UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








Form
10-K





(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,
2009




or




 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the Transition period from _______
to _______





COMMISSION
FILE NUMBER 333-122935-03





REEF
GLOBAL ENERGY VIII, L.P.


(Exact
name of registrant as specified in its charter)





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





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





Securities
registered pursuant to Section 12(b) of the Act:  None


Securities
registered pursuant to Section 12(g) of the Act:





General and Limited
Partnership Interests


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  ̈ No
x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes   ̈ No
x




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes x  No
 ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈ No
 ̈




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




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





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





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




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




As of
March 31, 2010, the registrant had 32.425 units of general partner interest held
by the managing general partner, and 616.076 units of limited partner interest
outstanding.




Documents
incorporated by reference:  None





REEF
GLOBAL ENERGY VIII, L.P.


ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009


TABLE OF
CONTENTS


Part IItem
      1.
                                          Business
                                          
                                          
                                          3Item
      1A.
                                          Risk
      Factors
                                          
                                          
                                          8Item
      1B.
                                          Unresolved
      Staff Comments
                                          
                                          
                                          11Item
      2.
                                          Properties
                                          
                                          
                                          12Item
      3.
                                          Legal
      Proceedings
                                          
                                          
                                          14Item
      4.
                                          Reserved
                                          
                                          
                                          14PART IIItem
      5.
                                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                          
                                          
                                          14Item
      6.
                                          Selected
      Financial Data
                                          
                                          
                                          16Item
      7.
                                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                          
                                          
                                          16Item
      7A.
                                          Quantitative
      and Qualitative Disclosure About Market Risk
                                          
                                          
                                          22Item
      8.
                                          Financial
      Statements and Supplementary Data
                                          
                                          
                                          22Item
      9.
                                          Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                          
                                          
                                          23Item
      9A(T).
                                          Controls
      and Procedures
                                          
                                          
                                          23Item
      9B.
                                          Other
      Information
                                          
                                          
                                          23PART IIIItem
      10.
                                          Directors,
      Executive Officers and Corporate Governance
                                          
                                          
                                          23Item
      11.
                                          Executive
      Compensation
                                          
                                          
                                          25Item
      12.
                                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                          
                                          
                                          26Item
      13.
                                          Certain
      Relationships and Related Transactions, and Director
      Independence
                                          
                                          
                                          27Item
      14.
                                          Principal
      Accountant Fees and Services
                                          
                                          
                                          27PART IVItem
      15.
                                          Exhibits
      and Financial Statement Schedules
                                          
                                          
                                          27Signatures
                                          
                                          
                                          28


2


PART
I





ITEM
      1.
            BUSINESS





Introduction





Reef
Global Energy VIII, L.P. (the Partnership) is the third in a series of four
Nevada limited 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 purchased working interests in oil and gas
prospects and participated in the drilling of wells on those prospects. The
primary objectives of the Partnership are to generate revenue from the
production of crude oil and natural gas, distribute cash to the partners, and
provide tax benefits. Reef Oil & Gas Partners, L.P. (Reef) is the managing
general partner of the Partnership.





The
Partnership was formed to drill, complete and own working interests in oil and
gas wells located onshore in the continental United States. The Partnership
purchased working interests in three developmental prospects located onshore in
Texas, New Mexico, and Louisiana upon which it drilled eighteen developmental
wells. The Partnership purchased working interests in three exploratory
prospects located onshore in Texas and Louisiana (two prospects) upon which it
drilled three exploratory wells. During 2008, the Partnership completed drilling
operations with the capital previously raised by the Partnership. The
Partnership will not purchase additional prospects. In accordance with the
Partnership’s limited partnership agreement (the Partnership Agreement), the
Partnership may conduct additional drilling operations to fully develop those
prospects already owned by the Partnership.





Other
partnerships formed as a part of the Program also own working interests in some
of the prospects owned by this Partnership. Reef has also purchased working
interests in certain partnership prospects for some of the other partnerships it
manages. In such cases where the percentage ownership of the Partnership and
Reef-affiliated entities in a prospect is large enough, Reef Exploration, L.P.
(RELP), an affiliate of Reef formed in 2005, serves as operator of the prospect.
RELP serves as operator of two developmental Partnership prospects. RELP
operates eight successful wells located on one developmental prospect. In this
Annual Report on Form 10-K (Annual Report), we use the term “successful” to
refer to wells that are drilled, tested, and either capable of or actually
producing in commercial quantities. We use the term “unsuccessful” to refer to
wells that do not meet one or more of these criteria.





Acquisition
and Drilling of Undeveloped Prospects





The
Partnership purchased working interests in two developmental prospects
internally sourced by RELP, and one developmental and three exploratory
prospects generated by and purchased from third parties. A "prospect" is
generally defined as a contiguous oil and gas leasehold estate, or lesser
interest in a leasehold estate, upon which drilling operations may be conducted.
A prospect may be characterized as "exploratory" or "developmental" based upon
the type of well to be drilled on the prospect.  A developmental well is a
well drilled within a proved area of an oil or gas reservoir to the depth of a
stratigraphic horizon known to be productive. Generally an exploratory well is
any well that is not a developmental well, including wells drilled to find and
produce oil or gas in an unproven area, wells drilled to find a new reservoir in
a field previously found to be productive of oil or gas, or wells drilled to
extend a known reservoir.





Prospects
were evaluated utilizing data generated by RELP or provided by unaffiliated
third parties to RELP. This data included well logs, production records from
other area wells, seismic, geological and geophysical information, and such
other information available and considered useful. Prospects in which the
Partnership purchased a working interest were evaluated by petroleum engineers,
geophysicists, geologists, and other technical consultants employed by or
retained by RELP on the Partnership's behalf.





The
Partnership prospects were acquired pursuant to an arrangement in which the
Partnership purchased part of the working interest. A working interest bears a
specified portion of the costs of development, operation and maintenance. A
working interest is subject to landowners' royalty interests and may be subject
to other royalty interests payable to unaffiliated third parties. Where the
Partnership acquired less than 100% of the working interest, costs were reduced
proportionately. The Partnership Agreement prohibits Reef or any of its
affiliates from retaining any overriding royalty interest, that is, any royalty
interest that would be paid out of the Partnership's working interest, in any
working interest purchased by the Partnership. The Partnership is a non-operator
working interest owner in all prospects purchased by the
Partnership.


3





Consulting
Agreements for Prospect Acquisitions





Reef
entered into an agreement (the CMI North Sea Agreement) with Challenger Minerals
Inc. (CMI), a subsidiary of GlobalSantaFe Corporation and a screener of oil and
gas prospects in the North Sea region. The CMI North Sea Agreement provided Reef
the opportunity to review and selectively participate in exploratory and
developmental prospects in the North Sea either originated or previewed by CMI.
Reef paid CMI for the geological and geophysical services provided by CMI under
the CMI North Sea agreement. The agreement expired in November,
2006.





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





Prospects
approved for acquisition by Reef under these agreements could be assigned to
this Partnership as well as other limited partnerships formed as part of the
Program. Each partnership formed as a part of the Program paid Reef, on a pro
rata basis, a portion of the fees paid by Reef under these agreements during the
term of the Program. Total reimbursements to Reef by the partnerships formed as
a part of this Program were equal to the actual fees paid by Reef under these
agreements. The Partnership paid Reef $104,545 as its pro rata share of these
fees. This amount has been capitalized as geological and geophysical costs in
accordance with the full cost method of accounting for oil and gas
properties.





Drilling
and Completion Phase of Operations





RELP is
currently the operator of two developmental prospects, and serves as operator of
eight successful wells in which the Partnership has a working interest. RELP
also serves as operator for eight unsuccessful Partnership wells located on the
Sand Dunes prospect discussed in more detail in Item 2 – Properties. As a well
operator, RELP receives operator fees during the drilling and production phase
of each well at the competitive rate in the geographical area where the well is
located.  These fees are charged as a monthly fee per well as agreed to in
an operating agreement signed by the Partnership and participating third parties
in the well. The wells are subject to a model form operating agreement issued by
the American Association of Petroleum Landmen and an accounting procedure for
joint operations issued by the Council of Petroleum Accountants Societies of
North America.





On all
prospects currently operated by RELP, drilling operations were contracted to
independent third party drillers, and the costs of the wells to the Partnership
were determined by actual third party costs, plus monthly operator fees charged
at the competitive rate for the geographical area where the wells are
located.





The
Partnership generally pays drilling and completion costs as incurred. Wells
drilled that fail to result in the discovery of commercial quantities of crude
oil or natural gas were plugged and abandoned in accordance with applicable
regulations. Nine development wells and two exploratory wells drilled by the
Partnership were unsuccessful.  Of the nine unsuccessful developmental
wells, eight developmental wells on the Sand Dunes prospect in which the
Partnership participated have not been plugged and abandoned at this
time.





Production
Phase of Operations





Wells
capable of producing quantities of crude oil and/or natural gas in commercial
quantities were completed by installing all surface equipment necessary to
control the flow of production or to shut down the well, and by installing any
storage facilities, gathering lines, or sales lines required to produce and sell
the crude oil and/or natural gas production from the well. The Partnership
drilled nine successful developmental wells and one successful exploratory well.
The successful exploratory well ceased production in 2009. One developmental
well and two exploratory wells were unsuccessful and have been plugged and
abandoned. Eight developmental wells on the Sand Dunes prospect in which the
Partnership participated and which were classified as unsuccessful during 2008
have not been plugged and abandoned.


4





The
Partnership has entered into agreements with third party marketers to sell the
crude oil and/or natural gas produced from successful wells on a competitive
basis at the best available terms and prices. In some cases the Partnership has
elected to sell its production under marketing arrangements entered into by the
operator of the well. Generally, purchase contracts for the sale of crude oil
are cancelable on 30 days' notice, but purchase contracts for the sale of
natural gas may have a longer term.  The Partnership sells natural gas
discovered by it at negotiated prices domestically, based upon a number of
factors, such as the quality of the gas, well pressure, estimated reserves,
prevailing supply conditions and any applicable price regulations promulgated by
the Federal Energy Regulatory Commission (FERC).





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





The
Partnership has not and does not expect to engage in commodity futures trading
or hedging activities, or to enter into derivative financial instrument
transactions for trading or other speculative purposes. Accordingly, the
Partnership is at risk for the volatility in commodity prices inherent in the
oil and gas industry, and the level of commodity prices has a significant impact
on the Partnership's results of operations.  See "Item 7A. Quantitative and
Qualitative Disclosure About Market Risk."





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





Major
Customers





The
Partnership sells crude oil and natural gas on credit terms to refiners,
pipelines, marketers, and other users of petroleum commodities. Revenues are
received directly from these parties or, in certain circumstances, paid to the
operator of the property who disburses to the Partnership its percentage share
of the revenues. During the year ended December 31, 2009, one marketer and one
operator accounted for 54.7% and 44.1% of the Partnership’s crude oil and
natural gas revenues, respectively.  During the year ended December 31,
2008, one marketer and one operator accounted for 70.3% and 25.3% of the
Partnership’s crude oil and natural gas revenues, respectively. During the year
ended December 31, 2007, two marketers accounted for 79.3% and 20.1% of the
Partnership’s crude oil and natural gas revenues, respectively. Due to the
competitive nature of the market for purchase of crude oil and natural gas, the
Partnership does not believe that the loss of any particular purchaser would
have a material adverse impact on the Partnership.




Insurance





The
Partnership is a named insured under blowout, pollution, public liability and
workmen's compensation insurance policies obtained by RELP. Such insurance,
however, may not be sufficient to cover all liabilities.  Each unit held by
general partners represents an open-ended security for unforeseen events
including, without limitation, blowouts, lost circulation, and stuck drill pipe
that may result in unanticipated additional liability materially in excess of a
general partner's initial investment in the Partnership.





The
Partnership is a named insured under various insurance policies and intends to
maintain such policies subject to its analysis of their premium costs, coverage
and other factors.  In the exercise of Reef 's fiduciary duty as managing
general partner, Reef has obtained insurance on behalf of the Partnership to
provide the Partnership with such coverage as Reef believes is sufficient to
protect the investor partners against the foreseeable risks of drilling and
production. Reef reviewed the Partnership insurance coverage prior to commencing
drilling operations and periodically evaluates the sufficiency of insurance. In
no event will the Partnership maintain public liability insurance of less than
two times the Partnership's capitalization.Subject to the
foregoing, Reef may, in its sole discretion, increase or decrease the policy
limits and types of insurance from time to time as Reef deems appropriate under
the circumstances, which may vary materially.


5


In
accordance with the Partnership Agreement of the Partnership, all general
partner units held by investors were converted into limited partner units during
the third quarter of 2008. At that time, Reef amended the Certificate of Limited
Partnership to effectuate the conversion of the interest of the former non-Reef
general partners to that of a limited partner. Non-Reef general partners will
have limited liability as a limited partner for any Partnership operations
conducted after their conversion date. However, non-Reef general partners that
converted to limited partners continue to have unlimited liability regarding
partnership activities that occurred prior to their conversion
date.





Competition





There are
thousands of oil and natural gas companies in the United States. 
Competition is strong among persons and entities involved in the exploration for
and production of oil and natural gas.  Reef expects the Partnership to
encounter strong competition at every phase of business.  The Partnership
competes with entities having financial resources and staffs substantially
larger than those available to it.





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





Markets





The
marketing of crude oil and natural gas produced by the Partnership is affected
by a number of factors that are beyond the Partnership's control and whose exact
effect cannot be accurately predicted.  These factors include:





·
            the
      amount of crude oil and natural gas
imports;


·
            the
      availability, proximity and cost of adequate pipeline and other
      transportation facilities;


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


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


·
            other
      matters affecting the availability of a ready market, such as fluctuating
      supply and demand; and


·
            general
      economic conditions in the United States and around the
    world.





The
supply and demand balance of crude oil and natural gas in world markets has
caused significant variations in the prices of these products over recent
years.  The North American Free Trade Agreement eliminated trade and
investment barriers between the United States, Canada, and Mexico, resulting in
increased foreign competition for domestic natural gas production.  New
pipeline projects recently approved by, or presently pending before, FERC, as
well as nondiscriminatory access requirements could further substantially
increase the availability of gas imports to certain U.S. markets. Such imports
could have an adverse effect on both the price and volume of natural gas sales
from Partnership wells.





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





In
several initiatives, FERC has required pipelines to develop electronic
communication and to provide standardized access via the Internet to information
concerning capacity and prices on a nationwide basis, so as to create a national
market.  Parallel developments toward an electronic marketplace for
electric power, mandated by FERC, are serving to create multi-national markets
for energy products generally.  These systems will allow rapid consummation
of natural gas transactions.  Although this system may initially lower
prices due to increased competition, it is anticipated to expand natural gas
markets and to improve their reliability.





Regulation





The
Partnership's operations will be affected from time to time in varying degrees
by domestic and foreign political developments and by federal and state laws and
regulations.


6


Regulation of Oil & Gas
Activities.  In most areas of operations within the United States
the production of crude oil and natural gas is regulated by state agencies that
set allowable rates of production and otherwise control the conduct of oil and
gas operations. Operators of oil and gas properties are required to have a
number of permits to operate such properties, including operator permits and
permits to dispose of salt water. RELP possesses all material requisite permits
required by the states and other local authorities in areas where it operates
properties.  States also control production through regulations that
establish the spacing of wells or limit the number of days in a given month a
well can produce. In addition, under federal law, operators of oil and gas
properties are required to possess certain certificates and permits such as
hazardous materials certificates, which RELP has obtained.





Environmental Matters. 
The Partnership's drilling and production operations are also subject to
environmental protection regulations established by federal, state, and local
agencies that may necessitate significant capital outlays that, in turn, would
materially affect the financial position and business operations of the
Partnership. These regulations, enacted to protect against waste, conserve
natural resources and prevent pollution, could necessitate spending funds on
environmental protection measures, rather than on drilling operations. If any
penalties or prohibitions were imposed on the Partnership for violating such
regulations, the Partnership's operations could be adversely
affected.





Climate Change Legislation and
Greenhouse Gas Regulation.Studies in recent years have indicated that
emissions of certain gases may be contributing to warming of the Earth’s
atmosphere. Many nations have agreed to limit emissions of greenhouse gases
(GHGs) pursuant to the United Nations Framework Convention on Climate Change,
and the Kyoto Protocol. Methane, a primary component of natural gas, and carbon
dioxide, a byproduct of the burning of crude oil, natural gas, and refined
petroleum products, are considered GHGs regulated by the Kyoto Protocol.
Although the United States is currently not participating in the Kyoto Protocol,
several states have adopted legislation and regulations to reduce emissions of
GHGs. Restrictions on emissions of methane or carbon dioxide that may be imposed
in various states could adversely affect our operations and demand for crude oil
and natural gas. On December 7, 2009, the Environmental Protection Agency (EPA)
issued a finding that serves as the foundation under the Clean Air Act to issue
rules that would result in federal GHGs regulations and emissions limits under
the Clean Air Act, even without Congressional action. On September 29, 2009, the
EPA also issued a GHG monitoring and reporting rule that requires certain
parties, including participants in the oil and gas industry, to monitor and
report their GHG emissions, including methane and carbon dioxide, to the EPA.
The emissions will be published on a register to be made available on the
Internet. These regulations may apply to our operations. The EPA has proposed
two other rules that would regulate GHGs, one of which would regulate GHGs from
stationary sources, and may affect the oil and gas exploration and production
industry and the pipeline industry. The EPA’s finding, the GHG reporting rule,
and the proposed rules to regulate the emissions of GHGs would result in federal
regulation of carbon dioxide emissions and other GHGs, and may affect the
outcome of other climate change lawsuits pending in United States federal courts
in a manner unfavorable to the oil and gas industry.





Natural Gas Transportation and
Pricing.  FERC regulates the rates for interstate transportation of
natural gas as well as the terms for access to natural gas pipeline capacity.
Pursuant to the Wellhead Decontrol Act of 1989, however, FERC may not regulate
the price of natural gas. Such deregulated natural gas production may be sold at
market prices determined by supply and demand, Btu content, pressure, location
of wells, and other factors. Reef anticipates that all of the natural gas
produced by the Partnership's wells will be considered price-decontrolled
natural gas and that the Partnership's natural gas will be sold at fair market
value. However, while sales by producers of natural gas can currently be made at
unregulated market prices, Congress could reenact price controls in the
future.





Proposed
Regulation.Various legislative proposals are being considered in
Congress and in the legislatures of various states, which, if enacted, may
significantly and adversely affect the petroleum and gas industries. Such
proposals involve, among other things, the imposition of price controls on all
categories of natural gas production, the imposition of land use controls, such
as prohibiting drilling activities on certain 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, will actually be enacted by
Congress or the various state legislatures and what effect, if any, such
proposals will have on the Partnership's operations.





Employees





The
Partnership has no employees, and is managed by its managing general partner,
Reef.  RELP employs a staff including geologists, petroleum engineers,
landmen, and accounting personnel who administer all of the Partnership’s
operations. The Partnership reimburses RELP for technical and administrative
services at cost.  See "Item 11- Executive Compensation."


7





FORWARD-LOOKING
STATEMENTS





This
Annual Report contains forward-looking statements that involve risks and
uncertainties.  You should exercise extreme caution with respect to all
forward-looking statements made in this Annual Report.  Specifically, the
following statements are forward-looking:





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


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


·
            statements
      regarding the state of the oil and gas industry and the opportunity to
      profit within the oil and gas industry, competition, pricing, level of
      production, or the regulations that may affect the
      Partnership;


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


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


·
            any
      statements of other than historical
fact.





Reef
believes that it is important to communicate its future expectations to the
partners.  Forward-looking statements reflect the current view of
management with respect to future events and are subject to numerous risks,
uncertainties and assumptions, including, without limitation, the factors listed
in Item 1A of this Annual Report captioned "Risk
Factors." Although Reef believes that the expectations reflected in such
forward-looking statements are reasonable, Reef can give no assurance that such
expectations will prove to have been correct.  Should any one or more of
these or other risks or uncertainties materialize or should any underlying
assumptions prove incorrect, actual results are likely to vary materially from
those described herein.  There can be no assurance that the projected
results will occur, that these judgments or assumptions will prove correct or
that unforeseen developments will not occur.





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





ITEM
      1A.
            RISK
      FACTORS





Our
business activities are subject to certain risks and hazards, including the
risks discussed below. If any of these events should occur, it could materially
and adversely affect our business, financial condition, cash flow, or results of
operations. The risks below are not the only risks we face. We may experience
additional risks and uncertainties not currently known to us or, as a result of
developments occurring in the future, conditions that we currently deem to be
immaterial may also materially and adversely affect our business, financial
condition, cash flow, and results of operations.  Consequently, you should
not consider this list to be a complete statement of all of our potential risks
or uncertainties.





Crude
oil and natural gas prices are volatile, and fluctuate due to a number of
factors outside of our control.





The
financial condition, results of operations, and the carrying value of our oil
and gas properties depend primarily upon the prices received for our crude oil
and natural gas production. Crude oil and natural gas prices historically have
been volatile and likely will continue to be volatile given current geopolitical
conditions. Cash flow from operations is highly dependent upon the sales prices
received from crude oil and natural gas production. The prices for oil and
natural gas are subject to a variety of factors beyond our control. These
factors include:





·
            the
      domestic and foreign supply of crude oil and natural gas; consumer demand
      for crude oil and natural gas, and market expectations regarding supply
      and demand;


·
            the
      ability of the members of  OPEC to agree to and maintain crude oil
      price and production controls;


·
            domestic
      government regulations and
taxes;


8


·
            the
      price and availability of foreign exports and alternative fuel
      sources;


·
            weather
      conditions, including hurricanes and tropical storms in and around the
      Gulf of Mexico;


·
            political
      conditions in crude oil and natural gas producing regions, including the
      Middle East, Nigeria, and Venezuela;
and


·
            domestic
      and worldwide economic conditions.





These
factors and the volatility of the energy markets make it extremely difficult to
predict price movements. Also, crude oil and natural gas prices do not
necessarily move in tandem. Declines in crude oil and natural gas prices would
not only reduce revenues and cash flow available for distributions to partners,
but could reduce the amount of oil and natural gas that can be economically
produced from successful wells drilled by the Partnership, and, therefore, have
an adverse effect upon financial condition, results of operations, crude oil and
natural gas reserves, and the carrying value of the Partnership’s oil and gas
properties. Approximately 60.9% of the Partnership’s estimated proved reserves
were crude oil reserves and 39.1% were natural gas reserves at December 31,
2009. As a result, the Partnership’s financial results are sensitive to
fluctuations in both crude oil and natural gas prices.





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





The
recent global economic downturn could have a material adverse impact on our
financial position, results of operations and cash flows.





The oil
and gas industry is cyclical and tends to reflect general economic conditions.
The United States and other countries around the world have experienced an
economic downturn which could impact the industry in 2010 and beyond. The
economic downturn has had an adverse impact on demand and pricing for crude oil
and natural gas. A continuation of the economic downturn could have a further
negative impact on crude oil and natural gas prices. The Partnership’s operating
cash flows and profitability will be significantly affected by declining crude
oil and natural gas prices. Further declines in crude oil and natural gas prices
may also impact the value of our crude oil and natural gas reserves, which could
result in future impairment charges to reduce the carrying value of the
Partnership’s oil and gas properties.





We
are subject to substantial operating risks that may adversely affect the results
of operations.





There are
numerous hazards involved in the drilling and operation of oil and gas wells,
including blowouts involving possible damages to property and third parties,
bodily injuries, mechanical failures, explosions, uncontrollable flows of crude
oil, natural gas or well fluids, fires, formations with abnormal pressure,
pollution, releases of toxic gas and other environmental hazards and risks. The
Partnership 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 and
gas business. Uninsured liabilities would reduce the funds available to the
Partnership, may result in the loss of Partnership properties and may create
liability for the general partners. Although the Partnership maintains insurance
coverage in amounts Reef deems appropriate, it is possible that insurance
coverage may be insufficient. In that case Partnership assets may have to be
sold to pay personal injury and property claims and the cost of controlling
blowouts or replacing damaged equipment rather than for drilling
activities.





We
cannot control activities on non-operated properties.





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





·
            timing
      and amount of capital expenditures;


·
            expertise
      and financial resources;


·
            inclusion
      of other participants in drilling wells;
and


·
            use
      of technology.


9





In
addition the Partnership could be held liable for the joint interest obligations
of other working interest owners, such as nonpayment of costs and liabilities
arising from the actions of other working interest owners. Full development of
prospects may be jeopardized in the event other working interest owners cannot
pay their share of drilling and completion costs.





Crude
oil and natural gas reserve data are estimates based upon assumptions that may
be inaccurate and existing economic and operating conditions that may differ
from future economic and operating conditions.





Securities
and Exchange Commission (SEC) rules require the Partnership to present annual
estimates of reserves. Reservoir engineering is a subjective process of
estimating the recovery from underground accumulations of crude oil and natural
gas that cannot be precisely measured, and is based upon assumptions that may
vary considerably from actual results. Accordingly, reserve estimates may be
subject to upward or downward adjustments. Actual production, revenues and
expenditures with respect to reserves will likely vary from estimates, and such
variances could be material.





You
should not assume the present value of future net cash flows referred to in this
Annual Report to be the current market value of our estimated crude oil and
natural gas reserves. The estimated discounted future net cash flows from our
proved reserves as of December 31, 2009 are based upon the 12-month unweighted
arithmetic average of the first-day-of-the-month prices and costs in effect when
the estimate is made. Actual current prices, as well as future prices and costs,
may be materially higher or lower. Further, actual future net cash flows will be
affected by factors such as the amount and timing of actual production, supply
and demand for crude oil and natural gas, and changes in governmental
regulations and tax rates.





The
Partnership Agreement limits Reef's liability to each partner and the
Partnership and requires the Partnership to indemnify Reef against certain
losses.





Reef will
have no liability to the Partnership or to any partner for any loss suffered by
the Partnership, and will be indemnified by the Partnership against loss
sustained by it in connection with the Partnership if:





·
            Reef
      determines in good faith that its action was in the best interest of the
      Partnership;


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


·
            Reef's
      actions did not constitute negligence or
  misconduct.





Drilling
exploratory wells is riskier than drilling developmental wells.





Drilling
exploratory wells involves greater risks of dry holes and loss of the partners'
investment than the drilling of developmental wells.  Drilling
developmental wells generally involves less risk of dry holes, although
sometimes developmental acreage is more expensive and subject to greater
royalties and other burdens on production. The Partnership purchased working
interests in three exploratory prospects upon which three exploratory wells were
drilled. Two exploratory wells were unsuccessful, and one exploratory well was
successful but ceased production during 2009.





The
production and producing life of Partnership wells is uncertain.





Production
will decline. It is not possible to predict the life and production of any well.
The actual life could differ from that which is anticipated. Sufficient crude
oil or natural gas may not be produced for a partner to receive a profit or even
to recover his initial investment. In addition, production from the
Partnership's oil and gas wells, if any, will decline over time, and does not
indicate any consistent level of future production. This production decline may
be rapid and irregular when compared to a well's initial
production.





Extreme
weather conditions may adversely affect production operations and partner
distributions.





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


10





Our
dependence on third parties for the processing and transportation of crude oil
and natural gas may adversely affect the Partnership’s revenues and,
consequently, the distribution of net cash flows to investor partners.





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





We
face strong competition within the energy industry.





The oil
and gas industry is highly competitive. Competition is encountered in all
aspects of Partnership operations, including the requisition of drilling and
service contractors. Many of our competitors are larger, well-established
companies with substantially larger operating staffs and greater capital
resources than those of the Partnership, Reef and its affiliates. We may not be
able to conduct our operations successfully, obtain drilling and service
contractors, consummate transactions, and obtain technical, managerial and other
professional personnel in this highly competitive environment. Specifically,
larger competitors may be able to pay more for competent personnel than the
Partnership, Reef and its affiliates. In addition, such competitors may be able
to expend greater resources on the existing and changing technologies that will
be increasingly important to success. Such competitors may also be in a better
position to secure drilling and oilfield services, as well as equipment, more
timely or on more favorable terms. Finally, oil and gas producers are
increasingly facing competition from providers of non-fossil energy, and
government policy may favor those competitors in the future.





The
Partnership has limited external sources of funds, which could result in a
shortage of working capital.





The
Partnership expended funds in excess of the previously raised capital in
connection with the drilling and completion of wells and acquisition of the
prospects during the drilling phase of operations. These excess expenditures
have been recovered through reductions in Partnership distributions. The
Partnership only has nominal funds available for Partnership purposes until
there are revenues from Partnership operations. Any future requirement for
additional funding for drilling or for repayment of the excess capital spent
during the drilling phase of operations will have to come, if at all, from the
Partnership's revenues or from borrowings. Reef cannot assure the partners that
Partnership operations will be sufficient to provide the Partnership with
necessary additional funding.  Reef cannot assure the partners that the
Partnership will be able to borrow funds from third parties on commercially
reasonable terms or at all.





The
Partnership may incur liability for liens against its
subcontractors.





Although
Reef will try to determine the financial condition of nonaffiliated
subcontractors, if subcontractors fail to timely pay for materials and services,
the properties of the Partnership could be subject to materialmen's and
workmen's liens.  In that event, the Partnership could incur excess costs
in discharging such liens.





Other
partnerships Reef sponsors will compete with the Partnership for equipment,
contractors, and personnel.





Reef
plans to offer interests in other partnerships to be formed for substantially
the same purposes as those of the Partnership. Therefore, a number of
partnerships with unexpended capital funds, including those partnerships to be
formed in future oil and gas programs sponsored by Reef, may exist at the same
time.  Due to competition among the partnerships for equipment,
contractors, and Reef's personnel, the fact that other partnerships organized by
Reef and its affiliates may still be purchasing prospects and drilling and
completing wells when the Partnership is attempting to drill and complete wells
on its prospects may make such activities of the Partnership more
difficult.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS





None.


11





ITEM
      2.
            PROPERTIES





Drilling
Activities and Productive Wells





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





The
Partnership participated in the drilling of eight developmental wells on the
Sand Dunes prospect located in Eddy County, New Mexico during the fourth quarter
of 2007 and the first quarter of 2008. Initial testing confirmed the presence of
crude oil and natural gas in all eight wells. However, the field was temporarily
shut-in because of the lack of electric service and because of the high cost of
trucking offsite the salt water volumes associated with the production of the
crude oil and natural gas from the wells. Electrical service to the eight Sand
Dunes wells was connected in September 2008. Based upon initial testing, larger
bottom hole pumps were placed below the well perforations in three of the wells
and testing was resumed in late September 2008 to determine the three wells’
commercial productivity. Water continued to be trucked offsite, and RELP applied
for and received a permit which would allow for the conversion of one of the
existing eight Sand Dunes wells into a water disposal well. RELP also explored
the possibility of drilling a ninth well as a salt water disposal well for the
field. Testing results on two of the three wells were positive, and salt water
production volumes declined as a result of pumping off the wells using the
larger bottom hole pumps. However, the price of crude oil also declined at a
rapid rate while testing was being conducted. In late December 2008, two of the
three testing wells were shut-in again. Crude oil prices continued declining to
a level below $40 per barrel. In February 2009, following a mechanical failure
in the third testing well, RELP, as operator, shut-in the field. The eight wells
cannot be commercially productive without efficient salt water disposal
capabilities, and none of the options regarding salt water disposal were
economically viable at first quarter 2009 commodity prices. As a result, as of
December 31, 2008, the eight Sand Dunes wells were classified as unsuccessful,
and no crude oil and natural gas reserves for these wells were included in the
December 31, 2008 reserve information presented in this Annual
Report.





Beginning
with March 2009, oil sales prices increased from levels below $40 per barrel to
between $60 and $70 per barrel. As a result of this increase in prices, in
October 2009, Reef approved the conversion of one of the eight wells on the Sand
Dunes development prospect located in Eddy County, New Mexico to a salt water
disposal well. The conversion work began in March 2010. Upon conversion of this
well to a salt water disposal well, three of the current Sand Dunes wells are
expected to be placed on full time production during the second quarter of 2010.
RELP believes, based upon testing already performed, that the disposal capacity
of the well to be converted will be such that only three Sand Dunes wells can be
placed on full time production. However, if possible, additional wells may be
placed on production. RELP will determine what actions to take regarding the
other Sand Dunes wells after a period of evaluation of this initial conversion.
The estimated cost of the well conversion to this Partnership is expected to be
approximately $79,290. This cost will be paid for by the Partnership by
retaining a portion of the funds normally paid out in distributions to the
partners. There are 5,340 BBL of crude oil and 8,820 MCF of natural gas reserves
for the three wells expected to be placed on full time production included in
the December 31, 2009 reserve information presented in this Annual
Report.





The
Partnership also has interests in unproved property consisting of un-drilled
leasehold interests (11 potential drilling locations) in the Sand Dunes
prospect. The Partnership fully impaired this unproved property during the
fourth quarter of 2008 based upon the eight already drilled wells being
classified as unsuccessful at December 31, 2008. The Partnership currently has
no plans to conduct any drilling operations on this acreage.





The
Partnership purchased working interests in three exploratory prospects upon
which three exploratory wells were drilled. The Partnership drilled one
successful exploratory well located in Lavaca County, Texas that ceased
production during 2009. The Partnership drilled two unsuccessful exploratory
wells located in St. Mary and Iberville Parish, Louisiana.





Nine of
the successful wells in which the Partnership participated drilling are
currently productive.


12


Proved
Crude Oil and Natural Gas Reserves





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009.  In addition to expanding the definition and disclosure
requirements for crude oil and natural gas reserves, the new rule changes the
requirements for determining quantities of crude oil and natural gas reserves.
The new rule requires disclosure of crude oil and natural gas proved reserves by
significant geographic area, using the weighted arithmetic average of the
first-day-of-the-month commodity prices over the preceding 12-month period,
rather than end-of-period prices, and allows the use of reliable technologies to
estimate proved crude oil and natural gas reserves, if those technologies have
been demonstrated to result in reliable conclusions about reserves volumes.
Reserve and related information for 2009 is presented consistent with the
requirements of the new rule. The new rule does not allow prior-year reserve
information to be restated, so all information related to periods prior to 2009
is presented consistent with prior SEC rules for the estimation of proved
reserves. The effect of applying the new definition of reliable technology and
other non-price related aspects of the updated rules did not significantly
impact 2009 net proved reserve volumes.  All of the Partnership’s reserves
are located in the United States.





The
estimated net proved crude oil and natural gas reserves at December 31, 2009,
2008, and 2007 are summarized below. The estimated quantities of proved crude
oil and natural gas reserves discussed in this section include only the amounts
which the Partnership reasonably expects to recover in the future from known oil
and gas reservoirs under the current economic and operating conditions. Proved
reserves include only quantities that the Partnership expects to recover
commercially using current prices, costs, existing regulatory practices, and
technology. Therefore, any changes in future prices, costs, regulations,
technology or other unforeseen factors could materially increase or decrease the
proved reserve estimates.





Oil (BBL)
                      
                      
                      Gas (MCF)Net
      proved reserves as of December 31, 2007
                      
                      
                      74,932
                      
                      
                      
                      376,991Net
      proved reserves as of December 31, 2008
                      
                      
                      23,716
                      
                      
                      
                      170,476Net
      proved reserves as of December 31, 2009
                      
                      
                      40,040
                      
                      
                      
                      154,440





The
standardized measure of discounted future net cash flows as of December 31, 2009
is computed by applying the 12-month average beginning-of-month price for the
year, costs, and legislated tax rates and a discount factor of 10% to net proved
reserves.  The standardized measure of discounted future net cash flows as
of December 31, 2008 and 2007 is computed by applying year-end prices, costs,
and legislated tax rates and a discount factor of 10% to net proved reserves.
The standardized measure of discounted future net cash flows does not purport to
present the fair value of our crude oil and natural gas reserves.





Standardized
      measure of discounted future net cash flows as of December 31,
      2007
                    
                    $
                    4,381,920Standardized
      measure of discounted future net cash flows as of December 31,
      2008
                    
                    $
                    1,012,742Standardized
      measure of discounted future net cash flows as of December 31,
      2009
                    
                    $
                    1,175,290





During
the years ended December 31, 2009, 2008, and 2007, the Partnership recorded
property impairment costs of proved properties totaling $349,404, $3,252,689 and
$8,031,060 as a result of the net capitalized costs of proved oil and gas
properties exceeding the sum of estimated future net revenues from proved
reserves, using the methodologies described above.


13


Qualifications
of Technical Persons and Internal Controls Over the Reserves Estimation
Process





The
Partnership used an independent petroleum consulting company, Forrest A. Garb
& Associates, Inc. (FGA), of Dallas, Texas, to prepare its December 31, 2009
estimates of net proved crude oil and natural gas reserves.  FGA estimated
reserves for all of our properties as of December 31, 2009. The technical
personnel responsible for preparing the reserve estimates at FGA meet the
requirements regarding qualifications, independence, objectivity, and
confidentiality set forth in the Standards Pertaining to the Estimating and
Auditing of Oil and Gas Reserves Information promulgated by the Society of
Petroleum Engineers. FGA is an independent firm of petroleum engineers and
geologists. They do not own an interest in any of our properties, and are not
employed on a contingent fee basis. FGA’s report was developed utilizing state
reporting records and published production data purchased from third parties,
and data provided by Reef.  Their reserve summary, which contains further
discussions of the reserve estimates and evaluations, as well as the
qualifications of FGA’s technical personnel responsible for overseeing their
estimates and evaluations, is included as Exhibit 99.1 to this Annual
Report.





The
Partnership used an independent petroleum engineer, Gleason Engineering, of
Arlington, Texas, to prepare its December 31, 2008 and 2007 estimates of net
proved crude oil and natural gas reserves.





Reef’s
policies and practices regarding internal controls over the recording of
reserves are structured to objectively and accurately estimate oil and gas
reserve quantities and present values in compliance with SEC regulations and US
GAAP.





Reef
maintains a staff of petroleum engineers who work with FGA. Our accounting
department accumulates historical production and pricing data and lease
operating expenses for our wells, as well as the percentage interest owned by
the Partnership, which is reviewed by our engineering personnel. Reserve
estimates are prepared by FGA. Our engineering personnel meet regularly
with FGA’s representative to review properties and discuss methods and
assumptions used in the preparation of their estimates. Mr. Byron H. (Howard)
Dean, Manager – Acquisitions and Divestitures of RELP, is the petroleum engineer
primarily responsible for overseeing the preparation of reserve estimates by
FGA. Mr. Dean is a registered petroleum engineer with over thirty years of
industry experience in oil and gas operations and reservoir engineering. He is
an active member of the Society of Petroleum Engineers and the Society of
Petroleum Evaluation Engineers. Any significant reserve changes are approved by
Mr. Dean and Mr. Michael J. Mauceli, Chief Executive Officer of
RELP.





Title
to Properties





The
Partnership's interests in producing and non-producing acreage are in the form
of assigned direct interests in leases held by the Partnership or by Reef on
behalf of the Partnership. Such properties are subject to customary royalty
interests and could be subject to liens incident to operating agreements, liens
for current taxes and overriding royalty interests and other burdens.  The
Partnership believes that none of these burdens will materially interfere with
the use of such properties in the operation of the Partnership's business and
that it has or will obtain satisfactory title to all of its leases. Title will
be held by the Partnership or by Reef on behalf of the Partnership.





ITEM
      3.
            LEGAL
      PROCEEDINGS





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





ITEM
      4.
            Reserved





PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





As of
December 31, 2009, the Partnership had one managing general partner, and 536
investor limited partners. Pursuant to the Partnership Agreement of the
Partnership, all general partner units held by investor partners were converted
into limited partner units during the 3rd quarter
of 2008. Reef holds a total of 32.425 general partner units and the investor
partners hold 616.076 limited partner units. No established trading market
exists for the units.





Cash
which, in the sole judgment of the managing general partner, is not required to
meet the Partnership’s obligations is distributed to the partners at least
quarterly in accordance with the Partnership Agreement. The Partnership has made
cash distributions to the partners of interest income and crude oil and natural
gas sales revenues, less operating, general and administrative and other costs
since April 2007. Cash distributions are distributed 15.45% to the managing
general partner (based upon the 11% interest not represented by units and the
4.45% interest represented by Partnership units) and 84.55% to investor
partners.


14





Investor
limited partner interests are transferable, subject to certain restrictions
contained in the Partnership Agreement; however, no assignee of a unit in the
Partnership can become a substituted partner without the written consent of both
the transferor and Reef.





The
Partnership has adopted a unit repurchase program. Under the terms of the
program, the managing general partner is obligated to purchase up to 5% of the
units in the Partnership per year during the period set forth in the Partnership
Agreement unless changes in oil and gas pricing meet certain criteria specified
in the prospectus supplement, dated July 14, 2006. However, the managing general
partner’s obligation to purchase units is limited to $500,000 per year in the
aggregate for all partnerships previously or subsequently organized by the
managing general partner or its affiliates. The Partnership did not repurchase
any units in 2009.





Use
of Proceeds





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





The
Partnership registered a total of 400 units of limited partner interests and
1,600 units of general partner interests. The aggregate offering amount
registered was $50,000,000. During the offering period that terminated on
December 29, 2006, the Partnership sold 616.076 units to investor partners,
consisting of 95.283 units of limited partner interest and 520.793 units of
additional general partner interest. Reef purchased 32.425 general partner
units, equaling 5.00% of the total Partnership units sold. The Partnership did
not sell the remaining registered units. Total offering proceeds were
$16,090,928. Reef also contributes 1% of all leasehold, drilling, and completion
costs as incurred. At December 31, 2009, Reef had contributed $131,210 in
connection with this obligation.





All units
except those purchased by Reef paid a 15% management fee to Reef to pay for the
Partnership organization and offering costs, including sales commissions. These
costs totaled $2,310,285, leaving capital contributions of $13,911,853 available
for Partnership oil and gas operations. As of December 31, 2009, the Partnership
had expended $14,102,150 on property acquisitions and $53,047 on general and
administrative expenses. Expenditures in excess of available capital
contributions were deducted from Partnership distributions during
2009.


15


ITEM
      6.
            SELECTED
      FINANCIAL DATA





The
following table sets forth selected financial data. The selected financial data
presented below has been derived from the audited financial statements of the
Partnership.





As of and For the Years Ended December 31,
                
                
                Period from
                  inception
                  (August 14,
                  2006) to
                  December
                  31,2009
                
                
                2008
                
                
                2007
                
                
                2006Revenue
                
                $
                863,908
                
                
                $
                1,682,789
                
                
                $
                1,213,154
                
                
                $
                —Interest
      income
                
                
                2,033
                
                
                
                14,852
                
                
                
                233,093
                
                
                
                76,702Costs
      and expenses
                
                
                1,133,508
                
                
                
                5,036,689
                
                
                
                (9,184,540
                )
                
                
                (56,693
                )Net
      income (loss)
                
                
                (267,567
                )
                
                
                (3,339,048
                )
                
                
                (7,738,293
                )
                
                
                20,009Allocation
      of net income (loss):Managing
      general partner
                
                $
                (3,472
                )
                
                $
                (123,770
                )
                
                $
                (352,799
                )
                
                $
                10,816General
      partner units
                
                
                —
                
                
                
                123,577
                
                
                
                (6,243,247
                )
                
                
                7,771Limited
      partner units
                
                
                (264,095
                )
                
                
                (3,338,855
                )
                
                
                (1,142,247
                )
                
                
                1,422Net
      income (loss) per managing partner unit
                
                
                (107.07
                )
                
                
                (3,817.12
                )
                
                
                (10,880.45
                )
                
                
                333.58Net
      income (loss) per general partner unit
                
                
                —
                
                
                
                237.29
                
                
                
                (11,987.96
                )
                
                
                14.92Net
      income (loss) per limited partner unit
                
                
                (428.67
                )
                
                
                (5,218.96
                )
                
                
                (11,987.96
                )
                
                
                14.92Total
      assets
                
                
                805,603
                
                
                
                1,575,857
                
                
                
                6,225,728
                
                
                
                16,268,841Distributions
      to managing general partner
                
                
                10,745
                
                
                
                155,527
                
                
                
                156,586
                
                
                
                —Distributions
      to investor partners
                
                
                58,803
                
                
                
                851,123
                
                
                
                856,914
                
                
                
                —Distributions
      per general partner unit
                
                
                —
                
                
                
                639.81
                
                
                
                1,390.92
                
                
                
                —Distributions
      per limited partner unit
                
                
                95.45
                
                
                
                1,381.52
                
                
                
                1,390.92
                
                
                
                —Distributions
      per managing  general partner unit
                
                
                331.38
                
                
                
                4,796.52
                
                
                
                4,829.18
                
                
                
                —Operating
      DataAnnual
      sales volume:Gas
      (MCF)
                
                
                46,555
                
                
                
                46,147
                
                
                
                22,974
                
                
                
                —Oil
      (BBL)
                
                
                11,978
                
                
                
                12,259
                
                
                
                12,330
                
                
                
                —Average
      sales price:Gas
      (per MCF)
                
                $
                4.75
                
                
                $
                10.27
                
                
                $
                10.62
                
                
                $
                —Oil
      (per BBL)
                
                $
                53.68
                
                
                $
                98.62
                
                
                $
                78.61
                
                
                $
                —





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





The
following discussion will assist you in understanding the Partnership’s
financial position, liquidity, and results of operations. The information should
be read in conjunction with the audited financial statements and notes to
financial statements contained herein. The discussion contains historical and
forward-looking information.





For a
discussion of risk factors that could impact the Partnership’s financial
results, please see Item 1A of this Annual Report.





Critical
Accounting Policies





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make estimates
and assumptions that can affect the reporting of assets, liabilities, equity,
revenues, and expenses. We base our estimates on historical experience and
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We are also required to select among alternative
acceptable accounting policies. See Note 2 to the financial statements for a
complete list of significant accounting policies.


16


Oil
and Gas Properties





The
Partnership follows the full cost method of accounting for oil and gas
properties. Under this method, all direct costs and certain indirect costs
associated with acquisition of properties and successful as well as unsuccessful
exploration and development activities are capitalized. Depreciation, depletion,
and amortization of capitalized oil and gas properties and estimated future
development costs, excluding unproved properties, are based on the
unit-of-production method using estimated proved reserves.  For these
purposes, proved natural gas reserves are converted to equivalent barrels of
crude oil at a rate of 6 Mcf to 1 Bbl.





In
applying the full cost method at December 31, 2009, we perform a quarterly
ceiling test on the capitalized costs of oil and gas properties, whereby the
capitalized costs of oil and gas properties are limited to the sum of the
estimated future net revenues from proved reserves using prices that are the
12-month unweighted arithmetic average of the first-day-of-the-month price for
crude oil and natural gas held constant and discounted at 10%, plus the lower of
cost or estimated fair value of  unproved properties, if any, for 2009. If
capitalized costs exceed the ceiling, an impairment loss is recognized for the
amount by which the capitalized costs exceed the ceiling, and is shown as a
reduction of oil and gas properties and as property impairment expense on the
Partnership’s statement of operations.  No gain or loss is recognized upon
sale or disposition of oil and gas properties, unless such a sale would
significantly alter the rate of depletion and amortization. During the years
ended December 31, 2009, 2008, and 2007, the Partnership recognized property
impairment expense of proved properties totaling $349,404, $3,252,689 and
$8,031,060, respectively.





Unproved
properties consist of undeveloped leasehold interest. Investments in unproved
properties are not depleted pending determination of the existence of proved
reserves. Unproved properties are assessed for impairment quarterly as of the
balance sheet date by considering the primary lease term, the holding period of
the properties, geologic data obtained relating to the properties, and other
drilling activity in the immediate area of the properties. Any impairment
resulting from this quarterly assessment is reported as property impairment
expense in the current period, as appropriate. During the year ended December
31, 2008, the Partnership fully impaired its unproved properties by recognizing
$153,330 of property impairment expense.





The
estimate of proved crude oil and natural gas reserves used to determine property
impairment expense, and also utilized in the Partnership’s disclosures of
supplemental information regarding oil and gas producing activities, including
the standardized measure of discounted cash flows, was prepared by an
independent petroleum engineer at December 31, 2009, 2008, and 2007, utilizing
prices and costs as promulgated by the SEC. Reservoir engineering is a
subjective and inexact process of estimating underground accumulations of crude
oil and natural gas that cannot be measured in an exact manner, and is based
upon assumptions that may vary considerably from actual results. Accordingly,
reserve estimates may be subject to upward or downward adjustments. Actual
production, revenues and expenditures with respect to reserves will likely vary
from estimates, and such variances could be material.





The
determination of depreciation, depletion and amortization expense recognized in
the financial statements is also dependent upon the estimates of proved crude
oil and natural gas reserves and is computed using the units-of-production
method based upon this estimate of proved reserves. During the years ended
December 31, 2009, 2008, and 2007, the Partnership had depreciation, depletion,
and amortization expense totaling $283,830, $754,949 and $840,172,
respectively.





Asset
retirement costs and liabilities associated with future site restoration and
abandonment of long-lived assets are initially measured at fair value which
approximates the cost a third party would incur in performing the tasks
necessary to retire such assets. The fair value is recognized in the financial
statements as the present value of expected future cash expenditures for site
restoration and abandonment. Subsequent to the initial measurement, the effect
of the passage of time on the liability for the net asset retirement obligation
(accretion expense) and the amortization of the asset retirement cost are
recognized in the results of operations. During the years ended December 31,
2009, 2008, and 2007, the Partnership recognized $0, $79,341 and $103,092 of
asset retirement obligations and additional capitalized cost in connection with
successful wells drilled by the Partnership.





Recognition
of Revenue





The
Partnership has entered into sales contracts for disposition of its share of
crude oil and natural gas production from productive wells. Revenue is
recognized based upon the metered volumes delivered to those purchasers each
month. Any significant over or under balanced gas positions are disclosed in the
financial statements. As of December 31, 2009, 2008, and 2007, the Partnership
had no material gas imbalance positions.


17


Recently Adopted Accounting
Pronouncements





Modernization
of Oil and Gas Reporting





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009. In addition to expanding the definition and disclosure requirements
for crude oil and natural gas reserves, the new rule changes the requirements
for determining quantities of crude oil and natural gas reserves. The new rule
also changes certain accounting requirements under the full cost method of
accounting for oil and gas activities. The changes are designed to modernize the
requirements for the determination of crude oil and natural gas reserves,
aligning them with current practices and updating them for changes in
technology. The effect of applying the un-weighted arithmetic average of the
first-day-of-the-month commodity prices for the preceding 12-month period,
compared to the use of end-of-period prices and costs, decreased net proved
reserves by 11.5%. The standardized measure of discounted future net cash flows
for the year ended December 31, 2009 was lower by $807,290 as a result of using
the new rule as compared to amounts calculated using the previous rules. The
effect of applying the new rule resulted in additional depletion expense of
$3,049, but no additional impairment expense.





Accounting
Standards Codification




In
June 2009, the Financial Accounting Standards Board (FASB) issued guidance
on the accounting standards codification and the hierarchy of generally accepted
accounting principles. The accounting standards codification is intended to be
the source of authoritative US GAAP and reporting standards as issued by
the FASB. Its primary purpose is to improve clarity and use of existing
standards by grouping authoritative literature under common topics. The
accounting standards codification is effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The
Partnership now describes the authoritative guidance used within the footnotes
but no longer uses numerical references. The accounting standards codification
does not change or alter existing US GAAP, and there is no expected impact
on the Partnership’s financial position, results of operations or cash
flows.





Fair
Value Measurement of Liabilities




In
August 2009, the FASB issued new guidance for the accounting for the fair
value measurement of liabilities.  The new guidance provides clarification
that in certain circumstances in which a quoted price in an active market for
the identical liability is not available, a company is required to measure fair
value using one or more of the following valuation techniques: the quoted price
of the identical liability when traded as an asset, the quoted prices for
similar liabilities or similar liabilities when traded as assets, and/or another
valuation technique that is consistent with the principles of fair value
measurements.  The new guidance is effective for interim and annual periods
beginning after August 27, 2009.  The Partnership does not
expect that the provisions of the new guidance will have a material
effect on its results of operations, financial position or
liquidity.





Subsequent
Events





In
May 2009, the FASB issued new guidance for accounting for subsequent
events.  This guidance established general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. This guidance is
effective for interim and annual reporting periods ending after June 15, 2009.
The Partnership adopted the provisions of this guidance for the period ended
June 30, 2009. In February 2010, the FASB issued an update to this guidance.
Among other provisions, this update provides that an entity that is a SEC filer
is not required to disclose the date through which subsequent events have been
evaluated. The Partnership adopted the provisions on its effective date of
February 24, 2010. There was no impact on the Partnership’s operating results,
financial position or cash flows.





Recognition
and Presentation of Other-Than-Temporary Impairments





In April
2009, the FASB issued new guidance related to the presentation and disclosure of
other-than-temporary impairments on debt and equity securities.  The new
guidance amends the other-than-temporary impairment guidance for debt securities
to make the guidance more operational and to improve the presentation and
disclosure of other-than-temporary impairments on debt and equity securities in
the financial statements.  The guidance does not amend existing recognition
and measurement guidance for equity securities, but does establish a new method
of recognizing and reporting for debt securities.  Disclosure requirements
for impaired debt and equity securities have been expanded significantly and are
now required quarterly, as well as annually.  This guidance became
effective for interim and annual reporting periods ending after June 15,
2009.  Comparative disclosures are required for periods ending after the
initial adoption.  This guidance did not have an impact on the
Partnership’s financial position, results of operations or cash
flows.


18





Interim
Reporting of Fair Value of Financial Instruments





In
April 2009, the FASB issued new guidance related to the disclosure of the
fair value of financial instruments.  The new guidance amends SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments,” to require disclosures
about fair value of financial instruments for interim reporting periods. 
The guidance also amends APB Opinion No. 28, “Interim Financial Reporting,” to
require those disclosures about the fair value of financial instruments in
summarized financial information at interim reporting periods.  This
guidance is effective for reporting periods ending after June 15, 2009. 
The adoption of this guidance did not have any impact on the Partnership’s
results of operations, cash flows, or financial position.





Overview





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





The
Partnership raised capital from the sale of Partnership units to investor
partners and Reef, and used those funds for the purchase of working interests in
prospects and for drilling and completion operations and administrative costs
during its drilling phase of operations. The Partnership did not borrow funds
during the drilling phase of operations, and interest income and crude oil and
natural gas revenues from successful wells, net of expenses, are being
distributed monthly to the partners. The Partnership is allowed to borrow funds
in accordance with the Partnership Agreement, or utilize cash flows from
successful wells in order to conduct further development upon prospects
initially purchased by and drilled on by the Partnership during the drilling
phase of operations. The Partnership completed its drilling phase of operations
during the first quarter of 2008. The Partnership currently has no plans to
drill additional wells on any Partnership prospect, or to acquire any additional
prospects.





The
Partnership does not operate in any other industry segment. The Partnership
expended approximately $599,000 for the purchase of working interests in three
developmental prospects, and expended approximately $368,000 for the purchase of
working interests in three exploratory prospects.  The Partnership has
three prospects in Louisiana, two in Texas, and one in New Mexico, all of which
are located onshore. The Partnership has drilled eighteen developmental and
three exploratory wells on these prospects as of December 31, 2008. Eighteen
wells were drilled during 2007, and three were drilled during 2008. The
Partnership drilled nine successful developmental wells, all of which are
currently productive, and nine unsuccessful developmental wells. The Partnership
drilled one successful exploratory well which ceased production during 2009, and
two unsuccessful exploratory wells.





Should
the Partnership elect to borrow monies for additional development activity on
its prospects, it will be subject to the interest rate risk inherent in
borrowing activities. The Partnership has no current plans for additional
drilling. The Partnership is permitted but is not expected to engage in
commodity futures trading or hedging activities, and therefore is subject to
commodity price risk.   See "Item 7A - Quantitative And Qualitative
Disclosure About Market Risk."





Liquidity
and Capital Resources





The
Partnership was funded with initial capital contributions totaling $16,090,928.
Investor partners purchased 520.793 general partner units and 95.283 limited
partner units for $15,401,896. Reef purchased 32.425 general partner units, or
5% of the total units sold, for $689,032. As of December 31, 2009, Reef has also
contributed $131,210 in connection with its obligation to pay 1% of all
leasehold, drilling, and completion costs. Organization and offering costs
totaled $2,310,285, leaving capital contributions of $13,911,853 available for
Partnership activities. The Partnership was formed on August 14, 2006 and the
last partner was admitted to the Partnership on December 29,
2006.


19





The
Partnership did not borrow additional funds in accordance with limitations set
forth in the Partnership Agreement during the drilling phase of operations. The
Partnership expended $14,102,150 on the drilling of 21 wells and $53,048 on
general and administrative expenses during its initial drilling phase of
operations. Expenditures in excess of available capital contributions were
deducted from Partnership distributions during 2009.





Please
see Item 1A of this Annual Report for a list of risk factors that could impact
the Partnership. The Partnership distributes to investors on at least a
quarterly basis the net cash flow from interest income and crude oil and natural
gas sales revenues from successful wells, less operating, general and
administrative, and other costs. These funds are not available for drilling
activities.





The
Partnership had working capital of $181,455 at December 31, 2009. Subsequent to
expending the initial available Partnership capital contributions on prospect
acquisitions and drilling and completion costs of partnership wells, the
Partnership’s working capital consists primarily of cash flows from productive
properties utilized to pay cash distributions to investors.





Results
of Operations





Year
ended December 31, 2009 compared to Year ended December 31, 2008





During
2009, the Partnership incurred a net loss of $267,567, compared to a net loss of
$3,339,048 incurred during 2008. The change in operating results is due to three
primary factors.  First, the Partnership saw significant decreases in the
2009 average sales prices for its crude oil of 45.6% and natural gas of 53.7%
compared to 2008.  The decreased prices caused overall sales revenues to
fall from $1,682,789 in 2008 to $863,908 in 2009, a decrease of 48.7%. 
Second, the Partnership had impairment of proved properties of $349,404 in 2009,
compared to impairment of proved properties of $3,252,689 and impairment of
unproved properties of $153,330 in 2008.  The Partnership also saw
depreciation, depletion, and amortization fall from $754,949 in 2008 to $283,380
in 2009, as a result of the reduced property basis for 2009 which resulted from
the large 2008 impairments.





The
Partnership’s year-end reserve report utilizes the un-weighted arithmetic
average of the first-day-of-the-month commodity prices over the preceding
12-month period and current costs to compute estimated discounted future net
cash flows from successful wells. The base year end prices used in the
Partnership’s reserve studies were $61.08 per barrel of oil and $3.83 per MCF of
natural gas at December 31, 2009, compared to $44.60 per barrel of oil and $5.71
per MCF of natural gas at December 31, 2008.  The 2009 year-end prices
directly affect the estimated economic lives and, therefore, estimated reserves
recoverable from Partnership wells. The increase in oil prices between periods
outweighed the decrease in gas prices between periods, due to the fact that a
majority of Partnership reserves are crude oil reserves.  At December 31,
2009, the estimated discounted future net cash flows of the Partnership totaled
$1,175,290 compared to $1,012,742 at December 31, 2008. The Partnership recorded
property impairment expense of proved properties totaling $349,404 during the
first and third quarters of 2009, but no additional impairment was needed at
December 31, 2009.





Lease
operating expenses decreased from $436,643 during the year ended December 31,
2008 to $207,749 during the year ended December 31, 2009, primarily due to the
Sand Dunes prospect, which incurred higher operating costs during 2008 due to
the costs of electricity, salt water disposal, equipment rental, and sub-surface
repairs and maintenance during the testing of the Sand Dunes wells in 2008. In
addition, 2008 production costs were impacted by the expensed workover costs
incurred to change bottom hole pumps on three Partnership wells. As a result of
shutting in the eight Sand Dunes wells in February 2009, lease operating costs
declined from comparable levels during 2008.





Production
expenses decreased during 2009 primarily due to decreases in sales prices. As a
result of the decrease in sales prices received during 2009 as compared to 2008,
production taxes decreased by $56,044 during 2009.





General
and administrative costs decreased from $290,673 incurred during the year ended
December 31, 2008 to $233,665 incurred during the year ended December 31, 2009,
primarily due to decreased legal fees and decreased overhead charges. Effective
April 1, 2008, Reef implemented a new method for allocating overhead that takes
actual overhead and allocates it based upon the summation of revenues, expenses,
and actual capital costs incurred. Reef administrative fees during the year
ended December 31, 2009 were $120,372, compared to $172,290 for the year ended
December 31, 2008.


20





The rapid
decline in crude oil and natural gas prices that occurred during the first half
of 2009, and the 2009 impairment of proved properties caused the Partnership to
have an overall net loss for 2009. Due to rising average prices, however, the
Partnership had net income of $175,378 during the fourth quarter of 2009. 
Average sales prices during the first quarter of 2010 have continued to increase
from 2009 levels. The Partnership expects that it will continue to generate net
income in 2010.





Year
ended December 31, 2008 compared to Year ended December 31, 2007





During
2008, the Partnership incurred a net loss of $3,339,048, compared to a net loss
of $7,738,293 incurred during 2007. During 2008, the final successful
Partnership well began production operations in May. The well accounted for
20.4% of total 2008 crude oil sales volumes and 41.5% of total 2008 natural gas
sales volumes. As a result, despite declining sales volumes from other
Partnership wells, crude oil sales volumes fell by only 0.6%, and natural gas
sales volumes increased by 100.8% during 2008. The average sales price per
barrel received from the sale of crude oil for 2008 increased by 25.5% from its
2007 level. The average sales price per MCF of natural gas declined by
approximately 3.3%, but the Partnership’s natural gas sales volume more than
doubled. Consequently, overall sales revenues increased from $1,213,154 in 2007
to $1,682,789 in 2008.





Property
impairment expense totaling $8,031,060 was incurred during 2007. Of this amount,
$6,528,851 was the result of a decline in crude oil and natural gas production
volumes from the eight Cole Ranch wells at a greater rate than originally
anticipated during the third and fourth quarters of 2007. Of the total property
impairment expense, $1,502,209 was incurred during the first two quarters of
2007 as a result of two unsuccessful wells. The property impairment expense was
the primary cause of the 2007 net loss. In comparison, property impairment
expense for 2008 totaled only $3,406,019. Of this amount, $153,330 was
impairment of unproved property relating to the Partnership’s interest in the
Sand Dunes prospect, and $3,252,689 was impairment of proved properties. The
entire $3,252,689 impairment of proved properties resulted from a ceiling test
writedown (see Note 2 to the Partnership’s financial statements). The
Partnership’s year-end reserve report utilizes current year end prices and costs
to compute estimated discounted future net cash flows from successful wells. The
base year end prices used in the Partnership’s reserve studies were $44.60 per
barrel of oil and $5.71 per MCF of natural gas at December 31, 2008, compared to
$89.16 per barrel of oil and $7.207 per MCF of natural gas at December 31,
2007.  The lower 2008 year-end prices directly affect the estimated
economic lives and, therefore, estimated reserves recoverable from Partnership
wells. At December 31, 2008, the estimated discounted future net cash flows of
the Partnership totaled $1,012,742, compared to $4,381,920 at December 31, 2007.
The Partnership recorded property impairment expense of proved properties
totaling $3,252,689 in order to reduce the proved property amount shown on the
accompanying balance sheet at December 31, 2008 to the estimated discounted
future net cash flow from wells at December 31, 2008.





As
production and sales volumes from the eight Cole Ranch wells decreased,
operating costs on a barrels of oil equivalent (BOE) basis have risen, since
operating costs tend to increase as a property ages and production tends to
decline. During the year ended December 31, 2008, total production expenses for
all wells averaged $26.83 per BOE produced compared to $12.55 per BOE produced
during 2007. The decline rate attributable to the eight Cole Ranch wells has
slowed significantly; however, the Partnership expects that natural declines in
production will cause 2009 quarterly sales volumes to begin to trend downward
from the level achieved during the fourth quarter of 2008, and that operating
costs per BOE will slowly increase.





General
and administrative costs increased from $105,748 in 2007 to $290,673 in 2008 as
a result of two primary factors. Reef implemented a new method for allocating
overhead that takes actual overhead and allocates it based upon the summation of
revenues, expenses, and capital costs incurred. Under the prior method of
allocating overhead, not all allocable general and administrative expenses were
charged to the Partnership during 2007. In addition, during the fourth quarter
expenses were incurred in connection with Sarbanes-Oxley compliance and
improvement of financial reporting. The Partnership expects to have continuing
costs during 2009 related to Sarbanes-Oxley compliance, as RELP is required to
be Sarbanes-Oxley compliant by December 31, 2009. Third party costs in
connection with financial reporting ended during January 2009.  The
administrative overhead charge to the Partnership for the year ended December
31, 2008 was $175,801, compared to $35,397 for the year ended December 31,
2007.


21





The rapid
decline in crude oil and natural gas prices that occurred during the fourth
quarter of 2008, the impairment of proved properties and unproved properties,
and the significant increase in general and administrative costs incurred during
the fourth quarter of 2008 caused the Partnership to have a net loss of
$3,688,546 for the fourth quarter. RELP and Reef are working to cut overhead
costs, and even with costs in connection with Sarbanes-Oxley compliance, the
Partnership expects to incur overall lower general and administrative costs
during 2009. Average sales prices during the first quarter of 2009 will continue
to decline from fourth quarter 2008 levels. The Partnership expects that prior
to depletion expense and any possible impairment charges it will continue to
generate net income. Nonetheless, 2009 results are expected to decline
significantly from 2008 results.





Off-Balance
Sheet Arrangements





The
Partnership does not participate in transactions that generate relationships
with unconsolidated entities or financial partnerships, such as entities often
referred to as structure finance or special purpose entities (SPEs), which would
have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.  As of
December 31, 2009, 2008 and 2007, the Partnership was not involved in any
unconsolidated SPE transactions or any other off-balance sheet
arrangements.





Contractual
Obligations Table





The
Partnership has no obligations under non-cancelable agreements as of December
31, 2009.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK





Interest Rate
Risk





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





Commodity Price
Risk





The
Partnership has not and does not expect to engage in commodity futures trading
or hedging activities or to enter into derivative financial instrument
transactions for trading or other speculative purposes. The Partnership sells a
vast majority of its production from successful oil and gas wells on a
month-to-month basis at current spot market prices. Accordingly, the Partnership
is at risk for the volatility in commodity prices inherent in the oil and gas
industry, and the level of commodity prices has a significant impact on the
Partnership's results of operations.





Assuming
the production levels we attained during the year ended December 31, 2009, a 10%
change in the price received for our crude oil would have had an approximate
$64,300 impact on our crude oil revenues, and a 10% change in the price received
for our natural gas would have had an approximate $22,300 impact on our natural
gas revenues.





ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





The
reports of our independent registered public accounting firm, and the
Partnership's financial statements, related notes, and supplementary data are
presented beginning on page F-1.


22





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





None.





ITEM
      9A(T).
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





As the
managing general partner of the Partnership, Reef maintains a system of controls
and procedures designed to provide reasonable assurance as to the reliability of
the financial statements and other disclosures included in this Annual Report,
as well as to safeguard assets from unauthorized use or disposition. The
Partnership, under the supervision and with participation of its management,
including the principal executive officer and principal financial officer of the
Partnership’s managing general partner, Reef Oil & Gas Partners, L.P.,
evaluated the effectiveness of its “disclosure controls and procedures” as such
term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended (the Exchange Act), as of the end of the period covered by this Annual
Report. Based on that evaluation,  the principal executive officer and
principal financial officer of our managing general partner have concluded that
the Partnership’s disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Partnership in reports that it
files or submits under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms, and includes controls and procedures designed to ensure that
information required to be disclosed by us in such reports is accumulated and
communicated to our management, including the principal executive officer and
principal financial officer of our managing general partner, as appropriate to
allow timely decisions regarding financial disclosure.





Management
Report on Internal Control Over Financial Reporting





Management
of the Partnership is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). Our management conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation under the
framework in Internal Control – Integrated Framework, management of the
Partnership concluded that the Partnership’s internal control over financial
reporting was effective as of December 31, 2009.





This
annual report does not include an attestation report of the Partnership’s
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the
Partnership’s registered public accounting firm pursuant to temporary rules of
the SEC that permit the Partnership to provide only management’s report in this
annual report.





Changes
in Internal Controls





There
have not been any changes in the Partnership’s internal controls over financial
reporting during the fiscal quarter ended December 31, 2009 that have materially
affected, or are reasonably likely to materially affect, the Partnership’s
internal control over financial reporting.





ITEM
      9B.
            OTHER
      INFORMATION





None.





PART
III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE





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


23





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





The
Manager, officers and key personnel of the managing general partner, their ages,
current positions with the managing general partner and/or RELP, and certain
additional information are set forth below.





On
January 4, 2010, Reef SWD 2007-A, L.P., an affiliate of Reef for which Reef is
the managing general partner, instituted a Federal bankruptcy Chapter 11
proceeding in U.S. Bankruptcy Court, Northern District of Texas. 
On
March 30, 2010, Reef SWD 2007-A, L.P., filed an application with the court to
convert the Chapter 11 proceeding to a Chapter 7 proceeding under the U.S.
Bankruptcy Code.





Name
              
              Age
              
              Positions and Offices HeldMichael
      J. Mauceli
              
              53
              
              Manager
      of Reef Oil & Gas Partners GP, LLC;
                Chief
      Executive Officer of RELPH.
      Walt Dunagin
              
              52
              
              Executive
      Vice President and Land Manager of RELPByron
      H. Dean
              
              60
              
              Manager
      of Acquisitions and Divestitures of RELPDaniel
      C. Sibley
              
              58
              
              General
      Counsel of RELPL.
      Mark Price
              
              47
              
              Controller
      of RELP;
                Chief
      Financial Officer of Pure Reef, L.P.David
      M. Tierney
              
              57
              
              Cheif
      Financial Reporting Officer and Treasurer of
  RELP





Michael J. Mauceli is the
Manager and a member of Reef Oil & Gas Partners, GP, LLC, which is the
general partner of Reef, as well as the Chief Executive Officer of RELP. Mr.
Mauceli has been the principal executive officer of Reef since its formation in
February 1999. He has served in this position with RELP since January 2006 and
has served in this position with its predecessor entity, OREI, Inc. (OREI),
since 1987.  Mr. Mauceli attended the University of Mississippi where he
majored in business management and marketing as well as the University of
Houston where he received his Commercial Real Estate License. He entered the oil
and natural gas business in 1976 when he joined Tenneco Oil & Gas
Company.  Mr. Mauceli moved to Dallas in 1979, where he was independently
employed by several exploration and development firms in planning exploration
and marketing feasibility of privately sponsored drilling programs.





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





Byron H. (Howard) Deanis Manager –
Acquisitions and Divestitures of RELP and is responsible for solicitation and
technical evaluation of acquisition and development opportunities for Reef. A
registered petroleum engineer, Mr. Dean has over 30 years of industry experience
with oil and natural gas operations and reservoir engineering, both domestic
onshore and offshore. Prior to joining RELP in 2006, Mr. Dean was Senior
Petroleum Engineer and Acquisition and Divestiture Specialist for PLS, Inc. in
2006, and Senior Acquisitions Engineer of Noble Royalties, Inc. from 2004 to
2007.  From 1998 to 2004, Mr. Dean was an engineering consultant to H&D
Management, and from 1997 to 1998 he was Operations Manager for Hrubetz Oil
Company.  Mr. Dean served as Senior Staff Engineer for Coda Energy from
1988 to 1997and for Santa Fe Minerals from 1983 to 1988.  He was Senior
Reservoir Engineer for General American Oil Company from 1979 to 1983, worked
for Amoco Production Company from 1974 to 1979, attaining the position of Senior
Petroleum Engineer.
He is a 1974 graduate of the University of Texas at Arlington with a Bachelor of
Science degree in Civil Engineering. Mr. Dean is an active member of the Society
of Petroleum Engineers, the Society of Petroleum Evaluation Engineers, ADAM
Energy Forum, and Texas Independent Producer and Royalty Owners
Association.





Daniel
C. Sibleybecame Chief Financial Officer of RELP in March 2010 and
General Counsel of RELP in January 2009.  He previously served as Chief
Financial Officer of Reef from December 1999 until his appointment to General
Counsel of RELP. He also served as Chief Financial Officer for RELP from January
2006 until his appointment to General Counsel of RELP, and had served in this
same position with RELP’s predecessor entity, OREI, since 1998. Mr. Sibley was
employed as a CertifiedPublic Accountant
with Grant Thornton from 1977 to 1980. From 1980 to 1994, he was involved in the
private practice of law. He received a B.B.A. in accounting from the University
of North Texas in 1973, a law degree (J.D.) from the University of Texas in
1977, and a Master of Laws-Taxation degree (L.L.M.) from Southern Methodist
University in 1984. Mr.
Sibley became a certified public accountant in 1977, but no longer maintains
this license.


24





L. Mark Price
is Controller of RELP and Chief Financial Officer of Pure Reef L.P., an
affiliate of Reef.  Mr. Price was appointed to his position with RELP
in March 2010 and to his position with Pure Reef in October 2009.  Mr.
Price joined RELP in January 2009 as Chief Financial Officer of RELP.  He
served in that capacity until October 2009 when he became Chief Financial
Officer of Pure Reef L.P.  He has over twenty-two years of experience
working in the oil and gas and manufacturing industries.  He previously
served as the Chief Financial Officer for The Terramar Group, Inc., an
international oil and gas and manufacturing company, beginning in 2007. 
From 2004 to 2007, he served as the Chief Accounting Officer for Lancer
Corporation, an international manufacturing company.  Additionally, Mr.
Price served as the Chief Financial Officer of Nunn Manufacturing, and for PCLC
Asset Management after its acquisition of Nunn Manufacturing in 1998, from 1996
until 2004.  Mr. Price received his BBA in accounting and finance from
Texas Tech University in 1984 and is a licensed certified public accountant in
the state of Texas. In
October 2003, Mr. Price filed a personal bankruptcy petition under Chapter 7 in
U.S. Bankruptcy Court, Northern District of Texas. On September 30, 2004, the
court granted a discharge under §727 of the U.S.
Bankruptcy Code.





David M. Tierney,
the Chief Financial Reporting Officer and Treasurer of RELP, has been
employed by RELP since January 2006 and was previously with its predecessor
entity, OREI, Inc., since March 2001.  Mr. Tierney became Chief Financial
Reporting Officer of RELP in March 2010 and Treasurer of RELP in May 2009. Prior
to that, Mr. Tierney served as Chief Accounting Officer – Public Partnerships of
RELP starting in July 2008. From 2001 to 2008, Mr. Tierney was the Controller of
the Reef Global Energy Ventures and Reef Global Energy Ventures II
partnerships.  Mr. Tierney received a Bachelor's degree from Davidson
College in 1974, a Masters of Business Administration from Tulane University in
1976, and is a Texas Certified Public Accountant.  Mr. Tierney has worked
in public accounting, and has worked in the oil and gas industry since
1979.  From 1992 through 2000 he served as controller/treasurer of an
independent oil and gas exploration company.





Audit
Committee and Nominating Committee





Because
the Partnership has no directors, it does not have an audit committee, an audit
committee financial expert or a nominating committee.





Code
of Ethics





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





ITEM
      11.
            EXECUTIVE
      COMPENSATION





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





Recipient
            
            Form of Compensation
            
            AmountManaging
      General Partner
            
            Partnership
      interest (excluding any partnership interest resulting from the purchase
      of units)
            
            10%
      interestManaging
      General Partner
            
            Management
      fee
            
            15%
      of subscriptionsManaging
      General Partner and its Affiliates
            
            Direct
      and administrative costs
            
            Reimbursement
      at costAffiliate
      of the Managing General Partner
            
            Operator's
      per-well charges
            
            Competitive
      pricesManaging
      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 only to its
interest as managing general partner and does not include the interest Reef has
as the result of its purchase of units in the Partnership, or the 1% interest
Reef has as the result of its payment of 1% of all leasehold, drilling, and
completion costs.  Reef purchased 5.00% of the outstanding Partnership
units. Reef received a 10% interest as managing general partner of the
Partnership and a 1% interest as a result of Reef’s payment of 1% of all
leasehold, drilling, and completion costs, for a total of an 11% interest. 
This 11% interest is not represented by partnership units.  Reef has a
total interest in the Partnership of 15.45%.


25





Reef is
entitled to receive a management fee equal to 15% of the Partnership
subscriptions exclusive of the units purchased by Reef. From this amount Reef
pays all of the Partnership's organization and offering costs, including sales
commissions. The management fee is payable to Reef in two parts. Reef initially
received an amount not to exceed 13.5% to cover actual sales commissions and
actual organization and offering costs. The remainder of the management fee is
paid to Reef from the net cash flow available for partner distributions, at a
rate not to exceed $1 million per year. The total management fee owed Reef is
$2,310,285. The Partnership recorded $2,260,285 of this amount as offering
costs, and $50,000 as organization costs. Of this amount, $2,085,232 has been
paid to Reef to cover actual sales commissions and organization and offering
costs, and $225,053 has been paid to Reef from net cash flows of the
Partnership.





Reef is
reimbursed for direct costs and all documented out-of-pocket expenses incurred
on behalf of the Partnership, including administrative costs. During the years
ended December 31, 2009, 2008, and 2007, the Partnership reimbursed Reef $1,509,
$62,446, and $699,401, respectively, for technical services costs which have
been capitalized as project costs, and $144,277, $175,801, and $35,397,
respectively, for administrative costs included as general and administrative
expenses.





Operator
fees are payable to RELP for the wells on the two prospects where RELP serves as
operator. RELP receives operator fees during the drilling and production phase
of each well at the competitive rate in the geographical area where the well is
located.  These fees are charged as a monthly fee per well as agreed to in
an operating agreement signed by the Partnership and participating third party
working interest owners in the well. During the years ended December 31, 2009,
2008, and 2007, the Partnership paid operator fees totaling $42,785, $39,363,
and $50,961 to RELP. RELP serves as operator for two Partnership prospects upon
which eight successful wells and eight unsuccessful wells have been drilled,
including the eight Sand Dunes prospect wells classified as unsuccessful that
have not yet been plugged and abandoned.





Compensation
Committee





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





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





The
following table sets forth information as of December 31, 2009 concerning all
persons known by Reef to own beneficially more than 5% of the interests in the
Partnership. Unless expressly indicated otherwise, each partner exercises sole
voting and investment power with respect to the interests beneficially
owned.





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





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





The
managing general partner received a 10% 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 all leasehold, drilling and completion
costs. In addition to this 11% interest not represented by Partnership units,
Reef purchased 5% of the 648.501 Partnership units and, therefore, holds 5% of
the 89% interest in the Partnership (4.45%) held by the unit
holders.


26





ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
Partnership is managed by a managing general partner and does not have
directors. Reef is the managing general partner of the Partnership.  Along
with its affiliates, Reef has entered into agreements with, and received
compensation from, the Partnership for services it performs for the
Partnership.  See “Item 11. - Executive Compensation.”





ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





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





2009
                  
                  
                  2008Audit
      fees
                  
                  $
                  48,825
                  
                  
                  $
                  48,658Audit
      related fees
                  
                  
                  —
                  
                  
                  
                  —Tax
      fees
                  
                  
                  —
                  
                  
                  
                  2,243All
      other fees
                  
                  
                  —
                  
                  
                  
                  —





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





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





PART
IV





ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





(a)
                  
                  1.
      Financial StatementsReport
      of Independent Registered Public Accounting Firm
                  
                  F-1Balance
      Sheets
                  
                  F-2Statements
      of Operations
                  
                  F-3Statements
      of Partnership Equity
                  
                  F-4Statements
      of Cash Flows
                  
                  F-5Notes
      to Financial Statements
                  
                  F-62.
      Financial Statement Schedules
                  
                  None3.
      Exhibits





A list of
the exhibits filed or furnished with this Annual Report (or incorporated by
reference to exhibits previously filed or furnished by us) is provided in the
Exhibit Index in this Annual Report.  Those exhibits incorporated by
reference herein are indicated as such by the information supplied in the
parenthetical thereafter. Otherwise, the exhibits are filed
herewith.


27


SIGNATURES





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





Date:    April
      2, 2010
              REEF
      GLOBAL ENERGY VIII, L.P.Reef
      Oil & Gas Partners, L.P.Managing
      General PartnerBy:
              Reef Oil & Gas Partners, GP, LLCManaging
      General Partner





By:
                      /s/
      Michael
      J. MauceliMichael
      J. MauceliManager
      (principal executive
      officer)


28


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.




Signature
                          
                          Title
                          
                          Date/s/
      Michael
      J. Mauceli
                          
                          Manager
      and Member of the general partner of Reef
                          
                          April 2,
      2010Michael
      J. Mauceli
                          
                          Oil
      & Gas Partners, L.P. (principal executive
      officer)/s/
      Daniel C. Sibley
                          
                          Chief
      Financial Officer
                          
                          April
      2, 2010Daniel
      C. Sibley
                          
                          Reef
      Exploration, L.P.
                            (principal
      financial and accounting officer)


29





EXHIBIT
INDEX





3.1(a)(i)
              
              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,
      2007.3.1(a)(ii)
              
              Certificate
      of Amendment to the Certificate of Limited Partnership of Reef Global
      Energy VIII, L.P., dated August 27, 2008 (incorporated by reference to
      Exhibit 3.1(i)(a) to Form 8-K, SEC File No. 000-52541, as filed with the
      SEC on September 3, 2008).3.1(a)(iii)
              
              Certificate
      of Amendment to the Certificate of Limited Partnership of Reef Global
      Energy VIII, L.P., dated August 28, 2008 (incorporated by reference to
      Exhibit 3.1(i)(b) to Form 8-K, SEC File No. 000-52541, as filed with the
      SEC on September 3, 2008).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
      theReport on Form 10-K of Reef
      Global Energy Ventures as filed with the SEC on March 5,
      2002).23.2
              *
              Consent
      of Forrest A. Garb & Associates, Inc.31.1
              *
              Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934.31.2
              *
              Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934.32.1
              *
              Certification
      of Principal Executive Officer pursuant to 18 U.S.C.
  §1350.32.2
              *
              Certification
      of Principal Financial Officer pursuant to 18 U.S.C. §1350.99.1
              *
              Summary
      Reserve Report of Forrest A. Garb & Associates,
Inc.*  Attached
      herewith


30





Reef
Global Energy VIII, L.P.





Financial
Statements





Years
Ended December 31, 2009, 2008, and 2007




Contents





Report
      of Independent Registered Public Accounting Firm
                  
                  
                  F-1Audited
      Financial StatementsBalance
      sheets
                  
                  
                  F-2Statements
      of operations
                  
                  
                  F-3Statements
      of partnership equity
                  
                  
                  F-4Statements
      of cash flows
                  
                  
                  F-5Notes
      to financial statements
                  
                  
                  F-6










Report of
Independent Registered Public Accounting Firm





The
Partners


Reef
Global Energy VIII, L.P.





We have
audited the accompanying balance sheets of Reef Global Energy VIII, L.P. as of
December 31, 2009 and 2008 and the related statements of operations, partnership
equity, and cash flows for each of the three years in the period ended December
31, 2009. These financial statements are the responsibility of the Partnership’s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.





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





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Reef Global Energy VIII, L.P. at
December 31, 2009 and 2008, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2009, in conformity
with accounting principles generally accepted in the United States of
America.





As
discussed in Note 2 to the financial statements, effective December 31, 2009,
the Partnership changed its reserve estimates and related disclosures as a
result of adopting new oil and gas reserve estimation and disclosure
requirements.





BDO
Seidman, LLP





Dallas,
Texas


April 2,
2010


F-1





Reef
Global Energy VIII, L.P.


Balance
Sheets





December 31,
                    
                    2009
                    
                    
                    2008AssetsCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    43,541
                    
                    
                    $
                    557,935Accounts
      receivable
                    
                    
                    2,680
                    
                    
                    
                    2,680Accounts
      receivable from affiliates
                    
                    
                    136,067
                    
                    
                    
                    —Prepaid
      expenses
                    
                    
                    4,167
                    
                    
                    
                    2,500Total
      current assets
                    
                    
                    186,455
                    
                    
                    
                    563,115Oil
      and gas properties, full cost method of accounting:Proved
      properties, net of accumulated depletion of  $13,512,105 and
      $12,878,870
                    
                    
                    619,148
                    
                    
                    
                    1,012,742Net
      oil and gas properties
                    
                    
                    619,148
                    
                    
                    
                    1,012,742Total
      assets
                    
                    $
                    805,603
                    
                    
                    $
                    1,575,857Liabilities
      and partnership equityCurrent
      liabilities:Accounts
      payable
                    
                    $
                    5,000
                    
                    
                    $
                    —Accounts
      payable to affiliates
                    
                    
                    —
                    
                    
                    
                    457,622Total
      current liabilities
                    
                    
                    5,000
                    
                    
                    
                    457,622Long-term
      liabilities:Asset
      retirement obligation
                    
                    
                    253,347
                    
                    
                    
                    237,049Total
      long-term liabilities
                    
                    
                    253,347
                    
                    
                    
                    237,049Commitments
      and contingencies (Note 5)Partnership
      equityLimited
      partners
                    
                    
                    519,097
                    
                    
                    
                    841,995Managing
      general partner
                    
                    
                    28,159
                    
                    
                    
                    39,191Partnership
      equity
                    
                    
                    547,256
                    
                    
                    
                    881,186Total
      liabilities and partnership equity
                    
                    $
                    805,603
                    
                    
                    $
                    1,575,857





See
accompanying notes to financial statements.


F-2





Reef
Global Energy VIII, L.P.


Statements
of Operations





For the Years Ended December
      31,2009
                
                
                2008
                
                
                2007Revenues
                
                $
                863,908
                
                
                $
                1,682,789
                
                
                $
                1,213,154Costs
      and expenses:Lease
      operating expenses
                
                
                207,749
                
                
                
                436,643
                
                
                
                139,153Production
      taxes
                
                
                42,562
                
                
                
                98,606
                
                
                
                63,590Depreciation,
      depletion and amortization
                
                
                283,830
                
                
                
                754,949
                
                
                
                840,172Property
      impairment
                
                
                349,404
                
                
                
                3,406,019
                
                
                
                8,031,060Accretion
      of asset retirement obligation
                
                
                16,298
                
                
                
                49,799
                
                
                
                4,817General
      and administrative
                
                
                233,665
                
                
                
                290,673
                
                
                
                105,748Total
      costs and expenses
                
                
                1,133,508
                
                
                
                5,036,689
                
                
                
                9,184,540Loss
      from operations
                
                
                (269,600
                )
                
                
                (3,353,900
                )
                
                
                (7,971,386
                )Interest
      income
                
                
                2,033
                
                
                
                14,852
                
                
                
                233,093Net
      loss
                
                $
                (267,567
                )
                
                $
                (3,339,048
                )
                
                $
                (7,738,293
                )Net
      income (loss) per general partner unit
                
                $
                —
                
                
                $
                237.29
                
                
                $
                (11,987.96
                )Net
      loss per limited partner unit
                
                $
                (428.67
                )
                
                $
                (5,218.96
                )
                
                $
                (11,987.96
                )Net
      loss per managing general partner unit
                
                $
                (107.07
                )
                
                $
                (3,817.12
                )
                
                $
                (10,880.45
                )





See
accompanying notes to financial statements.


F-3





Reef
Global Energy VIII, L.P.


Statements
of Partnership Equity




General
      partners
                  
                  
                  Limited
      partners
                  
                  
                  Managing
      general
                    partner
                  
                  
                  TotalUnits
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  AmountBalance
      at December 31, 2006
                  
                  
                  520.793
                  
                  
                  $
                  11,116,890
                  
                  
                  
                  95.283
                  
                  
                  $
                  2,033,914
                  
                  
                  
                  32.425
                  
                  
                  $
                  713,129
                  
                  
                  
                  648.501
                  
                  
                  $
                  13,863,933Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  109,344
                  
                  
                  
                  —
                  
                  
                  
                  109,344Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  (724,383
                  )
                  
                  
                  —
                  
                  
                  
                  (132,531
                  )
                  
                  
                  —
                  
                  
                  
                  (156,586
                  )
                  
                  
                  —
                  
                  
                  
                  (1,013,500
                  )Net
      loss
                  
                  
                  —
                  
                  
                  
                  (6,243,247
                  )
                  
                  
                  —
                  
                  
                  
                  (1,142,247
                  )
                  
                  
                  —
                  
                  
                  
                  (352,799
                  )
                  
                  
                  —
                  
                  
                  
                  (7,738,293
                  )Balance
      at December 31, 2007
                  
                  
                  520.793
                  
                  
                  
                  4,149,260
                  
                  
                  
                  95.283
                  
                  
                  
                  759,136
                  
                  
                  
                  32.425
                  
                  
                  
                  313,088
                  
                  
                  
                  648.501
                  
                  
                  
                  5,221,484Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  1,390.92
                  
                  
                  
                  
                  
                  
                  $
                  1,390.92
                  
                  
                  
                  
                  
                  
                  $
                  4,829.18Balance
      at December 31, 2007
                  
                  
                  520.793
                  
                  
                  
                  4,149,260
                  
                  
                  
                  95.283
                  
                  
                  
                  759,136
                  
                  
                  
                  32.425
                  
                  
                  
                  313,088
                  
                  
                  
                  648.501
                  
                  
                  
                  5,221,484Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  5,400
                  
                  
                  
                  —
                  
                  
                  
                  5,400Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  (333,209
                  )
                  
                  
                  —
                  
                  
                  
                  (517,914
                  )
                  
                  
                  —
                  
                  
                  
                  (155,527
                  )
                  
                  
                  —
                  
                  
                  
                  (1,006,650
                  )Net
      income (loss)
                  
                  
                  —
                  
                  
                  
                  123,577
                  
                  
                  
                  —
                  
                  
                  
                  (3,338,855
                  )
                  
                  
                  —
                  
                  
                  
                  (123,770
                  )
                  
                  
                  —
                  
                  
                  
                  (3,339,048
                  )Conversion
      of general partner units into limited partner units (Note
    1)
                  
                  
                  (520.793
                  )
                  
                  
                  (3,939,628
                  )
                  
                  
                  520.793
                  
                  
                  
                  3,939,628
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Balance
      at December 31, 2008
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  616.076
                  
                  
                  
                  841,995
                  
                  
                  
                  32.425
                  
                  
                  
                  39,191
                  
                  
                  
                  648.501
                  
                  
                  
                  881,186Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  639.81
                  
                  
                  
                  
                  
                  
                  $
                  1,381.52
                  
                  
                  
                  
                  
                  
                  $
                  4,796.52Balance
      at December 31, 2008
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  616.076
                  
                  
                  
                  841,995
                  
                  
                  
                  32.425
                  
                  
                  
                  39,191
                  
                  
                  
                  648.501
                  
                  
                  
                  881,186Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3,185
                  
                  
                  
                  —
                  
                  
                  
                  3,185Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (58,803
                  )
                  
                  
                  —
                  
                  
                  
                  (10,745
                  )
                  
                  
                  —
                  
                  
                  
                  (69,548
                  )Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (264,095
                  )
                  
                  
                  —
                  
                  
                  
                  (3,472
                  )
                  
                  
                  —
                  
                  
                  
                  (267,567
                  )Balance
      at December 31, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  616.076
                  
                  
                  $
                  519,097
                  
                  
                  
                  32.425
                  
                  
                  $
                  28,159
                  
                  
                  
                  648.501
                  
                  
                  $
                  547,256Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  —
                  
                  
                  
                  
                  
                  
                  $
                  95.45
                  
                  
                  
                  
                  
                  
                  $
                  331.38





See
accompanying notes to financial statements.


F-4


Reef
Global Energy VIII, L.P.


Statements
of Cash Flows





For the Years Ended December
      31,2009
                
                
                2008
                
                
                2007Operating
      ActivitiesNet
      loss
                
                $
                (267,567
                )
                
                $
                (3,339,048
                )
                
                $
                (7,738,293
                )Adjustments
      to reconcile net loss to net cash  provided by (used in)
      operating activities:Adjustments
      for non-cash transactions:Depreciation,
      depletion and amortization
                
                
                283,830
                
                
                
                754,949
                
                
                
                840,172Property
      impairment
                
                
                349,404
                
                
                
                3,406,019
                
                
                
                8,031,060Accretion
      of asset retirement obligation
                
                
                16,298
                
                
                
                49,799
                
                
                
                4,817Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                —
                
                
                
                (2,680
                )
                
                
                —Accounts
      receivable from affiliates
                
                
                (136,067
                )
                
                
                —
                
                
                
                —Prepaid
      expenses
                
                
                (1,667
                )
                
                
                (2,500
                )
                
                
                —Accounts
      payable
                
                
                5,000
                
                
                
                —
                
                
                
                (20,000
                )Accounts
      payable to affiliates
                
                
                (357,569
                )
                
                
                313,848
                
                
                
                15,177Net
      cash provided by (used in) operating activities
                
                
                (108,338
                )
                
                
                1,180,387
                
                
                
                1,132,933Investing
      ActivitiesProperty
      acquisition and development
                
                
                (239,640
                )
                
                
                (1,191,680
                )
                
                
                (9,464,870
                )Net
      cash used in investing activities
                
                
                (239,640
                )
                
                
                (1,191,680
                )
                
                
                (9,464,870
                )Financing
      ActivitiesPartner
      capital contributions
                
                
                3,185
                
                
                
                17,060
                
                
                
                566,515Offering
      costs
                
                
                (100,053
                )
                
                
                (120,000
                )
                
                
                (836,774
                )Partner
      distributions
                
                
                (69,548
                )
                
                
                (1,006,650
                )
                
                
                (1,013,500
                )Net
      cash used in financing activities
                
                
                (166,416
                )
                
                
                (1,109,590
                )
                
                
                (1,283,759
                )Net
      decrease in cash and cash equivalents
                
                
                (514,394
                )
                
                
                (1,120,883
                )
                
                
                (9,615,696
                )Cash
      and cash equivalents at beginning of period
                
                
                557,935
                
                
                
                1,678,818
                
                
                
                11,294,514Cash
      and cash equivalents at end of period
                
                $
                43,541
                
                
                $
                557,935
                
                
                $
                1,678,818Non-cash
      investing transactionsProperty
      additions included in accounts payable to affiliates
                
                $
                —
                
                
                $
                28,544
                
                
                $
                661,105Property
      additions and asset retirement obligation
                
                $
                —
                
                
                $
                79,341
                
                
                $
                103,092Non-cash
      financing transactions:Managing
      partner contributions included in accounts receivable from
      affiliates
                
                $
                —
                
                
                $
                —
                
                
                $
                11,660Offering
      costs included in accounts payable to affiliates
                
                $
                —
                
                
                $
                100,053
                
                
                $
                120,000Offering
      costs included in non-current accounts payable to
    affiliates
                
                $
                —
                
                
                $
                —
                
                
                $
                100,053




See
accompanying notes to financial statements.


F-5





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements




1.
Organization and Basis of Presentation





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





The
Partnership is a Nevada limited partnership formed under the Nevada Uniform
Limited Partnership Act. Reef Oil & Gas Partners, L.P. (“Reef”) serves as
the Partnership’s managing general partner. Partnership interests are held by
the managing general partner and investor partners who are general and limited
partners (“investor partners”). The managing general partner received a 10%
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 all
leasehold, drilling and completion costs. This 11% interest is not represented
by Partnership units. In addition, Reef purchased 5% of the Partnership units
and, therefore, holds 5% of the 89% interest in the Partnership (4.45%) held by
the unit holders. The Partnership purchased working interests in exploratory and
developmental drilling prospects and drilled oil and gas wells located onshore
in the continental United States. Other partnerships formed as a part of this
Program, as well as other partnerships managed by Reef also own interests in
some of the prospects purchased by this Partnership. In instances where
Reef-affiliated entities own a majority working interest in a prospect, wells
drilled on that prospect may be operated by Reef Exploration, L.P. (“RELP”), an
affiliate of the managing general partner.





Pursuant
to the Partnership Agreement of the Partnership, all general partner units held
by investors other than the managing general partner were converted into limited
partner units. This conversion of general partner units into limited partner
units occurred during the 3rd quarter
of 2008. The general partner equity at June 30, 2008 was transferred to limited
partner equity, and all income and expense items subsequent to the second
quarter of 2008 have been allocated between the managing general partner and the
limited partners.





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





Organization
and offering costs are allocated 100% to investor partners, as the managing
general partner purchases its units net of the 15% fee for organization and
offering costs. Quarterly cash distributions to partners are based upon the
number and type of partnership units held at the close of the prior quarter.
Cash distributions to partners of the net cash flow from interest income and
crude oil and natural gas sales revenues, less operating, general and
administrative, and other costs are distributed 15.45% to the managing general
partner (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 accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.


F-6





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





Cash
and Cash Equivalents





The
Partnership considers all highly liquid investments with maturity dates of no
more than three months from the purchase date to be cash equivalents. Cash and
cash equivalents consist of demand deposits and money market investments
invested with a major national bank, which at times may exceed federally insured
limits. The Partnership has not experienced any losses in such accounts, and
does not expect any loss from this exposure. The carrying value of the
Partnership’s cash equivalents approximates fair value.





Risks
and Uncertainties





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





The
Partnership has not engaged in commodity futures trading or hedging activities
and has not entered into derivative financial instrument transactions for
trading or other speculative purposes. Accordingly, the Partnership is at risk
for the volatility in commodity prices inherent in the oil and gas industry, and
the level of commodity prices has a significant impact on the Partnership’s
results of operations.





Crude
Oil and Natural Gas Properties





The
Partnership follows the full cost method of accounting for crude oil and natural
gas properties. Under this method, all direct costs and certain indirect costs
associated with acquisition of properties and successful as well as unsuccessful
exploration and development activities are capitalized. Depreciation, depletion,
and amortization of capitalized crude oil and natural gas properties and
estimated future development costs, excluding unproved properties, are based on
the unit-of-production method using estimated proved reserves, as determined by
independent petroleum engineers.  For these purposes, proved natural
gas reserves are converted to equivalent barrels of crude oil at a rate of 6 Mcf
to 1 Bbl.





In
applying the full cost method at December 31, 2009, the Partnership performs a
quarterly ceiling test on the capitalized costs of oil and gas properties,
whereby the capitalized costs of oil and gas properties are limited to the sum
of the estimated future net revenues from proved reserves using prices that are
the 12-month un-weighted arithmetic average of the first-day-of-the-month price
for crude oil and natural gas held constant and discounted at 10%, plus the
lower of cost or estimated fair value of  unproved properties, if any,
for 2009. If capitalized costs exceed the ceiling, an impairment loss is
recognized for the amount by which the capitalized costs exceed the ceiling, and
is shown as a reduction of oil and gas properties and as property impairment
expense on the Partnership’s statement of operations. No gain or loss is
recognized upon sale or disposition of crude oil and natural gas properties,
unless such a sale would significantly alter the rate of depletion and
amortization. During the years ended December 31, 2009, 2008, and 2007, the
Partnership recognized property impairment expense of proved properties totaling
$349,404, $3,252,689 and $8,031,060, respectively.





Unproved
properties consist of undeveloped leasehold interests. Investments in unproved
properties are not depleted pending determination of the existence of proved
reserves. Unproved properties are assessed for impairment quarterly as of the
balance sheet date by considering the primary lease term, the holding period of
the properties, geologic data obtained relating to the properties, and other
drilling activity in the immediate area of the properties. Any impairment
resulting from this quarterly assessment is reported as property impairment
expense in the current period, as appropriate. During the year ended December
31, 2008, the Partnership fully impaired its unproved properties by recognizing
$153,330 of property impairment expense.





Estimates
of Proved Oil and Gas Reserves





Estimates
of the Partnership’s proved reserves at December 31, 2009 have been prepared and
presented in accordance with new SEC rules and accounting standards. These new
rules are effective for fiscal years ending on or after December 31, 2009, and
require SEC reporting entities to prepare their reserve estimates using revised
reserve definitions and revised pricing based upon the un-weighted arithmetic
average of the first-day-of-the-month commodity prices over the preceding 12
month period and current costs. Estimates of the Partnership’s proved reserves
at December 31, 2008 and 2007 have been prepared and presented using previous
SEC rules and accounting standards that required pricing based upon
end-of-period commodity prices and costs. Future prices and costs may be
materially higher or lower than these prices and costs, which would impact the
estimate of reserves and future cash flows. Our proved reserve information
included in this report was based upon evaluations prepared by independent
petroleum engineers.




F-7


Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)




Reserves
and their relation to estimated future net cash flows impact the Partnership’s
depletion and impairment calculations. As a result, adjustments to depletion and
impairment are made concurrently with changes to reserve estimates. If proved
reserve estimates decline, the rate at which depletion expense is recorded
increases, reducing net income. A decline in estimated proved reserves and
future cash flows also reduces the capitalized cost ceiling and may result in
increased impairment expense.




The
adoption of the new SEC rules and accounting standards at December 31, 2009
resulted in a downward adjustment of $749,290 to the estimated discounted future
cash flows from proved reserves, and in a reduction of 8,600 BOE equivalent of
proved reserves. Additionally, the change resulted in increases of $3,049 and $0
in depletion and impairment expense, respectively,  in the fourth
quarter of 2009.





Restoration,
Removal, and Environmental Liabilities





The
Partnership is subject to extensive Federal, state and local environmental laws
and regulations. These laws regulate the discharge of materials into the
environment and may require the Partnership to remove or mitigate the
environmental effects of the disposal or release of petroleum substances at
various sites. Environmental expenditures are expensed or capitalized depending
on their future economic benefit. Expenditures that relate to an existing
condition caused by past operations and that have no future economic benefit are
expensed.





Liabilities
for expenditures of a non-capital nature are recorded when environmental
assessments and/or remediation is probable, and the costs can be reasonably
estimated. Such liabilities are generally undiscounted values unless the timing
of cash payments for the liability or component is fixed or reliably
determinable.





Asset
retirement costs and liabilities associated with future site restoration and
abandonment of long-lived assets are initially measured at fair value which
approximates the cost a third party would incur in performing the tasks
necessary to retire such assets. The fair value is recognized in the financial
statements as the present value of expected future cash expenditures for site
restoration and abandonment. Subsequent to the initial measurement, the effect
of the passage of time on the liability for the net asset retirement obligation
(accretion expense) and the amortization of the asset retirement cost are
recognized in the results of operations.





The
following table summarizes the Partnership’s asset retirement obligation for the
years ended December 31, 2009 and 2008.


2009
                    
                    
                    2008Beginning
      asset retirement obligation
                    
                    $
                    237,049
                    
                    
                    $
                    107,909Additions
      related to new properties
                    
                    
                    —
                    
                    
                    
                    79,341Accretion
      expense
                    
                    
                    16,298
                    
                    
                    
                    49,799Ending
      asset retirement obligation
                    
                    $
                    253,347
                    
                    
                    $
                    237,049





Recognition
of Revenue





The
Partnership enters into sales contracts for disposition of its share of crude
oil and natural gas production from productive wells. Revenues are recognized
based upon the Partnership’s share of metered volumes delivered to its
purchasers each month. The Partnership had no material gas imbalances at
December 31, 2009, 2008 and 2007.





Income
Taxes





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




F-8





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





As of
December 31, 2009, the tax basis of the Partnership’s assets exceeds the
financial reporting basis of the assets by approximately $2.83 million,
primarily due to the difference between property impairment costs deducted for
financial reporting purposes and intangible drilling costs deducted for income
tax purposes.





Accounting
for Uncertainty in Income Taxes





FASB
provides guidance on accounting for uncertainty in income taxes. This guidance
is intended to clarify the accounting for uncertainty in income taxes recognized
in a company’s financial statements and prescribes the recognition and
measurement of a tax position taken or expected to be taken in a tax return. It
also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and
transition.





Under
this guidance, evaluation of a tax position is a two-step process. The first
step is to determine whether it is more-likely-than-not that a tax position will
be sustained upon examination, including the resolution of any related appeals
or litigation based on the technical merits of that position. The second step is
to measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50% likely of being realized upon ultimate settlement.





Tax
positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent period in which the
threshold is met. Previously recognized tax positions that no longer meet the
more-likely-than-not criteria should be de-recognized in the first subsequent
reporting period in which the threshold is no longer met. Penalties and interest
are classified as income tax expense.





Based on
the Partnership’s assessment, there are no material uncertain tax positions as
of December 31, 2009.





Fair
Value of Financial Instruments





The
estimated fair values for financial instruments have been determined at discrete
points in time based on relevant market information. These estimates involve
uncertainties and cannot be determined with precision. The estimated fair
value of cash, accounts receivable and accounts payable approximates their
carrying value due to their short-term nature.





Recently
Adopted Accounting Pronouncements





Modernization
of Oil and Gas Reporting





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009. In addition to expanding the definition and disclosure requirements
for crude oil and natural gas reserves, the new rule changes the requirements
for determining quantities of crude oil and natural gas reserves. The new rule
requires disclosure of crude oil and natural gas proved reserves by geographical
area, using the unweighted arithmetic average of first-day-of-the-month
commodity prices over the preceding 12-month period, rather than end-of-period
prices, and allows the use of reliable technologies to estimate proved crude oil
and natural gas reserves, if those technologies have been demonstrated to result
in reliable conclusions about reserve volumes.  In addition, in
January 2010, the FASB issued guidance relating to crude oil and natural gas
reserve estimation and disclosures to provide consistency with the new SEC
rules.  The Partnership adopted the new standards effective December
31, 2009.  The new standards are applied prospectively as a change in
estimate. The effect of applying the unweighted arithmetic average of
first-day-of-the-month commodity prices over the preceding 12-month period,
versus applying the 2009 end-of-period price, decreased net proved reserves by
11.6%. The standardized measure of discounted future net cash flows for the year
ended December 31, 2009 was lower by $807,200 using the new rule as compared to
amounts calculated using the previous rules.  The effect of applying
the new rule resulted in additional depletion expense of $3,049, but no
additional impairment expense.




F-9


Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





Accounting
Standards Codification




In
June 2009, the Financial Accounting Standards Board (“FASB”) issued
guidance on the accounting standards codification and the hierarchy of generally
accepted accounting principles. The accounting standards codification is
intended to be the source of authoritative US GAAP and reporting standards
as issued by the FASB. Its primary purpose is to improve clarity and use of
existing standards by grouping authoritative literature under common topics. The
accounting standards codification is effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The
Partnership now describes the authoritative guidance used within the footnotes
but no longer uses numerical references. The accounting standards codification
does not change or alter existing US GAAP, and there is no expected impact
on the Partnership’s financial position, results of operations or cash
flows.





Fair
Value Measurement of Liabilities





In
August 2009, the FASB issued new guidance for the accounting for the fair
value measurement of liabilities.  The new guidance provides clarification
that in certain circumstances in which a quoted price in an active market for
the identical liability is not available, a company is required to measure fair
value using one or more of the following valuation techniques: the quoted price
of the identical liability when traded as an asset, the quoted prices for
similar liabilities or similar liabilities when traded as assets, and/or another
valuation technique that is consistent with the principles of fair value
measurements.  The new guidance is effective for interim and annual periods
beginning after August 27, 2009.  The Partnership does not
expect that the provisions of the new guidance will have a material
effect on its results of operations, financial position or
liquidity.





Subsequent
Events





In
May 2009, the FASB issued new guidance for accounting for subsequent
events.  This guidance established general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. This guidance is
effective for interim and annual reporting periods ending after June 15, 2009.
The Partnership adopted the provisions of this guidance for the period ended
June 30, 2009. In February 2010, the FASB issued an update to this guidance.
Among other provisions, this update provides that an entity that is a SEC filer
is not required to disclose the date through which subsequent events have been
evaluated.  The Partnership adopted the provisions on its effective
date of February 24, 2010. There was no impact on the Partnership’s operating
results, financial position or cash flows.





Recognition
and Presentation of Other-Than-Temporary Impairments





In April
2009, the FASB issued new guidance related to the presentation and disclosure of
other-than-temporary impairments on debt and equity securities.  The
new guidance amends the other-than-temporary impairment guidance for debt
securities to make the guidance more operational and to improve the presentation
and disclosure of other-than-temporary impairments on debt and equity securities
in the financial statements.  The guidance does not amend existing
recognition and measurement guidance for equity securities, but does establish a
new method of recognizing and reporting for debt
securities.  Disclosure requirements for impaired debt and equity
securities have been expanded significantly and are now required quarterly, as
well as annually.  This guidance became effective for interim and
annual reporting periods ending after June 15, 2009.  Comparative
disclosures are required for periods ending after the initial
adoption.  This guidance did not have an impact on the Partnership’s
financial position, results of operations or cash flows.





Interim
Reporting of Fair Value of Financial Instruments





In
April 2009, the FASB issued new guidance related to the disclosure of the
fair value of financial instruments.  The new guidance amends SFAS No. 107,
“Disclosures about Fair Value of Financial Instruments,” to require disclosures
about fair value of financial instruments for interim reporting
periods.  The guidance also amends APB Opinion No. 28, “Interim
Financial Reporting,” to require those disclosures about the fair value of
financial instruments in summarized financial information at interim reporting
periods.  This guidance is effective for reporting periods ending
after June 15, 2009.  The adoption of this guidance did not have any
impact on the Partnership’s results of operations, cash flows, or financial
position.




F-10


Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





3.
Transactions with Affiliates





The
Partnership has no employees. RELP employs a staff including geologists,
petroleum engineers, landmen and accounting personnel who administer all of the
Partnership’s operations. The Partnership reimburses RELP for technical and
administrative services at cost. During the years ended December 31, 2009, 2008,
and 2007, the Partnership incurred technical services and administrative costs
totaling $145,786, $238,247, and $734,798, respectively. Of these amounts,
$1,509, $62,446, and $699,401 represent technical services costs capitalized as
project costs, and $144,277, $175,801, and $35,397 represent administrative
costs included as general and administrative expenses.





Reef
contributes 1% of all leasehold, drilling, and completion costs when incurred.
During the years ended December 31, 2009, 2008, and 2007, this 1% obligation
totaled $3,185, $5,400 and $109,343, respectively. Reef also purchased 5% of the
Partnership units and pays 5% of the 99% of these costs paid by the unit holders
(4.95%).





RELP
processes joint interest billings and revenue payments on behalf of the
Partnership. At December 31, 2009, RELP owed the Partnership $136,067 for net
revenues processed in excess of joint interest and technical and administrative
charges.  At December 31, 2008, the Partnership owed RELP $357,569 for
joint interest and technical and administrative charges processed in excess of
net revenues.





Accounts
payable to affiliates as of December 31, 2008 also includes $100,053 for the
unpaid portion of the 15% management fee due Reef for organization and offering
costs, including sales commissions. The management fee is payable in two parts.
Reef initially received an amount not to exceed 13.5% to recover actual
commissions and organization and offering costs. The portion of the management
fee in excess of actual commissions and organization and offering costs is paid
to Reef from the oil and gas cash flows available for partner distributions, at
a rate not to exceed $1 million per year. During 2009, the Partnership
reimbursed the remaining $100,053 of this amount to Reef.





If an
affiliate of Reef serves as operator of a Partnership prospect, then operator
fees are payable to the affiliate. Under such circumstances, such affiliate
receives fees at the competitive rate in the geographical area where the
prospect is located during the drilling and production phase of operations.
These fees are charged as a monthly fee per well as agreed to in an operating
agreement signed by the Partnership as well as outside third party working
interest owners in the well. During the year ended December 31, 2007, the
Partnership paid drilling overhead fees totaling $28,086 to RELP. During the
years ended December 31, 2009, 2008, and 2007, the Partnership paid operating
overhead fees totaling $42,785, $39,363 and $22,875 to RELP,
respectively.





4.
Major Customers





The
Partnership sells crude oil and natural gas on credit terms to refiners,
pipelines, marketers, and other users of petroleum commodities. Revenues are
received directly from these parties or, in certain circumstances, paid to the
operator of the property who disburses to the Partnership its percentage share
of the revenues. During the year ended December 31, 2009, one marketer and one
operator accounted for 54.7% and 44.1% of the Partnership’s crude oil and
natural gas revenues, respectively. During the year ended December 31, 2008, one
marketer and one operator accounted for 70.3% and 25.3% of the Partnership’s
crude oil and natural gas revenues, respectively. During the year ended December
31, 2007, two marketers accounted for 79.3% and 20.1% of the Partnership’s crude
oil and natural gas revenues, respectively. Due to the competitive nature of the
market for purchase of crude oil and natural gas, the Partnership does not
believe that the loss of any particular purchaser would have a material adverse
impact on the Partnership.





5.
Commitments and Contingencies





The
Partnership is not currently involved in any legal proceedings.





6.
Partnership Equity





Sales of
Partnership units began on July 14, 2006. Proceeds received were placed into an
interest bearing escrow account until the Partnership reached the minimum
subscription level of 40 units. The Partnership was formed on August 14, 2006,
and the sale of Partnership units was closed on December 29, 2006. The
Partnership raised $15,401,896 from the sale of 616.076 Partnership units to
investor partners. Reef purchased 32.425 units (5%) for $689,032. Reef also
contributes 1% of all leasehold, drilling, and completion costs when incurred,
in addition to having paid its pro rata share (4.95%) of the leasehold,
drilling, and completion costs paid by the Partnership. In connection with this
obligation, Reef has contributed $131,210 to the Partnership at December 31,
2009.


F-11





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





All
units, except those purchased by Reef, paid a 15% management fee to Reef to pay
for Partnership organization and offering costs, including sales commissions.
These costs totaled $2,310,285, leaving net capital contributions of $13,911,853
available for Partnership oil and gas activities. Of the $2,310,285 management
fee, offering costs were $2,260,285 and organization costs were $50,000. The
Partnership has drilled twenty-one wells at December 31, 2009, and has completed
drilling operations with the capital raised by the Partnership.





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





7.
Partnership Prospects





As of
December 31, 2009, the Partnership owns working interests in three developmental
prospects and three exploratory prospects, upon which a total of twenty-one
wells have been drilled.





The
Partnership drilled nine successful developmental wells and ten unsuccessful
development wells, including the eight Sand Dunes wells described below. The
Partnership drilled one successful exploratory well and two unsuccessful
exploratory wells.  The successful exploratory well ceased production
during 2009.  The Partnership’s nine successful developmental wells
are productive at December 31, 2009.





The
Partnership participated in the drilling of eight developmental wells on the
Sand Dunes prospect located in Eddy County, New Mexico during the fourth quarter
of 2007 and the first quarter of 2008. Initial testing confirmed the presence of
crude oil and natural gas in all eight wells. However, the field was temporarily
shut-in because of the lack of electric service and because of the high cost of
trucking offsite the salt water volumes associated with the production of the
crude oil and natural gas from the wells. Electrical service to the eight Sand
Dunes wells was connected in September 2008. Based upon initial testing, larger
bottom hole pumps were placed below the well perforations in three of the wells
and testing was resumed in late September 2008 to determine the three wells’
commercial productivity. Water continued to be trucked offsite, and RELP applied
for and received a permit which would allow for the conversion of one of the
existing eight Sand Dunes wells into a water disposal well. RELP also explored
the possibility of drilling a ninth well as a salt water disposal well for the
field. Testing results on two of the three wells were positive, and salt water
production volumes declined as a result of pumping off the wells using the
larger bottom hole pumps. However, the price of crude oil also declined at a
rapid rate while testing was being conducted. In late December 2008, two of the
three testing wells were shut-in again. Crude oil prices continued declining to
a level below $40 per barrel. In February 2009, following a mechanical failure
in the third testing well, RELP, as operator, shut-in the field. The eight wells
cannot be commercially productive without efficient salt water disposal
capabilities, and none of the options regarding salt water disposal were
economically viable at first quarter 2009 commodity prices. As a result, as of
December 31, 2008, the eight Sand Dunes wells were classified as unsuccessful,
and no crude oil and natural gas reserves for these wells were included in the
December 31, 2008 reserve information presented in this Annual
Report.





Beginning
with March 2009, oil sales prices increased from levels below $40 per barrel to
between $60 and $70 per barrel. As a result of this increase in prices, in
October 2009, Reef approved the conversion of one of the eight wells on the Sand
Dunes development prospect located in Eddy County, New Mexico to a salt water
disposal well. The conversion work began in March 2010. Upon conversion of this
well to a salt water disposal well, three of the current Sand Dunes wells are
expected to be placed on full time production during the second quarter of 2010.
RELP believes, based upon testing already performed, that the disposal capacity
of the well to be converted will be such that only three Sand Dunes wells can be
placed on full time production. However, if possible, additional wells may be
placed on production. RELP will determine what actions to take regarding the
other Sand Dunes wells after a period of evaluation of this initial conversion.
The estimated cost of the well conversion to this Partnership is expected to be
approximately $79,290 (unaudited).  This cost will be paid for by the
Partnership by retaining a portion of the funds normally paid out in
distributions to the partners. There are 5,340 BBL of crude oil and 8,820 MCF of
natural gas reserves (unaudited) for these wells included in the December 31,
2009 reserve information presented in this Annual Report.





The
Partnership also has unproved property consisting of un-drilled leasehold
interest (11 potential drilling locations) in the Sand Dunes prospect. The
Partnership has fully impaired this unproved property during the fourth quarter
of 2008 based upon the eight already drilled wells being classified as
unsuccessful at December 31, 2008. The Partnership currently has no plans to
conduct any drilling operations on this acreage.


F-12





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





8.
Supplemental Information on Crude Oil & Natural Gas Exploration and
Production Activities  (unaudited)





Capitalized
Costs





The
following table presents the Partnership’s aggregate capitalized costs relating
to oil and gas activities at the end of each of the years
indicated:





December
      31,
                
                2009
                
                
                2008
                
                
                2007Oil
      and natural  gas properties:Unproved
      properties
                
                $
                —
                
                
                $
                —
                
                
                $
                153,330Proved
      properties
                
                
                14,131,253
                
                
                
                13,891,612
                
                
                
                13,253,152Total
      oil and gas properties
                
                
                14,131,253
                
                
                
                13,891,612
                
                
                
                13,406,482Less:Accumulated
      depreciation, depletion, and amortization
                
                
                (1,878,952
                )
                
                
                (1,595,121
                )
                
                
                (840,172
                )Property
      impairment
                
                
                (11,633,153
                )
                
                
                (11,283,749
                )
                
                
                (8,031,060
                )Total
                
                $
                619,148
                
                
                $
                1,012,742
                
                
                $
                4,535,250





Costs
Incurred





The
following table sets forth costs incurred in oil and gas exploration and
development activities during the years ended December 31, 2009, 2008, and
2007:





2009
                  
                  
                  2008
                  
                  
                  2007Oil
      and natural gas properties:Exploration
                  
                  $
                  115,206
                  
                  
                  $
                  (23,971
                  )
                  
                  $
                  2,607,831Development
                  
                  
                  124,435
                  
                  
                  
                  662,431
                  
                  
                  
                  9,470,570Total
                  
                  $
                  239,641
                  
                  
                  $
                  638,460
                  
                  
                  $
                  12,078,401





Results
of Operations





The
following table sets forth results of operations from oil and gas producing
activities for the years ended December 31, 2009, 2008, and 2007.





2009
                  
                  
                  2008
                  
                  
                  2007Oil
      and gas producing activities:Crude
      oil sales
                  
                  $
                  642,966
                  
                  
                  $
                  1,208,950
                  
                  
                  $
                  969,233Natural
      gas sales
                  
                  
                  220,942
                  
                  
                  
                  473,839
                  
                  
                  
                  243,921Production
      expenses
                  
                  
                  (250,311
                  )
                  
                  
                  (535,249
                  )
                  
                  
                  (202,743
                  )Accretion
      of asset retirement obligation
                  
                  
                  (16,298
                  )
                  
                  
                  (49,799
                  )
                  
                  
                  (4,817
                  )Depreciation
      , depletion and amortization
                  
                  
                  (283,830
                  )
                  
                  
                  (754,949
                  )
                  
                  
                  (840,172
                  )Property
      impairment expense
                  
                  
                  (349,404
                  )
                  
                  
                  (3,252,689
                  )
                  
                  
                  (8,031,060
                  )Results
      of producing activities
                  
                  $
                  (35,935
                  )
                  
                  $
                  (2,909,897
                  )
                  
                  $
                  (7,865,638
                  )Depletion
      rate per BOE
                  
                  $
                  14.38
                  
                  
                  $
                  37.84
                  
                  
                  $
                  51.99





BOE =
Barrels of Oil Equivalent (6 MCF equals 1 BOE)


F-13





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





Crude
Oil and Natural Gas Reserves





Recent
SEC and FASB Rule Making Activity





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009. The Partnership adopted the rules effective December 31, 2009, and the
rule changes, including those related to pricing and technology, are included in
the Partnership’s reserve estimates. See Note 2, “Summary of Significant
Accounting Policies – Modernization of Oil and Gas Reporting.”





In
accordance with new SEC rules, estimates of the Partnership’s proved reserves
and future net revenues are made using the unweighted arithmetic average of
first-day-of-the-month commodity prices over the preceding 12 month period for
the year ended December 31, 2009. These prices are held constant in accordance
with SEC guidelines for the economic life of the wells included in the reserve
report but are adjusted by well in accordance with sales contracts, energy
content quality, transportation, compression and gathering fees, and regional
price differentials. Estimated quantities of proved reserves and future net
revenues are affected by crude oil and natural gas prices, which have fluctuated
significantly in recent years.





The new
rules resulted in the use of lower prices at December 31, 2009 for both crude
oil and natural gas than would have been used under the previous rules, and
resulted in a downward adjustment of approximately 8,600 BOE to our proved
reserves as of December 31, 2009, as compared to the old end-of-period prices
rule.





Net
Proved Developed Reserve Summary





The
reserve information presented below is based upon estimates of net proved
reserves that were prepared by the independent petroleum engineering firms
Forrest A. Garb & Associates, Inc., as of December 31, 2009, and by Gleason
Engineering as of December 31, 2008 and 2007.   A copy of the
Forrest A. Garb & Associates summary reserve report is included as Exhibit
99.1 to this Annual Report.  Proved crude oil and natural gas reserves
are the estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be economically
recoverable in future years from known reservoirs under existing economic
conditions, operating methods and governmental regulations (i.e. prices and
costs as of the date the estimate is made).  Proved developed reserves
are reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods.  At December 31, 2009, all
of the Partnership’s reserves are classified as proved developed
reserves.  All of the Partnership’s reserves are located in the United
States.





The
following table sets forth changes in estimated net proved developed crude oil
and natural gas reserves for the years ended December 31, 2009, 2008 and
2007.





Oil
                    (BBL) (1)
                  
                  
                  Gas
                    (mcf)
                  
                  
                  BOE (2)Net
      proved reserves for properties owned by the Partnership:Reserves
      at December 31, 2006
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —New
      discoveries
                  
                  
                  87,262
                  
                  
                  
                  399,965
                  
                  
                  
                  153,923Production
                  
                  
                  (12,330
                  )
                  
                  
                  (22,974
                  )
                  
                  
                  (16,159
                  )Reserves
      at December 31, 2007
                  
                  
                  74,932
                  
                  
                  
                  376,991
                  
                  
                  
                  137,764Revisions
      of previous estimates
                  
                  
                  (38,957
                  )
                  
                  
                  (160,368
                  )
                  
                  
                  (65,685
                  )Production
                  
                  
                  (12,259
                  )
                  
                  
                  (46,147
                  )
                  
                  
                  (19,950
                  )Reserves
      at December 31, 2008
                  
                  
                  23,716
                  
                  
                  
                  170,476
                  
                  
                  
                  52,129Revisions
      of previous estimates
                  
                  
                  28,301
                  
                  
                  
                  30,518
                  
                  
                  
                  33,387Production
                  
                  
                  (11,977
                  )
                  
                  
                  (46,554
                  )
                  
                  
                  (19,736
                  )Reserves
      at December 31, 2009
                  
                  
                  40,040
                  
                  
                  
                  154,440
                  
                  
                  
                  65,780




F-14





Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





(1)
            Oil
      includes both oil and natural gas
liquids


(2)
            BOE
      (barrels of oil equivalent) is calculated by converting 6 MCF of natural
      gas to 1 BBL of oil. A BBL (barrel) of oil is one stock tank barrel,
      or 42 U.S. gallons liquid volume, of crude oil or other liquid
      hydrocarbons.





Standardized
Measure of Discounted Future Net Cash Flows





Certain
information concerning the assumptions used in computing the valuation of proved
reserves and their inherent limitations are discussed below.  The
Partnership believes such information is essential for a proper understanding
and assessment of the data presented.




For the
year ended December 31, 2009, future cash inflows are computed by applying the
new SEC pricing, which holds constant the unweighted arithmetic average of the
first-day-of-the-month prices for crude oil and natural gas over the preceding
12-month period as the price basis for estimating the Partnership’s proved
reserves. For the year ended December 31, 2009, calculations were made using
average prices of $61.08 per barrel of crude oil and $3.83 per MCF of natural
gas. For the years ending December 31, 2008 and 2007, future cash inflows were
computed by applying the former SEC pricing rules, which hold constant the
end-of-year price for crude oil and natural gas as the price basis for
estimating the Partnership’s proved reserves. During 2008, the calculations were
made using average prices of $44.60 per barrel of oil and $5.71 per MCF of
natural gas.  During 2007, the calculations were made using average
prices of $89.16 per barrel of oil and $7.21 per MCF of natural gas. Prices and
costs are held constant for the life of the wells, however, prices are adjusted
by well in accordance with sales contracts, energy content quality,
transportation, compression and gathering fees, and regional price
differentials.




These
assumptions used to compute estimated future cash inflows do not necessarily
reflect Reef’s expectations of the Partnership’s actual revenues or costs, nor
their present worth. Further, actual future net cash flows will be affected by
factors such as the amount and timing of actual production, supply and demand
for crude oil and natural gas, and changes in governmental regulations and tax
rates. Sales prices of both crude oil and natural gas have fluctuated
significantly in recent years. Reef, as managing general partner, does not rely
upon the following information in making investment and operating decisions for
the Partnership.





Future
development and production costs are computed by estimating the expenditures to
be incurred in developing and producing the proved crude oil and natural gas
reserves at the end of the year, based on year-end costs and assuming
continuation of existing economic conditions.





A 10%
annual discount rate is used to reflect the timing of the future net cash flows
relating to proved reserves.




December
      31,
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Crude
      oil and natural gas properties owned by the Partnership:Future
      cash inflows
                  
                  $
                  3,023,340
                  
                  
                  $
                  2,186,805
                  
                  
                  $
                  9,270,671Future
      production costs
                  
                  
                  (1,544,320
                  )
                  
                  
                  (968,301
                  )
                  
                  
                  (3,589,920
                  )Future
      development costs
                  
                  
                  (79,290
                  )
                  
                  
                  —
                  
                  
                  
                  (248,093
                  )Future
      net cash flows
                  
                  
                  1,399,730
                  
                  
                  
                  1,218,405
                  
                  
                  
                  5,432,658Effect
      of discounting net cash flows at 10%
                  
                  
                  (224,440
                  )
                  
                  
                  (205,663
                  )
                  
                  
                  (1,050,738
                  )Discounted
      future net cash flows
                  
                  $
                  1,175,290
                  
                  
                  $
                  1,012,742
                  
                  
                  $
                  4,381,920





Changes
in the Standardized Measure of Discounted Future Net Cash flows Relating to
Proved Crude Oil and Natural Gas Reserves


F-15


Reef
Global Energy VIII, L.P.


Notes to
Financial Statements (continued)





December
      31,
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Crude
      oil and natural gas properties owned by the Partnership:Standardized
      measure at beginning of period
                  
                  $
                  1,012,742
                  
                  
                  $
                  4,381,920
                  
                  
                  $
                  —Extensions
      and discoveries
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  5,387,514Net
      change in sales price, net of production costs
                  
                  
                  39,603
                  
                  
                  
                  (1,042,024
                  )
                  
                  
                  —Revisions
      of quantity estimates
                  
                  
                  630,352
                  
                  
                  
                  (1,276,104
                  )
                  
                  
                  —Net
      changes in estimated future development costs
                  
                  
                  (66,576
                  )
                  
                  
                  (50,527
                  )
                  
                  
                  —Changes
      in production timing rates
                  
                  
                  55,194
                  
                  
                  
                  (340,974
                  )
                  
                  
                  —Accretion
      of discount
                  
                  
                  101,274
                  
                  
                  
                  438,192
                  
                  
                  
                  —Sales
      net of production costs
                  
                  
                  (597,299
                  )
                  
                  
                  (1,097,741
                  )
                  
                  
                  (1,005,594
                  )Net
      increase (decrease)
                  
                  
                  162,548
                  
                  
                  
                  (3,369,178
                  )
                  
                  
                  4,381,920Standardized
      measure at end of year
                  
                  $
                  1,175,290
                  
                  
                  $
                  1,012,742
                  
                  
                  $
                  4,381,920





9.
Supplementary Quarterly Financial Data (unaudited)





Year ended December 31,
                    2008
                  
                  1st Qtr
                  
                  
                  2nd Qtr
                  
                  
                  3rd Qtr
                  
                  
                  4th Qtr
                  
                  
                  TotalsRevenues
                  
                  $
                  400,028
                  
                  
                  $
                  527,062
                  
                  
                  $
                  445.330
                  
                  
                  $
                  310,369
                  
                  
                  $
                  1,682,789Income  (loss)
      from operations
                  
                  
                  43,412
                  
                  
                  
                  149,058
                  
                  
                  
                  143,106
                  
                  
                  
                  (3,689,476
                  )
                  
                  
                  (3,353,900
                  )Net
      income (loss)
                  
                  
                  54,380
                  
                  
                  
                  150,910
                  
                  
                  
                  144,208
                  
                  
                  
                  (3,688,546
                  )
                  
                  
                  (3,339,048
                  )Net
      income (loss) per managing general partner unit
                  
                  
                  743.53
                  
                  
                  
                  1,079.23
                  
                  
                  
                  1,100.35
                  
                  
                  
                  (6,740.23
                  )
                  
                  
                  (3,817.12
                  )Net
      income per  general partner unit
                  
                  
                  49.14
                  
                  
                  
                  188.15
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  237.29Net
      income (loss) per limited partner unit
                  
                  
                  49.14
                  
                  
                  
                  188.15
                  
                  
                  
                  176.16
                  
                  
                  
                  (5,632.41
                  )
                  
                  
                  (5,218.96
                  )





Property
impairment expense included in the fourthquarter
totaled $3,406,019.





Year ended December 31,
                    2009
                  
                  1st Qtr
                  
                  
                  2nd Qtr
                  
                  
                  3rd Qtr
                  
                  
                  4th Qtr
                  
                  
                  TotalsRevenues
                  
                  $
                  170,066
                  
                  
                  $
                  223,688
                  
                  
                  $
                  201,386
                  
                  
                  $
                  268,768
                  
                  
                  $
                  863,908Income  (loss)
      from operations
                  
                  
                  (316,903
                  )
                  
                  
                  (37,896
                  )
                  
                  
                  (90,128
                  )
                  
                  
                  175,327
                  
                  
                  
                  (269,600
                  )Net
      income (loss)
                  
                  
                  (315,701
                  )
                  
                  
                  (37,222
                  )
                  
                  
                  (90,022
                  )
                  
                  
                  175,378
                  
                  
                  
                  (267,567
                  )Net
      income (loss) per managing general partner unit
                  
                  
                  (521.96
                  )
                  
                  
                  8.21
                  
                  
                  
                  (428.94
                  )
                  
                  
                  835.62
                  
                  
                  
                  (107.07
                  )Net
      income (loss) per limited partner unit
                  
                  
                  (484.97
                  )
                  
                  
                  (60.85
                  )
                  
                  
                  (123.55
                  )
                  
                  
                  240.70
                  
                  
                  
                  (428.67
                  )





The
fourth quarter includes the effects of applying the new oil and gas
rules.  See footnote 2, “Summary of Accounting Policies,” for more
information regarding the new oil and gas rules.


F-16