaccordance with the full cost method of accounting for oil and gas properties.The amount was paid to Reef during the first quarter of 2007.

**Drilling and Completion Phase ofOperations**

Whenthe combined prospect ownership of the Partnership and any other Reefaffiliated entities, if any, total less than a 50% working interest in aprospect, it is probable that the majority owner of the prospect will selectthe operator for the wells drilled on the prospect. Reef will monitor theoperator’s performance and activity, will represent the Partnership in decisionmaking with regard to the Partnership's prospects, and otherwise represent thePartnership with regard to the activities of the Partnership.  When RELP serves as operator of a prospect,it will receive operator fees during the drilling and production phase ofoperations at the competitive rate in the area where the prospect islocated.  Typically, these are charged asa monthly fee per well as agreed to in an operating agreement signed by thePartnership and participating third parties in the well. When RELP does serveas operator on any Partnership wells, it does so pursuant to a model formoperating agreement issued by the American Association of Petroleum Landmen andan accounting procedure for joint operations issued by the Council of PetroleumAccountants Societies of North America. RELP is currently the operator on one Partnership prospect upon whicheight wells are expected to be drilled.

When RELP serves as the operator, it contracts thedrilling of the well to an independent third party, and the resulting costs ofthe well to the Partnership are determined by the actual third party costs,plus RELP's monthly charges for supervision, engineering, geology, accountingand other services for the area where the well is located. Under nocircumstances will RELP, Reef, or any other affiliate act as contractor orsubcontractor in connection with the drilling of any Partnership well.

The Partnership normally pays drilling and completioncosts as incurred. The Partnership is permitted to make advance payments wherenecessary to secure the tax benefits of prepaid intangible drilling costs andwhere there is a valid business reason. In order to comply with conditions tosecure the tax benefits of prepaid intangible drilling costs, the operator maynot refund any portion of amounts paid in the event actual costs are less thanamounts paid, but may apply any such amounts solely for payment of additionaldrilling services to the Partnership. A well that fails 

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to result in the discovery of oil or natural gas, orthat is determined to be unable to produce oil or natural gas in commercialquantities will be plugged and abandoned in accordance with applicableregulations. Generally, the costs of abandoning a well location includerestoration of the well site to its original condition prior to the drilling ofthe well.

**Production Phase of Operations**

For any well capable of producing quantities of oiland/or natural gas in commercial quantities, production operations commenceonce a Partnership well has been completed by installing all surface equipmentnecessary to control the flow of production or to shut down the well, and byinstalling any storage facilities, gathering, or sales lines required toproduce and sell the oil and/or natural gas production from the well.

ThePartnership intends to sell oil and/or natural gas production from its wells torefineries, foreign governmental agencies, entities controlled by foreigngovernments, industrial users, gas brokers, interstate pipelines or localutilities.  In many cases the Partnershipwill elect to sell its production under marketing arrangements entered into bythe operator of the well. Due to rapidly changing market conditions and normalcontracting procedures, final terms and contracts will not be completed untilafter the wells have been drilled.

ThePartnership will attempt to sell the oil and/or natural gas produced fromsuccessful wells on a competitive basis at the best available terms andprices.  Domestic sales of oil will be atmarket prices.  Certain internationalsales may, however, be at prices determined by foreign governments or byentities controlled by foreign governments. Generally, purchase contracts forthe sale of oil are cancelable on 30 days' notice, but purchase contracts forthe sale of natural gas may have a term of a number of years and may requirethe dedication of the gas from a well for the life of its reserves.  The Partnership will sell natural gas discoveredby it at negotiated prices domestically, based upon a number of factors, suchas the quality of the gas, well pressure, estimated reserves, prevailing supplyconditions and any applicable price regulations promulgated by the FederalEnergy Regulatory Commission (FERC). International gas sales, like international oil sales, may be at pricesdetermined by foreign governments or entities controlled by foreigngovernments.

Historically, the oil and gas market has experienced significant pricefluctuations. Prices are significantly impacted by local weather, supply in thearea, 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 does not expect to engage incommodity futures trading or hedging activities, or to enter into derivativefinancial instrument transactions for trading or other speculative purposes.Accordingly, the Partnership will be at risk for the volatility in commodityprices inherent in the oil and gas industry, and the level of commodity priceswill have a significant impact on the Partnership's results of operations.  See "Item 7A. — Quantitative andQualitative Disclosures About Market Risk."

ThePartnership's share of revenue from productive wells will be burdened by and/orsubject to royalties and overriding royalties, monthly operating charges, andother operating costs.  These items ofexpenditure involve amounts payable solely out of, or expenses incurred solelyby reason of, production operations.  ThePartnership will deduct operating expenses from the production revenue for thecorresponding period.

**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 the general partnersrepresents an open ended security for unforeseen events such as blowouts, lostcirculation, stuck drill pipe, etc. that may result in unanticipated additionalliability materially in excess of a general partner's initial investment in thePartnership.

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The Partnership is anamed insured under various insurance policies and intends to maintain suchpolicies subject to its analysis of their premium costs, coverage and otherfactors.  In the exercise of Reef 'sfiduciary duty as managing general partner, Reef has obtained insurance onbehalf of the Partnership to provide the Partnership with such coverage as Reefbelieves is sufficient to protect 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. Subject to the foregoing, Reef may, in itssole discretion, increase or decrease the policy limits and types of insurancefrom time to time as Reef deems appropriate under the circumstances, which mayvary materially.

Reef will notify allinvestor general partners of the Partnership at least 30 days prior to anymaterial change in the amount of the Partnership's insurance coverage.  Within this 30 day period and otherwise afterthe expiration of one year following the closing of the offering of thePartnership, investor general partners have the right to convert their unitsinto units of limited partnership interest by giving Reef written notice oftheir intent to convert.  At any timeduring this 30 day period, upon receipt of the required written notice from aninvestor general partner of his intent to convert, Reef will amend thePartnership Agreement and will file the amendment with the State of Nevadaprior to the effective date of the change in insurance coverage.  This amendment to the Partnership Agreementwill effectuate the conversion of the interest of the former investor generalpartner to that of a limited partner. Effecting conversion is subject to the express requirement that theconversion will not cause a termination of the Partnership for federal incometax purposes.  Investor general partnerswill have 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 ofconversion, the investor partner will continue to have unlimited liabilityregarding partnership activities that occurred while he was an investor generalpartner.

**Competition**

Thereare thousands of oil and natural gas companies in the United States.  Competition is strong among persons andcompanies 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.

Thenational supply of natural gas is widely diversified, with no one entitycontrolling over 5%.  As a result ofderegulation of the natural gas industry enacted by Congress and FERC, naturalgas prices are generally determined by competitive market forces.  Prices of crude oil, condensate and naturalgas liquids are not currently regulated and are generally determined bycompetitive market forces.

Thereis competition among operators for drilling equipment, goods, and drillingcrews. Such competition may affect the ability of the Partnership to developleases suitable for development by the Partnership once they are acquired.

**Markets**

Themarketing of any oil and natural gas produced by the Partnership is affected bya number of factors that are beyond the Partnership's control and whose exacteffect cannot be accurately predicted. These factors include:

·                  theamount of crude oil and natural gas imports;

·                  theavailability, proximity and cost of adequate pipeline and other transportationfacilities;

·                  thesuccess of efforts to market competitive fuels, such as coal and nuclear energyand the growth and/or success of alternative energy sources such as wind power;

·                  theeffect of United States and state regulation of production, refining,transportation and sales;

·                  thelaws of foreign jurisdictions and the laws and regulations affecting foreignmarkets;

·                  othermatters affecting the availability of a ready market, such as fluctuatingsupply and demand; and

·                  generaleconomic conditions in the United States and around the world.

Thesupply and demand balance of crude oil and natural gas in world markets hascaused significant variations in the prices of these products over recentyears.  The North American Free TradeAgreement eliminated trade and investment barriers between the United States,Canada, and Mexico, resulting in increased foreign competition for 

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domesticnatural gas production.  New pipelineprojects recently approved by, or presently pending before, FERC as well asnondiscriminatory access requirements could further substantially increase theavailability 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.

Membersof the Organization of Petroleum Exporting Countries (OPEC) establish pricesand production quotas for petroleum products from time to time with the intentof affecting the global supply of crude oil and reducing, increasing ormaintaining certain price levels.  Reefis unable to predict what effect, if any, such actions will have on the amountof or the prices received for oil produced and sold from the Partnership'swells.

Inseveral initiatives, FERC has required pipelines to develop electroniccommunication 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 increasedcompetition, it is anticipated to expand natural gas markets and to improvetheir reliability.

**Regulation**

ThePartnership's operations will be affected from time to time in varying degreesby domestic and foreign political developments, federal and state laws andregulations and the laws of other countries where some of the prospects may belocated.

*Production.*  In most areas of operations within the UnitedStates the production of oil and natural gas is regulated by state agenciesthat set allowable rates of production and otherwise control the conduct of oiland natural gas operations. Among the ways that states control production isthrough regulations that establish the spacing of wells or limit the number ofdays in a given month during which a well can produce.

*Environmental.*  The Partnership's drilling and productionoperations are also subject to environmental protection regulations establishedby federal, state, and local agencies that may necessitate significant capitaloutlays that, in turn, would materially affect the financial position andbusiness operations of the Partnership. These regulations, enacted to protectagainst waste, conserve natural resources and prevent pollution, couldnecessitate spending funds on environmental protection measures, rather than ondrilling operations. If any penalties or prohibitions were imposed on thePartnership for violating such regulations, the Partnership's operations couldbe adversely affected.

*NaturalGas 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.*Various legislativeproposals are being considered in Congress and in the legislatures of variousstates, which, if enacted, may significantly and adversely affect the petroleumand natural gas industries. Such proposals involve, among other things, theimposition of price controls on all categories of natural gas production, theimposition of land use controls, such as prohibiting drilling activities oncertain federal and state lands in protected areas, as well as other measures.At the present time, it is impossible to predict what proposals, if any, willactually be enacted by Congress or the various state legislatures and whateffect, if any, such proposals will have on the Partnership's operations.

*ForeignRegulation.*  Reefrelies heavily on local experts and personnel, including attorneys and accountants,for advice and assistance in complying with the laws and regulations of foreignjurisdictions when prospects are located in such jurisdictions.

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**Employees**

The Partnershiphas no employees, and is managed by its managing general partner, Reef. OnJanuary 2, 2006, OREI, Inc. (OREI), an affiliate of Reef, transferred all ofits employees to RELP, a new Reef affiliate formed during 2005. RELP employs astaff including geologists, geophysicists, petroleum engineers, landmen andaccounting personnel who administer all of the Partnership's operations. ThePartnership reimburses RELP for direct and administrative services atcost.  See "Item 11 – ExecutiveCompensation."

**ITEM 1A.****                                            RISKFACTORS**

**Oil andgas drilling is a speculative activity involving numerous risks and substantialand uncertain costs which could adversely affect the Partnership.**

Drilling for oil andnatural gas involves numerous risks, including the risk that no commerciallyproductive oil and/or natural gas reserves will be discovered. There can be noassurance that wells drilled by the Partnership will be productive or recoverall or any portion of the investment in such wells. Drilling and completioncosts are substantial and uncertain, and drilling operations may be curtailed,delayed, or cancelled due to a variety of factors beyond our control, includingshortages or delays in the availability of drilling rigs and crews, unexpecteddrilling conditions, title problems, pressure or irregularities in formations,equipment failures or accidents, adverse weather conditions, and compliancewith environmental and other governmental regulations. Our drilling activitiesmay not be successful and, if unsuccessful, will have an adverse effect on thePartnership’s results of operations and cash flow available for distribution tothe partners. Unexpected costs incurred in the drilling of certain wells maylimit the total number of wells the Partnership is able to drill with thecapital raised by the Partnership, thus increasing the overall risk of thePartnership’s drilling program.

**Oil andnatural gas prices are volatile.**

The financial condition,results of operations, and the carrying value of our oil and natural gasproperties depend primarily upon the prices received for our oil and naturalgas production. Oil and natural gas prices historically have been volatile andlikely will continue to be volatile given current world geopoliticalconditions. Cash flow from operations is highly dependent upon the sales pricesreceived from oil and natural gas production. The prices for oil and naturalgas are subject to a variety of factors beyond our control. These factorsinclude:

·                                          thelevel of consumer demand for oil and natural gas;

·                                          thedomestic and foreign supply of oil and natural gas;

·                                          theability of the members of  OPEC to agreeto and maintain oil price and production controls;

·                                          theprice of foreign oil and natural gas;

·                                          domesticgovernment regulations and taxes;

·                                          theprice and availability of alternative fuel sources;

·                                          weatherconditions, including hurricanes and tropical storms in and around the Gulf ofMexico;

·                                          marketuncertainty;

·                                          politicalconditions in oil and natural gas producing regions, including the Middle East;and

·                                          worldwideeconomic conditions.

These factors and thevolatility of the energy markets make it extremely difficult to predict pricemovements. Also, oil and natural gas prices do not necessarily move in tandem.Declines in oil and natural gas prices would not only reduce revenues and cashflow available for distributions to partners, but could reduce the amount ofoil and natural gas that can be economically produced from successful wellsdrilled by the Partnership, and, therefore, have an adverse effect uponfinancial condition, results of operations, oil and gas reserves, and thecarrying value of the Partnership’s oil and natural gas properties.

The Partnership, whilenot prohibited from engaging in commodity trading or hedging activities in aneffort to reduce exposure to short-term fluctuations in the price of oil and naturalgas, currently does not expect to engage in 

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such activities.Accordingly, the Partnership will be at risk for the volatility in oil andnatural gas prices, and the level of commodity prices will have a significantimpact upon the partnership’s results of operations.

**We aresubject to substantial operating risks that may adversely affect the results ofoperations.**

There are numeroushazards involved in the drilling and operation of oil and natural gas wells,including blowouts involving possible damages to property and third parties,bodily injuries, mechanical failures, explosions, uncontrollable flows of 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.

**We cannotcontrol activities on non-operated properties.**

The Partnership willpurchase minority non-operated working interests in many of the prospects itacquires. As a result, the Partnership will have limited ability to exerciseinfluence over and control the risks associated with operations of theseproperties. The failure of an operator of our wells to adequately performoperations, an operator’s breach of the applicable agreements, or an operator’sfailure to act in ways that are in our best interest could reduce ourproduction and revenues. The success and timing of drilling and developmentactivities on properties operated by others depends upon a number of factorsoutside of our control, including the operator’s

·                                          timingand amount of capital expenditures;

·                                          expertiseand financial resources;

·                                          inclusionof other participants in drilling wells; and

·                                          useof technology.

In addition, thePartnership could be held liable for the joint interest obligations of otherworking interest owners, such as nonpayment of costs and liabilities arisingfrom the actions of the other working interest owners. Full development ofprospects may be jeopardized in the event other working interest owners cannotpay their share of drilling and completion costs.

**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 to current industrydemands, drilling contractors, well service providers and related equipment andpersonnel are in short supply. This is causing escalating prices, delays indrilling and other exploration activities, and the possibility of poor servicecoupled with potential damage to downhole reservoirs and personnel injuries.Such pressures will likely increase the actual cost of services, extend thetime to secure such services, and add costs for damages due to any accidentssustained from overuse of equipment and inexperienced personnel.

**We facestrong competition from larger oil and natural gas companies.**

The oil and gas industryis highly competitive. Competition is encountered in all aspects of Partnershipoperations, including the acquisition of prospects for drilling and requisitionof drilling and service contractors. Many of our competitors are larger,well-established companies with substantially larger operating staffs andgreater capital resources than those of the Partnership, Reef and itsaffiliates. We may not be able to conduct our operations successfully, evaluateand select suitable prospects, obtain drilling and service contractors,consummate transactions, and obtain technical, managerial and otherprofessional personnel in this highly competitive environment. Specifically,larger competitors may be able to pay more for prospects and competentpersonnel than the Partnership, Reef and its affiliates. In addition, suchcompetitors may be able to expend greater resources on the existing and 

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changing technologiesthat will be increasingly important to success. Such competitors may also be ina better position to secure drilling and oilfield services, as well asequipment, on a more timely basis or on more favorable terms.

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

Upon the successfuldrilling of Partnership oil and gas wells, Securities and Exchange Commission(SEC) rules will require the Partnership to present annual estimates ofreserves. Reservoir engineering is a subjective and inexact process ofestimating underground accumulations of oil and natural gas that cannot bemeasured in an exact manner, and is based upon assumptions that may varyconsiderably from actual results. Accordingly, reserve estimates may be subjectto upward or downward adjustments. Actual production, revenues and expenditureswith respect to reserves will likely vary from estimates, and such variancescould be material.

**If thePartnership acquires prospects outside the United States, it will be subject tocertain risks of international operations.**

ThePartnership may acquire interests in oil and natural gas prospects locatedoutside the United States. To date the Partnership has not purchased anyforeign prospects. If the Partnership were to acquire prospects outside of theUnited States, it will be subject to risks generally associated with conductingbusiness in foreign countries, such as:

·                                          foreignlaws and regulations that may be materially different from those of the UnitedStates;

·                                          changesin applicable laws and regulations;

·                                          challengesto or failure of title;

·                                          laborand political unrest;

·                                          foreigncurrency fluctuation;

·                                          changesin foreign economic and political conditions;

·                                          exportand import restrictions;

·                                          tariffs,customs, duties and other trade barriers;

·                                          difficultiesin staffing and managing foreign operations;

·                                          longertime periods in collecting revenues;

·                                          difficultiesin collecting accounts receivable and enforcing agreements;

·                                          possibleloss of properties due to nationalization or expropriation; and

·                                          limitationson repatriation of income or capital.

In addition, in the eventof a dispute, the Partnership may be subject to the exclusive jurisdiction offoreign courts and agencies, or may not be successful in obtaining jurisdictionover foreign persons in state or federal courts in the United States. ThePartnership also may be hindered or prevented from enforcing its rights againstforeign governments and their agencies because international law may grantforeign governments and their agencies immunity from our courts or prohibit thePartnership from bringing suit in their courts.

**Reef and its affiliates have sponsored ventures inthe past that have produced dry holes and abandoned wells.**

Reef Global EnergyVentures II is the second public drilling program sponsored by Reef as themanaging general partner, and Reef Global Energy VIII, L.P. is the third in aseries of limited partnerships offered under that Program. Reef and itsaffiliate, RELP, have sponsored 61 ventures from 1996 to the present. Amongthese ventures, (i) eight were dedicated almost exclusively to the purchase ofinterests in already producing reserves, (ii) one was dedicated primarily tothe purchase of interests in already producing reserves but has the ability touse up to 20% of capital raised for development purposes, and (iii) two werededicated to both the purchase of interests in producing wells and the use ofup to 50% of capital raised for development of proven reserves.  We refer to the programs described in clauses(i) and (ii) of the preceding sentence as “income fund” ventures and to theprograms described in (iii) as “income and development fund” ventures. We havealso sponsored 50 drilling ventures since 1996. Together, these ventures havedrilled 107 wells (94 by drilling ventures and 13 by income fund and income anddevelopment fund ventures). Of the wells drilled by Reef and its affiliates'ventures, 47 were exploratory wells and 60 were 

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developmentalwells. Forty-one of the wells drilled were dry holes, and four wells werecompleted but were non-commercial. Of the 62 wells that were commercial, 44 arestill owned by Reef or its affiliates' ventures and are currently producing,one is awaiting connection to a pipeline, five have been plugged and abandoned,seven have been sold and five are currently shut-in. Using this data,approximately 57.9% of the wells drilled by these ventures were completed ascommercially producing and 42.1% were dry holes (including the four wells thatwere completed but failed to become commercial producers). Approximately 4.7%of the wells drilled by our ventures were subsequently abandoned.

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

 The Partnership intends to utilizesubstantially all available capital for the drilling and completion of wellsand acquisition of prospects. The Partnership only has nominal funds availablefor partnership purposes until there are revenues from Partnership operations.  The Partnership Agreement permits thePartnership to borrow money only after drilling has been completed and alladditional general partnership interests have been converted into limitedpartnership interests.  Any future requirementfor additional funding will have to come, if at all, from the Partnership'srevenues or from borrowings. Reef cannot assure the partners that Partnershipoperations will be sufficient to provide the Partnership with necessaryadditional funding.  Reef is prohibitedunder the Partnership Agreement from loaning money to the Partnership, and Reefcannot assure the partners that the Partnership will be able to borrow fundsfrom third parties on commercially reasonable terms or at all.

**Other partnerships Reef sponsors will compete withthe Partnership for prospects, 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 thepartnerships for suitable prospects and availability of equipment, contractors,and Reef's personnel, the fact that partnerships previously organized by Reefand its affiliates may still be purchasing prospects when the Partnership isattempting to purchase prospects may make the completion of prospectacquisition activities by the Partnership more difficult.

**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:

·                                          Reefdetermines in good faith that its action was in the best interest of thePartnership;

·                                          Reefwas acting on behalf of or performing services for the Partnership; and

·                                          Reef'sactions 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 been exploratorywells. Drilling exploratory wells involves greater risks of dry holes and lossof the partners' investment than the drilling of developmental wells.  Drilling developmental wells generallyinvolves less risk of dry holes, although sometimes developmental acreage ismore expensive and subject to greater royalties and other burdens onproduction. To date, the Partnership has purchased three exploratory prospectswith available capital. A well has completed drilling on the first exploratoryprospect and was unsuccessful. A well is currently drilling on the secondprospect, and the third well will be drilled later this year.

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**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.

**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.

**Shut-inwells and delays in production may adversely affect Partnership operations.**

Productionfrom wells drilled in areas remote from marketing facilities may be delayeduntil sufficient reserves are established to justify construction of necessarypipelines and production facilities. In addition, production from wells may bereduced or delayed due to seasonal marketing demands. Wells drilled for thePartnership may have access to only one potential market. Local conditions,including closing businesses, conservation, shifting population, pipelinemaximum operating pressure constraints, and development of local oversupply ordeliverability problems could halt sales from Partnership wells.

**The productionand producing life of Partnership wells is uncertain.**

Productionwill decline. It is not possible to predict the life and production of anywell. The actual lives could differ from those anticipated. Sufficient oil ornatural gas may not be produced for a partner to receive a profit or even torecover his initial investment. In addition, production from the Partnership'soil and natural gas wells, if any, will decline over time, and does notindicate any consistent level of future production. This production decline maybe rapid and irregular when compared to a well's initial production.

**Extreme weather conditions may adversely affectdrilling operations and distributions.**

The Partnership mayconduct drilling operations in the Gulf of Mexico region of Louisiana andTexas. This region is susceptible to extreme weather conditions, especiallythose associated 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’s drillingoperations 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*.**  ***

Werely on third parties to process and transport the oil and gas produced by thePartnership’s successful wells. In the event a third party upon whom we rely isunable to provide transportation or processing services, and another thirdparty is unavailable to provide such services, the Partnership may have totemporarily shut-in successful wells, and revenues to the Partnership anddistributions to investor partners related to those wells may be delayed.

**FORWARD-LOOKING STATEMENTS**

ThisReport on Form 10-K contains forward-looking statements that involverisks and uncertainties.  You shouldexercise extreme caution with respect to all forward-looking statementsmade in this Report.  Specifically, thefollowing statements are forward-looking:

·                  statements regarding thePartnership's overall strategy for acquiring prospects, including its intent todiversify the Partnership's investments;

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·                  statementsestimating any number or specific type or size of prospects the Partnership mayacquire or size of the interest the Partnership may acquire in such prospects;

·                  statementsregarding the state of the oil and gas industry and the opportunity to profitwithin the oil and gas industry, competition, pricing, level of production, orthe regulations that may affect the Partnership;

·                  statementsregarding the plans and objectives of Reef for future operations, including,without limitation, the uses of Partnership funds and the size and nature ofthe costs the Partnership expects to incur and people and services thePartnership may employ;

·                  anystatements using the words "anticipate," "believe,""estimate," "expect" and similar such phrases or words; and

·                  any statements of other thanhistorical fact.

Reefbelieves that it is important to communicate its future expectations to thepartners.  Forward-lookingstatements reflect the current view of management with respect to future eventsand are subject to numerous risks, uncertainties and assumptions, including,without limitation, the factors listed above in the section captioned "RISK FACTORS." Although Reefbelieves that the expectations reflected in such forward-looking statementsare reasonable, Reef can give no assurance that such expectations will prove tohave been correct.  Should any one ormore of these or other risks or uncertainties materialize or should anyunderlying assumptions prove incorrect, actual results are likely to varymaterially from those described herein. There can be no assurance that the projected results will occur, thatthese judgments or assumptions will prove correct or that unforeseendevelopments will not occur.

Reefdoes not intend to update its forward-looking statements.  All subsequent written and oral forward-lookingstatements attributable to Reef or persons acting on its behalf are expresslyqualified in their entirety by the applicable cautionary statements.

**ITEM 1B.****                    UNRESOLVEDSTAFF COMMENTS**

None

**ITEM 2.****                             PROPERTIES.**

**DrillingActivities and Productive Wells**

The primary focusof the Partnership's operations will be onshore in the continental UnitedStates. However, there are no restrictions regarding project locations.  To date, the partnership has purchasedinterests in five prospects, of which two are in Texas and three are inLouisiana.  As of December 31, 2006, thePartnership had begun drilling operations on two wells located in St. MaryParish and Terrebone Parish, Louisiana. Subsequent to December 31, 2006 thePartnership has drilled five wells in Glasscock County, Texas. Three prospectsupon which three wells in total will be drilled are classified as exploratory,and two prospects upon which nine wells in total will be drilled are classifiedas developmental. Upon completion of drilling, a well will be considered"productive" if it is capable of producing oil and/or natural gas incommercial quantities. The Partnership expects to drill approximately 15 wellsin total with its available capital.

During the fourthquarter of 2006, the Partnership commenced drilling operations on oneexploratory well and one developmental well. Both of these wells were drillingas of December 31, 2006. Subsequent to December 31, the exploratory well completeddrilling operations and was plugged and abandoned. The developmental wellcontinues drilling operations. The Partnership began and completed drillingoperations on five developmental wells all located in the same prospect duringthe first quarter of 2007. Three additional wells will be drilled before theend of the second quarter on this prospect. Completion operations have begun onthese five wells and all are expected to begin production operations during thesecond quarter. Drilling operations have also begun subsequent to year-end onthe second exploratory prospect, and are expected to begin on the thirdexploratory prospect during the second or third quarter of 2007.

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The Partnershipexpects to complete the drilling of all 12 wells located on the five prospectscurrently owned by the Partnership by the end of the third quarter of 2007. ThePartnership will purchase interests in additional drilling prospects and drillapproximately 15 wells in total with the available Partnership capital.

As of December 31,2006, the Partnership had no completed wells and therefore had no provedreserves.

**Title toProperties**

The Partnership'sinterests in producing and non-producing acreage will be in the form ofassigned direct interests in leases held by the Partnership or by Reef onbehalf of the Partnership. Such properties will be 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 will obtain satisfactorytitle to all of its leases. Title will be held by the Partnership or by Reef onbehalf of the Partnership.

**ITEM 3.****                             LEGALPROCEEDINGS.**

The Partnership is not, and hasnot been, a party to any legal proceedings.

**ITEM 4.****                             SUBMISSIONOF 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.** |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------|

 

As of December 31, 2006,the Partnership had one managing general partner, 92 limited partners, and 442additional general partners. Reef holds a total of 32.425 general partner unitsand the general and limited investor partners hold 520.793 general partnerunits and 95.283 limited partner units. No established trading market existsfor the units.

Cashwhich, in the sole judgement of the managing general partner, is not requiredto meet the Partnership’s obligations will be distributed to the partners atleast quarterly in accordance with the Partnership Agreement.

Limited andadditional general partnership 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.

The Partnershiphas adopted a unit repurchase program. Under the terms of the program, themanaging general partner is obligated to purchase up to 5% of the units in thePartnership in the sixth through tenth years after the Partnership closesunless changes in oil and gas pricing meet certain criteria specified in theprospectus supplement, however, the managing general partner’s obligation topurchase units is limited to $500,000 per year in the aggregate for allpartnerships sponsored as a part of the Reef Global Energy Ventures II Program.The Partnership did not repurchase any units in 2006.

**Use ofProceeds**

In connection withthe Registration Statement filed on form S-1 (No. 333-122935) and declaredeffective July 7, 2005, Reef filed a final prospectus for the Program on July8, 2005. On July 14, 2006, Reef filed a prospectus supplement describing thePartnership and commenced the offering of units in the Partnership. All salesof Partnership units were made through the Program's dealer-manager, ReefSecurities, Inc., and a number of soliciting dealers. The offering terminatedDecember 29, 2006. Under the terms of the offering, a minimum of 40 Partnershipunits at a price of $25,000 per unit were required to be sold in order to formthe Partnership. Upon meeting this requirement, the Partnership was formed on August14, 2006.

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During theoffering period that terminated on December 29, 2006, the Partnership sold616.076 units to investor partners, consisting of 95.283 units of limitedpartner interest and 520.793 units of additional general partner interest. Reefpurchased 32.425 general partner units, equaling 5.00% of the total Partnershipunits sold. Total offering proceeds were $16,090,928. Reef will also contribute1% of all leasehold, drilling, and completion costs as incurred. At December31, 2006, Reef had contributed $13,281 to the Partnership in connection withthis obligation.

All units exceptthose purchased by Reef paid a 15% management fee to Reef to pay for thePartnership organization and offering costs, including sales commissions. Thesecosts totaled $2,310,285, leaving capital contributions of $13,793,924available for Partnership oil and gas operations. As of December 31, 2006, thePartnership had expended $4,872,106 on property acquisitions and prepaymentsand $6,693 on general and administrative expenses.

The Partnershipintends to utilize all available Partnership capital for oil and gas activitiesduring 2007.

**ITEM 6.****                             SELECTEDFINANCIAL DATA.**

The selected financialdata presented below has been derived from the audited financial statements ofthe Partnership.
|                                            | ** ** | **Period from**       | ** ** |
|--------------------------------------------|------------|----------------------------|------------|
| ** **                                 | ** ** | **inception (August** | ** ** |
| ** **                                 | ** ** | **14, 2006) to** | ** ** |
| ** **                                 | ** ** | **December 31,**      | ** ** |
| ** **                                 | ** ** | **2006**                   | ** ** |
|                                       |       |                       |       |
| Oil and gas sales  revenue                 |       | $                          | —     |   |
| Interest income                            |       | 76,702                     |       |
| Costs and expenses                         |       | 56,693                     |       |
| Partnership net income                     |       | 20,009                     |       |
|                                       |       |                       |       |
| Allocation of net income:                  |       |                       |       |
| Managing general  partner                  |       | 10,816                     |       |
| General partner units                      |       | 7,771                      |       |
| Limited partner units                      |       | 1,422                      |       |
| Net income per managing  partner unit      |       | 333.58                     |       |
| Net income per general  partner unit       |       | 14.92                      |       |
| Net income per limited  partner unit       |       | 14.92                      |       |
|                                       |       |                       |       |
| Total assets                               |       | 16,635,451                 |       |
| Distributions to  managing general partner |       | —                     |       |
| Distributions to investor partners         |       | —                     |       |
|                                            |            |                            |            |  |

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

 

**Critical Accounting Policies**

The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States requires us to make estimates and assumptions that can affect thereporting of assets, liabilities, equity, revenues, and expenses. We base ourestimates on historical experience and various other assumptions that arebelieved to be reasonable under the circumstances. Actual results may differfrom these estimates under different assumptions or conditions. We are alsorequired to select among alternative acceptable accounting policies. See Note 2to the financial statements for a complete list of significant accountingpolicies.

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**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 provedreserves.  Proved gas reserves are convertedto equivalent barrels at a rate of 6 Mcf to 1 Bbl. Net capitalized costs ofcrude 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 un-escalated prices discounted at 10 percent, plus thecost of properties not being amortized, if any, plus the lower of cost orestimated fair value of unproved properties included in the costs beingamortized, if any. Excess costs are charged to property impairment expense. Nogain or loss is recognized upon sale or disposition of crude oil and naturalgas properties, except in unusual circumstances. The Partnership held noproductive oil and gas assets as of December 31, 2006 and recognized noproperty impairment.

The estimate of proved oil and gas reserves used to determineproperty impairment expense, and also utilized in the Partnership’s disclosuresof supplemental information regarding oil and gas producing activities,including the standardized measure of discounted cash flows, will be preparedby a petroleum engineer employed by RELP utilizing the period end prices andcosts as promulgated by the SEC. Reserve engineering is a subjective andinexact process of estimating underground accumulations of oil and natural gasthat cannot be measured in an exact manner. The accuracy of any reserveestimate is a function of the quality of available data and of engineering andgeological interpretation and judgment. Accordingly, reserve estimates may besubject to upward or downward adjustments. Actual production, revenuesand expenditures with respect to reserves will likely vary from estimates, andsuch variances could be material. As of December 31, 2006 the Partnership hadno proved reserves.

The determination of depreciation,depletion and amortization expense recognized in the financial statements isalso dependent upon the estimates of proved oil and gas reserves and will becomputed using the units-of-production method based upon this estimate ofproved reserves. The Partnership has no productive oil and gas properties as ofDecember 31, 2006 and therefore has no depreciation, depletion, andamortization expense for the period from inception (August 14, 2006) to December31, 2006.

The Partnership will followStatement of Financial Accounting Standards No. 143, "Accounting for AssetRetirement Obligations," for all productive oil and gas wells drilled bythe Partnership. This statement requires the Partnership to estimate the fairvalue of asset retirement obligations (dismantlement and abandonment of oil andgas wells and site restoration) in the period in which the asset is placed inservice. The liability recognized is offset by a corresponding increase in thecarrying value of the asset. Each period the liability is accreted to its netpresent value with a corresponding charge to accretion expense, and theadditional asset cost is amortized using the units-of-production method. Uponsettlement of the obligation a gain or loss is recognized to the extent actualcharges are less than or exceed the liability recorded. The Partnership has noproductive oil and gas properties as of December 31, 2006 and thereforerecognized no asset retirement obligation for period from inception (August 14,2006) to December 31, 2006.

For a discussionof risk factors that could impact the Partnership's financial results, pleasesee Item 1A of this Report on Form 10-K.

**Overview**

Reef Global Energy VIII, L.P. is a Nevada limited partnership formed toexplore, develop, acquire and produce crude oil, natural gas, and natural gasliquids for the benefit of its investor partners. The Partnership's primarypurposes are to generate revenues from the production of oil and gas,distribute cash flow to investors, and provide tax benefits to investors. Themajority of the Partnership’s proceeds will be used to purchase prospects uponwhich the Partnership will conduct drilling operations.

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During 2006, the Partnership purchased interests in four prospects uponwhich it expects to drill eleven wells, and subsequent to December 31, 2006 thePartnership purchased an interest in one additional prospect upon which itexpects to drill one well. Three wells will be classified as exploratory wells,and nine as developmental wells. The Partnership expects to acquire interestsin additional prospects during 2007 and drill approximately 15 wells in totalwith its available capital. The Partnership expects to operate solely in theUnited States, although there are no restrictions regarding prospect locations.The Partnership currently has two prospects in Texas and three inLouisiana.  OREI, an affiliate of Reef,has expertise and has served as a well operator primarily in Texas andLouisiana since its inception in 1987. During 2006, OREI transferred itsemployees to RELP, and also transferred well operator status to RELP.

The Partnership will focus on acquiring a mix of both oil and gasprospects. The Partnership will focus on projects in Louisiana and Texas wheregeologic factors are well known, where pipeline and other infrastructure ishighly developed, enabling the project operator to quickly complete successfulwells and establish cash flows, and where there is a highly competitive marketfor sale of the Partnership's production. The Partnership will acquireinternally generated prospects as well as prospects reviewed and developed byconsultants and other independent and major oil and gas industry participants.Participation in prospects developed by third parties will allow thePartnership to benefit from the expertise of these entities and increase thediversity and therefore lessen the overall drilling risk to the investors.

The Partnership does not operate in any other industry segment. Shouldany prospect in which the Partnership purchases an interest be determined towarrant additional development activity, the Partnership may pay for suchdevelopment with the original Partnership capital, or may borrow an amount upto 25% of the Partnership’s aggregate capital contributions without the consentof the investor partners, provided the lender agrees it will have no recourseagainst individual investor partners. The Partnership is prohibited fromissuing additional cash calls to investor partners. Borrowings for developmentalactivity in excess of 25% of the Partnership’s aggregate capital contributionsrequire approval of the investor partners. The Partnership is not allowed toborrow funds during the drilling phase of Partnership operations. Should thePartnership elect to borrow monies for additional development activity onPartnership properties, it will be subject to the interest rate risk inherentin borrowing activities. The Partnership is permitted but is not expected toengage in commodity futures trading or hedging activities, and therefore issubject to commodity price risk.   See"Item 7A—Quantitative and Qualitative Disclosures About Market Risk."

**Liquidityand Capital Resources**

The Partnershipwas funded with initial capital contributions totaling $16,090,928. Reefpurchased 32.425 units, or 5% of the total units sold, for $689,032. Investorpartners purchased 520.793 general partner units and 95.283 limited partnerunits for $15,401,896. Reef has also contributed $13,281 in connection with itsobligation to pay 1% of all leasehold, drilling, and completion costs.Syndication and organization costs totaled $2,310,285, leaving capitalcontributions of $13,793,924 available for Partnership activities. ThePartnership was formed on August 14, 2006 and the last partner was admitted tothe Partnership on December 29, 2006.

Because thePartnership is not allowed to borrow funds during the drilling phase ofoperations, the $13,793,924, plus any additional contributions made by Reef inconnection with the 1% obligation mentioned above, is the total amountavailable to the Partnership for drilling and administrative costs.  As of December 31, 2006, the Partnership hadexpended $4,872,106 on property acquisitions and prepayments and $6,693 ongeneral and administrative expenses. Please see Item 1A of this Report on Form10-K for a list of risk factors that could impact the Partnership. ThePartnership will begin distributing to investors the interest income earned bythe Partnership during the second quarter of 2007, and will distribute the netcash flow from successful wells drilled by the Partnership when received. Thesefunds will not be available for drilling activities.

The Partnershiphad working capital of $9,498,808 as of December 31, 2006, which includes interestincome earned on funds during and subsequent to escrow.

The Partnershipexpects to utilize the available capital contributions for lease acquisitionand drilling activities during 2007. The Partnership will purchase interests inadditional prospects during 2007 and expects the Partnership 

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to participate inthe drilling of approximately fifteen wells in total. The Partnership hascurrently budgeted $8.70 million of the $13.79 million available in connectionwith the 5 prospects it has purchased to date. Drilling activities will beconducted solely with the $13.79 million capital raised by the Partnership.

Until initialdrilling operations are completed it is not known whether any borrowings willbe required for additional developmental activities.  The Partnership is prohibited from issuingadditional partner assessments.

**Results of Operations**

Becausethe Partnership was formed on August 16, 2006, there is no comparableinformation for the period ended December 31, 2005.

**Periodfrom Inception (August 14, 2006) thru December 31, 2006**

The Partnershipbegan operations in August 2006. During the period between August and December2006, the Partnership purchased interests in four prospects upon which itexpects to drill 11 wells. As of December 31, 2006, the Partnership had twowells in progress, and expects all 11 wells to be drilled by the end of thethird quarter of 2007. During the period from inception (August 14, 2006) toDecember 31, 2006, the only income earned by the Partnership was interestincome earned from the investment of partner capital contributions. Thisinterest income of $76,702 was offset by organization costs of $50,000 (a onetime expense), and by general and administrative costs of $6,693, producing netincome of $20,009 for the year.

The Partnershipexpects to drill approximately fifteen wells in total with available capital,and expects to expend all or substantially all capital on the drilling of thesewells during 2007. As Partnership drilling activity increases and successfulwells begin production operations, we expect general and administrative coststo increase substantially above the levels of 2006. The Partnership will incurgeneral and administrative costs not only in connection with the operation ofwells, but also in connection with meeting its quarterly reporting obligations.Audit, legal, printing, and other costs associated with these reportingobligations are expected to be approximately $50,000-$60,000 per year.

Since December 31,2006, the Partnership has completed the drilling of five developmental wellswhich it expects will begin production during the second quarter of 2007. Oneexploratory well has been deemed non-commercial and has been plugged andabandoned. Drilling operations on the other five wells should be completed nolater than the end of the third quarter. The Partnership expects to have oiland gas revenues beginning in the second quarter of 2007.

**Off-Balance Sheet Arrangements**

The Partnership does not participate in transactions that generaterelationships with unconsolidated entities or financial partnerships, such asentities often referred to as structure finance or special purpose entities(SPEs), which would have been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limitedpurposes.  As of December 31, 2006, thePartnership was not involved in any unconsolidated SPE transactions.

**Contractual Obligations Table**

The 15% management fee dueReef for organization and syndication costs, including sales commissions, ispayable in two parts. Reef initially received an amount, not to exceed 13.5%,to recover actual commissions and organization and syndication costs. As ofDecember 31, 2006, the Partnership is obligated to pay Reef $506,981, representingthe portion of the management fee in excess of actual commissions andorganization and syndication costs, from the oil and gas cash flows availablefor partner distributions at a rate not to exceed $1 million per year. As ofDecember 31, 2006, the Partnership had no productive oil and gas assets and theinitial date of repayment is unknown. At such time as the Partnership has cashflows from productive oil and gas assets, the timing of the payment of theadditional management fee is solely at the discretion of the managing generalpartner.

17

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**ITEM 7A.****                    QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

**Interest Rate Risk**

The PartnershipAgreement allows borrowings from banks or other financial sources of up to 25%of the aggregate capital contributions to the Partnership without investorapproval, and allows borrowings in excess of 25% of the total capitalcontributions to the Partnership with the consent of investor partners.Borrowings are not allowed during the initial drilling phase of the Partnership,but only for additional development drilling and facilities costs onPartnership prospects already drilled. Should the Partnership elect to borrowmonies for additional development activity on Partnership properties, it willbe subject to the interest rate risk inherent in borrowing activities. Changesin interest rates could significantly affect the Partnership’s results ofoperations and the amount of net cash flow available for partner distributions.Also, to the extent that changes in interest rates affect general economicconditions, the Partnership will be affected by such changes. 

**Commodity Price Risk**

The Partnershipdoes not expect to engage in commodity futures trading or hedging activities orenter into derivative financial instrument transactions for trading or otherspeculative purposes.  The Partnershipexpects to sell a vast majority of its production from successful oil and gaswells on a month-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 will have a significantimpact on the Partnership's results of operations.

**Exchange Rate Risk**

The Partnershipcurrently has no income from foreign sources or operations in foreign countriesthat would subject it to currency exchange rate risks. The Partnership has notpurchased, and does not currently expect to purchase any prospects locatedoutside of the United States.

**ITEM 8.****                             FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA.**

The Partnership'sfinancial statements and supplementary data are set forth in a separate sectionto this Report, beginning on page F-1.
| **ITEM 9.** | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTING AND FINANCIAL DISCLOSURE.** |
|-------------|--------------------------------------------------------------------------------------------|

 

None

**ITEM 9A.****                   ****CONTROLSAND 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 report, as well as tosafeguard assets from unauthorized use or disposition. As of the end of theperiod covered by this report, Reef's Principal Executive Officer and Chief FinancialOfficer have evaluated the effectiveness of the design and operation of thePartnership's disclosure controls and procedures (as defined in Rule 13a-15(e)of the Securities and Exchange Act of 1934) with the assistance andparticipation of other members of management. Based upon that evaluation,Reef's Principal Executive Officer and Chief Financial Officer concluded thatas of December 31, 2006, our disclosure controls and procedures were effectiveat a reasonable assurance level for gathering, analyzing and disclosing theinformation the Partnership is required to disclose in the reports it filesunder the Securities Exchange Act of 1934 within the time periods specified inthe SEC's rules and forms.

18

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**Changes in Internal Controls**

There have been nochanges in Reef's internal controls over financial reporting that occurredduring our last fiscal quarter that have materially affected or are reasonablylikely to materially affect our internal control over financial reporting.

**ITEM 9B.****                    OTHERINFORMATION**.

None.

**PART III**

**ITEM 10.****                      DIRECTORSAND EXECUTIVE OFFICERS OF THE REGISTRANT.**

The Partnershiphas no directors or executive officers; it is managed by Reef Oil & GasPartners, L.P.

**Reef Oil & Gas Partners, L.P.and Reef Exploration, L.P.**

The Manager, officers and key personnel of the managinggeneral partner, their ages, current positions with the managing generalpartner and/or RELP, and certain additional information are set forth below:
| **Name**           | ** ** | **Age** | ** ** | **Positions and Offices Held**                                                   |
|--------------------|------------|---------|------------|----------------------------------------------------------------------------------|
| Michael J. Mauceli |       | 50      |       | Manager of Reef Oil & Gas Partners GP, LLC;  Chief Executive Officer of RELP |
| Kellam Colquitt    |       | 59      |       | Chief Operating Officer of RELP                                                  |
| H. Walt Dunagin    |       | 49      |       | Executive Vice President—Land Manager of RELP                               |
| Laura S. Klein     |       | 47      |       | Drilling Engineering Manager of RELP                                             |
| John M. Dees       |       | 53      |       | Vice President—Operations and Engineering of RELP                           |
| Daniel C. Sibley   |       | 55      |       | Chief Financial Officer of Reef and of RELP                                      |
| David M. Tierney   |       | 54      |       | Controller—Reef Global Energy Ventures                                      |

 

**Michael J. Mauceli** is the Manager and a member of Reef Oil & Gas PartnersGP, LLC, which is the general partner of Reef, and he also serves as the ChiefExecutive Officer of RELP. Mr. Mauceli has been the principal executive officerof Reef since its formation in February 1999. He has served in this positionwith RELP since January 2, 2006 and previously served in this position with itspredecessor entity, OREI, since 1987. Mr. Mauceli attended the University of Mississippi where he majored inbusiness management and marketing as well as the University of Houston where hereceived his Commercial Real Estate License. He entered the oil and gasbusiness in 1976 when he joined Tenneco Oil & Gas Company.  Mr. Mauceli moved to Dallas in 1979, where hewas independently employed by several exploration and development firms inplanning exploration and marketing feasibility of privately sponsored drillingprograms.

**Kellam Colquitt**joined RELP as Chief Operating Officer on February 14,2006. Mr. Colquitt has over thirty-five years of experience in the oil and gasindustry.  He is a 1971 graduate of TexasA&M University with a degree in geology. Prior to joining RELP, Mr.Colquitt served as Vice President-Exploration of Vintage Petroleum, Inc. inTulsa Oklahoma from 2001-2006. He also served as the General Manager-Explorationof Vintage Petroleum, Inc. from 2000-2001. Prior to that, Mr. Colquitt wasemployed from 1995-2000, first as Vice President-International ExplorationWestern Hemisphere and later as Vice President-U.S. Operations for Ranger OilLimited.  He is a member of the AmericanAssociation of Petroleum Geologists, the Houston Petroleum Club, the TulsaGeological Society, and the Houston Geological Society.

**H. Walt Dunagin** is Executive Vice President—Land Manager of RELP. He hasheld this position with RELP since January 2, 2006 and previously served in thesame position with its predecessor entity, OREI, since 1990. He is a 1979graduate of the University of Mississippi. Mr. Dunagin began his career doingindependent land work for Exxon Co. U.S.A. Since that time he has performed land work in Alabama, Mississippi,Louisiana, North 

19

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Dakota, Montana, Oklahoma andTexas. For six years prior to joining OREI, he was directly involved in thesale of producing properties for Mobil, Texaco, Oryx Energy and AmericanExploration Company. He has been a Certified Professional Landman since 1986and is a member of the American Association of Petroleum Landmen, DallasAssociation of Petroleum Landmen and the International Association of PetroleumNegotiators.

**Laura S. Klein** is Drilling EngineeringManager of RELP.  She has held thisposition with RELP since January 2, 2006 and previously served in the sameposition with its predecessor entity, OREI, since 2000. She is a 1981 graduateof the Colorado School of Mines with a Bachelor's degree in PetroleumEngineering. Since receiving her degree, Ms. Klein has accumulated 25 years ofexperience as a drilling/completion engineer and as a worldwide rig operationssupervisor. From 1996 until joining OREI, she held the position of Senior StaffDrilling Engineer with Mobil's International Drilling Services Unit and oversawprojects in Russia, China, Italy and the North Sea. Ms. Klein also managedrecruiting and training for Mobil's worldwide drilling organization. Ms.Klein's professional affiliations include the Society of Petroleum Engineers,the American Association of Drilling Engineers and the American Society ofTraining and Development.

**John M. Dees, P.E.** is Vice President-Operations and Engineering of RELP. From1994 to 2004, Mr. Dees served as a petroleum engineering consultant with DeesWell Completions. Mr. Dees has over 30 years of industry experience. Mr. Deeshas conducted well completion engineering and production operations for RELPsince January 2, 2006, and was previously with RELP's predecessor entity, OREI,since 2003, when he joined it in a consulting capacity. He holds a Bachelor ofScience degree in Chemistry from Southwestern Oklahoma State University and aMasters in Petroleum Engineering from the University of Oklahoma. Prior toconsulting for Reef, Mr. Dees worked for Halliburton Services in fracturingfluids, fracturing research engineering, and field operations engineering, aswell as for numerous oil and gas companies, including Getty Oil, Sun E&P,and Oryx Energy. Mr. Dees has published several peer-reviewed technical papersand was the inventor of several U.S. and international patents on extremeoverbalancing perforating stimulation and resin formation sand control. Mr.Dees is a member of the American Chemical Society and the Society of PetroleumEngineers.

**Daniel C. Sibley**became Chief FinancialOfficer of Reef in December 1999. He has served in the same position for RELPsince January 2, 2006 and has served in this position with RELP’s predecessorentity, OREI, since 1998. Mr. Sibley was employed as a Certified PublicAccountant with Grant Thornton from 1977 to 1980. From 1980 to 1998, he wasinvolved in the private practice of law. He received a B.B.A. in accountingfrom the University of North Texas in 1973, a law degree (J.D.) from theUniversity of Texas in 1977, and a Master of Laws-Taxation degree (L.L.M.) fromSouthern Methodist University in 1984.

**David M. Tierney** has been employed by RELPsince January 2, 2006 and was previously with its predecessor entity, OREI,since March 2001.  Mr. Tierney is theController of the Reef Global Energy Ventures 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, andhas worked in the oil and gas industry since 1979. From 1992 through 2000 heserved as controller/treasurer of an independent oil and gas explorationcompany.

**Audit Committee andNominating Committee**

Because the Partnership has no directors, it doesnot have an audit committee, an audit committee financial expert or anominating committee.

**Code of Ethics**

Because the Partnership hasno 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 investor partners, without charge, upon request made toReef Oil and Gas Partners, L.P., 1901 N. Central Expressway, Suite 300,Richardson, Texas 75080, Attention: Daniel C. Sibley.

20

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**ITEM 11.****                      EXECUTIVECOMPENSATION.**

The following table summarizes the items of compensation to be receivedby 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, refers onlyto its interest as managing general partner and does not include the interestReef has as the result of its purchase of units in the Partnership, nor the 1%interest Reef has as the result of its payment of 1% of all lease costs,intangible drilling and development costs, and well completion costs.  Reef purchased 5.00% of the outstandingPartnership units. Reef received a 10% interest as managing general partner ofthe Partnership and a 1% interest as a result of Reef’s payment of 1% of alllease costs, intangible drilling and development costs, and well completioncosts 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 will receivea management fee equal to 15% of the Partnership subscriptions exclusive of theunits purchased by Reef. From this amount Reef pays all of the Partnership'sorganization and offering costs, including sales commissions. The managementfee is payable to Reef in two parts. Reef initially receives an amount not toexceed 13.5% to cover actual sales commissions and actual organization andsyndication costs. The remainder of the management fee is paid to Reef from thenet cash flow available for partner distributions, at a rate not to exceed $1million per year. The total management fee owed Reef is $2,310,285. Of thisamount, $1,803,304 has been paid to Reef to cover actual sales commissions andorganization and syndication costs, and $506,981 has been accrued as an accountpayable to be paid to Reef from net cash flow of the Partnership. ThePartnership recorded $2,260,285 of this amount as syndication costs, and $50,000as organization costs.

Reef will bereimbursed for direct costs and all documented out-of-pocket expenses incurredon behalf of the Partnership, including administrative costs. During the periodfrom inception (August 14, 2006) to December 31, 2006, the Partnershipreimbursed Reef $36,343 for technical services costs which have beencapitalized as project costs.

Operators feeswill be payable only if RELP or another Reef affiliate serves as operator of aPartnership prospect. Under such circumstances, such affiliate will receivefees at the competitive rate in the area during the drilling and productionphase of operations. Often these are charged as a monthly fee per well. Duringthe period from inception (August 14, 2006) to December 31, 2006, the Partnershippaid no operator fees. RELP will serve as operator of one Partnership prospectupon which drilling will take place during 2007.
| **ITEM 12.** | **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS** |
|--------------|-----------------------------------------------------------------------------------------------------|

 

The following table setsforth information as of December 31, 2006 concerning all persons known by Reefto own beneficially more than 5% of the interests in the Partnership. Unlessexpressly indicated otherwise, each partner exercises sole voting andinvestment power with respect to the units beneficially owned.

21

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| 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 & GasPartners, L.P.’s address is 1901 N. Central Expressway, Suite 300, Richardson,Texas 75080.

Themanaging general partner receives 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 RELATEDTRANSACTIONS.

Reef is the managing general partner of thePartnership.  Along with its affiliates,Reef has entered into agreements with, and received compensation from, thePartnership for services it performs for the Partnership.  See Item 11. – Executive Compensation.

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

ThePartnership was formed August 14, 2006. The Partnership incurred professionalaudit and tax fees from its principal auditor BDO Seidman, LLP, as disclosed inthe table below:
|                     | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|
| Audit fees          |       | $        | 33,700     |   |
| Tax compliance fees |       | 615      |       |
|                     |            |          |            |  |

 

Fees fortax services are for review of the Partnership’s tax return.

**PART IV**

**ITEM 15.**                      EXHIBITS, FINANCIAL STATEMENT SCHEDULESAND REPORTS ON FORM 8-K.
| (a)    |   | 1.  Financial Statements                                 |   |   |
|--------|--------|----------------------------------------------------------|--------|--------|
|   |   |                                                     |   |   |
|   |   | Report of  Independent Registered Public Accounting Firm |   |   |
|   |   | Balance  Sheets                                          |   |   |
|   |   | Statements  of Operations                                |   |   |
|   |   | Statements of  Partnership Equity                        |   |   |
|   |   | Statements  of Cash Flows                                |   |   |
|   |   | Notes to Financial  Statements                           |   |   |
|   |   |                                                     |   |   |
|   |   | 2. Financial Statement Schedules                         |   |   |
|   |   |                                                     |   |   |
|   |   | 3. Exhibits                                              |   |   |

 

A list of theexhibits filed or furnished with this report on Form 10-K (or incorporated byreference to exhibits previously filed or furnished by us) is provided in theExhibit Index in this report.  Thoseexhibits incorporated by reference herein are indicated as such by theinformation supplied in the parenthetical thereafter. Otherwise, the exhibitsare filed herewith.

22

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the Registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
| Date:  April 11, 2007 | **REEF GLOBAL ENERGY VIII, L.P.** |
|---------------------------------|-----------------------------------|
|                            | ** **                        |
| ** **                      | ** **                        |
|                            | Reef Oil & Gas Partners, L.P. |
|                            | Managing General Partner          |
|                            |                              |
|                            | By:                               | Reef Oil & Gas Partners, GP, LLC |
|                            |                              |   |
|                            | By:                               | /s/ Michael J. Mauceli |   |
|                            |                              | Michael J. Mauceli |
|                            |                              | Manager (principal executive officer) |

23

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Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

| Signature              | ** ** | **Title**                                                   | ** ** | **Date**       |
|------------------------|------------|-------------------------------------------------------------|------------|----------------|
|                   |       | * *                                                    |       |           |
| /s/ Michael J. Mauceli |       | Manager and Member of the general partner of Reef           |       | April 11, 2007 |
| Michael J. Mauceli     |       | Oil & Gas Partners, L.P.*(Principal Executive Officer)* |       |           |
|                   |       | * *                                                    |       |           |
| /s/ Daniel C. Sibley   |       | Chief Financial Officer *(Principal  Financial Officer*     |       | April 11, 2007 |
| Daniel C. Sibley       |       | *and Principal Accounting Officer)*                         |       |           |

 

24

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Reef Global EnergyVIII, L.P.

Financial Statements

For the Periodfrom Inception (August 14, 2006) to December 31, 2006

**Contents**
| Report of Independent Registered  Public Accounting Firm |   |   |
|----------------------------------------------------------|--------|--------|
|                                                     |   |   |
| Audited Financial Statements                             |   |   |
|                                                     |   |   |
| Balance  Sheet                                           |   |   |
| Statement  of Operations                                 |   |   |
| Statement of  Partnership Equity                         |   |   |
| Statement  of Cash Flows                                 |   |   |
| Notes to Financial  Statements                           |   |   |

 

----

Report of Independent Registered Public AccountingFirm

The Partners

Reef Global Energy VIII,L.P.

We have auditedthe accompanying balance sheet of Reef Global Energy VIII, L.P. as of December31, 2006, and the related statements of operations, partnership equity, andcash flows for the period from inception (August 14, 2006) to December 31,2006. These financial statements are the responsibility of the Partnership’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit.

We conducted our audit 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 audit provides areasonable basis for our opinion.

In our opinion,the financial statements referred to above present fairly, in all materialrespects, the financial position of Reef Global Energy VIII, L.P. at December31, 2006, and the results of its operations and its cash flows for the periodfrom inception (August 14, 2006) to December 31, 2006, in conformity withaccounting principles generally accepted in the United States of America.

BDO Seidman, LLP

Dallas, Texas

April 4, 2007

F-1

----

**ReefGlobal Energy VIII, L.P.**

**Balance Sheet**

 
| December 31,                             | ** ** | **2006**       | ** **     |
|-----------------------------------------------|------------|----------------|----------------|
| ** **                                    | ** ** | ** **     | ** **     |
| **Assets**                                    | ** ** | ** **     | ** **     |
| ** **                                    | ** ** | ** **     | ** **     |
| **Current  assets:**                          |       |           |           |
| Cash and cash equivalents                     |       | **$**          | 11,294,514     |   |
| Accounts receivable from affiliates           |       | 468,831        |           |
| **Total current  assets**                     |       | **11,763,345** |           |
|                                          |       |           |           |
| **Property  and equipment:**                  |       |           |           |
| Drilling in progress                          |       | 1,328,081      |           |
| Prepaid drilling costs                        |       | 3,544,025      |           |
| **Total  property and equipment**             |       | **4,872,106**  |           |
|                                          |       |           |           |
| **Total  assets**                             | ** ** | **$**          | **16,635,451** |   |
|                                          |       |           |           |
| **Liabilities  and Partnership Equity**       |       |           |           |
|                                          |       |           |           |
| **Current  liabilities:**                     |       |           |           |
| Accounts payable                              |       | **$**          | 20,000         |   |
| Accounts payable to affiliates                |       | 2,244,537      |           |
| **Total  current liabilities**                |       | **2,264,537**  |           |
|                                          |       |           |           |
| **Non-current  liabilities:**                 |       |           |           |
| Accounts payable to affiliates                |       | 506,981        |           |
| **Total  non-current liabilities**            |       | **506,981**    |           |
|                                          |       |           |           |
| **Partnership  Equity**                       |       |           |           |
| General partners                              |       | 11,116,890     |           |
| Limited partners                              |       | 2,033,914      |           |
| Managing general partner                      |       | 713,129        |           |
| **Partnership  equity**                       |       | **13,863,933** | ** **     |
|                                          |       |           |           |
| **Total liabilities and  partnership equity** | ** ** | **$**          | **16,635,451** |   |

 

*See accompanying notes to financial statements.*

F-2

----

**ReefGlobal Energy VIII, L.P.**

**Statement of Operations**

 
| Period from Inception (August 14, 2006) to December 31, | ** ** | **2006**   | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------|------------|
|                                                                                            | ** ** | ** ** | ** ** |
| **Costs  and expenses:**                                                                        | ** ** | ** ** | ** ** |
| Organization expenses                                                                           | ** ** | **$**      | 50,000     | ** ** |
| General and administrative expenses                                                             |       | 6,693      |       |
| **Total  costs and expenses**                                                                   | ** ** | **56,693** | ** ** |
|                                                                                            | ** ** | ** ** | ** ** |
| **Other  income:**                                                                              | ** ** | ** ** | ** ** |
| Interest income                                                                                 |       | 76,702     |       |
| **Total  other income**                                                                         | ** ** | **76,702** | ** ** |
| ** **                                                                                      | ** ** | ** ** | ** ** |
| **Net  income**                                                                                 | ** ** | **$**      | 20,009     | ** ** |
|                                                                                            | ** ** | ** ** | ** ** |
| Net income per  general partner unit                                                            | ** ** | **$**      | **14.92**  | ** ** |
| Net income per  limited partner unit                                                            | ** ** | **$**      | **14.92**  | ** ** |
| Net income per  managing general partner unit                                                   | ** ** | **$**      | **333.58** | ** ** |

 

*See accompanying notes to financial statements.*

F-3

----

**ReefGlobal Energy VIII, L.P.**

**Statement of Partnership Equity**

**For thePeriod from Inception (August 14, 2006)**

**ToDecember 31, 2006**

 
| ** **                                       | ** ** | **General partners** | ** ** | **Limited partners** | ** ** | **Managing general  partner** | ** ** | **Total**  | ** ** |
|--------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|------------------------------------|------------|------------|------------|
| ** **                                       | ** ** | **Units**                 | ** ** | **Amount**                | ** ** | **Units**                          | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** |
| Partner  contributions, net of syndication costs |       | 520.793                   |       | $                         | 11,109,119 |                               | 95.283     |       | $          | 2,032,492 |   | 32.425 |   | $ | 702,313 |   | 648.501 |   | $ | 13,843,924 |   |
| 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 |   |

 

* Seeaccompanying notes to financial statements.*

F-4

----

**ReefGlobal Energy VIII, L.P.**

**Statement of Cash Flows**

 
| Period from Inception (August 14, 2006) to December 31, | ** ** | **2006**       | ** **     |
|-------------------------------------------------------------------------------------------------|------------|----------------|----------------|
| ** **                                                                                      | ** ** | ** **     | ** **     |
| **Operating  Activities**                                                                       |       |           |           |
| Net income                                                                                      | ** ** | **$**          | **20,009**     | ** ** |
| Adjustments to  reconcile net income to net cash provided by operating activities:              | ** ** | ** **     | ** **     |
| Changes in  operating assets and liabilities:                                                   |       |           |           |
| Accounts payable                                                                                |       | 20,000         |           |
| Accounts payable to affiliates                                                                  |       | —         |           |
| **Net  cash provided by operating activities**                                                  | ** ** | **40,009**     | ** **     |
|                                                                                            | ** ** | ** **     | ** **     |
| **Investing  Activities**                                                                       |       |           |           |
| Property acquisition and development                                                            |       | (3,177,415     | )              |
| ** Net cash used in investing activities**                                                 | ** ** | **(3,177,415** | **)**          |
| ** **                                                                                      | ** ** | ** **     | ** **     |
| **Financing  Activities**                                                                       | ** ** | ** **     | ** **     |
| Partner capital contributions                                                                   |       | 15,635,378     |           |
| Syndication costs                                                                               |       | (1,203,458     | )              |
| **Net  cash provided by financing activities**                                                  | ** ** | **14,431,920** | ** **     |
|                                                                                            | ** ** | ** **     | ** **     |
| **Net  increase in cash and cash equivalents**                                                  | ** ** | **11,294,514** | ** **     |
| Cash and cash  equivalents at inception                                                         | ** ** | **—**     | ** **     |
| **Cash  and cash equivalents at end of period**                                                 | ** ** | **$**          | **11,294,514** | ** ** |
|                                                                                            | ** ** | ** **     | ** **     |
| Non-cash  investing transactions:                                                               | ** ** | ** **     | ** **     |
| Increase in  property included in accounts payable to affiliates                                | ** ** | **$**          | 1,694,691      | ** ** |
| Non-cash  financing transactions:                                                               |       |           |           |
| Managing partner  capital contributions included in accounts receivables from affiliates        | ** ** | **$**          | 468,831        | ** ** |
| Syndication  costs included in accounts payable to affiliates                                   | ** ** | **$**          | 549,846        | ** ** |
| Syndication costs  included in non-current accounts payable to affiliates                       | ** ** | **$**          | 506,981        | ** ** |

 

*See accompanying notes to financial statements.*

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**ReefGlobal Energy VIII, L.P.**

**Notes to Financial Statements**

**December 31,2006**

**1. Organization and Basis of Presentation**

Reef Global Energy VIII, L.P. (the Partnership) is the third in aseries of Nevada limited partnerships comprising a program called Reef GlobalEnergy Ventures II (the Program), pursuant to an S-1 Registration Statementdeclared effective by the Securities and Exchange Commission (the SEC) on July7, 2005. In order to be formed, each partnership is required to sell a minimumof 40 partnership units at $25,000 per unit, including units purchased by themanaging general partner. Each partnership to be formed as a part of theProgram will offer a minimum of 1,000 and a maximum of 2,000 units for sale.The Program is 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. Reef Global Energy VIII, L.P. offered 2,000 units for sale ($50,000,000),consisting of up to 400 limited partner units and up to 1600 general partnerunits. Investor funds are held in escrow and are subject to reimbursement withinterest if the minimum number of units is not sold. The Program filed aprospectus supplement with the SEC on July 14, 2006 describing the Partnership,and commenced 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 outside investorstotaling 95.283 limited partner units and 520.793 general partner 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 purchases working interests in exploratoryand developmental drilling prospects and drills oil and gas wells locatedprimarily onshore in the continental United States. Other partnerships formedas a part of this Program may also own interests in the wells purchased by thisPartnership. In instances where the partnerships own a majority workinginterest in a well, the well may be operated by Reef Exploration, L.P. (RELP),an affiliate of the managing general partner. The Partnership began drillingactivities during October 2006. As of December 31, the Partnership haspurchased an interest in four prospects upon which eleven wells are expected tobe drilled. The Partnership is continuing to acquire leases and expectsdrilling operations to continue through 2007.

Duringthe year following completion of the drilling phase of the Partnership, allgeneral partner units purchased by investor partners will be converted intolimited partner units. Limited partners do not have any rights to convert theirunits to general partner units.

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Under the terms of the partnership agreement, certain expense items areallocated differently between the managing general partner and the investorpartners. Cash distributions to partners of the net cash flow from interestincome 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%interest represented 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.

ThePartnership does not expect to engage in commodity futures trading or hedgingactivities and has not entered into derivative financial instrumenttransactions for trading or other speculative purposes. Accordingly, thePartnership will be at risk for the volatility in commodity prices inherent inthe oil and gas industry, and the level of commodity prices is expected to havea significant impact on the Partnership’s results of operations.

F-7

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**Organization and Syndication Costs**

Organization and syndication costs total 15% of investor capitalcontributions, except for units purchased by the managing general partner,which are purchased net of the 15% cost. Partnership organization coststotaling $50,000 have been expensed in the financial statements. Syndicationcosts represent costs incurred in conjunction with the offering of partnershipunits. These costs, totaling $2,260,285, have been recorded as a reduction ofthe proceeds of the offering.

# **Oil and 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 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 un-escalated prices discounted at 10 percent, plus thecost of properties not being amortized, if any, plus the lower of cost orestimated fair value of unproved properties included in the costs beingamortized, if any. Excess costs are charged to property impairment expense. Nogain or loss is recognized upon sale or disposition of crude oil and naturalgas properties, except in unusual circumstances. The Partnership held noproductive oil and gas assets as of December 31, 2006 and recognized no propertyimpairment.

# **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 that relateto an existing condition caused by past operations and that have no futureeconomic benefit are expensed.

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

Statementof Financial Accounting Standards No. 143, “Accounting for Retirement Obligations”(SFAS 143) addresses accounting and reporting for obligations associated withthe retirement of tangible long-lived assets and the associated assetretirement costs. SFAS 143 requires that the

F-8

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fair value of a liability for an asset’s retirement obligation berecorded in the period in which it is incurred and the corresponding costcapitalized by increasing the carrying amount of the related long-lived asset.The liability is accreted to its then present value each period, and thecapitalized cost is depreciated over the useful life of the related asset. SFAS143 is effective for the Partnership as of its inception date. As of December31, 2006 the Partnership had no productive long-lived assets and therefore hadno asset retirement obligation.

**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.

The book basis of the Partnership’s assets exceeds the tax basis of theassets by approximately $3.86 million as of December 31, 2006, primarily due tothe deduction of intangible drilling costs and prepaid drilling costs for taxpurposes.

**New Accounting Pronouncements**

In September 2006, the FASB issued Statement of Financial AccountingStandards No. 157, “Fair Value Measurements” (“SFAS No. 157). This standardclarifies the principal that fair value should be based on the assumptions thatmarket participants would use when pricing an asset or liability. Additionally,it establishes a fair value hierarchy that prioritizes the information used todevelop those assumptions. We have not yet determined the impact that the implementationof SFAS No. 157 will have on our results of operations or financial condition,if any. SFAS No. 157 is effective for financial statements issued for fiscalyears beginning after November 15, 2007.

**3. Transactions with Affiliates**

The Partnership has no employees. RELP, an affiliate of Reef, employs astaff including geologists, petroleum engineers, landmen and accountingpersonnel who administer all of the Partnership’s operations. The Partnershipreimburses RELP for technical and administrative services at cost. During theperiod from inception (August 14, 2006) to December 31, 2006, the Partnershipincurred technical services costs totaling $36,343, which have been capitalizedas project costs.

ThePartnership has a receivable from Reef as of December 31, 2006 related to itscapital contribution. The balance due consists of $455,835 for the purchase of21.451 Partnership units. Reef is required to purchase a minimum of 5% of theunits in the Partnership. Reef paid the $455,835 during February 2007.

F-9

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Reef, as managing general partner, contributes 1% of all leasehold,drilling and completion costs when incurred, in addition to the costs it paysas a result of purchasing 5% of Partnership units. During the period frominception (August 14, 2006) to December 31, 2006, this obligation totaled$13,281, of which $12,996 is due as of December 31, 2006 and included asaccounts receivable from affiliates. Reef paid the $12,996 during March 2007.

RELP processes joint interest billings on behalf of the Partnership. Asof December 31, 2006, the Partnership owed RELP $1,553,803 in connection withdrilling and prepayment invoices paid by RELP on behalf of the Partnership, and$36,343 for technical services costs. The Partnership settles its balances withRELP on a quarterly basis.

Accounts payableto affiliates as of December 31, 2006 also includes $1,056,827 for the unpaidportion of the 15% management fee due Reef for organization and syndicationcosts, including sales commissions. The management fee is payable in two parts.Reef initially receives an amount not to exceed 13.5% to recover actualcommissions and organization and syndication costs. As of December 31, 2006,$549,846 of the balance due represents recovery of these costs, and this amounthas been paid to Reef during the first quarter of 2007. The remaining balanceof $506,981, representing the portion of the management fee in excess of actualcommissions and organization and syndication costs, will be paid to Reef fromthe oil and gas cash flows available for partner distributions, at a rate notto exceed $1 million per year. The Partnership has no productive properties asof December 31, 2006. The Partnership will begin paying this additionalmanagement fee amount when it has productive properties and begins distributionof net revenues to investor partners. The liability has been classified asnon-current since the Partnership currently has no productive properties andthe initial date of repayment is currently unknown.

Reef had entered into, and has allowed to expire, an agreement (the CMINorth Sea 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 allowed 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. Reef has also entered into an agreement with Access Exploration Corp(AEC), a screener of domestic oil and gas prospects both onshore and in theGulf of Mexico. This agreement allows Reef the opportunity to review andselectively participate in exploratory and developmental prospects previewed byAEC. Reef pays AEC for the geological and geophysical services provided by AECunder this agreement.

Prospectsapproved for acquisition by Reef under these agreements are assigned to thisPartnership as well as other limited partnerships formed as part of theProgram. Each partnership formed as a part of the Program pays Reef anestimated payment as reimbursement, on a pro rata basis, of the fees paid byReef under these agreements. When the Program’s offering is completed, theactual fees to be reimbursed by each partnership formed as a part of theProgram

F-10

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will be calculated based upon each partnership’s total capitalcontributions, and each partnership formed will either receive an additionalassessment or refund of fees. Total reimbursement to Reef by the partnershipsformed as a part of this Program will not exceed the actual fees paid by Reefunder these agreements. As of December 31, 2006, this Partnership accrued anestimated payment to Reef of $104,545, which was paid to Reef during the firstquarter of 2007. The payment has been capitalized as geological and geophysicalcosts in accordance with the full cost method of accounting for oil and gasproperties.

**4. Prepaid Drilling Costs**

As of December 31, 2006, the Partnership has prepaid $3,544,025 inconnection with intangible drilling costs to be incurred on wells in which thePartnership has a working interest and which are drilling as of December 31,2006 or will be drilled during 2007.

**5. Major Customers**

The Partnership will sell crude oil and natural gas on credit terms torefiners, pipelines, marketers, and other users of petroleum commodities.Revenues will be received directly from these parties or, in certaincircumstances, paid to the operator of the property who disburses to thePartnership its percentage share of the revenues. As of December 31, 2006, thePartnership had no oil and gas production and, therefore, had no customers.

**6. Commitments and Contingencies**

The Partnership is not currently involved in any legal proceedings. SeeNote 8 for a summary of the Partnership’s drilling and development plans.

**7. Partnership Equity**

Sales of Partnership units began on July 14, 2006.Proceeds received 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 closed onDecember 29, 2006. The Partnership raised $15,401,896 from the sale of 616.076Partnership units to investor partners. Reef purchased 32.425 units (5%) for$689,032. Reef paid $233,197 to the Partnership during 2006, and paid theadditional $455,835 to the Partnership in February 2007. Reef will alsocontribute 1% of all leasehold, drilling and completion costs when incurred, inaddition to paying its pro rata share (4.95%) of the leasehold, drilling, andcompletion costs paid by the Partnership. As of December 31, 2006, Reef hadpaid $285 in connection with this obligation, and had accrued $12,996 which waspaid during March 2007.

ThePartnership has $13,793,924 available for Partnership oil & gas operations,net of the management fee of $2,310,285. This amount includes $13,325,093 paidto the Partnership prior to December 31, plus $468,831 accrued and paid to thePartnership subsequent to December 31,

F-11

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2006. Of the $2,310,285 management fee, syndication costs were$2,260,285 and organization costs were $50,000.

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 Projects**

As of December 31, 2006,the Partnership had one developmental and one exploratory well on whichdrilling operations had commenced and were in progress. The Partnership hadalso purchased interests in two additional prospects upon which one exploratoryand eight developmental wells will be drilled during 2007. The Partnershipexpects to purchase interests in additional prospects during 2007 and conductdrilling operations on purchased prospects during 2007.

One developmentalprospect purchased by the Partnership, upon which eight developmental wells areexpected to be drilled during 2007, is also owned by another partnership in theProgram, and RELP will serve as operator of the prospect.

**9. Subsequent Events (unaudited)**

Subsequent to December31, 2006, the Partnership completed drilling operations on the exploratory wellthat was in progress at December 31. This well was unsuccessful and has beenplugged and abandoned. The Partnership has completed drilling operations onfive of the eight developmental wells mentioned in Note 8, and all five wellsare undergoing completion operations and are expected to begin productionduring the second quarter.

**10.Supplemental Information on Oil & Gas Exploration and Production Activities(unaudited)**

**Capitalized Costs**

The capitalized costs ofoil and gas properties are as follows:
| December 31,                       | ** ** | **2006**      | ** **    |
|-----------------------------------------|------------|---------------|---------------|
| ** **                              | ** ** | ** **    | ** **    |
| **Oil and gas properties:**             | ** ** | ** **    | ** **    |
| Drilling in  progress                   | ** ** | **$**         | 1,328,081     | ** ** |
| Prepaid drilling  costs                 |       | 3,544,025     |          |
| **Total oil and gas properties**        | ** ** | **4,872,106** | ** **    |
| Accumulated  depreciation and depletion |       | —        |          |
| **Net oil and gas property**            | ** ** | **$**         | **4,872,106** | ** ** |

 

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**Costs Incurred**

Costs incurred in property acquisition,exploration, development, and production activities consisted of the following:
|                              | ** ** | **2006**   | ** **    |
|------------------------------|------------|------------|---------------|
| ** **                   | ** ** | ** ** | ** **    |
| **Oil and  gas properties:** | ** ** | ** ** | ** **    |
| Exploration costs            | ** ** | **$**      | 1,315,324     | ** ** |
| Development costs            |       | 3,556,782  |          |
| **Total costs incurred**     | ** ** | **$**      | **4,872,106** | ** ** |

 

**11. Supplementary QuarterlyFinancial Data (unaudited)**
| Period from Inception (August  14, 2006) to December 31, 2006 | ** ** | **3rd Qtr** | ** ** | **4th Qtr** | ** ** | **Totals** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------------|------------|------------|------------|
| Total oil and  gas sales                                                                              | ** ** | **$**            | **—** | ** **       | **$**      | **—** | ** ** | **$** | **—** | ** ** |
| Loss from  operations                                                                                 |       | (50,991          | )          | (5,702           | )          | (56,693    | )          |
| Net income  (loss)                                                                                    |       | (46,304          | )          | 66,313           |       | 20,009     |       |
| Net income 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      |       |
|                                                                                                       |            |                  |            |                  |            |            |            |  |  |  |

 

 

F-13

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**EXHIBITINDEX**
| 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, 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).                           |
|   |   |                                                                                                                                                                                                                                                                               |
| 31.1   |   | Certification of Chief Executive Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                               |
| 31.2   |   | Certification of Chief Financial Officer Pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                               |
| 32.1   |   | Certification of Chief Executive Officer Pursuant to  18 U.S.C. §1350.                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                               |
| 32.2   |   | Certification of Chief Financial Officer Pursuant to  18 U.S.C. §1350.                                                                                                                                                                                                        |

 

 

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