Table of Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-K**

 

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**(MarkOne)**

** **

| x      | **ANNUAL REPORT PURSUANT TO  SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------|-----------------------------------------------------------------------------------------------------|
|   | ** **                                                                                          |
|   | **For The Fiscal Year Ended  December 31, 2008**                                               |

 

**or**

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

 

**For the Transition period from              to**

 

**COMMISSION FILE NUMBER 333-122935-01**

 

**REEFGLOBAL ENERGY VI, L.P.**

(Exact name of registrant as specified in its charter)

** **

| **Nevada**                                                      | ** ** | **20-3170768**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (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 theAct:  None

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

 

General and Limited Partnership Interests

(Title of Class)

 

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

 

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

 

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

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted 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 registrantwas required to submit and post such files). Yes o No x

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

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

 

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  No x

 

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

 

As of March 31, 2009,the registrant had 75.363 units of general partner interest held by themanaging general partner, and 1,431.897 units of limited partner interestoutstanding.

 

##### ***Documents incorporated byreference:  None***

##### *** ***

 

 

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REEF GLOBAL ENERGY VI, L.P.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2008

TABLE OF CONTENTS

 
| **Part I**   | ** **                                                                                                         | ** ** |
|-------------------|--------------------------------------------------------------------------------------------------------------------|------------|
| ** **        | ** **                                                                                                         | ** ** |
| Item 1.           | Business                                                                                                           |       |
| Item 1A.          | Risk Factors                                                                                                       |       |
| Item 1B.          | Unresolved Staff Comments                                                                                          |       |
| Item 2.           | Properties                                                                                                         |       |
| Item 3.           | Legal Proceedings                                                                                                  |       |
| Item 4.           | Submission of Matters to a Vote of  Security Holders                                                               |       |
|              |                                                                                                               |       |
| **PART II**  |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 5.           | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchases of Equity Securities |       |
| Item 6.           | Selected Financial Data                                                                                            |       |
| Item 7.           | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                        |       |
| Item 7A.          | Quantitative and Qualitative Disclosure  About Market Risk                                                         |       |
| Item 8.           | Financial Statements and Supplementary  Data                                                                       |       |
| Item 9.           | Changes in and Disagreements with  Accountants on Accounting and Financial Disclosure                              |       |
| Item 9A.          | Controls and Procedures                                                                                            |       |
| Item 9B.          | Other Information                                                                                                  |       |
|              |                                                                                                               |       |
| **PART III** |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 10.          | Directors, Executive Officers and  Corporate Governance                                                            |       |
| Item 11.          | Executive Compensation                                                                                             |       |
| Item 12.          | Security Ownership of Certain Beneficial  Owners and Management and Related Stockholder Matters                    |       |
| Item 13.          | Certain Relationships and Related  Transactions, and Director Independence                                         |       |
| Item 14.          | Principal Accountant Fees and Services                                                                             |       |
|              |                                                                                                               |       |
| **PART IV**  |                                                                                                               |       |
|              |                                                                                                               |       |
| Item 15.          | Exhibits and Financial Statement  Schedules                                                                        |       |
|              | Signatures                                                                                                         |       |
|              |                                                                                                               |       |
|              |                                                                                                               |       |

 

 

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**PART I**

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

 

**Introduction**

 

ReefGlobal Energy VI, L.P. (the Partnership) is the first in a series of fourNevada limited partnerships comprising a program called Reef Global EnergyVentures II (the Program). The Partnership was formed in the state of Nevada onJuly 18, 2005.  The Partnershippurchased working interests in oil and gas prospects and participated in thedrilling of wells on those prospects. The primary objectives of the Partnershipare 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.

 

ThePartnership was formed to drill, complete and own working interests in oil andgas wells located onshore in the continental United States or in U.S. coastalwaters in the Gulf of Mexico. The Partnership purchased working interests intwenty developmental prospects upon which it drilled twenty-seven developmentalwells. The Partnership purchased working interests in fourteen exploratoryprospects upon which it drilled fifteen exploratory and eight developmentalwells. These prospects are located onshore in Texas, Louisiana, Oklahoma, NewMexico and in U.S. coastal waters in the Gulf of Mexico. In 2008, thePartnership completed drilling operations with the capital previously raised bythe Partnership. The Partnership will not purchase additional prospects. Inaccordance with the Partnership Agreement, the Partnership may conductadditional drilling operations to fully develop those prospects already ownedby the Partnership.

 

Otherpartnerships formed as a part of the Program also own working interests in someof the prospects owned by this Partnership. Reef also purchased workinginterests in certain partnership prospects for some of the other partnershipsit manages. In instances where the percentage ownership of the Partnership andReef-affiliated entities in a prospect is large enough, Reef Exploration, L.P.(RELP) or its predecessor OREI, Inc. (OREI) has served as operator of theprospect. During 2006, OREI transferred operator status of all prospectsoperated by OREI to RELP. RELP serves as operator of eight developmental andfour exploratory Partnership prospects. RELP operates one successfuldevelopmental well and two successful exploratory wells located on threePartnership prospects.  In this AnnualReport on Form 10-K (Annual Report), we use the term “successful” to referto wells that are drilled, tested, and either capable of or actually producingin commercial quantities. We use the term “unsuccessful” to refer to wells thatdo not meet one or more of these criteria.

 

**Acquisitionand Drilling of Undeveloped Prospects**

 

ThePartnership purchased working interests in eight developmental and fourexploratory prospects internally sourced by RELP, and twelve developmental andten exploratory prospects generated by and purchased from third parties. A “prospect”is generally defined as a contiguous oil and gas leasehold estate, or lesserinterest in a leasehold estate, upon which drilling operations may beconducted. A prospect may be characterized as “exploratory” or “developmental”based upon the type of well to be drilled on the prospect.  A development well is a well drilled within aproved area of an oil or gas reservoir to the depth of a stratigraphic horizonknown to be productive. Generally an exploratory well is any well that is not adevelopment well, including wells drilled to find and produce crude oil ornatural gas in an unproven area, wells drilled to find a new reservoir in afield previously found to be productive of crude oil or natural gas, or wellsdrilled to extend a known reservoir.

 

Prospectswere evaluated utilizing data generated by RELP or provided by unaffiliatedthird parties to RELP. This data included well logs, production records fromother area wells, seismic, geological and geophysical information, and suchother information available and considered useful. Prospects in which thePartnership purchased a working interest were evaluated by petroleum engineers,geophysicists, geologists, and other technical consultants employed by orretained by RELP on the Partnership’s behalf.

 

ThePartnership prospects were acquired pursuant to an arrangement in which thePartnership purchased part of the working interest. A working interest bears aspecified 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 tounaffiliated third parties. Where the Partnership acquired less than 100% ofthe working interest, costs were reduced proportionately. The Partnership’slimited partnership agreement (the Partnership Agreement)

 

 

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prohibitsReef or any of its affiliates from retaining any overriding royalty interest,that is, any royalty interest that would be paid out of the Partnership’sworking interest, in any working interest purchased by the Partnership. ThePartnership is a non-operator working interest owner in all prospects purchasedby the Partnership.

 

**ConsultingAgreements for Prospect Acquisitions**

 

Reefentered into three agreements (the CMI Agreements) with Challenger MineralsInc. (CMI), a subsidiary of GlobalSantaFe Corporation and a screener of oil andgas prospects in the Gulf of Mexico and North Sea regions. Under the terms ofthese agreements, Reef had the opportunity to review and selectivelyparticipate in exploratory and developmental prospects either originated orpreviewed by CMI. Reef paid CMI an annual fee for the geological andgeophysical services provided by CMI. Two of these agreements expired in January 2006,and one expired in November, 2006.

 

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

 

Prospectsapproved for acquisition by Reef under these agreements were assigned to thisPartnership as well as other limited partnerships formed as part of theProgram. Each partnership formed as a part of the Program paid Reef, on a prorata basis, a portion of the fees paid by Reef under these agreements duringthe term of the Program. Total reimbursements to Reef by the partnershipsformed as a part of this Program were equal to the actual fees paid by Reefunder these agreements. The Partnership paid Reef $240,658 as its pro ratashare of these fees. This amount has been capitalized as geological andgeophysical costs in accordance with the full cost method of accounting for oiland gas properties.

 

**Drillingand Completion Phase of Operations**

 

RELPis currently the operator of eight developmental and four exploratoryprospects, and serves as operator of three successful wells in which thePartnership has a working interest. As a well operator, RELP receives operatorfees during the drilling and production phase of each well at the competitiverate in the geographical area where the prospect is located.  These fees are charged as a monthly fee perwell as agreed to in an operating agreement signed by the Partnership andparticipating third parties in the well. The wells are subject to a model formoperating agreement issued by the American Association of Petroleum Landmen andan accounting procedure for joint operations issued by the Council of PetroleumAccountants Societies of North America.

 

Onall prospects operated by OREI and later transferred to RELP, drillingoperations were contracted to independent third party drillers, and the costsof the wells to the Partnership were determined by actual third party costs,plus OREI’s or RELP’s monthly operator fees at the competirtive rate for thegeographical area where the wells are located.

 

ThePartnership generally pays drilling and completion costs as incurred. Wellsdrilled that fail to result in the discovery of commercial quantities of crudeoil or natural gas are plugged and abandoned in accordance with applicableregulations.  Twenty development wellsand seven exploratory wells drilled by the Partnership were unsuccessful.  Of the twenty unsuccessful developmentalwells, eight developmental wells on the Sand Dunes prospect in which thePartnership participated have not been plugged and abandoned at this time.

 

**ProductionPhase of Operations**

 

Wellscapable of producing quantities of crude oil and/or natural gas in commercialquantities were completed by installing all surface equipment necessary tocontrol the flow of production or to shut down the well, and by installing anystorage facilities, gathering lines, or sales lines required to produce andsell the crude oil and/or natural gas production from the well. The Partnershipdrilled fifteen successful developmental and eight successful exploratorywells. Three of the developmental wells and three of the exploratory wells haveceased production. Twelve developmental and seven exploratory wells wereunsuccessful and have been plugged and abandoned. Eight

 

 

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developmentalwells on the Sand Dunes prospect in which the Partnerhsip participated areunsuccessful but have not been plugged and abandoned at this time.

 

ThePartnership has entered into agreements with third party marketers to sell thecrude oil and/or natural gas produced from successful wells on a competitivebasis at the best available terms and prices. In some cases the Partnership has elected to sell its production undermarketing 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 discoveredby it at negotiated prices domestically, based upon a number of factors, suchas the quality of the gas, well pressure, estimated reserves, prevailing supplyconditions and any applicable price regulations promulgated by the FederalEnergy Regulatory Commission (FERC).

 

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

 

ThePartnership has not and does not expect to engage in commodity futures tradingor hedging activities, or  enter intoderivative financial instrument transactions for trading or other speculativepurposes. Accordingly, the Partnership is at risk for the volatility incommodity prices inherent in the oil and gas industry, and the level ofcommodity prices has a significant impact on the Partnership’s results ofoperations.  See “Item 7A. Quantitativeand Qualitative Disclosure About Market Risk.”

 

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

 

**MajorCustomers**

 

The Partnership sells crudeoil and natural gas on credit terms to refiners, pipelines, marketers, andother users of petroleum commodities. Revenues are received directly from theseparties or, in certain circumstances, paid to the operator of the property whodisburses to the Partnership its percentage share of the revenues. During theyear ended December 31, 2008, one marketer and two operators accounted for57.2%, 17.4%, and 11.4% of the Partnership’s crude oil and natural gasrevenues, respectively. During the year ended December 31, 2007, onemarketer and two operators accounted for 53.9%, 23.0%, and 10.4% of thePartnership’s crude oil and natural gas revenues, respectively. During the yearended December 31, 2006, five operators accounted for 31.9%, 14.9%, 14.2%,11.5%, and 11.2% of the Partnership’s crude oil and natural gas revenues. Dueto the competitive nature of the market for purchase of crude oil and naturalgas, the Partnership does not believe that the loss of any particular purchaserwould have a material adverse impact on the Partnership.

 

**Insurance**

 

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

 

ThePartnership is a named insured under various insurance policies and intends tomaintain such policies subject to its analysis of their premium costs, coverageand other factors.  In the exercise ofReef ‘s fiduciary duty as managing general partner, Reef has obtained insuranceon behalf of the Partnership to provide the Partnership with such coverage asReef believes is sufficient to protect the investor partners against theforeseeable risks of drilling and production. Reef reviewed the Partnership insurance coverage prior to commencingdrilling operations and periodically evaluates the sufficiency of insurance. Inno event will the Partnership maintain public liability insurance of less thantwo times the Partnership’s capitalization.****Subjectto the foregoing, Reef may, in its sole

 

 

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discretion,increase or decrease the policy limits and types of insurance from time to timeas Reef deems appropriate under the circumstances, which may vary materially.

 

Inaccordance with the Partnership Agreement of the Partnership, all generalpartner units held by investors were converted into limited partner unitsduring the third quarter of 2008. At that time, Reef amended the Certificate ofLimited Partnership to effectuate the conversion of the interest of the formerinvestor general partners to that of a limited partner. Investor generalpartners will have limited liability as a limited partner for any Partnershipoperations conducted after their conversion date. However, investor generalpartners that converted to limited partners continue to have unlimitedliability regarding partnership activities that occurred prior to theirconversion date.

 

**Competition**

 

Thereare thousands of oil and gas companies in the United States.  Competition is strong among persons andentities involved in the exploration for and production of crude oil andnatural gas.  Reef expects thePartnership to encounter strong competition at every phase of business.  The Partnership competes with entities havingfinancial resources and staffs substantially larger than those available to it.

 

Thenational supply of natural gas is widely diversified, with no one entitycontrolling over 5% of the supply.  As aresult of deregulation of the natural gas industry enacted by Congress andFERC, natural gas prices are generally determined by competitive marketforces.  Prices of crude oil, condensateand natural gas liquids are not currently regulated and are generallydetermined by competitive market forces.

 

**Markets**

 

Themarketing of crude oil and natural gas produced by the Partnership is affectedby a number of factors that are beyond the Partnership’s control and whoseexact 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.                                                                                                |

 

Thesupply and demand balance of crude oil and natural gas in world markets hascaused significant variations in the prices of these products over recentyears.  The North American Free TradeAgreement eliminated trade and investment barriers between the United States,Canada, and Mexico, resulting in increased foreign competition for domesticnatural gas production.  New pipelineprojects recently approved by, or presently pending before, FERC, as well asnondiscriminatory access requirements could further substantially increase theavailability of gas imports to certain U.S. markets.  Such imports could have an adverse effect onboth the price and volume of natural gas sales from Partnership wells.

 

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

 

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

 

 

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**Regulation**

 

ThePartnership’s operations will be affected from time to time in varying degreesby domestic and foreign political developments, and by federal and state lawsand regulations.

 

*Production.*  In most areas of operations within the UnitedStates the production of crude oil and natural gas is regulated by stateagencies that set allowable rates of production and otherwise control theconduct of oil and gas operations. Among the ways that states controlproduction is through regulations that establish the spacing of wells or limitthe number of days in a given month during which a well can produce.

 

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

 

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

 

*ProposedRegulation.*Various legislative proposals are being consideredin Congress and in the legislatures of various states, which, if enacted, maysignificantly and adversely affect the petroleum and gas industries. Suchproposals involve, among other things, the imposition of price controls on allcategories of natural gas production, the imposition of land use controls, suchas prohibiting drilling activities on certain federal and state lands inprotected areas, as well as other measures. At the present time, it isimpossible to predict what proposals, if any, will actually be enacted byCongress or the various state legislatures and what effect, if any, suchproposals will have on the Partnership’s operations.

 

**Employees**

 

ThePartnership has no employees, and is managed by its managing general partner,Reef. Through January 1, 2006, OREI employed a staff including geologists,petroleum engineers, landmen, and accounting personnel who administered all ofthe Partnership’s operations. On January 2, 2006, the employees of OREIwere transferred to RELP, where they continue to administer all of thePartnership’s operations. The Partnership reimburses OREI and RELP fortechnical and administrative services at cost. See “Item 11- Executive Compensation.”

 

**FORWARD-LOOKING STATEMENTS**

 

ThisAnnual Report contains forward-looking statements that involve risks anduncertainties.  You should exerciseextreme caution with respect to all forward-looking statements made in thisAnnual Report.  Specifically, thefollowing statements are forward-looking:

 

| · |   | statements  regarding the Partnership’s overall strategy for acquiring prospects,  including its intent to diversify the Partnership’s investments;                                                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                        |
| · |   | statements  estimating any number or specific type or size of prospects the Partnership  may acquire or size of the interest the Partnership may acquire in such  prospects;                                                |
|   |   |                                                                                                                                                                                                                        |
| · |   | statements  regarding the state of the oil and gas industry and the opportunity to profit  within the oil and gas industry, competition, pricing, level of production,  or the regulations that may affect the Partnership; |

 

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| · |   | 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.                                                                                                                                                                                                                          |

 

Reefbelieves that it is important to communicate its future expectations to thepartners.  Forward-looking statementsreflect the current view of management with respect to future events and aresubject to numerous risks, uncertainties and assumptions, including, withoutlimitation, the factors listed in ITEM 1A of this Annual Report captioned “RISKFACTORS.” Although Reef believes that the expectations reflected in suchforward-looking statements are reasonable, Reef can give no assurance that suchexpectations will prove to have been correct. Should any one or more of these or other risks or uncertaintiesmaterialize or should any underlying assumptions prove incorrect, actualresults are likely to vary materially from those described herein.  There can be no assurance that the projectedresults will occur, that these judgments or assumptions will prove correct orthat unforeseen developments will not occur.

 

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

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

** **

**Our business activities are subject to certain risksand hazards, including the risks discussed below. If any of these events shouldoccur, it could materially and adversely affect our business, financial condition,cash flow, or results of operations. The risks below are not the only risks weface. We may experience additional risks and uncertainties not currently knownto us or, as a result of developments occurring in the future, conditions thatwe currently deem to be immaterial may also materially and adversely affect ourbusiness, financial condition, cash flow, and results of operations.**

** **

**Crudeoil and natural gas prices are volatile, and fluctuate due to a number offactors outside of our control.**

 

Thefinancial condition, results of operations, and the carrying value of our oiland gas properties depend primarily upon the prices received for our crude oiland natural gas production. Crude oil and natural gas prices historically havebeen volatile and likely will continue to be volatile given currentgeopolitical conditions. Cash flow from operations is highly dependent upon thesales prices received from crude oil and natural gas production. The prices forcrude oil and natural gas are subject to a variety of factors beyond ourcontrol. 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;                                                                                                                          |
|   |   |                                                                                                                                                                 |
| · |   | the  price and availability of foreign exports and alternative fuel sources;                                                                                         |
|   |   |                                                                                                                                                                 |
| · |   | weather  conditions, including hurricanes and tropical storms in and around the Gulf  of Mexico;                                                                     |
|   |   |                                                                                                                                                                 |
| · |   | political  conditions in oil and  gas producing  regions, including the Middle East, Nigeria, and Venezuela; and                                                |
|   |   |                                                                                                                                                                 |
| · |   | domestic  and worldwide economic conditions.                                                                                                                         |

 

Thesefactors and the volatility of the energy markets make it extremely difficult topredict price movements. Also, crude oil and natural gas prices do notnecessarily move in tandem. Declines in crude oil and natural gas prices wouldnot only reduce revenues and cash flow available for distributions to partners,but could reduce the amount of crude oil and natural gas that can beeconomically 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’soil and gas properties. Approximately 78.8% of the Partnership’s estimatedproved reserves at December 31, 2008 were natural gas, and, as a result,financial results are more sensitive to fluctuations in natural gas prices.

 

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ThePartnership, while not prohibited from engaging in commodity trading or hedgingactivities in an effort to reduce exposure to short-term fluctuations in the priceof 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 gasprices, and the level of commodity prices has a significant impact upon thePartnership’s results of operations.

 

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

 

Drillingoil and gas wells involves numerous risks, including the risk that no commerciallyproductive crude oil and/or natural gas reserves will be discovered. There canbe no assurance that wells drilled by the Partnership will be productive orrecover all or any portion of the investment in such wells. Drilling andcompletion costs are substantial and uncertain, and drilling operations may becurtailed, delayed, or cancelled due to a variety of factors beyond ourcontrol, including shortages or delays in the availability of drilling rigs andcrews, unexpected drilling conditions, title problems, pressure orirregularities in formations, equipment failures or accidents, adverse weatherconditions, and compliance with environmental and other governmentalregulations. Our drilling activities may not be successful and, if unsuccessful,will have an adverse effect on the Partnership’s results of operations and cashflow available for distribution to the partners.

 

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

 

Thereare numerous hazards involved in the drilling and operation of oil and gaswells, including blowouts involving possible damages to property and thirdparties, bodily injuries, mechanical failures, explosions, uncontrollable flowsof crude oil, natural gas or well fluids, fires, formations with abnormalpressure, pollution, releases of toxic gas and other environmental hazards andrisks. The Partnership could suffer substantial losses as a result of any ofthese risks. The Partnership is not fully insured against all risks inherent tothe oil and gas business. Uninsured liabilities would reduce the fundsavailable to the Partnership, may result in the loss of Partnership propertiesand may create liability for the general partners. Although the Partnershipmaintains insurance coverage in amounts Reef deems appropriate, it is possiblethat insurance coverage may be insufficient. In that case Partnership assetsmay have to be sold to pay personal injury and property claims and the cost ofcontrolling blowouts or replacing damaged equipment rather than for drillingactivities.

 

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

 

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

 

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

 

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

 

**Crudeoil and natural gas reserve data are estimates based upon assumptions that maybe inaccurate and existing economic and operating conditions that may differfrom future economic and operating conditions.**

 

Securitiesand Exchange Commission (SEC) rules require the Partnership to presentannual estimates of reserves. Reservoir engineering is a subjective and inexactprocess of estimating underground accumulations of crude oil and

 

 

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naturalgas that cannot be measured in an exact manner, and is based upon assumptionsthat may vary considerably from actual results. Accordingly, reserve estimatesmay be subject to upward or downward adjustments. Actual production, revenuesand expenditures with respect to reserves will likely vary from estimates, andsuch variances could be material.

 

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

 

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

 

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

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

 

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

 

Drillingexploratory wells involves greater risks of dry holes and loss of the partners’investment than the drilling of developmental wells.  Drilling developmental wells generallyinvolves less risk of dry holes, although sometimes developmental acreage ismore expensive and subject to greater royalties and other burdens onproduction. The Partnership purchased working interests in fourteen exploratoryprospects upon which fifteen exploratory and eight developmental wells weredrilled. Eight exploratory wells were successful and seven exploratory wells wereunsuccessful. Seven developmental wells were successful and one wasunsuccessful. Three of the successful exploratory wells have ceased productionas of December 31, 2008.

 

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

 

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

 

**Extreme weather conditions mayadversely affect production operations and partner distributions.**

 

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

 

**Our dependence on third parties for the processingand transportation of crude oil and natural gas may adversely affect thePartnership’s revenues and, consequently, the distribution of net cash flows toinvestor partners*.***

 

Werely on third parties to process and transport the crude oil and natural gasproduced by the Partnership’s successful wells. In the event a third party uponwhom we rely is unable to provide transportation or processing services, andanother third party is unavailable to provide such services, the Partnershipmay have to temporarily

 

 

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shut-insuccessful wells, and revenues to the Partnership and distributions to investorpartners related to those wells may be delayed.

 

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

 

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

 

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

 

ThePartnership expended funds in excess of the previously raised capital inconnection with the drilling and completion of wells and acquisition of theprospects during the drilling phase of operations. The Partnership only hasnominal funds available for partnership purposes until there are revenues fromPartnership operations.  Any futurerequirement for additional funding for drilling or for repayment of the excesscapital spent during the drilling phase of operations will have to come, if atall, from the Partnership’s revenues or from borrowings. Reef cannot assure thepartners that Partnership operations will be sufficient to provide thePartnership with necessary additional funding. Reef cannot assure the partners that the Partnership will be able toborrow funds from third parties on commercially reasonable terms or at all.

 

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

 

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

 

**Other partnerships Reef sponsors will compete with the Partnership forequipment, contractors, and personnel.**

 

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

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

** **

**None.**

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

 

**DrillingActivities and Productive Wells**

 

Partnershipprospects are located onshore in Texas, Louisiana, Oklahoma, and New Mexico andoffshore in U.S. coastal waters in the Gulf of Mexico. The Partnershippurchased working interests in twenty developmental prospects. The Partnershipdrilled eight successful developmental wells on eight developmental prospectslocated in Acadia Parish, Louisiana, Pittsburg County, Oklahoma, and PaloPinto, Jackson, Harris, Galveston, and Lavaca (2 prospects) County, Texas. Onewell located in Lavaca County, Texas ceased production during 2007 and twowells 

 

 

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locatedin Acadia Parish, Louisiana and JacksonCounty, Texas ceased production during2008. The Partnership drilled eleven unsuccessful developmental wells on elevendevelopmental prospects located in West Baton Rouge, Acadia, Calcasieu, andCameron Parish, Louisiana, and in Hardin, Upton, Ector, Jefferson, Lavaca,Reeves, and Dawson County, Texas.

 

ThePartnership participated in the drilling of eight developmental wells on theSand Dunes prospect located in Eddy County, New Mexico during the fourthquarter of 2007 and the first quarter of 2008. Initial testing confirmed thepresence of crude oil and natural gas in all eight wells; however, the fieldwas temporarily shut-in because of the lack of electric service and because ofthe high cost of trucking offsite the salt water volumes associated with theproduction of the crude oil and natural gas from the wells. Electrical serviceto the field was connected in September 2008. Based upon initial testing,larger bottom hole pumps were placed below the well perforations in three ofthe wells and testing was resumed to determine the three wells’ commercialproductivity. Water continued to be trucked offsite, and RELP applied for andreceived a permit which would allow for the conversion of one of the eightwells into a water disposal well. RELP has also explored the possibility ofdrilling a ninth well as a salt water disposal well for the field. Testingresults on two of the three wells were positive, and salt water productionvolumes declined as a result of pumping off the wells using the larger bottomhole pumps. However, the price of crude oil declined at a rapid rate whiletesting was being conducted. In late December 2008, two of the threetesting wells were shut-in again. Crude oil prices continued declining to alevel below $40 per barrel. In February 2009, following a mechanicalfailure in the third testing well, RELP, as operator, shut-in the field. The eightwells cannot be commercially productive without efficient salt water disposalcapabilities, and RELP does not believe any of the options regarding salt waterdisposal are economically viable at current commodity prices. As a result, asof December 31, 2008, the eight Sand Dunes wells have been classified asunsuccessful, and there are no crude oil and natural gas reserves for thesewells included in the December 31, 2008 reserve information presented inthis Annual Report. However, RELP has made no plans to plug and abandon thewells at this time, and will continue to monitor and evaluate the economics ofthe field based upon commodity prices.

 

ThePartnership also has interests in unproved property consisting of un-drilledleasehold interests (11 potential drilling locations) in the Sand Dunesprospect. The Partnership has fully impaired this unproved property during thefourth quarter of 2008 based upon the eight already drilled wells beingclassified as unsuccessful at December 31, 2008. The Partnership currentlyhas no plans to conduct any drilling operations on this acreage.

 

ThePartnership purchased working interests in fourteen exploratory prospects, uponwhich a total of fifteen exploratory and eight developmental wells weredrilled. The Partnership drilled eight successful exploratory wells, sevensuccessful developmental wells, and one unsuccessful developmental well onseven exploratory prospects located in Terrebonne and St. Martin Parish,Louisiana, Sterling, Jefferson (2 prospects) and Live Oak County, Texas, andoffshore in U.S. Coastal waters in the Gulf of Mexico. The Partnership drilledseven unsuccessful exploratory wells on seven exploratory prospects located inWest Baton Rouge, Beauregard, and Cameron Parish, Louisiana, Brazoria, Lavaca,and San Patricio County, Texas, and offshore in U.S. Coastal waters in the Gulfof Mexico. Of the fifteen successful wells, three wells located in St. Martinand Terrebonne Parish, Louisiana and in Live Oak County, Texas ceasedproduction in 2006 and 2007.

 

Seventeenof the twenty-three successful wells in which the Partnership participated indrilling are currently productive.

 

**ProvedCrude Oil and Natural Gas Reserves**

 

ThePartnership used an independent petroleum engineer, Gleason Engineering, ofArlington, Texas, to prepare its December 31, 2008 and 2007 estimates ofnet proved crude oil and natural gas reserves. Net proved crude oil and naturalgas reserves as of December 31, 2006 were estimated by a petroleumengineer employed by RELP. The estimated net proved crude oil and natural gasreserves at December 31, 2008, 2007, and 2006 are summarized below. Theestimated quantities of proved crude oil and natural gas reserves discussed inthis section include only the amounts which the Partnership reasonably expectsto recover in the future from known oil and gas reservoirs under the currenteconomic and operating conditions. Proved reserves include only quantities thatthe Partnership expects to recover commercially using current prices, costs,existing regulatory practices, and technology. Therefore, any changes in futureprices, costs, regulations, technology or other unforeseen factors couldmaterially increase or decrease the proved reserve estimates.

 

 

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| ** **                                  | ** ** | **Oil (BBL)** | ** ** | **Gas (MCF)** | ** ** |
|---------------------------------------------|------------|---------------|------------|---------------|------------|
| Net proved reserves, December 31, 2006 |       | 69,253        |       | 1,597,089     |       |
| Net proved reserves, December 31, 2007 |       | 186,993       |       | 3,401,162     |       |
| Net proved reserves, December 31, 2008 |       | 99,980        |       | 2,232,028     |       |

 

Thestandardized measure of discounted future net cash flows as of December 31,2008, 2007 and 2006 is computed by applying year-end prices, costs, andlegislated tax rates and a discount factor of 10% to net proved reserves. Thestandardized measure of discounted future net cash flows does not purport topresent the fair value of our crude oil and natural gas reserves.

 
| Standardized measure of discounted future net cash  flows as of December 31, 2006 |   | $ | 8,116,583  |   |
|----------------------------------------------------------------------------------------|--------|---|------------|--------|
| Standardized measure of discounted future net cash  flows as of December 31, 2007 |   | $ | 23,341,108 |   |
| Standardized measure of discounted future net cash  flows as of December 31, 2008 |   | $ | 10,651,949 |   |

 

Duringthe years ended December 31, 2008, 2007, and 2006, the Partnershiprecorded property impairment costs of proved properties totaling $0, $9,466,246and $8,145,740 as a result of the net capitalized costs of proved oil and gasproperties exceeding the sum of estimated future net revenues from proved reserves,using prices in effect at the end of the period held constant and discounted at10%.

 

**Titleto Properties**

 

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

 

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

 

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

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

 

None.

 

**PART II**

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

 

Asof December 31, 2008, the Partnership had one managing general partner,and 1,150 investor limited partners. Pursuant to the Partnership Agreement ofthe Partnership, all general partner units held by investor partners wereconverted into limited partner units during the 3rd quarter of2008. Reef holds a total of 75.363 general partner units and the investorpartners hold 1,431.897 limited partner units. No established trading marketexists for the units.

 

Cashwhich, in the sole judgment of the managing general partner, is not required tomeet the Partnership’s obligations is distributed to the partners at leastquarterly in accordance with the Partnership Agreement. The Partnership hasmade monthly cash distributions to the partners of interest income and crudeoil and natural gas sales revenues, less operating, general and administrative,and other costs since December 2005. Cash distributions are distributed 15.45% to the managing generalpartner (based upon the 11% interest not represented by units and the 4.45%interest represented by Partnership units) and 84.55% to investor partners.

 

 

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Investor limited partnerinterests are transferable, subject to certain restrictions contained in thePartnership Agreement; however, no assignee of a unit in the Partnership canbecome a substituted partner without the written consent of both the transferorand Reef.

 

ThePartnership has adopted a unit repurchase program. Under the terms of theprogram, the managing general partner is obligated to purchase up to 5% of theunits in the Partnership per year during the period set forth in thePartnership Agreement, unless changes in oil and gas pricing meet certaincriteria specified in the prospectus supplement, dated July 8, 2005.However, the managing general partner’s obligation to purchase units is limitedto $500,000 per year in the aggregate for all partnerships previously orsubsequently organized by the managing general partner or its affiliates. ThePartnership did not repurchase any units in 2008.

 

**Use ofProceeds**

 

Inconnection with the Registration Statement filed on form S-1 (No. 333-122935)and declared effective July 7, 2005, Reef filed a final prospectus for theProgram on July 8, 2005. On July 8, 2005, Reef filed a prospectussupplement describing the Partnership and commenced the offering of units inthe Partnership. All sales of Partnership units were made through the Program’sdealer-manager, Reef Securities, Inc., and a number of soliciting dealers.The offering terminated October 31, 2005. Under the terms of the offering,a minimum of 40 Partnership units at a price of $25,000 per unit were requiredto be sold in order to form the Partnership. Upon meeting this requirement, thePartnership was formed on July 18, 2005.

 

ThePartnership registered a total of 400 units of limited partner interests and1,600 units of general partner interests. The aggregate offering amountregistered was $50,000,000. During the offering period that terminated on October 31,2005, the Partnership sold 1,431.897 units to investor partners, consisting of241.336 units of limited partner interest and 1,190.561 units of additionalgeneral partner interest. Reef purchased 75.363 general partner units, equaling5.00% of the total Partnership units sold. The Partnership did not sell theremaining registered units. Total offering proceeds were $37,398,898. Reef alsocontributes 1% of all leasehold, drilling, and completion costs as incurred. AtDecember 31, 2008, Reef had contributed $308,756 in connection with thisobligation.

 

Allunits except those purchased by Reef paid a 15% management fee to Reef to payfor the Partnership organization and offering costs, including salescommissions. These costs totaled $5,369,615, leaving capital contributions of$32,338,039 available for Partnership oil and gas operations. As of December 31,2008, the Partnership had expended $33,097,643 on property acquisitions and$138,317 on general and administrative expenses.  At December 31, 2008, the Partnershiphad recovered $640,000 of the $897,921 deficit through a reduction in partnerdistributions. The remainder of this deficit was recovered during the firstquarter of 2009 through reductions in partner distributions.

 

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

 

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

 
| ** **                                      | ** ** | **Year ended**

**December 31,** | ** ** | **Year ended**

**December 31,** | ** ** | **Year ended**

**December 31,** | ** ** | **Period from**

**Inception**

**(July 18, 2005) to**

**December 31** | ** ** |
|-------------------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **2008**                              | ** ** | **2007**                              | ** ** | **2006**                              | ** ** | **2005**                                                                          | ** ** |
|                                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Oil and gas sales revenue                       |       | $                                     | 9,444,159  |                                  | $          | 4,211,670                             |       | $                                                                                 | 552,572    |   | $ | — |   |
| Interest income                                 |       | 15,179                                |       | 387,479                               |       | 836,045                               |       | 218,477                                                                           |       |
| Costs and expenses                              |       | (5,011,335                            | )          | (12,887,713                           | )          | (8,877,529                            | )          | (106,989                                                                          | )          |
| Partnership net income (loss)                   |       | 4,448,003                             |       | (8,288,564                            | )          | (7,488,912                            | )          | 111,488                                                                           |       |
| Allocation of net income (loss):                |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Managing general partner                        |       | 920,577                               |       | (156,552                              | )          | (331,615                              | )          | (4,464                                                                            | )          |
| General partner units                           |       | 1,875,514                             |       | (6,761,418                            | )          | (5,950,984                            | )          | 96,353                                                                            |       |
| Limited partner units                           |       | 1,651,912                             |       | (1,370,594                            | )          | (1,206,313                            | )          | 19,599                                                                            |       |
| Net income (loss) per managing partner unit     |       | 12,215.24                             |       | (2,077.31                             | )          | (4,400.24                             | )          | (59.23                                                                            | )          |
| Net income (loss) per general partner unit      |       | 1,575.32                              |       | (5,679.19                             | )          | (4,998.47                             | )          | 80.93                                                                             |       |
| Net income (loss) per limited partner unit      |       | 2,463.46                              |       | (5,679.19                             | )          | (4,998.47                             | )          | 81.21                                                                             |       |
|                                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Total assets                                    |       | 11,539,478                            |       | 13,913,337                            |       | 28,061,160                            |       | 33,800,949                                                                        |       |
| Distributions to managing general partner       |       | 966,629                               |       | 453,728                               |       | 142,700                               |       | 7,725                                                                             |       |
| Distributions to investor partners              |       | 5,289,871                             |       | 2,483,022                             |       | 780,923                               |       | 42,275                                                                            |       |
| Distributions per general partner unit          |       | 1,719.76                              |       | 1,734.08                              |       | 545.38                                |       | 29.52                                                                             |       |
| Distributions per limited partner unit          |       | 3,694.31                              |       | 1,734.08                              |       | 545.38                                |       | 29.52                                                                             |       |
| Distributions per managing general partner unit |       | 12,826.31                             |       | 6,020.57                              |       | 1,893.50                              |       | 102.50                                                                            |       |
|                                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| **Operating Data**                              | ** ** | ** **                            | ** ** | ** **                            | ** ** | ** **                            | ** ** | ** **                                                                        | ** ** |
| Annual sales volume:                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Gas (MCF)                                       |       | 659,300                               |       | 373,949                               |       | 69,088                                |       | —                                                                            |       |
| Oil (BBL)                                       |       | 33,086                                |       | 20,002                                |       | 2,374                                 |       | —                                                                            |       |
|                                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Average sales price:                            |       |                                  |       |                                  |       |                                  |       |                                                                              |       |
| Gas (per MCF)                                   |       | $                                     | 9.36       |                                  | $          | 7.29                                  |       | $                                                                                 | 5.99       |   | $ | — |   |
| Oil (per BBL)                                   |       | $                                     | 98.92      |                                  | $          | 74.20                                 |       | $                                                                                 | 58.37      |   | $ | — |   |

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

 

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

 

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

 

**CriticalAccounting Policies**

 

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

 

**Oil and Gas Properties**

 

ThePartnership follows the full cost method of accounting for oil and gasproperties. Under this method, all direct

 

 

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costsand certain indirect costs associated with acquisition of properties and successfulas well as unsuccessful exploration and development activities are capitalized.Depreciation, depletion, and amortization of capitalized oil and gas propertiesand estimated future development costs, excluding unproved properties, arebased on the unit-of-production method using estimated proved reserves.  For these purposes, proved natural gasreserves are converted to equivalent barrels of crude oil at a rate of 6 Mcf to1 Bbl. Net capitalized costs of oil and gas properties, as adjusted for assetretirement obligations, are limited to the lower of unamortized cost or thecost ceiling, defined as the sum of the present value of estimated future netrevenues from proved reserves based on prices in effect at the end of theperiod held constant and discounted at 10 percent, plus the lower of cost orestimated fair value of  unprovedproperties, if any. Pursuant to full cost accounting rules, the Partnershipperforms a ceiling test quarterly as of the balance sheet date on its provedoil and gas properties. Excess capitalized costs are charged to propertyimpairment expense. No gain or loss is recognized upon sale or disposition ofoil and gas properties, unless such a sale would significantly alter the rateof depletion and amortization. During the years ended December 31, 2008,2007 and 2006, the Partnership recognized property impairment expense of provedproperties totaling $0, $9,466,246 and $8,145,740, respectively.

 

Unprovedproperties consist of undeveloped leasehold interest. Investments in unprovedproperties are not depleted pending determination of the existence of provedreserves. Unproved properties are assessed for impairment quarterly as of thebalance sheet date by considering the primary lease term, the holding period ofthe properties, geologic data obtained relating to the properties, and otherdrilling activity in the immediate area of the properties. Any impairmentresulting from this quarterly assessment is reported as property impairmentexpense in the current period, as appropriate. During the year ended December 31,2008, the Partnership recognized property impairment expense of unprovedproperties totaling $172,930.

 

The estimate of proved crude oil and natural gas reserves used todetermine property impairment expense, and also utilized in the Partnership’sdisclosures of supplemental information regarding oil and gas producingactivities, including the standardized measure of discounted cash flows, wasprepared by an independent petroleum engineer at  December 31, 2008 and 2007, and by apetroleum engineer employed by RELP at December 31, 2006, utilizing theperiod end prices and costs as promulgated by the SEC. Reservoir engineering isa subjective and inexact process of estimating underground accumulations ofcrude oil and natural gas that cannot be measured in an exact manner, and isbased upon assumptions that may vary considerably from actual results.Accordingly, reserve estimates may be subject to upward or downwardadjustments. Actual production, revenues and expenditures with respect toreserves will likely vary from estimates, and such variances could be material.

 

The determination of depreciation,depletion and amortization expense recognized in the financial statements isalso dependent upon the estimates of proved crude oil and natural gas reservesand will be computed using the units-of-production method based upon thisestimate of proved reserves. During the years ended December 31, 2008,2007 and 2006, the Partnership had depreciation, depletion, and amortizationexpense totaling $2,320,505, $2,468,104 and $552,848, respectively.

 

ThePartnership accounts for its asset retirement obligations in accordance withStatement of Financial Accounting Standards (“SFAS”) No. 143, “Accountingfor Asset Retirement Obligations” (“SFAS No. 143”). Asset retirement costsand liabilities associated with future site restoration and abandonment oflong-lived assets are initially measured at fair value which approximates thecost a third party would incur in performing the tasks necessary to retire suchassets. The fair value is recognized in the financial statements as the presentvalue of expected future cash expenditures for site restoration andabandonment. Subsequent to the initial measurement, the effect of the passageof time on the liability for the net asset retirement obligation (accretionexpense) and the amortization of the asset retirement cost are recognized inthe results of operations. Duringthe years ended December 31, 2008, 2007 and 2006, the Partnershiprecognized $35,166, $66,966 and $199,253 of asset retirement obligations andadditional capitalized cost in connection with successful wells drilled by thePartnership.

 

**Recognitionof Revenue**

 

The Partnership has entered into salescontracts for disposition of its share of crude oil and natural gas productionfrom productive wells. Revenue is recognized based upon the metered volumesdelivered to those purchasers each month. Any significant over or underbalanced gas positions are disclosed in the financial statements. As of December 31,2008, 2007 and 2006, the Partnership had no material gas imbalance positions.

 

 

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**New Accounting Pronouncements**

 

**Modernization of Oil and GasReporting**

 

In January 2009, theSEC issued revisions to the oil and gas reporting disclosures, “Modernizationof Oil and Gas Reporting; Final Rule” (“the Final Rule”). In addition tochanging the definition and disclosure requirements for oil and gas reserves,the Final Rule changes the requirements for determining quantities of oiland gas reserves. The Final Rule also changes certain accountingrequirements under the full cost method of accounting for oil and gasactivities. The amendments are designed to modernize the requirements for thedetermination of oil and gas reserves, aligning them with current practices andupdating them for changes in technology. The Final Rule is effective forannual reports on Form 10-K for fiscal years ending on or after December 31,2009. The Partnership has not yet determined the impact, if any, on thefinancial statements.

 

**The Hierarchy of GenerallyAccepted Accounting Principles**

 

In May 2008, the FASBissued SFAS No. 162, “The Hierarchy of Generally Accepted AccountingPrinciples” (“SFAS 162”). SFAS 162 identifies the sources for accountingprinciples and the framework for selecting the principles to be used inpreparing financial statements of nongovernmental entities that are presentedin conformity with generally accepted accounting principles in the UnitedStates. This Statement became effective in November 2008.

 

**Disclosures About DerivativeInstruments and Hedging Activities**

 

In March 2008, the FASBissued SFAS No. 161, “Disclosures about Derivative Instruments and HedgingActivities” (“SFAS 161”). SFAS 161 requires entities that utilize derivativeinstruments to provide qualitative disclosures about their objectives andstrategies for using such instruments, as well as any details ofcredit-risk-related contingent features contained within derivatives. ThePartnership does not utilize derivative instruments; therefore, the Partnershipdoes not expect this pronouncement to have any impact on the Partnership’sresults of operations, cash flows or financial position.

 

**Non-controlling Interests inConsolidated Financial Statements**

 

In December 2007, theFASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements, an amendment of Accounting Research Bulletin No. 51”(“SFAS 160”), which improves the relevance, comparability and transparency ofthe financial information that a reporting entity provides in its consolidatedfinancial statements by establishing accounting and reporting standards for thenoncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary. The Partnership does not own any subsidiaries, and does not expectthis pronouncement to have any impact on the Partnership’s results ofoperations, cash flows or financial position.

 

**Business Combinations**

 

In December 2007, theFASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS141R”), which replaces SFAS No. 141, “Business Combinations” (“SFAS 141”).SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisitionmethod of accounting (which SFAS 141 called the purchase method) be used forall business combinations. The Partnership has no business combinations inprogress or, at this time, in future plans. The Partnership does not expect thispronouncement to have any impact on the Partnership’s results of operations,cash flows or financial position.

 

**Accounting Standard Fair Valuefor Financial Assets and Financial Liabilities**

 

In February 2007, theFASB issued SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities” (“SFAS 159”). SFAS 159 allows entities the option tomeasure eligible financial instruments at fair 

 

 

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value as of specified dates.The Partnership did not elect fair value as an alternative as provided underSFAS 159 for any of its financial assets and liablilities that are notcurrently measured at fair value.

 

**Overview**

 

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

 

The Partnership raised capital from the sale ofPartnership units to investor partners and Reef, and used those funds for thepurchase of working interests in prospects and for drilling and completionoperations 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 successfulwells, net of expenses, are being distributed monthly to the partners. ThePartnership is allowed to borrow funds in accordance with the PartnershipAgreement, or utilize cash flows from successful wells in order to conductfurther development upon prospects initially purchased by and drilled on by thePartnership during the drilling phase of operations. The Partnership completedits drilling phase of operations during the first quarter of 2008. Subsequentto the original drilling phase of operations, the Partnership has drilled twoadditional exploratory wells on one of the Partnerships’ prospects located inLive Oak County, Texas. An exploratory well drilled during the third quarter of2008 was successful and began production operations in November of 2008. Asecond exploratory well drilled during March 2009 was unsuccessful and wasplugged and abandoned. The Partnership utilized cash flow from existing wellsby reducing distributions to partners in the drilling of these two wells. ThePartnership may conduct additional drilling operations on its prospects in thefuture.

 

The Partnership does not operate in any otherindustry segment. The Partnership expended approximately $1,644,000 for thepurchase of working interests in twenty developmental prospects, and expendedapproximately $1,237,000 for the purchase of working interests in fourteenexploratory prospects.  The Partnershiphas twenty prospects in Texas, ten in Louisiana, one in Oklahoma, and one inNew Mexico, all of which are located onshore, and two prospects located offshorein U.S. coastal waters in the Gulf of Mexico. The Partnership has drilledthirty-five developmental and fifteen exploratory wells on these prospects asof December 31, 2008. Forty-nine of these wells were drilled during thePartnership’s drilling phase of operations, and one additional well was drilledsubsequent to the completion of the Partnership’s drillin phase ofoperations.  Four wells were drilledduring 2005, twenty-seven were drilled during 2006, fourteen were drilledduring 2007, and five were drilled during 2008. The Partnership has drilledfifteen successful developmental wells, of which twelve are currentlyproductive. The Partnership drilled twenty unsuccessful developmental wells.The Partnership drilled eight successful exploratory wells, of which five arecurrently productive. The Partnership drilled seven unsuccessful exploratorywells. Subsequent to December 31, 2008, the Partnership participated inthe drilling of an unsuccessful exploratory well on one of its prospects.

 

Should the Partnership elect to borrow monies for additionaldevelopment activity on its prospects, it will be subject to the interest raterisk inherent in borrowing activities. The Partnership is permitted but is notexpected to engage in commodity futures trading or hedging activities, andtherefore is subject to commodity price risk.  See “Item 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISK.”

 

**Liquidityand Capital Resources**

 

ThePartnership was funded with initial capital contributions totaling $37,398,898.Investor partners purchased 1,190.561 general partner units and 241.336 limitedpartner units for $35,797,434. Reef purchased 75.363 general partner units, or5% of the total units sold, for $1,601,464. As of December 31, 2008, Reefhas also contributed $308,756 in connection with its obligation to pay 1% ofall leasehold, drilling, and completion costs. Organization and offering coststotaled $5,369,615, leaving capital contributions of $32,338,039 available forPartnership activities. The Partnership was formed on July 18, 2005, and thelast partner was admitted to the Partnership on October 31, 2005.

 

 

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ThePartnership did not borrow additional funds in accordance with limitations setforth in the Partnership Agreement during the drilling phase of operations. ThePartnership expended $32,966,010 on the drilling of 49 wells and $138,317 ongeneral and administrative expenses during its initial drilling phase ofoperations. The Partnership also expended $131,633 on the drilling of asuccessful exploratory well in September 2008, subsequent to thecompletion of the Partnership’s drilling phase. The $897,921 expended in excessof capital raised is being recovered from the cash flow from successful wellsby reducing cash distributions to investor partners. At December 31, 2008,$640,000 had been recovered.

 

InMarch 2009, Reef committed to the drilling of a third exploratory well onthis prospect at a cost of approximately $220,000 which will also be recoveredby utilizing cash flow from successful wells. There are no plans to conduct anyadditional drilling on Partnership prospects at this time; however, additionaldrilling activity is permitted on the Partnership prospects.

 

Pleasesee Item 1A of this Annual Report for a list of risk factors that could impactthe Partnership.

 

Thetable below summarizes Partnership drilling expenditures as of December 31,2008 by type and classification of well:

 
| ** **          | ** ** | **Leasehold**

**Costs** | ** ** | **Drilling,**

**Completion,**

**and Facilities**

**Costs** | ** ** | **Total Costs** | ** ** |
|---------------------|------------|--------------------------|------------|---------------------------------------------------------------|------------|-----------------|------------|
| Developmental wells |       | $                        | 1,644,361  |                                                          | $          | 19,020,050      |       | $ | 20,664,411 |   |
| Exploratory wells   |       | 1,237,049                |       | 11,196,183                                                    |       | 12,433,232      |       |
| Total               |       | $                        | 2,881,410  |                                                          | $          | 30,216,233      |       | $ | 33,097,643 |   |
|                |       |                     |       |                                                          |       |            |       |
| Successful wells    |       | $                        | 1,166,086  |                                                          | $          | 16,475,155      |       | $ | 17,641,241 |   |
| Unsuccessful wells  |       | 1,542,394                |       | 13,741,078                                                    |       | 15,283,472      |       |
| Unproved properties |       | 172,930                  |       | —                                                        |       | 172,930         |       |
| Total               |       | $                        | 2,881,410  |                                                          | $          | 30,216,233      |       | $ | 33,097,643 |   |

 

ThePartnership had working capital of $1,122,674 at December 31, 2008.Subsequent to expending the initial available Partnership capital contributionson prospect acquisitions and drilling and completion costs of partnershipwells, the Partnership working capital consists primarily of cash flows fromproductive properties utilized to pay cash distributions to investors.

 

**Resultsof Operations**

 

**YearEnded December 31, 2008 compared to Year Ended December 31, 2007**

 

ThePartnership had net income totaling $4,448,003 during 2008, compared to a netloss totaling ($8,288,564) during 2007. The significant improvement inoperating results is due to three primary factors. First, the Partnership hadthree significant discoveries during the last half of 2007. These three wellsbegan production in September 2007, January 2008, and May 2008,and led to a 65.4% increase in crude oil sales and a 76.3% increase in naturalgas sales volumes during 2008 compared to 2007 sales volumes. Second, thePartnership saw increases in the 2008 average sales prices for its crude oil of33.3% and natural gas of 28.4% compared to 2007. Finally, the Partnership hadno impairment of proved properties during 2008, compared to $9,466,246 ofimpairment of proved properties during 2007. The Partnership had $172,930 ofimpairment of unproved properties during 2008, compared to no impairment ofunproved properties during 2007.

 

Theimpairment of proved properties during 2007 occurred during the first half of2007, and was the result of large reductions in estimated reserves from four2006 Partnership wells as a result of production declines significantly inexcess of original estimates. As shown in the Partnership’s Quarterly Report onForm 10-Q for the period ended June 30, 2007, estimated reservesdeclined from 335,435 barrels of oil equivalent (BOE) to 172,111 BOE during thefirst half of 2007.  Subsequent to June 30,2007, the Partnership had three major discoveries for which the discountedfuture net cash flows was estimated at approximately $16.3 million at December 31,2007, accounting

 

 

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forapproximately 70% of the total estimated discounted future net cash flows of$23.3 million at December 31, 2007. The Partnership was not allowed toreverse the impairment expense taken during the first half of 2007, even thoughthe increase in the estimated discounted future net cash flows from thesediscoveries during the second half of 2007 exceeded the impairment taken duringthe first half of 2007.

 

AtDecember 31, 2008, the estimated discounted future net cash flows of thePartnership totaled $10,651,949, compared to $23,341,108 at December 31,2007. Approximately $7.9 million of the reduction is the direct result of lowerbase sales prices at December 31, 2008, which impacts the estimatedeconomic life of Partnership wells and estimated economic reserves to beproduced from Partnership wells. The base year end prices used in thePartnership’s reserve studies were $44.60 per barrel of oil and $5.71 per MCFof natural gas at December 31, 2008, compared to $89.16 per barrel of oiland $7.207 per MCF of natural gas at December 31, 2007. Even with thisdrop in estimated discounted future net cash flows from 2007 to 2008, thePartnership recorded no impairment of proved properties during 2008 because ofthe impact of the three significant discoveries during the last half of 2007.

 

Theimpact of the Partnership’s 2007 discoveries began with third quarter 2007results, when the first of the three significant 2007 discoveries beganproducing. Third quarter 2008 volumes were negatively impacted by HurricanesGustav and  Ike, which resulted inseveral Partnership wells being shut-in for portions of August and September 2008.

 

During2008, four Partnership wells accounted for 82.6% of Partnership oil and gassales revenues, and these four

 

 

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wellsaccount for 88.9% of total Partnership reserves at December 31, 2008.

 

Productionexpenses rose during 2008 in conjunction with new wells placed into productionduring 2007 and 2008, and increases in sales prices. As a result of theincrease in sales prices received during 2008 as compared to 2007, productiontaxes increased by $350,989 during 2008.

 

During2008, the Partnership participated in the drilling of four wells in the SandDunes prospect, which have been classified as unsuccessful during the fourthquarter of 2008, and drilled one successful exploratory well during the thirdquarter of 2008 which began production in November 2008.

 

Generaland administrative costs increased from $227,249 in 2007 to $1,012,874 in 2008as a result of two primary factors. Reef implemented a new method forallocating overhead that takes actual overhead and allocates it based upon thesummation of revenues, expenses, and capital costs incurred. Under the priormethod of allocating overhead, not all allocable general and administrativeexpenses were charged to the Partnership during 2007. In addition, during thefourth quarter expenses were incurred in connection with Sarbanes-Oxleycompliance and improvement of financial reporting. The Partnership expects tohave continuing costs during 2009 related to Sarbanes-Oxley compliance, as thePartnership is required to be Sarbanes-Oxley compliant by December 31,2009. Third party costs in connection with improvement of financial reportingended during January 2009.  Theadministrative overhead charge to the Partnership for the year ended December 31,2008 was $856,371, compared to $141,081 for the year ended December 31,2007.

 

Therapid decline in crude oil and natural gas prices that occurred during thefourth quarter of 2008, the impairment of unproved properties, and thesignificant increase in general and administrative costs incurred during thefourth quarter of 2008 caused the Partnership’s net income for the quarter todecline to only $5,701. RELP and Reef are working to cut overhead costs, andeven with costs in connection with Sarbanes-Oxley compliance, the Partnershipexpects to incur overall lower general and administrative costs during 2009.Average sales prices during the first quarter of 2009 will continue to declinefrom fourth quarter 2008 levels. The Partnership expects that prior todepletion expense and any possible impairment charges it will continue togenerate net income. Nonetheless, 2009 results are expected to declinesignificantly from 2008 results.

 

Partnershipinterest income comes from the short-term investment of unexpended partnercapital contributions, and therefore deceases during the drilling phase ofoperations as partner capital is expended to purchase working interests inprospects and to drill and complete wells. Interest income declined from$387,479 during 2007 to $15,179 during 2008 as a result of the Partnershipcompleting its drilling phase of operations during the first quarter of 2008.

 

**YearEnded December 31, 2007 compared to Year Ended December 31, 2006**

 

ThePartnership incurred net losses for both 2006 and 2007, primarily due toproperty impairment costs. The net loss for 2007 was $8,288,564, compared to anet loss of $7,488,912 incurred in 2006.

 

ThePartnership began its drilling phase of operations during the third quarter of2005, and completed its drilling phase of operations during the first quarterof 2008. Partnership oil and natural gas sales revenues totaled $4,211,670during 2007 compared to $552,572 during 2006, and show a steady growth assuccessful wells drilled by the Partnership during its drilling phase ofoperations have been placed on production. The Partnership has one successfulexploratory well that began production operations in January 2008, and hasone successful developmental well that began production operations in May 2008.

 

Oneexploratory well that both began and ceased production during 2006 accountedfor 32% of the 2006 oil and natural gas sales revenues. This well is currentlyshut-in. The Partnership has one successful exploratory well that beganproduction in January 2007 and accounted for 30.2% of total 2007 oil andnatural gas sales, one successful development well that began production in September 2007and accounted for 21.1% of total 2007 oil and natural

 

 

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gassales, and a field with one successful exploratory and six successfuldevelopmental wells that began production at various times during 2007 andaccounted for 23.0% of total 2007 oil and natural gas sales.

 

Productionexpenses totaled $691,698 in 2007 as compared to $95,060 in 2006. This increasereflects Partnership progress in placing successful wells on production during2007.

 

AtDecember 31, 2006 the Partnership had drilled thirty-one wells, of whichfifteen were successful and sixteen were unsuccessful. One successfulexploratory well ceased production during the fourth quarter, and sixsuccessful wells did not begin production operations until 2007.  During 2007, the Partnership drilled fourteenwells and had four wells in progress, including a successful well that beganproduction in May 2008 and three unsuccessful wells on the Sand Dunesprospect. Six wells were successful and eight were unsuccessful, including fivewells drilled on the Sand Dunes prospect. One of the successful wells did notbegin production until January 2008.

 

Propertyimpairment expense totaled $9,466,246 during 2007 compared to $8,145,740 during2006. The sudden loss of production in October 2006 from the exploratorywell which accounted for 32% of the Partnership’s 2006 revenues resulted in areduction in estimated reserve value of approximately $9.5 million, and was themajor reason the Partnership recorded property impairment expense of $8,145,740during 2006. During the first half of 2007, the Partnership recorded propertyimpairment expense of $9,466,246, primarily resulting from large reductions inestimated reserves from four 2006 Partnership wells as a result of productiondeclines significantly in excess of original estimates. As shown in thePartnership’s Quarterly Report on Form 10-Q for the period ended June 30,2007, estimated reserves declined from 335,435 BOE to 172,111 BOE during thefirst half of 2007.  Subsequent to June 30,2007, the Partnership had three major discoveries for which the discountedfuture net cash flows are estimated at approximately $16.3 million at December 31,2007, or approximately 70% of the total estimated discounted future net cashflows of 23.3 million at December 31, 2007. The Partnership is not allowedto reverse the impairment expense taken during the first half of 2007, eventhough the increase in the estimated discounted future net cash flows fromthese discoveries during the second half of 2007 exceeds the impairment takenduring the first half of 2007.

 

Increasesin general and administrative costs from $81,313 during 2006 to $227,249 werethe result of the increased activities of the Partnership during 2007. Of the$145,936 increase in costs during 2007, $125,257 pertained to administrative costspaid to Reef for administering Partnership operations. These costs rose from$15,824 in 2006 to $141,081 in 2007, primarily as a result of the overallincrease in the number of productive wells, and the increase in the number ofproductive wells operated by Reef from none during 2006 to three during 2007.

 

Partnershipinterest income comes from the short-term investment of unexpended partnercapital contributions, and therefore deceases during the drilling phase ofoperations as partner capital is expended to purchase working interests inprospects and to drill and complete wells. Interest income declined from$836,045 during 2006 to $387,479 during 2007, and will significantly declineagain during 2008 as the Partnership expends capital to complete its drillingphase of operations.

 

**Off-BalanceSheet Arrangements**

 

The Partnership does not participate in transactionsthat generate relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structure finance orspecial purpose entities (SPEs), which would have been established for thepurpose of facilitating off-balance sheet arrangements or other contractuallynarrow or limited purposes.  As of December 31,2008, 2007 and 2006, the Partnership was not involved in any unconsolidated SPEtransactions or any other off-balance sheet arrangements.

 

**Contractual Obligations Table**

 
| ** **                  | ** ** | **Payment due by period** | ** ** |
|-----------------------------|------------|---------------------------|------------|
| **Contractual obligations** | ** ** | **Total**                 | ** ** | **Less than 1 Year** | ** ** | **1-3 Years** | ** ** | **3-5 years** | ** ** | **More than 5 Years** | ** ** |
| Purchase obligations *      |       | $                         | 144,789    |   | $ | 144,789 |   | — |   | — |   | — |   |
|                             |            |                           |            |  |  |  |  |  |  |  |  |  |  |

----

*      The 15% management fee due Reef for organization and offeringcosts, including sales commissions, is payable in two parts. Reef initiallyreceived an amount, not to exceed 13.5%, to recover actual commissions and organization

 

 

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and offering costs. As of December 31, 2008,the Partnership is obligated to pay Reef $144,789, representing the portion ofthe management fee in excess of actual commissions and organization andoffering costs, from the oil and gas cash flows available for partnerdistributions at a rate not to exceed $1 million per year. The Partnership ispaying this balance at a rate of $50,000 per month, and completed payment ofthis obligation during March 2009.

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

 

**Interest Rate Risk**

 

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

 

**Commodity Price Risk**

 

ThePartnership has not and does not expect to engage in commodity futures tradingor hedging activities or enter into derivative financial instrumenttransactions for trading or other speculative purposes.  The Partnership sells a vast majority of itsproduction from successful oil and gas wells on a month-to-month basis atcurrent spot market prices. Accordingly, the Partnership is at risk for thevolatility in commodity prices inherent in the oil and gas industry, and thelevel of commodity prices has a significant impact on the Partnership’s resultsof operations.

 

Assumingthe production levels we attained during the year ended December 31, 2008,a 10% change in the price received for our crude oil would have had anapproximate $327,000 impact on our crude oil revenues, and a 10% change in theprice received for our natural gas would have had an approximate $617,000impact on our natural gas revenues.

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

 

Thereports of our independent registered public accounting firm, and thePartnership’s financial statements, related notes, and supplementary data areset forth in a separate section to this Annual Report, beginning on page F-1.

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

 

None.

 
| **ITEM 9A.** | **CONTROLS AND  PROCEDURES** |
|--------------|------------------------------|

 

**Evaluation of Disclosure Controls and Procedures**

 

As the managing generalpartner of the Partnership, Reef maintains a system of controls and proceduresdesigned to provide reasonable assurance as to the reliability of the financialstatements and other disclosures included in this Annual Report, as well as tosafeguard assets from unauthorized use or disposition. The Partnership, underthe supervision and with participation of its management, including theprincipal executive officer and principal financial officer of the Partnership’smanaging general partner, Reef Oil & Gas Partners, L.P., evaluated theeffectiveness of its “disclosure controls and procedures” as such term isdefined in Rule 13a-15(e) under the Securities Exchange Act of 1934,as amended (the “Exchange Act”), as of the end of the period covered by thisAnnual Report. Based on that evaluation, the principal executive officer and principal financial officer of ourmanaging general partner have concluded that the Partnership’s disclosurecontrols and procedures are effective to ensure that information required to bedisclosed by the Partnership in reports that it files or submits under the 

 

 

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Exchange Act is recorded,processed, summarized, and reported within the time periods specified inSecurities and Exchange Commission rules and forms, and includes controlsand procedures designed to ensure that information required to be disclosed byus in such reports is accumulated and communicated to our management, includingthe principal executive officer and principal financial officer of our managinggeneral partner, as appropriate to allow timely decisions regarding financialdisclosure.

 

**Management Report on Internal Control Over FinancialReporting**

 

Management of thePartnership is responsible for establishing and maintaining adequate internalcontrol 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 internalcontrol over financial reporting based on the framework in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission. Based on this evaluation under the framework in InternalControl — Integrated Framework, management of the Partnership concluded thatthe Partnership’s internal control over financial reporting was effective as ofDecember 31, 2008.

 

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

 

**Changes in Internal Controls**

 

Therehave not been any changes in the Partnership’s internal controls over financialreporting during the fiscal quarter ended December 31, 2008 that havematerially affected, or are reasonably likely to materially affect, thePartnership’s internal control over financial reporting.

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

 

****None.****

 

**PART III**

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

 

ThePartnership has no directors or executive officers. Its managing generalpartner is Reef Oil & Gas Partners, L.P.

 

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

 

TheManager, officers and key personnel of the managing general partner, theirages, current positions with the managing general partner and/or RELP, andcertain additional information are set forth below:

 

| **Name**                             | ** ** | **Age** | ** ** | **Positions and Offices Held**                                                        |
|--------------------------------------|------------|---------|------------|---------------------------------------------------------------------------------------|
| Michael  J. Mauceli                  |       | 52      |       | Manager  of Reef Oil & Gas Partners GP, LLC; Chief Executive Officer of RELP |
| H.  Walt Dunagin                     |       | 51      |       | Vice  President — Land Manager of RELP                                           |
| Lawrence  J. Harrison, Jr Klein |       | 58      |       | Vice  President — Business Development of RELP                                   |
| Byron  H. Dean                       |       | 59      |       | Manager  of Acquisitions and Divestitures of RELP                                     |
| Daniel  C. Sibley                    |       | 57      |       | General  Counsel of RELP                                                              |
| L.  Mark Price                       |       | 46      |       | Chief  Financial Officer of Reef and of RELP                                          |
| David  M. Tierney                    |       | 56      |       | Chief  Accounting Officer — Public Partnerships                                  |

 

**Michael J. Mauceli** is the Manager and a member of Reef Oil & GasPartners, GP, LLC, which is the general partner of Reef, as well as the ChiefExecutive Officer of RELP. Mr. Mauceli has been the principal executiveofficer of Reef since its formation in February 1999. He has served inthis position with RELP since January 2006 and has served in this positionwith its predecessor entity, OREI, since 1987. Mr. Mauceli attended the University 

 

 

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of Mississippi where he majored inbusiness management and marketing as well as the University of Houston where hereceived his Commercial Real Estate License. He entered the oil and natural gasbusiness 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 developmentfirms in planning exploration and marketing feasibility of privately sponsoreddrilling programs.

 

**H. Walt Dunagin** is Vice President - Land Manager of RELP. He has held thisposition since January 2006 and has served in this position with itspredecessor entity, OREI, since 1990. He is responsible for all contracts withother 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. Agraduate of the University of Mississippi in 1969 with a B.B.A. degree, Walt’scareer has also involved land work for ExxonMobil, ChevronTexaco, UNOCAL, SantaFe Energy and Oryx Energy (now Kerr-McGee). Walt is a member of the DallasAssociation of Petroleum Landmen and the Association of International PetroleumNegotiators.

 

**Lawrence J.Harrison, Jr.**is Vice President — Business Development of RELP. Hejoined RELP in October 2006 following fourteen years with The Oil &Gas Asset Clearinghouse, a leading acquisition and divestiture advisory firm. Mr. Harrisonhas served as an independent landman verifying title ownership and acquiringleases and other agreements in support of clients drilling programs. He workedfor Mobil Oil Corporation and several other companies before joining TheClearinghouse. Mr. Harrison is a 1972 graduate of the University ofSouthern Mississippi with a Bachelor of Science degree in Communications. Mr. Harrisonis a past president of the Houston Association of Professional Landmen and apast member of the American Association of Professional Landmen ExecutiveCommittee. He is currently a Director of the Louisiana Oil & GasAssociation (LOGA) and a member of the ADAM Energy Forum and the IndependentPetroleum Association of America.

 

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

 

**Daniel C. Sibley**is General Counsel of RELP. Mr. Sibleywas appointed General Counsel of RELP on January 14, 2009. Previously, Mr. Sibleyserved as Chief Financial Officer of Reef and RELP. Mr. Sibleywas employed as a Certified Public Accountant with Grant Thornton from 1977 to1980. From 1980 to 1994, he was involved in the private practice of law. Hereceived a B.B.A. in accounting from the University of North Texas in 1973, alaw degree (J.D.) from the University of Texas in 1977, and a Master ofLaws-Taxation degree (L.L.M.) from Southern Methodist University in 1984.

 

**L. Mark Price** is Chief Financial Officer of Reef and RELP.  Mr. Price was appointed to this positionJanuary 9, 2009.   Mr. Pricehas over twenty-two years of experience working in the oil and gas andmanufacturing industries. He previously served as the Chief Financial Officerfor The Terramar Group, Inc., an international oil and gas andmanufacturing company, since 2007. From 2004 to 2007, he served as the ChiefAccounting Officer for Lancer Corporation, an international manufacturingcompany. Additionally, Mr. Price served as the Chief Financial Officer ofNunn Manufacturing, and for PCLC Asset Management after its acquisition of NunnManufacturing in 1998, from 1996 until 2004. Mr. Price received his BBA inaccounting and finance from Texas Tech University and is a Texas CertifiedPublic Accountant.

 

**David M. Tierney**is****Chief Accounting Officer — Public Partnerships. Mr. Tierneywas appointed to this position in July 2008. Mr. Tierney has been employed by RELP since January 2006 and waspreviously with its predecessor entity, OREI, since March 2001.  Mr. Tierney was previously theController of the Reef Global Energy Ventures and Reef Global Energy VenturesII partnerships. Mr. Tierney received a Bachelor’s degree from DavidsonCollege in 1974, a Masters of Business Administration from Tulane University in1976, and is a Texas Certified Public Accountant. Mr. Tierney has workedin 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 oiland gas exploration company.

 

 

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**Audit Committee and Nominating Committee**

 

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

 

**Code of Ethics**

 

Because the Partnership hasno employees, it does not have a code of ethics.  Employees of the Partnership’s managinggeneral partner, Reef, must comply with Reef’s Code of Ethics, a copy of whichwill be provided to investor partners, without charge, upon request made toReef Oil & Gas Partners, L.P., 1901 N. Central Expressway, Suite 300,Richardson, Texas 75080, Attention: Daniel C. Sibley.

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

 

Thefollowing table summarizes the items of compensation to be received by Reef asthe managing general partner from the Partnership.

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

 

Reef’s“partnership interest,” as described in the table above, refers only to itsinterest as managing general partner and does not include the interest Reef hasas the result of its purchase of units in the Partnership, or the 1% interestReef has as the result of its payment of 1% of all leasehold, drilling, andcompletion costs.  Reef purchased 5.00%of the outstanding Partnership units. Reef received a 10% interest as managinggeneral partner of the Partnership and a 1% interest as a result of Reef’spayment of 1% of all leasehold, drilling, and completion costs for a total ofan 11% interest.  This 11% interest isnot represented by partnership units. Reef has a total interest in the Partnership of 15.45%.

 

Reefis entitled to receive a management fee equal to 15% of the Partnershipsubscriptions exclusive of the units purchased by Reef. From this amount Reefpays all of the Partnership’s organization and offering costs, including salescommissions. The management fee is payable to Reef in two parts. Reef initiallyreceived an amount not to exceed 13.5% to cover actual sales commissions andactual organization and offering costs. The remainder of the management fee ispaid to Reef from the net cash flow available for partner distributions, at a ratenot to exceed $1 million per year. The total management fee owed Reef is$5,369,615. The Partnership recorded $5,319,615 of this amount as offeringcosts, and $50,000 as organization costs. Of this amount, $4,564,826 has beenpaid to Reef to cover actual sales commissions and organization and offeringcosts, $660,000 has been paid to Reef from net cash flow, and $144,789 has beenaccrued at December 31, 2008 as an account payable to be paid to Reef fromfuture net cash flows of the Partnership. The payable of $144,789 at December 31,2008 was paid to Reef during the first quarter of 2009.

 

Reefis reimbursed for direct costs and all documented out-of-pocket expensesincurred on behalf of the Partnership, including administrative costs. Duringthe years ended December 31, 2008, 2007 and 2006, the Partnershipreimbursed Reef $126,680, $754,097, and $571,112, respectively, for technicalservices costs which have been capitalized as project costs, and $856,371,$141,081,and  $15,824, respectively, foradministrative costs included as general and administrative expenses.

 

 

26

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OREIand RELP receive operator fees during the drilling and production phase of eachwell at the competitive rate in the geographical area where the well islocated.  These fees are charged as amonthly fee per well as agreed to in an operating agreement signed by thePartnership and participating third party working interest owners in the well.During the years ended December 31, 2008, 2007 and 2006, the Partnershippaid operator fees totaling $14,105, $3,662, and $8,791 to RELP and OREI. RELP(previously OREI) serves as operator for eleven Partnership prospects uponwhich three successful wells and sixteen unsuccessful wells have been drilled,including the eight Sand Dunes wells classified as unsuccessful that have notyet been plugged and abandoned.

 

**CompensationCommittee**

 

Becausethe 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** |
|--------------|------------------------------------------------------------------------------------------------------|

 

Thefollowing table sets forth information as of December 31, 2008 concerningall persons known by Reef to own beneficially more than 5% of the interests inthe Partnership. Unless expressly indicated otherwise, each partner exercisessole voting and investment power with respect to the units beneficially owned.

 
| **Person or Group**                        | ** ** | **Number of Units Beneficially Owned** | ** ** | **Percent of Total Partnership Units Outstanding** | ** ** | **Percentage of Total Partnership Interests Beneficially Owned** | ** ** |
|--------------------------------------------|------------|----------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------------------------|------------|
| Reef Oil & Gas Partners, L.P. (1) |       | 75.363                                 |       | 5.00                                               | %          | 4.45                                                             | %          |
| Reef Oil & Gas Partners, L.P. (1) |       | —                                 |       | —                                             |       | 11.00                                                            | %          |

----

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

 

Themanaging general partner received a 10% interest in the Partnership ascompensation for forming the Partnership, and also holds a 1% interest in thePartnership as a result of paying 1% of all leasehold, drilling and completioncosts. In addition to this 11% interest not represented by Partnership units,Reef purchased 5% of the 1,507.260 Partnership units and, therefore, holds 5%of the 89% interest in the Partnership (4.45%) held by the unit holders.

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

** **

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

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

** **

ThePartnership incurred professional audit and tax fees from its principal auditorBDO Seidman, LLP, as disclosed in the table below:

 
| ** **         | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit fees         |       | $        | 41,536     |     | $          | 36,430 |   |
| Audit related fees |       | —   |       | —   |       |
| Tax fees           |       | 4,837    |       | 866      |       |
| All other fees     |       | —   |       | —   |       |
|                    |            |          |            |          |            |  |  |

 

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

 

 

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Asindicated in Item 10 above, the Partnership does not have any directors or anaudit committee.

 

**PART IV**

 
| **ITEM 15.** | **EXHIBITS  AND FINANCIAL STATEMENT SCHEDULES** |
|--------------|-------------------------------------------------|

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

 

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

 

**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this Annual Report on Form 10-Kto be signed on its behalf by the undersigned, thereunto duly authorized.

 

| Date:  April 15, 2009 | **REEF  GLOBAL ENERGY VI, L.P.**        |
|----------------------------|-----------------------------------------|
|                       | ** **                              | ** ** |
|                       | ** **                              | ** ** |
|                       | Reef  Oil & Gas Partners, L.P. |
|                       | Managing  General Partner               |
|                       | ** **                              |   |
|                       | By:                                     | Reef  Oil & Gas Partners, GP, LLC |
|                       |                                    |   |
|                       | By:                                     | /s/  Michael J. Mauceli |
|                       |                                    | Michael  J. Mauceli |
|                       |                                    | Manager  (principal executive officer) |

 

 

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

 
| **Signature**          | ** ** | **Title**                                                               | ** ** | **Date**             |
|------------------------|------------|-------------------------------------------------------------------------|------------|----------------------|
|                   |       |                                                                    |       |                 |
| /s/ Michael J. Mauceli |       | Manager  and Member of the general partner of Reef                      |       | April 15,  2009 |
| Michael J. Mauceli     |       | Oil &  Gas Partners, L.P. (*Principal Executive  Officer*)     |       |                 |
|                   |       |                                                                    |       |                 |
| /s/ David M. Tierney   |       | Chief  Accounting Officer — Public Partnerships                    |       | April 15,  2009 |
| David M. Tierney       |       | Reef  Exploration, L.P. (*Principal Financial and  Accounting Officer*) |       |                 |

 

 

29

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Reef Global Energy VI, L.P.

 

Financial Statements

 

YearsEnded December 31, 2008 and 2007, and 2006.

 

**Contents**

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

 

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Table ofContents

 

Report of IndependentRegistered Public Accounting Firm

 

ThePartners

ReefGlobal Energy VI, L.P.

 

We have audited the accompanying balance sheets of Reef Global EnergyVI, L.P. as of December 31, 2008 and 2007, and the related statements ofoperations, partnership equity, and cash flows for the years ended December 31,2008, 2007, and 2006. These financial statements are the responsibility of thePartnership’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

 

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

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Reef Global Energy VI, L.P. at December 31,2008 and 2007, and the results of its operations and its cash flows for theyears ended December 31, 2008, 2007, and 2006, in conformity withaccounting principles generally accepted in the United States of America.

 

BDOSeidman, LLP

 

 

Dallas,Texas

April 13,2009

 

 

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

**Balance Sheets**

 
| **December 31,**                                                           | ** ** | **2008**       | ** **     | **2007**       | ** ** |
|---------------------------------------------------------------------------------|------------|----------------|----------------|----------------|------------|
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Assets**                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Current assets:**                                                             | ** ** | ** **     | ** **     | ** **     | ** ** |
| Cash and cash equivalents                                                       | ** ** | $              | 1,125,458      |           | $          | 2,366,065 | ** ** |
| Accounts receivable                                                             |       | 2,680          |           | —         |       |
| Accounts receivable from affiliates                                             |       | 144,486        |           | 15,098         |       |
| **Total current assets**                                                        | ** ** | **1,272,624**  | ** **     | **2,381,163**  | ** ** |
|                                                                            |       |           |           |           |       |
| **Oil and gas properties, full cost method of  accounting:**                    | ** ** | ** **     | ** **     | ** **     | ** ** |
| Proved properties, net of accumulated depletion of $22,961,256 and  $20,632,938 |       | 10,266,854     |           | 11,359,244     |       |
| Unproved properties                                                             |       | —         |           | 172,930        |       |
| **Net oil and gas properties**                                                  | ** ** | **10,266,854** | ** **     | **11,532,174** | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Total Assets**                                                                | ** ** | **$**          | **11,539,478** | ** **     | **$**      | **13,913,337** | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Liabilities and partnership Equity**                                          | ** ** | ** **     | ** **     | ** **     | ** ** |
|                                                                            |       |           |           |           |       |
| **Current liabilities:**                                                        | ** ** | ** **     | ** **     | ** **     | ** ** |
| Accounts payable                                                                |       | $              | 5,161          |           | $          | 1,981 | ** ** |
| Accounts payable to affiliates                                                  |       | 144,789        |           | 661,692        |       |
| **Total current liabilities**                                                   | ** ** | **149,950**    | ** **     | **663,673**    | ** ** |
|                                                                            |       |           |           |           |       |
| **Long-term liabilities:**                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| Accounts payable to affiliates                                                  |       | —         |           | 144,789        |       |
| Asset retirement obligation                                                     |       | 386,346        |           | 305,215        |       |
| **Total long-term liabilities**                                                 | ** ** | **386,346**    | ** **     | **450,004**    | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Commitments and contingencies (Note 5)**                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Partnership equity**                                                          | ** ** | ** **     | ** **     | ** **     | ** ** |
| General partners                                                                |       | —         |           | 9,975,966      |       |
| Limited partners                                                                |       | 10,235,797     |           | 2,022,276      |       |
| Managing general partner                                                        |       | 767,385        |           | 801,418        |       |
| **Partnership equity**                                                          | ** ** | **11,003,182** | ** **     | **12,799,660** | ** ** |
| ** **                                                                      | ** ** | ** **     | ** **     | ** **     | ** ** |
| **Total liabilities and partnership equity**                                    | ** ** | **$**          | **11,539,478** | ** **     | **$**      | **13,913,337** | ** ** |

 

*Seeaccompanying notes to financial statements.*

 

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

**Statements of Operations**

 
| ** **                                          | ** ** | **Year ended  December 31,  2008** | ** **    | **Year ended  December 31,  2007** | ** ** | **Year ended  December 31,  2006** | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------|---------------|-----------------------------------------|------------|-----------------------------------------|------------|
|                                                |       |                                    |          |                                    |       |                                    |       |
| **Revenues**                                        | ** ** | **$**                                   | **9,444,159** | ** **                              | **$**      | **4,211,670**                           | ** ** | **$** | **552,572** | ** ** |
|                                                |       |                                    |          |                                    |       |                                    |       |
| **Costs and expenses:**                             | ** ** | ** **                              | ** **    | ** **                              | ** ** | ** **                              | ** ** |
| Lease operating expenses                            |       | 818,037                                 |          | 416,484                                 |       | 55,637                                  |       |
| Production taxes                                    |       | 626,203                                 |          | 275,214                                 |       | 39,423                                  |       |
| Depreciation, depletion and amortization            |       | 2,320,505                               |          | 2,468,104                               |       | 552,848                                 |       |
| Property impairment                                 |       | 172,930                                 |          | 9,466,246                               |       | 8,145,740                               |       |
| Accretion of asset retirement obligation            |       | 60,786                                  |          | 34,416                                  |       | 2,568                                   |       |
| General and administrative                          |       | 1,012,874                               |          | 227,249                                 |       | 81,313                                  |       |
| **Total costs and expenses**                        | ** ** | **5,011,335**                           | ** **    | **12,887,713**                          | ** ** | **8,877,529**                           | ** ** |
|                                                |       |                                    |          |                                    |       |                                    |       |
| **Income (loss) from operations**                   | ** ** | **4,432,824**                           | ** **    | **(8,676,043**                          | **)**      | **(8,324,957**                          | **)**      |
| ** **                                          | ** ** | ** **                              | ** **    | ** **                              | ** ** | ** **                              | ** ** |
| **Other income:**                                   | ** ** | ** **                              | ** **    | ** **                              | ** ** | ** **                              | ** ** |
| Interest income                                     |       | 15,179                                  |          | 387,479                                 |       | 836,045                                 |       |
| ** **                                          | ** ** | ** **                              | ** **    | ** **                              | ** ** | ** **                              | ** ** |
| **Net income (loss)**                               | ** ** | **$**                                   | **4,448,003** | ** **                              | **$**      | **(8,288,564**                          | **)**      | **$** | **(7,488,912** | **)** |
|                                                |       |                                    |          |                                    |       |                                    |       |
| Net income (loss) per general partner unit          | ** ** | **$**                                   | **1,575.32**  | ** **                              | **$**      | **(5,679.19**                           | **)**      | **$** | **(4,998.47** | **)** |
| Net income (loss) per limited partner unit          | ** ** | **$**                                   | **2,463.46**  | ** **                              | **$**      | **(5,679.19**                           | **)**      | **$** | **(4,998.47** | **)** |
| Net income (loss) per managing general partner unit | ** ** | **$**                                   | **12,215.24** | ** **                              | **$**      | **(2,077.31**                           | **)**      | **$** | **(4,400.24** | **)** |

 

*Seeaccompanying notes to financial statements.*

 

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

**Statements of Partnership Equity**

 
| ** **                                                               | ** ** | **General partners** | ** ** | **Limited partners** | ** ** | **Managing general partner** | ** ** | **Total**  | ** ** |
|--------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|------------------------------|------------|------------|------------|
| ** **                                                               | ** ** | **Units**            | ** ** | **Amount**           | ** ** | **Units**                    | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** |
| Balance at December 31, 2005                                        |       | 1,190.561            |       | $                    | 25,402,198 |                         | 241.336    |       | $          | 5,149,298 |   | 75.363 |   | $ | 1,624,585 |   | 1,507.260 |   | $ | 32,176,081 |   |
| Partner contributions                                                    |       | —               |       | —               |       | —                       |       | —     |       | — |   | 150,472 |   | — |   | 150,472 |   |
| Partner distributions                                                    |       | —               |       | (649,304             | )          | —                       |       | (131,619   | )          | — |   | (142,700 | ) | — |   | (923,623 | ) |
| Net loss                                                                 |       | —               |       | (5,950,984           | )          | —                       |       | (1,206,313 | )          | — |   | (331,615 | ) | — |   | (7,488,912 | ) |
| Balance at December 31, 2006                                        |       | 1,190.561            |       | 18,801,910           |       | 241.336                      |       | 3,811,366  |       | 75.363 |   | 1,300,742 |   | 1,507.260 |   | 23,914,018 |   |
|                                                                     |       |                 |       |                 |       |                         |       |       |       |   |   |   |   |   |   |   |   |
| Distribution amount per partnership unit                                 |       |                 |       | $                    | 545.38     |                         |       |       | $          | 545.38 |   |   |   | $ | 1,893.50 |   |   |   |   |   |
|                                                                     |       |                 |       |                 |       |                         |       |       |       |   |   |   |   |   |   |   |   |
| Balance at December 31, 2006                                        |       | 1,190.561            |       | 18,801,910           |       | 241.336                      |       | 3,811,366  |       | 75.363 |   | 1,300,742 |   | 1,507.260 |   | 23,914,018 |   |
| Partner contributions                                                    |       | —               |       | —               |       | —                       |       | —     |       | — |   | 110,956 |   | — |   | 110,956 |   |
| Partner distributions                                                    |       | —               |       | (2,064,526           | )          | —                       |       | (418,496   | )          | — |   | (453,728 | ) | — |   | (2,936,750 | ) |
| Net loss                                                                 |       | —               |       | (6,761,418           | )          | —                       |       | (1,370,594 | )          | — |   | (156,552 | ) | — |   | (8,288,564 | ) |
| Balance at December 31, 2007                                        |       | 1,190.561            |       | 9,975,966            |       | 241.336                      |       | 2,022,276  |       | 75.363 |   | 801,418 |   | 1,507.260 |   | 12,799,660 |   |
|                                                                     |       |                 |       |                 |       |                         |       |       |       |   |   |   |   |   |   |   |   |
| Distribution amount per partnership unit                                 |       |                 |       | $                    | 1,734.08   |                         |       |       | $          | 1,734.08 |   |   |   | $ | 6,020.57 |   |   |   |   |   |
|                                                                     |       |                 |       |                 |       |                         |       |       |       |   |   |   |   |   |   |   |   |
| Balance at December 31, 2007                                        |       | 1,190.561            |       | 9,975,966            |       | 241.336                      |       | 2,022,276  |       | 75.363 |   | 801,418 |   | 1,507.260 |   | 12,799,660 |   |
| Partner contributions                                                    |       | —               |       | —               |       | —                       |       | —     |       | — |   | 12,019 |   | — |   | 12,019 |   |
| Partner distributions                                                    |       | —               |       | (2,047,479           | )          | —                       |       | (3,242,392 | )          | — |   | (966,629 | ) | — |   | (6,256,500 | ) |
| Net income                                                               |       | —               |       | 1,875,514            |       | —                       |       | 1,651,912  |       | — |   | 920,577 |   | — |   | 4,448,003 |   |
| Conversion of general partner units into limited partner units (Note  1) |       | (1,190.561           | )          | (9,804,001           | )          | 1,190.561                    |       | 9,804,001  |       | — |   | — |   | — |   | — |   |
| Balance at December 31, 2008                                        |       | —               |       | $                    | —     |                         | 1,431.897  |       | $          | 10,235,797 |   | 75.363 |   | $ | 767,385 |   | 1,507.260 |   | $ | 11,003,182 |   |
|                                                                     |       |                 |       |                 |       |                         |       |       |       |   |   |   |   |   |   |   |   |
| Distribution amount per partnership unit                                 |       |                 |       | $                    | 1,719.76   |                         |       |       | $          | 3,694.31 |   |   |   | $ | 12,826.31 |   |   |   |   |   |

* *

*Seeaccompanying notes to financial statements.*

 

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

**Statements of Cash Flows**

 
| ** **                                                                                | ** ** | **2008**       | ** **    | **2007**        | ** ** | **2006**        | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------|---------------|-----------------|------------|-----------------|------------|
| **Operating Activities**                                                                  | ** ** | ** **     | ** **    | ** **      | ** ** | ** **      | ** ** |
| Net income (loss)                                                                         |       | $              | 4,448,003     |            | $          | (8,288,564      | )          | $ | (7,488,912 | ) |
| Adjustments for non-cash transactions:                                                    |       |           |          |            |       |            |       |
| Depreciation, depletion and amortization                                                  |       | 2,320,505      |          | 2,468,104       |       | 552,848         |       |
| Property impairment                                                                       |       | 172,930        |          | 9,466,246       |       | 8,145,740       |       |
| Accretion of asset retirement obligation                                                  |       | 60,786         |          | 34,416          |       | 2,568           |       |
| Adjustments to reconcile net income (loss) to net cash provided by  operating activities: |       |           |          |            |       |            |       |
| Changes in operating assets and liabilities:                                              |       |           |          |            |       |            |       |
| Accounts receivable                                                                       |       | (2,680         | )             | —          |       | —          |       |
| Accounts receivable from affiliates                                                       |       | (144,486       | )             | 46,842          |       | 327,206         |       |
| Accounts payable                                                                          |       | 3,180          |          | 33              |       | (5,457          | )          |
| Accounts payable to affiliates                                                            |       | —         |          | —          |       | (27,567         | )          |
| **Net cash provided by operating activities**                                             | ** ** | **6,858,238**  | ** **    | **3,727,077**   | ** ** | **1,506,426**   | ** ** |
|                                                                                      |       |           |          |            |       |            |       |
| **Investing Activities**                                                                  | ** ** | ** **     | ** **    | ** **      | ** ** | ** **      | ** ** |
| Property acquisition and development                                                      |       | (1,262,454     | )             | (14,166,731     | )          | (10,704,780     | )          |
| Plugging and abandonment costs paid from ARO                                              |       | (7,008         | )             | —          |       | —          |       |
| **Net cash used in investing activities**                                                 | ** ** | **(1,269,462** | **)**         | **(14,166,731** | **)**      | **(10,704,780** | **)**      |
|                                                                                      |       |           |          |            |       |            |       |
| **Financing Activities**                                                                  | ** ** | ** **     | ** **    | ** **      | ** ** | ** **      | ** ** |
| Partner capital contributions                                                             |       | 27,117         |          | 160,524         |       | 113,853         |       |
| Offering costs                                                                            |       | (600,000       | )             | (60,000         | )          | (189,481        | )          |
| Partner distributions                                                                     |       | (6,256,500     | )             | (2,936,750      | )          | (923,623        | )          |
| **Net cash used in financing activities**                                                 | ** ** | **(6,829,383** | **)**         | **(2,836,226**  | **)**      | **(999,251**    | **)**      |
|                                                                                      |       |           |          |            |       |            |       |
| **Net decrease in cash and cash equivalents**                                             | ** ** | **(1,240,607** | **)**         | **(13,275,880** | **)**      | **(10,197,605** | **)**      |
| Cash and cash equivalents at beginning of period                                          |       | 2,366,065      |          | 15,641,945      |       | 25,839,550      |       |
| **Cash and cash equivalents at end of period**                                            | ** ** | **$**          | **1,125,458** | ** **      | **$**      | **2,366,065**   | ** ** | **$** | **15,641,945** | ** ** |
|                                                                                      |       |           |          |            |       |            |       |
| **Non-cash investing transactions**                                                       | ** ** |           |          |            |       |            | ** ** |
| Property additions included in accounts payable to affiliates                             | ** ** | $              | —        |            | $          | 61,692          |       | $ | 3,136,602 |   |
| Property additions and asset retirement obligation                                        | ** ** | $              | 35,166        |            | $          | 66,966          |       | $ | 199,253 |   |
| Adjustment to asset retirement obligation                                                 | ** ** | $              | 7,813         |            | $          | —          |       | $ | — |   |
| **Non-cash financing transactions:**                                                      | ** ** |           |          |            |       |            | ** ** |
| Managing partner contributions included in accounts receivable from  affiliates           | ** ** | $              | —        |            | $          | 15,098          |       | $ | 64,666 |   |
| Offering costs included in accounts payable to affiliates                                 | ** ** | $              | 144,789       |            | $          | 600,000         |       | $ | — |   |
| Offering costs included in non-current accounts payable to affiliates                     | ** ** | $              | —        |            | $          | 144,789         |       | $ | 804,789 |   |

 

*See accompanying notes to financial statements.*

 

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Table of Contents

 

Reef Global Energy VI, L.P.

Notesto Financial Statements

December 31, 2008

 

**1. Organization and Basis of Presentation**

 

ReefGlobal Energy VI, L.P. (the “Partnership”) is the first in a series of fourNevada limited partnerships comprising a program called Reef Global EnergyVentures II (the “Program”), pursuant to an S-1 Registration Statement declaredeffective 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 of40 partnership units at $25,000 per unit, including units purchased by themanaging general partner. Each partnership formed as a part of the programoffered a minimum of 1,000 and a maximum of 2,000 units for sale. The Programwas authorized to sell up to 1,600 limited partner units and 6,400 generalpartner units during the period beginning July 8, 2005 through July 7,2007. The Partnership offered 2,000 units for sale ($50,000,000); consisting ofup to 400 limited partner units and up to 1,600 general partner units. Investorfunds were held in escrow and were subject to reimbursement with interest ifthe minimum number of units was not sold. The Program filed a prospectussupplement with the SEC on July 8, 2005 describing the Partnership, andcommenced offering units in the Partnership. Upon reaching the minimumsubscription level, the Partnership was formed on July 18, 2005. ThePartnership offering closed October 31, 2005, with sales to outsideinvestors totaling 1,190.561 general partner units and 241.336 limited partnerunits, and sales to the managing general partner totaling 75.363 generalpartner units.

 

ThePartnership is a Nevada limited partnership formed under the Nevada UniformLimited Partnership Act. Reef Oil & Gas Partners, L.P. (“Reef”) servesas the Partnership’s managing general partner. Partnership interests are heldby the managing general partner and investor partners who are general andlimited partners (“investor partners”). The managing general partner received a10% interest in the Partnership as compensation for forming the Partnership,and also holds a 1% interest in the Partnership as a result of paying 1% of allleasehold, drilling and completion costs. This 11% interest is not representedby Partnership units. In addition, Reef purchased 5% of the Partnership unitsand, therefore, holds 5% of the 89% interest in the Partnership (4.45%) held bythe unit holders. The Partnership purchased working interests in exploratoryand developmental drilling prospects and drilled oil and gas wells located primarilyonshore in the continental United States and in U.S. coastal waters in the Gulfof Mexico. Other partnerships formed as a part of this Program, as well asother partnerships managed by Reef, also own interests in some of the prospectspurchased by this Partnership. In instances where Reef-affiliated entities owna majority working interest in a prospect, wells drilled on that prospect maybe operated by OREI, Inc. (“OREI”) or Reef Exploration, L.P. (“RELP”),affiliates of the managing general partner.

 

Pursuantto the Partnership Agreement of the Partnership, all general partner units heldby investors other than the managing general partner were converted intolimited partner units. This conversion of general partner units into limitedpartner units occurred during the 3rd quarter of2008. The general partner equity at June 30, 2008 was transferred tolimited partner equity, and all income and expense items subsequent to thesecond quarter of 2008 have been allocated between the managing general partnerand the limited partners.

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

Underthe terms of the partnership agreement, certain income and expense items areallocated differently between the managing general partner and the investorpartners.  Allocations of income andexpense to the managing general partner and investor partners are madequarterly based upon the number and type of partnership units held at the endof the quarter.

 

Organizationand offering costs are allocated 100% to investor partners, as the managinggeneral partner purchases its units net of the 15% fee for organization andoffering costs. Monthly cash distributions to partners are based upon thenumber and type of partnership units held at the close of the prior month. Cashdistributions to partners of the net cash flow from interest income and crudeoil and natural gas sales revenues, less operating, general and administrative,and other costs are distributed 15.45% to the managing general partner (basedupon the 11% interest not represented by units and the 4.45% interestrepresented by Partnership units) and 84.55% to investor partners.

 

**2. Summary of Accounting Policies**

 

**Use of Estimates**

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the amounts reported in the financialstatements and accompanying notes. Actual results could differ from theseestimates.

 

**Cash and Cash Equivalents**

 

ThePartnership considers all highly liquid investments with maturity dates of nomore than three months from the purchase date to be cash equivalents. Cash andcash equivalents consist of demand deposits and money market investmentsinvested with a major national bank, which at times may exceed federallyinsured limits. The Partnership has not experienced any losses in suchaccounts, and does not expect any loss from this exposure. The carrying valueof the Partnership’s cash equivalents approximates fair value.

 

**Risks and Uncertainties**

 

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

 

ThePartnership has not engaged in commodity futures trading or hedging activitiesand has not entered into derivative financial instrument transactions fortrading or other speculative purposes. Accordingly, the Partnership is at riskfor the volatility in commodity prices inherent in the oil and gas industry,and the level of commodity prices has a significant impact on the Partnership’sresults of operations.

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

# **Oil and GasProperties**

# ** **

ThePartnership follows the full cost method of accounting for oil and gas properties.Under this method, all direct costs and certain indirect costs associated withacquisition of properties and successful as well as unsuccessful explorationand development activities are capitalized. Depreciation, depletion, andamortization of capitalized oil and gas properties and estimated futuredevelopment costs, excluding unproved properties, are based on theunit-of-production method using estimated proved reserves.  For these purposes, proved natural gas reservesare converted to equivalent barrels of crude oil at a rate of 6 Mcf to 1 Bbl.Net capitalized costs of oil and gas properties, as adjusted for assetretirement obligations, are limited to the lower of unamortized cost or thecost ceiling, defined as the sum of the present value of estimated future netrevenues from proved reserves based on prices in effect at the end of theperiod held constant and discounted at 10 percent, plus the lower of cost orestimated fair value of  unprovedproperties, if any. Pursuant to full cost accounting rules, the Partnershipperforms a ceiling test quarterly as of the balance sheet date on its provedoil and gas properties. Excess capitalized costs are charged to propertyimpairment expense. No gain or loss is recognized upon sale or disposition ofoil and gas properties, unless such a sale would significantly alter the rateof depletion and amortization. During the years ended December 31, 2008,2007 and 2006, the Partnership recognized property impairment expense of provedproperties totaling $0, $9,466,246 and $8,145,740 respectively.

 

Unprovedproperties consist of undeveloped leasehold interest. Investments in unprovedproperties are not depleted pending determination of the existence of provedreserves. Unproved properties are assessed for impairment quarterly as of thebalance sheet date by considering the primary lease term, the holding period ofthe properties, geologic data obtained relating to the properties, and otherdrilling activity in the immediate area of the properties. Any impairment resultingfrom this quarterly assessment is reported as property impairment expense inthe current period, as appropriate. During the year ended December 31,2008, the Partnership recognized property impairment expense of unprovedproperties totaling $172,930.

 

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

# ** **

ThePartnership is subject to extensive Federal, state and local environmental lawsand regulations. These laws regulate the discharge of materials into theenvironment and may require the Partnership to remove or mitigate theenvironmental effects of the disposal or release of petroleum substances atvarious sites. Environmental expenditures are expensed or capitalized dependingon their future economic benefit. Expenditures that relate to an existing conditioncaused by past operations and that have no future economic benefit areexpensed.

 

Liabilitiesfor expenditures of a non-capital nature are recorded when environmentalassessments and/or remediation is probable, and the costs can be reasonablyestimated. Such liabilities are 

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

generallyundiscounted values unless the timing of cash payments for the liability orcomponent is fixed or reliably determinable.

 

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

 

Thefollowing table summarizes the Partnership’s asset retirement obligation forthe years ended December 31, 2008 and 2007.

 
| ** **                                                 | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------------------------------|------------|----------|------------|----------|------------|
| Beginning asset retirement obligation                      |       | $        | 305,215    |     | $          | 203,803 |   |
| Additions related to new properties                        |       | 35,166   |       | 66,996   |       |
| Accretion expense                                          |       | 60,786   |       | 34,416   |       |
| Retirement related to property abandonment and restoration |       | (14,821  | )          | —   |       |
| Ending asset retirement obligation                         |       | $        | 386,346    |     | $          | 305,215 |   |

 

**Recognition of Revenue**

 

The Partnership enters intosales contracts for disposition of its share of crude oil and natural gasproduction from productive wells. Revenues are recognized based upon thePartnership’s share of metered volumes delivered to its purchasers each month.The Partnership had no material gas imbalances at December 31, 2008, 2007,and 2006.

 

**Income Taxes**

 

ThePartnership’s net income or loss flows directly through to its partners, whoare responsible for the payment of Federal taxes on their respective share ofany income or loss. Therefore, there is no provision for federal income taxesin the accompanying financial statements.

 

Asof December 31, 2008, the financial reporting basis of the Partnership’sassets exceeds the tax basis of the assets by approximately $1.32 million,primarily due to the difference between property impairment costs deducted forfinancial reporting purposes and intangible drilling costs deducted for incometax purposes.

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

**Fair Value Measurements**

 

In September 2006, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 157, whichdefines fair value, establishes a framework for measuring fair value, andexpands disclosures about fair value measurements. Effective January 1,2008, the Partnership adopted SFAS No. 157, which applies to otheraccounting pronouncements that require or permit fair value measurements;however, it does not require any new fair value measurements.

 

SFAS No. 157establishes a hierarchy for disclosure of the inputs to valuation used tomeasure fair value. The hierarchy prioritizes the inputs into three broadlevels. Level 1 inputs are quoted prices (unadjusted) in active markets foridentical assets or liabilities. All of the Partnership’s cash equivalents fallinto Level 1 and consist of short-term, highly liquid investments, which havematurities of 90 days or less, including money market funds. The Partnershipdoes not have any assets or liabilities falling under Level 2 or 3.

 

**New AccountingPronouncements**

 

**Modernization of Oil and GasReporting**

 

In January 2009, theSEC issued revisions to the oil and gas reporting disclosures, “Modernizationof Oil and Gas Reporting; Final Rule” (“the Final Rule”). In addition tochanging the definition and disclosure requirements for oil and gas reserves,the Final Rule changes the requirements for determining quantities of oiland gas reserves. The Final Rule also changes certain accountingrequirements under the full cost method of accounting for oil and gasactivities. The amendments are designed to modernize the requirements for thedetermination of oil and gas reserves, aligning them with current practices andupdating them for changes in technology. The Final Rule is effective forannual reports on Form 10-K for fiscal years ending on or after December 31,2009. The Partnership has not yet determined the impact, if any, on thefinancial statements.

 

**The Hierarchy of GenerallyAccepted Accounting Principles**

 

In May 2008, the FASBissued SFAS No. 162, “The Hierarchy of Generally Accepted AccountingPrinciples” (“SFAS 162”). SFAS 162 identifies the sources for accountingprinciples and the framework for selecting the principles to be used inpreparing financial statements of nongovernmental entities that are presentedin conformity with generally accepted accounting principles in the United States.This Statement became effective in November 2008.

 

**Disclosures About DerivativeInstruments and Hedging Activities**

 

In March 2008, the FASBissued SFAS No. 161, “Disclosures about Derivative Instruments and HedgingActivities” (“SFAS 161”). SFAS 161 requires entities that utilize derivativeinstruments to provide qualitative disclosures about their objectives andstrategies for using such instruments, as well as any details ofcredit-risk-related contingent features contained within derivatives. The 

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

Partnership does not utilizederivative instruments; therefore, the Partnership does not expect thispronouncement to have any impact on the Partnership’s results of operations,cash flows or financial position.

 

**Non-controlling Interests inConsolidated Financial Statements**

 

In December 2007, theFASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements, an amendment of Accounting Research Bulletin No. 51”(“SFAS 160”), which improves the relevance, comparability and transparency ofthe financial information that a reporting entity provides in its consolidatedfinancial statements by establishing accounting and reporting standards for thenoncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary. The Partnership does not own any subsidiaries, and does not expectthis pronouncement to have any impact on the Partnership’s results ofoperations, cash flows or financial position.

 

**Business Combinations**

 

In December 2007, theFASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS141R”), which replaces SFAS No. 141, “Business Combinations” (“SFAS 141”).SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisitionmethod of accounting (which SFAS 141 called the purchase method) be used forall business combinations. The Partnership has no business combinations inprogress or, at this time, in future plans. The Partnership does not expectthis pronouncement to have any impact on the Partnership’s results ofoperations, cash flows or financial position.

 

**Accounting Standard Fair Valuefor Financial Assets and Financial Liabilities**

 

In February 2007, theFASB issued SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities” (“SFAS 159”). SFAS 159 allows entities the option tomeasure eligible financial instruments at fair value as of specified dates. ThePartnership did not elect fair value as an alternative as provided under SFAS159 for any of its financial assets and liabilities that are not currentlymeasured at fair value.

 

**3. Transactions with Affiliates**

 

ThePartnership has no employees. RELP employs a staff including geologists,petroleum engineers, landmen and accounting personnel who administer all of thePartnership’s operations. Prior to January 2, 2006, OREI employed this staffof employees. On January 2, 2006, the employees of OREI were transferred toRELP. In addition, during 2006 RELP assumed from OREI well operator status forall wells previously operated by OREI. The Partnership reimburses RELP and OREIfor technical and administrative services at cost. During the years ended December 31,2008, 2007, and 2006 the Partnership incurred technical services andadministrative costs totaling $983,051, $895,178, and $586,936, respectively.Of these amounts $126,680, $754,097, and $571,112 represent technical servicescosts capitalized as project costs, 

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

and$856,371, 141,081, and $15,824 represent administrative costs included asgeneral and administrative expenses.

 

Reefcontributes 1% of all leasehold, drilling, and completion costs when incurred.During the year ended December 31, 2008, this 1% obligation totaled$12,019. Reef also purchased 5% of the Partnership units and pays 5% of the 99%of these costs paid by the unit holders (4.95%). In connection with the 1%obligation, Reef owed the Partnership $15,098 at December 31, 2007.

 

RELPprocesses joint interest billings and revenue payments on behalf of thePartnership. At December 31, 2008, RELP owed the Partnership $144,486 fornet revenues processed in excess of joint interest and technical andadministrative charges. At December 31, 2007, the Partnership owed RELP$61,692 for joint interest and technical and administrative charges processedin excess of net revenues. The Partnership settles its balances with Reef andRELP on a quarterly basis.

 

Accountspayable to affiliates as of December 31, 2008 and 2007 also includes$144,789 and $744,789, respectively, for the unpaid portion of the 15%management fee due Reef for organization and offering costs, including salescommissions. The management fee is payable in two parts. Reef initiallyreceived an amount not to exceed 13.5% to recover actual commissions andorganization and offering costs. The balances payable at December 31, 2008and 2007 represent the unpaid portion of the management fee in excess of actualcommissions and organization and offering costs, and is paid to Reef from theoil and gas cash flows available for partner distributions, at a rate not toexceed $1 million per year. During 2007, the Partnership reimbursed $600,000 ofthis amount to Reef. The Partnership is reimbursing this amount to Reef at arate of $50,000 per month, and completed payment of the December 31, 2008balance due during March 2009. As such, the $144,789 balance due at December 31,2008 has been classified as a current liability to affiliates at December 31,2008.

 

Ifan affiliate of Reef serves as operator of a Partnership prospect, thenoperator fees will be payable to the affiliate. Under such circumstances, suchaffiliate will receive fees at the competitive rate in the geographical areawhere the prospect is located during the drilling and production phase ofoperations. These fees are charged as a monthly fee per well as agreed to in anoperating agreement signed by the Partnership as well as outside third partyworking interest owners in the well. During the years ended December 31,2007 and 2006, the Partnership paid drilling overhead fees totaling $2,149 and$8,791 to RELP. During the years ended December 31, 2008 and 2007, thePartnership paid operating overhead fees totaling $14,105 and $1,513 to RELP.

 

**4. Major Customers**

 

The Partnership sells crudeoil and natural gas on credit terms to refiners, pipelines, marketers, andother users of petroleum commodities. Revenues are received directly from theseparties or, in certain circumstances, paid to the operator of the property whodisburses to the Partnership its percentage share of the revenues. During theyear ended December 31, 2008, one marketer and 

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

two operators accounted for57.2%, 17.4%, and 11.4% of the Partnership’s crude oil and natural gasrevenues, respectively. During the year ended December 31, 2007, onemarketer and two operators accounted for 53.9%, 23.0%, and 10.4% of thePartnership’s crude oil and natural gas revenues, respectively. During the yearended December 31, 2006, five operators accounted for 31.9%, 14.9%, 14.2%,11.5%, and 11.2% of the Partnership’s crude oil and natural gas revenues. Dueto the competitive nature of the market for purchase of crude oil and naturalgas, the Partnership does not believe that the loss of any particular purchaserwould have a material adverse impact on the Partnership.

 

**5. Commitments and Contingencies**

 

ThePartnership is not currently involved in any legal proceedings.

 

**6.  Partnership Equity**

 

Salesof Partnership units began on July 8, 2005. Proceeds received were placedinto an interest bearing escrow account until the Partnership reached theminimum subscription level of 40 units. The Partnership was formed on July 18,2005, and the sale of Partnership units was closed on October 31, 2005.The Partnership raised $35,797,434 from the sale of 1,431.897 Partnership unitsto investor partners. Reef purchased 75.363 units (5%) for $1,601,464. Reefalso contributes 1% of all leasehold, drilling, and completion costs whenincurred, in addition to paying its pro rata share (4.95%) of the leasehold,drilling, and completion costs paid by the Partnership. In connection with thisobligation, Reef has contributed $308,756 to the Partnership at December 31,2008.

 

Allunits, except those purchased by Reef, paid a 15% management fee to Reef to payfor Partnership organization and offering costs, including sales commissions.These costs totaled $5,369,615, leaving net capital contributions of$32,338,039 available for Partnership oil & gas activities. Of the$5,369,615 management fee, offering costs were $5,319,615 and organizationcosts were $50,000. The Partnership has drilled fifty wells at December 31,2008, and has completed drilling operations with the capital raised by thePartnership.

 

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

 

**7. Partnership Prospects**

 

As of December 31, 2008, the Partnership owns workinginterests in twenty developmental prospects and fourteen exploratory prospects,upon which a total of fifty wells have been drilled.

 

ThePartnership drilled fifteen successful developmental wells, and twentyunsuccessful developmental wells, including the eight Sand Dunes wellsdescribed below. The Partnership has drilled eight successful exploratory wellsand seven unsuccessful exploratory wells. Three of the 

 

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ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

successfuldevelopmental wells and three of the successful exploratory wells have ceasedproduction.

 

ThePartnership participated in the drilling of eight developmental wells on theSand Dunes prospect during the fourth quarter of 2007 and the first quarter of2008. Initial testing confirmed the presence of crude oil and natural gas inall eight wells, however, the field was temporarily shut-in because of the lackof electric service and because of the high cost of trucking offsite the saltwater volumes associated with the production of the crude oil and natural gasfrom the wells. Electrical service to the field was connected in September 2008.Based upon initial testing, larger bottom hole pumps were placed below the wellperforations in three of the wells and testing was resumed to determine thethree wells’ commercial productivity. Water continued to be trucked offsite,and RELP applied for and received a permit which would allow for the conversionof one of the eight wells into a water disposal well. RELP has also exploredthe possibility of drilling a ninth well as a salt water disposal well for thefield. Testing results on two of the three wells were positive, and salt waterproduction volumes declined as a result of pumping off the wells using thelarger bottom hole pumps. However, the price of crude oil declined at a rapidrate while testing was being conducted. In late December 2008 two of thethree testing wells were shut-in again. Crude oil prices continued declining toa level below $40 per barrel. In February 2009, following a mechanicalfailure in the third testing well, RELP, as operator, shut-in the field. Theeight wells cannot be commercially productive without efficient salt waterdisposal capabilities, and RELP does not believe any of the options regardingsalt water disposal are economically viable at current commodity prices. As aresult, as of December 31, 2008, the eight Sand Dunes wells have beenclassified as unsuccessful, and there are no crude oil and natural gas reservesfor these wells included in the December 31, 2008 reserve informationpresented in this Annual Report. However, RELP has made no plans to plug andabandon the wells at this time, and will continue to monitor and evaluate theeconomics of the field based upon commodity prices.

 

ThePartnership also has unproved property consisting of un-drilled leaseholdinterest (11 potential drilling locations) in the Sand Dunes prospect. ThePartnership has fully impaired this unproved property during the fourth quarterof 2008 based upon the eight already drilled wells being classified asunsuccessful at December 31, 2008. The Partnership currently has no plansto conduct any drilling operations on this acreage.

 

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

 

**Capitalized Costs**

 

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

 
| **December 31,**                                | ** ** | **2008**       | ** **     | **2007**       | ** ** | **2006**       | ** ** |
|------------------------------------------------------|------------|----------------|----------------|----------------|------------|----------------|------------|
| **Oil and gas properties:**                          |       |           |           |           |       |           | ** ** |
| Unproved properties                                  |       | $              | —         |           | $          | 172,930        |       | $ | 2,030,077 | ** ** |
| Proved properties                                    |       | 33,228,110     |           | 31,992,182     |       | 16,815,171     |       |
| ** **                                           | ** ** | **33,228,110** | ** **     | **32,165,112** | ** ** | **18,845,248** | ** ** |
| Less:                                                |       |           |           |           |       |           |       |
| Accumulated depreciation, depletion and amortization |       | (5,349,270     | )              | (3,020,952     | )          | (552,848       | )          |
| Property impairment                                  |       | (17,611,986    | )              | (17,611,986    | )          | (8,145,740     | )          |
| **Total**                                            | ** ** | **$**          | **10,266,854** | ** **     | **$**      | **11,532,174** | ** ** | **$** | **10,146,660** | ** ** |

 

F-14

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Table of Contents

 

ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

**CostsIncurred**

 

Thefollowing table sets forth costs incurred in oil and gas exploration anddevelopment activities during the years ended December 31, 2008, 2007, and2006:

 
| ** **                  | ** ** | **2008**   | ** **    | **2007**   | ** ** | **2006**       | ** ** |
|-----------------------------|------------|------------|---------------|------------|------------|----------------|------------|
| **Oil and gas properties:** | ** ** | ** ** | ** **    | ** ** | ** ** | ** **     | ** ** |
| Exploration                 |       | $          | 1,362,999     |       | $          | 1,980,078      |       | $ | 7,171,639 |   $ |
| Development                 |       | (127,071   | )             | 11,339,786 |       | 8,169,917      |       |
| **Total**                   | ** ** | **$**      | **1,235,928** | ** ** | **$**      | **13,319,864** | ** ** | **$** | **15,341,556** | ** ** |

 

**Resultsof Operations**

 

The following table sets forth results of operationsfrom oil and gas producing activities for the years ended December 31,2008, 2007, and 2006:

 
| ** **                                | ** ** | **2008**   | ** **    | **2007**   | ** ** | **2006**       | ** ** |
|-------------------------------------------|------------|------------|---------------|------------|------------|----------------|------------|
| **Oil and gas producing activities:**     | ** ** | ** ** | ** **    | ** ** | ** ** | ** **     | ** ** |
| Crude oil sales                           |       | $          | 3,273,008     |       | $          | 1,484,188      |       | $ | 138,576 |   |
| Natural gas sales                         |       | 6,171,151  |          | 2,727,482  |       | 413,996        |       |
| Production expenses                       |       | (1,444,240 | )             | (691,698   | )          | (95,060        | )          |
| Accretion of asset retirement obligation  |       | (60,786    | )             | (34,416    | )          | (2,568         | )          |
| Depreciation , depletion and amortization |       | (2,320,505 | )             | (2,468,104 | )          | (552,848       | )          |
| Property impairment expense               |       | —     |          | (9,466,246 | )          | (8,145,740     | )          |
| **Results of producing activities**       | ** ** | **$**      | **5,618,628** | ** ** | **$**      | **(8,448,794** | **)**      | **$** | **(8,243,644** | **)** |
|                                      |       |       |          |       |       |           |       |
| Depletion rate per BOE                    |       | $          | 16.23         |       | $          | 29.98          |       | $ | 39.80 |   |

----

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

 

F-15

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Table of Contents

 

ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

**Crude Oil and Natural Gas Reserves**

 

Thefollowing information describes changes during the year and balances of provedcrude oil and natural gas reserves as of December 31, 2008, 2007, and2006. The definitions used are in accordance with applicable SEC regulations.

 

Provedcrude oil and natural gas reserves are the estimated quantities of crude oil,natural gas and natural gas liquids which geological and engineering data demonstratewith reasonable certainty to be recoverable in future years from knownreservoirs under existing economic and operating conditions, that is, pricesand costs as of the date the estimate is made.

 

Pricesinclude consideration of changes in existing prices provided by contractualarrangements, but not escalations based upon future conditions. Additionaldevelopment costs required to recover these proved reserves are estimated atapproximately $0, $362,920, and $108,059 as of December 31, 2008, 2007, and2006, respectively. All of the Partnership’s reserves are located in the UnitedStates.

 
| ** **                                                   | ** ** | **Oil  (BBL) (1)** | ** ** | **Gas  (mcf)** | ** ** | **BOE (2)** | ** ** |
|--------------------------------------------------------------|------------|--------------------|------------|----------------|------------|-------------|------------|
| Net proved reserves for properties owned by the Partnership: |       |               |       |           |       |        |       |
| Reserves at December 31, 2005                           |       | 1,046              |       | 29,002         |       | 5,880       |       |
| Revisions of previous estimates                              |       | (341               | )          | (20,676        | )          | (3,787      | )          |
| New discoveries                                              |       | 70,922             |       | 1,657,851      |       | 347,230     |       |
| Production                                                   |       | (2,374             | )          | (69,088        | )          | (13,889     | )          |
| Reserves at December 31, 2006                           | ** ** | **69,253**         | ** ** | **1,597,089**  | ** ** | **335,434** | ** ** |
|                                                         |       |               |       |           |       |        |       |
| Revisions of previous estimates                              |       | (38,383            | )          | (609,595       | )          | (139,982    | )          |
| New discoveries                                              |       | 176,125            |       | 2,787,617      |       | 640,728     |       |
| Production                                                   |       | (20,002            | )          | (373,949       | )          | (82,327     | )          |
| Reserves at December 31, 2007                           | ** ** | **186,993**        | ** ** | **3,401,162**  | ** ** | **753,853** | ** ** |
|                                                         |       |               |       |           |       |        |       |
| Revisions of previous estimates                              |       | (53,994            | )          | (538,377       | )          | (143,723    | )          |
| New discoveries                                              |       | 67                 |       | 28,543         |       | 4,824       |       |
| Production                                                   |       | (33,086            | )          | (659,300       | )          | (142,969    | )          |
| Reserves at December 31, 2008                           | ** ** | **99,980**         | ** ** | **2,232,028**  | ** ** | **471,985** | ** ** |

----

**(1)****        **Oil includes both crude oiland gas liquids

 

**(2)****        **BOE (barrels of oilequivalent) is calculated by converting 6 MCF of natural gas to 1 BBL ofcrude oil. A BBL (barrel) of crude 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**

 

As required by the FinancialAccounting Standards Board, the standardized measure of discounted future netcash flows is computed by applying year-end prices, costs and legislated taxrates and a discount factor of 10 percent to net proved reserves.

 

F-16

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Table of Contents

 

ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

Changes in the demand forcrude oil and natural gas, inflation, and other factors make such estimatesinherently imprecise and subject to substantial revision. This table should notbe construed to be an estimate of the current market value of the Partnership’sproved reserves.

 
| **December 31,**                            | ** ** | **2008**       | ** **     | **2007**       | ** ** | **2006**       | ** ** |
|--------------------------------------------------|------------|----------------|----------------|----------------|------------|----------------|------------|
| Oil and gas properties owned by the Partnership: |       |           |           |           |       |           |       |
| Future cash inflows                              |       | $              | 17,876,444     |           | $          | 40,242,582     |       | $ | 12,047,691 |   |
| Future production costs                          |       | (4,552,354     | )              | (8,306,872     | )          | (2,245,260     | )          |
| Future development costs                         |       | —         |           | (362,920       | )          | (108,059       | )          |
| Future net cash flows                            | ** ** | **13,324,090** | ** **     | **31,572,790** | ** ** | **9,694,372**  | ** ** |
| Effect of discounting net cash flows at 10%      |       | (2,672,141     | )              | (8,231,682     | )          | (1,577,789     | )          |
| Discounted future net cash flows                 | ** ** | **$**          | **10,651,949** | ** **     | **$**      | **23,341,108** | ** ** | **$** | **8,116,583** | ** ** |

 

**Changesin the Standardized Measure of Discounted Future Net Cash flows Relating toProved Crude Oil and Natural Gas Reserves**

 
| **December 31,**                              | ** ** | **2008**    | ** **     | **2007**   | ** ** | **2006**       | ** ** |
|----------------------------------------------------|------------|-------------|----------------|------------|------------|----------------|------------|
| Oil and gas properties owned by the Partnership:   |       |        |           |       |       |           |       |
| Standardized measure at beginning of period        |       | $           | 23,341,108     |       | $          | 8,116,583      |       | $ | 267,642 |   |
| Extensions and discoveries                         |       | 107,475     |           | 20,763,274 |       | 8,510,878      |       |
| Net change in sales price, net of production costs |       | (4,653,321  | )              | 2,380,708  |       | (113,037       | )          |
| Revisions of quantity estimates                    |       | (3,245,873  | )              | (3,752,984 | )          | (76,130        | )          |
| Net changes in estimated future development costs  |       | 29,491      |           | 5,914      |       | —         |       |
| Changes in production timing rates                 |       | 678,091     |           | (1,498,489 | )          | (44,590        | )          |
| Accretion of discount                              |       | 2,334,111   |           | 811,658    |       | 26,764         |       |
| Sales net of production costs                      |       | (7,939,133  | )              | (3,485,556 | )          | (454,944       | )          |
| Net increase                                       |       | (12,689,159 | )              | 15,224,525 |       | 7,848,941      |       |
| Standardized measure at end of year                | ** ** | **$**       | **10,651,949** | ** ** | **$**      | **23,341,108** | ** ** | **$** | **8,116,583** | ** ** |

 

**9. Supplementary Quarterly Financial Data (Unaudited)**

** **
| **Year ended December 31, 2007**               | ** ** | **1st Qtr** | ** ** | **2nd Qtr** | ** ** | **3rd Qtr** | ** ** | **4th Qtr** | ** ** | **Totals** | ** ** |
|-----------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|------------|------------|
| Total crude oil and natural gas sales               |       | $           | 509,731    |        | $          | 862,040     |       | $           | 1,151,705  |       | $          | 1,688,194 |   | $ | 4,211,670 |   |
| Income (loss) from operations                       |       | (6,669,195  | )          | (3,261,872  | )          | 353,342     |       | 901,682     |       | (8,676,043 | )          |
| Net income (loss)                                   |       | (6,511,990  | )          | (3,143,327  | )          | 427,035     |       | 939,718     |       | (8,288,564 | )          |
| Net income (loss) per managing general partner unit |       | (4,469.70   | )          | (1,634.30   | )          | 1,513.19    |       | 2,513.50    |       | (2,077.31  | )          |
| Net income (loss) per general partner unit          |       | (4,312.56   | )          | (2,109.20   | )          | 218.59      |       | 523.98      |       | (5,679.19  | )          |
| Net income (loss) per limited partner unit          |       | (4,312.56   | )          | (2,109.20   | )          | 218.59      |       | 523.98      |       | (5,679.19  | )          |
|                                                     |            |             |            |             |            |             |            |             |            |            |            |  |  |  |  |  |

 

F-17

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Table of Contents

 

ReefGlobal Energy VI, L.P.

Notesto Financial Statements (continued)

 

The first quarter loss from operations includesproperty impairment expense of $6,333,132. The second quarter loss fromoperations includes property impairment expense of $3,133,114.

** **
| **Year ended December 31, 2008**        | ** ** | **1st Qtr** | ** ** | **2nd Qtr** | ** ** | **3rd Qtr** | ** ** | **4th Qtr** | ** ** | **Totals** | ** ** |
|----------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|------------|------------|
| Total crude oil and natural gas sales        |       | $           | 1,920,280  |        | $          | 2,989,817   |       | $           | 2,738,367  |       | $          | 1,795,695 |   | $ | 9,444,159 |   |
| Income from operations                       |       | 964,084     |       | 1,806,376   |       | 1,658,663   |       | 3,701       |       | 4,432,824  |       |
| Net income                                   |       | 974,658     |       | 1,807,487   |       | 1,660,157   |       | 5,701       |       | 4,448,003  |       |
| Net income per managing general partner unit |       | 2,609.96    |       | 4,375.56    |       | 4,158.26    |       | 1,071.46    |       | 12,215.24  |       |
| Net income per general partner unit          |       | 543.31      |       | 1,032.01    |       | —      |       | —      |       | 1,575.32   |       |
| Net income (loss) per limited partner unit   |       | 543.31      |       | 1,032.01    |       | 940.55      |       | (52.41      | )          | 2,463.46   |       |
|                                              |            |             |            |             |            |             |            |             |            |            |            |  |  |  |  |  |

 

F-18

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Table of Contents

 

**EXHIBIT INDEX**

** **
| 3.1(a)(i)   |       | Certificate of Limited Partnership (incorporated by reference to  Exhibit 3.1 to Form 8-A, SEC File No. 000-52539, 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 VI, L.P., dated August 27, 2008 (incorporated by reference  to Exhibit 3.1(i)(a) to Form 8-K, SEC File No. 000-52539,  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 VI, L.P., dated August 28, 2008 (incorporated by reference  to Exhibit 3.1(i)(b) to Form 8-K, SEC File No. 000-52539,  as filed with the SEC on September 3, 2008). |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                  |
| 3.2         |       | Form of Limited Partnership Agreement (incorporated by  reference to Exhibit 3.1 to Form S-1, SEC file No.333-122935, as  filed with the SEC on June 24, 2005).                                                                                                         |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                  |
| 10.1        |       | Letter Agreement, dated November 7, 2001, by and between  Reef Partners LLC and Challenger Minerals Inc. (incorporated by reference to  Exhibit 10.2 of the Annual Report on Form 10-K of Reef Global  Energy Ventures as filed with the SEC on March 5, 2002).         |
|        |       |                                                                                                                                                                                                                                                                                        |
| 23.2*       |       | Consent of  Gleason Engineering.                                                                                                                                                                                                                                                            |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                  |
| 31.1*       |       | Certification of  Principal Executive Officer pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934.                                                                                                                                                              |
|        |       |                                                                                                                                                                                                                                                                                        |
| 31.2*       |       | Certification of  Principal Financial Officer pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934.                                                                                                                                                              |
|        |       |                                                                                                                                                                                                                                                                                        |
| 32.1*       |       | Certification of  Principal Executive Officer pursuant to 18 U.S.C. §1350.                                                                                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                        |
| 32.2*       |       | Certification of  Principal Financial Officer pursuant to 18 U.S.C. §1350.                                                                                                                                                                                                             |

----

* Attached herewith

 

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