UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549










Form 10-K












(Mark
One)





x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
The Fiscal Year Ended December 31, 2009




or




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 333-93399-04





REEF
GLOBAL ENERGY IV, L.P.


(Exact
name of registrant as specified in its charter)





Nevada
              20-1654113(State or other jurisdiction of
              (I.R.S. Employerincorporation or organization)
              Identification No.)





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




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


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





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act.      Yes o No x
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  o No x
  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes x  No o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer,” “accelerated filer" and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer o
                  Accelerated filer o
                  Non-accelerated filer  o
                  Smaller reportingcompany  x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act)           Yes o  No x


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




As of
March 31, 2010, the registrant had 25.028 units held by the managing general
partner, and 474.972 units of limited partner interest outstanding.




Documents
incorporated by reference:  None





REEF
GLOBAL ENERGY IV, L.P.


ANNUAL
REPORT ON FORM10-K FOR THE YEAR ENDED DECEMBER 31, 2009


TABLE OF
CONTENTS





Part
      IItem
      1.
                                                          
                                                          Business
                                                          3Item
      1A.
                                                          
                                                          Risk
      Factors
                                                          8Item
      1B.
                                                          
                                                          Unresolved
      Staff Comments
                                                          11Item
      2.
                                                          
                                                          Properties
                                                          11Item
      3.
                                                          
                                                          Legal
      Proceedings
                                                          13Item
      4.
                                                          
                                                          Reserved
                                                          13PART
      IIItem
      5.
                                                          
                                                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                                          13Item
      6.
                                                          
                                                          Selected
      Financial Data
                                                          14Item
      7.
                                                          
                                                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                          15Item
      7A.
                                                          
                                                          Quantitative
      and Qualitative Disclosure About Market Risk
                                                          19Item
      8.
                                                          
                                                          Financial
      Statements and Supplementary Data
                                                          20Item
      9.
                                                          
                                                          Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                          20Item
      9A(T).
                                                          
                                                          Controls
      and Procedures
                                                          20Item
      9B.
                                                          
                                                          Other
      Information
                                                          21PART
      IIIItem
      10.
                                                          
                                                          Directors,
      Executive Officers and Corporate Governance
                                                          21Item
      11.
                                                          
                                                          Executive
      Compensation
                                                          23Item
      12.
                                                          
                                                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                          23Item
      13.
                                                          
                                                          Certain
      Relationships and Related Transactions, and Director
      Independence
                                                          24Item
      14.
                                                          
                                                          Principal
      Accountant Fees and Services
                                                          24PART
      IVItem
      15.
                                                          
                                                          Exhibits
      and Financial Statement Schedules
                                                          24Signatures


2


PART
I




ITEM
      1.
            BUSINESS.




Introduction





Reef
Global Energy IV, L.P. (the Partnership) is the fourth in a series of five
Nevada limited partnerships comprising a program called Reef Global Energy
Ventures (the Program). The Partnership was formed in the state of Nevada on
November 10, 2004.  The Partnership purchased working interests in oil
and gas prospects and participated in the drilling of wells on those prospects.
The primary objectives of the Partnership are to generate revenue from the
production of crude oil and natural gas, distribute cash to the partners, and
provide tax benefits. Reef Oil & Gas Partners, L.P. (Reef) is the managing
general partner of the Partnership.





During
2004 and 2005, the Partnership acquired working interests in eight developmental
and five exploratory prospects located in Texas, Louisiana, and in U.S coastal
waters in the Gulf of Mexico.  The Partnership participated in the
drilling of 13 wells on these prospects during 2004 thru 2007. The Partnership
purchased a minority non-operated working interest in these
prospects.  Reef purchased additional interests in certain Partnership
prospects for some of the other partnerships it manages. The additional interest
purchased by Reef on nine of the Partnership prospects was large enough that
Reef Exploration L.P. (RELP), an affiliate of Reef formed in 2005, currently
serves as prospect operator.





During
2006, Reef agreed to pay 100% of the costs for a working interest in a
developmental well in Louisiana. This well was not successful. However, in
October 2007 the well was re-entered and successfully side-tracked. The well
began production operations in May 2008 and remains productive as of the date of
this report. Reef expended approximately $184,000 in costs related to the
drilling and completion of the original well and the successful sidetrack. The
Partnership expended no funds in connection with the drilling and completion of
the original well and the successful sidetrack.





In this
Annual Report on Form 10-K (Annual Report), we use the term “successful” to
refer to wells that are drilled, tested, and either capable of or actually
producing in commercial quantities. We use the term “unsuccessful” to refer to
wells that do not meet one or more of these criteria.





Acquisition
and Drilling of Undeveloped Prospects





The
Partnership purchased working interests in eight developmental and five
exploratory prospects. A "prospect" is generally defined as a contiguous oil and
gas leasehold estate, or lesser interest in a leasehold estate, upon which
drilling operations may be conducted. A prospect is 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 a proved
area of an oil or gas reservoir to the depth of a stratigraphic horizon known to
be productive. Generally an exploratory well is any well that is not a
development well, including wells drilled to find and produce oil or gas in an
unproven area, wells drilled to find a new reservoir in a field previously found
to be productive of oil or gas, or wells drilled to extend a known reservoir.
Thirteen wells were drilled on the prospects acquired by the
Partnership.





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





Consulting
Agreements for Prospect Acquisitions





Reef
entered into three agreements (the CMI Agreements) with Challenger Minerals Inc.
(CMI), a subsidiary of GlobalSantaFe Corporation and a screener of oil and gas
prospects in the Gulf of Mexico and North Sea regions. Under the terms of these
agreements, Reef had the option to acquire working interests in prospects
screened by CMI. Reef paid CMI an annual fee for the geological and geophysical
services provided by CMI. The last of these agreements expired effective
November 30, 2006.


3


Prospects
approved for acquisition by Reef under these agreements were assigned to this
Partnership as well as other limited partnerships formed as part of the Program.
The five partnerships formed as a part of this Program have each reimbursed to
Reef a portion of the actual fees paid by Reef under these agreements during the
term of the Program. The payments made were proportionate to the capital raised
by each partnership. This Partnership reimbursed Reef $314,380, or 3.17% of its
gross capital contributions of $9,924,916. This amount has been capitalized as
geological and geophysical costs in accordance with the full cost method of
accounting for oil and gas properties. There are no further amounts to be
reimbursed by this Partnership under these agreements. The partnerships formed
as a part of this Program did not reimburse Reef any amount in excess of the
actual fees paid by Reef.





Drilling
and Completion Phase of Operations





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





The
Partnership generally pays drilling and completion costs as incurred. Wells
drilled that failed to result in the discovery of commercial quantities of crude
oil or natural gas were plugged and abandoned in accordance with applicable
regulations. Two of the developmental wells and four of the exploratory wells
drilled by the Partnership were unsuccessful.





Production
Phase of Operations





Wells
capable of producing quantities of crude oil and/or natural gas in commercial
quantities were completed by installing all surface equipment necessary to
control the flow of production or to shut down the well, and by installing any
storage facilities, gathering, or sales lines required to produce and sell the
crude oil and/or natural gas production from the well. The Partnership drilled
seven successful wells, of which six were developmental wells and one was an
exploratory well. Of the seven successful wells drilled by the Partnership, two
are productive at December 31, 2009.





The
Partnership also has two additional wells that are productive at December 31,
2009, for a total of four productive wells as of December 31,
2009.  These two wells are the well for which Reef paid 100% of the
costs, and a well in which the Partnership purchased a royalty
interest.





The
Partnership has entered into agreements with third party marketers to sell the
crude oil and/or natural gas produced from successful wells on a competitive
basis at the best available terms and prices.  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. In
certain instances the Partnership, as a minority non-operated working interest
owner, has elected to permit the operator of the well to enter into sales and
marketing agreements with third party purchasers.





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





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





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


4


Major
Customers





The
Partnership sells crude oil and natural gas on credit terms to refiners,
pipelines, marketers, and other users of petroleum commodities. Revenues are
received directly from these parties or, in certain circumstances, paid to the
operator of the property who disburses to the Partnership its percentage share
of the revenues. During the year ended December 31, 2009, two marketers and one
operator accounted for 25.3%, 18.5%, and 54.9% of the Partnership’s crude oil
and natural gas revenues, respectively. During the year ended December 31, 2008,
three marketers and one operator accounted for 34.2%, 17.9%, 11.0%, and 29.7% of
the Partnership’s crude oil and natural gas revenues, respectively. During the
year ended December 31, 2007, four marketers and one operator accounted for
41.0%, 17.2%, 16.8%, 13.4%, and 10.7% of the Partnership’s crude oil and natural
gas revenues, respectively.  Due to the competitive nature of the
market for purchase of crude oil and natural gas, the Partnership does not
believe that the loss of any particular purchaser would have a material adverse
impact on the Partnership.





Insurance





The
Partnership is a named insured under blowout, pollution, public liability and
workmen's compensation insurance policies obtained by RELP. Such insurance,
however, may not be sufficient to cover all liabilities.  Each unit
held by general partners represents an open-ended security for unforeseen events
such as blowouts, lost circulation, stuck drill pipe, etc. that may result in
unanticipated additional liability materially in excess of a general partner's
initial investment in the Partnership.





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





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





Markets





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





•
            the
      amount of crude oil and natural gas
imports;


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


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


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


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


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


5


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





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





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





Regulation





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





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





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





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


6


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





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





Employees





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





FORWARD-LOOKING
STATEMENTS





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





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


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


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


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


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


•
            any
      statements of other than historical
fact.





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


7


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





ITEM
      1A.
            RISK
      FACTORS




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





There
is substantial doubt about our ability to continue as a going
concern.





Our
independent registered public accounting firm’s opinion on our 2009, 2008, and
2007 financial statements included an explanatory paragraph indicating
substantial doubt about our ability to continue as a going concern. Since its
inception, the Partnership has expended its operating capital on drilling for
crude oil and natural gas. The Partnership has completed drilling operations
with the original capital raised by the Partnership. In addition, drilling
operations have been completed on the wells for which Reef has contributed 100%
of the cost. The drilling operations of the Partnership have not resulted in the
discovery or exploitation of sufficient crude oil and/or natural gas reserves to
recover all of the Partnership’s investment in Partnership wells. The December
31, 2009 estimate of the Partnership’s crude oil and natural gas reserves and
future cash flows raises doubts about the future ability of the Partnership to
generate crude oil and natural gas revenues in excess of current operating costs
at current crude oil and natural gas prices.





The
managing general partner is considering several options related to the
Partnership, including the possible sale of marketable assets, as a result of
the recurring losses, erosion of partnership equity, and lack of significant
cash flows from operations.





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





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





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


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


·
            domestic
      government regulations and taxes;


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


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


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


·
            domestic
      and worldwide economic conditions.





These
factors and the volatility of the energy markets make it extremely difficult to
predict price movements. Also, crude oil and natural gas prices do not
necessarily move in tandem. Declines in crude oil and natural gas prices would
not only reduce revenues and cash flow available for distributions to partners,
but could reduce the amount of crude oil and natural gas that can be
economically produced from successful wells drilled by the Partnership, and,
therefore, have an adverse effect upon financial condition, results of
operations, crude oil and natural gas reserves, and the carrying value of the
Partnership’s oil and gas properties.  Approximately 69.5% of the
Partnership’s estimated proved reserves at December 31, 2009 were natural gas,
and, as a result, our financial results are more sensitive to fluctuations in
natural gas prices.


8


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





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





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





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





There are
numerous hazards involved in the drilling and operation of oil and gas wells,
including blowouts involving possible damages to property and third parties,
bodily injuries, mechanical failures, explosions, uncontrollable flows of crude
oil, natural gas or well fluids, fires, formations with abnormal pressure,
pollution, releases of toxic gas and other environmental hazards and risks. The
Partnership could suffer substantial losses as a result of any of these risks.
The Partnership is not fully insured against all risks inherent to the oil and
gas business. Uninsured liabilities would reduce the funds available to the
Partnership, may result in the loss of Partnership properties and may create
liability for the general partners. Although the Partnership maintains insurance
coverage in amounts Reef deems appropriate, it is possible that insurance
coverage may be insufficient. In that case Partnership assets may have to be
sold to pay personal injury and property claims and the cost of controlling
blowouts or replacing damaged equipment rather than for drilling
activities.





We
cannot control activities on non-operated properties.





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





·
            timing
      and amount of capital expenditures;


·
            expertise
      and financial resources;


·
            inclusion
      of other participants in drilling wells;
and


·
            use
      of technology.





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


9


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





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





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





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





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





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


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


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





The
production and producing life of Partnership wells is uncertain.





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





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





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





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





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


10


ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS




None.





ITEM
      2.
            PROPERTIES.





Drilling
Activities and Productive Wells





The
Partnership focused its drilling operations in Texas, Louisiana, and in U.S.
coastal waters of the Gulf of Mexico. With the available Partnership capital,
the Partnership purchased interests in 13 prospects. Seven prospects were in
Louisiana, five were in Texas, and one was located in the Gulf of Mexico off of
the Texas coast. The Partnership also purchased a royalty interest in a field in
Louisiana with three productive wells, one of which remains productive as of the
date of this report. The Partnership drilled three wells in this field, of which
two were unsuccessful and one was successful but has ceased production. The
Partnership drilled 13 wells on its 13 prospects. Two developmental and four
exploratory wells were unsuccessful. These six wells were located in Galveston
County, Texas, in Jefferson, St. Charles, Plaquemines, and Acadia Parish,
Louisiana, and in the Gulf of Mexico. The Partnership completed six successful
developmental wells on six developmental prospects, of which one is currently
productive. Five of the developmental wells have ceased production and have or
will be plugged and abandoned. The current productive well is located in Nueces
County, Texas. The five wells that have ceased production are located in
Jefferson, Acadia, and Cameron Parish, Louisiana and Live Oak County, Texas (two
wells). The Partnership also completed one successful exploratory well in
Galveston County, Texas that remains productive. Drilling operations were
completed during 2006 with the capital raised by the Partnership.





In August
2006, Reef agreed to pay 100% of the costs for a working interest in a
developmental well in Terrebonne Parish, Louisiana. Though the initial well was
unsuccessful, the well was re-entered and successfully side-tracked beginning in
October 2007. The well began production operations in May 2008 and is currently
productive. The costs of the original well and the successful side-track,
totaling approximately $184,000, were paid by the Partnership and then
reimbursed to the Partnership through additional capital contributions to the
Partnership made by Reef. No Partnership funds were expended in connection with
the original drilling and successful side-tracking of this well.





The
Partnership has no plans to conduct additional drilling operations on any
Partnership prospect and has no plans to acquire additional
prospects.





Proved
Crude Oil and Natural Gas Reserves





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





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


11





Oil (BBL)
                  
                  
                  Gas (MCF)Net
      proved reserves as of December 31, 2007
                  
                  
                  3,175
                  
                  
                  
                  74,811Net
      proved reserves as of December 31, 2008
                  
                  
                  5,781
                  
                  
                  
                  83,173Net
      proved reserves as of December 31, 2009
                  
                  
                  4,510
                  
                  
                  
                  61,620





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





Standardized
      measure of discounted future net cash flows as of December 31,
      2007
                  
                  $
                  356,210Standardized
      measure of discounted future net cash flows as of December 31,
      2008
                  
                  $
                  339,744Standardized
      measure of discounted future net cash flows as of December 31,
      2009
                  
                  $
                  247,420





During
the years ended December 31, 2009, 2008, and 2007, the Partnership recorded
property impairment costs totaling $52,189, $0, and $56,256 as a result of the
net capitalized costs of oil and gas properties exceeding the standardized
measure of discounted future net cash flows.





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





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





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





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





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


12




ITEM 3.
            LEGAL
      PROCEEDINGS.





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





ITEM
      4.
            Reserved.





PART
II





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




As of
December 31, 2009, the Partnership had one managing general partner, and 377
investor limited partners. Pursuant to the Partnership Agreement of the
Partnership, all general partner units held by investor partners were converted
into limited partner units during the 3rd quarter
of 2008. Reef holds a total of 25.028 limited partner units and the investor
partners hold 474.972 limited partner units. No established trading market
exists for the units.





Cash
which, in the sole judgment of the managing general partner, is not required to
meet the Partnership’s obligations is distributed to the partners quarterly in
accordance with the Partnership Agreement. Cash distributions are distributed
5.96% to the managing general partner (based upon the 1% interest not
represented by units and the 4.96% interest represented by Partnership units)
and 94.04% to investor partners





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





The
Partnership did not repurchase any units in 2009, 2008, and 2007 and has not
adopted a unit repurchase program.





Use
of Proceeds





In
connection with the Registration Statement filed on Form S-1 (No. 333-93399) and
declared effective May 31, 2001, Reef filed a post-effective amendment to the
Registration Statement on behalf of the Program on September 14, 2001. On
January 10, 2002 Reef filed a final prospectus and commenced the offering of
units in the Program. All sales of Partnership units were made through the
Program's dealer-manager, Reef Securities, Inc., and a number of soliciting
dealers. The Program filed a prospectus supplement describing the Partnership on
September 21, 2004 and commenced offering units. Under the terms of the
offering, a minimum of 50 Partnership units at a price of $20,000 per unit were
required to be sold in order to form the Partnership. Upon meeting this
requirement, the Partnership was formed on November 10, 2004. The Partnership
offering consisted of 375 units of limited partner interest and 125 units of
general partner interest. The offering period ended on December 2, 2004, at
which time all 500 allowable units had been sold. Investor partners purchased
349.972 limited partner units and 125 general partner units. Reef purchased
25.028 limited partner units, equaling 5.01% of the total Partnership units
sold. Total offering proceeds were $9,924,916. Reef also contributed 1% of all
leasehold, drilling, and completion costs as incurred, and reimbursed the
Partnership 100% of the costs of drilling an unsuccessful development well and
100% of the costs of drilling and completing a successful sidetrack to the
unsuccessful developmental well in Louisiana. Reef has paid the Partnership
$273,440 in connection with these obligations. Reef also retained interest
income earned by the Partnership totaling $68,585 to be used during the drilling
phase of operations.





All units
except those purchased by Reef paid a 15% management fee to Reef to pay for
Partnership organization and offering costs, including sales commissions. These
costs totaled $1,424,916, leaving capital contributions of $8,842,025 available
for Partnership oil and gas operations. As of December 31, 2009, the Partnership
had expended $8,640,194 on property acquisitions and $112,843 on general and
administrative expenses. The remainder of $88,988 has been retained for plugging
and abandonment costs of productive wells. Drilling operations have been
completed on the 13 prospects owned by the Partnership, and the Partnership has
no plans to conduct further development operations on any Partnership
prospect.


13


ITEM
      6.
            SELECTED
      FINANCIAL DATA.




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





As of and For the Years Ended December 31,2009
                
                
                2008
                
                
                2007
                
                
                2006
                
                
                2005Financial
      DataRevenue
                
                $
                153,080
                
                
                $
                315,781
                
                
                $
                231,283
                
                
                $
                311,888
                
                
                $
                113,465Interest
      income
                
                
                741
                
                
                
                762
                
                
                
                1,155
                
                
                
                7,175
                
                
                
                54,820Costs
      and expenses
                
                
                (275,512
                )
                
                
                (250,388
                )
                
                
                (307,424
                )
                
                
                (3,260,326
                )
                
                
                (5,554,339
                )Net
      income ( loss)
                
                
                (121,691
                )
                
                
                66,155
                
                
                
                (74,986
                )
                
                
                (2,941,263
                )
                
                
                (5,386,054
                )Allocation
      of net income ( loss):Managing
      general partner
                
                $
                (80,669
                )
                
                $
                (45,797
                )
                
                $
                (28,494
                )
                
                $
                (161,672
                )
                
                $
                (325,236
                )General
      partner units
                
                
                —
                
                
                
                15,302
                
                
                
                (12,235
                )
                
                
                (731,514
                )
                
                
                (1,331,873
                )Limited
      partner units
                
                
                (41,022
                )
                
                
                96,650
                
                
                
                (34,256
                )
                
                
                (2,048,077
                )
                
                
                (3,728,945
                )Net
      loss per managing general partner unit
                
                
                (3,223.15
                )
                
                
                (1,829.83
                )
                
                
                (1,138.48
                )
                
                
                (6,459.63
                )
                
                
                (12,994.92
                )Net
      income (loss) per general partner unit
                
                
                —
                
                
                
                122.41
                
                
                
                (97.88
                )
                
                
                (5,852.12
                )
                
                
                (10,654.98
                )Net
      income (loss) per limited partner unit
                
                
                (86.36
                )
                
                
                235.70
                
                
                
                (97.88
                )
                
                
                (5,852.12
                )
                
                
                (10,654.98
                )Total
      assets
                
                
                232,550
                
                
                
                352,067
                
                
                
                228,326
                
                
                
                304,718
                
                
                
                3,482,185Distributions
      to managing general partner
                
                
                1,444
                
                
                
                7,206
                
                
                
                2,170
                
                
                
                12,952
                
                
                
                11,066Distributions
      to investor partners
                
                
                22,806
                
                
                
                113,794
                
                
                
                34,280
                
                
                
                89,298
                
                
                
                60,534Distributions
      per general partner unit
                
                
                —
                
                
                
                81.18
                
                
                
                72.17
                
                
                
                188.01
                
                
                
                127.45Distributions
      per limited partner unit
                
                
                48.02
                
                
                
                239.58
                
                
                
                72.17
                
                
                
                188.01
                
                
                
                127.45Distributions
      per managing  general partner unit
                
                
                57.70
                
                
                
                287.92
                
                
                
                86.70
                
                
                
                517.50
                
                
                
                442.14Operating
      DataAnnual
      production:Gas
      (MCF)
                
                
                14,000
                
                
                
                19,016
                
                
                
                22,447
                
                
                
                32,636
                
                
                
                11,019Oil
      (BBL)
                
                
                1,727
                
                
                
                1,305
                
                
                
                795
                
                
                
                1,014
                
                
                
                212Average
      sales price:Gas
      (per MCF)
                
                $
                4.43
                
                
                $
                9.88
                
                
                $
                7.77
                
                
                $
                7.55
                
                
                $
                9.20Oil
      (per BBL)
                
                $
                52.76
                
                
                $
                97.98
                
                
                $
                71.45
                
                
                $
                64.58
                
                
                $
                57.28


14


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




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





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





Critical Accounting
Policies





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





Oil
and Gas Properties





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





In
applying the full cost method at December 31, 2009, we perform a quarterly
ceiling test on the capitalized costs of oil and gas properties, whereby the
capitalized costs of oil and gas properties are limited to the sum of the
estimated future net revenues from proved reserves using prices that are the
12-month un-weighted arithmetic average of the first-day-of-the-month price for
crude oil and natural gas held constant and discounted at 10%, plus the lower of
cost or estimated fair value of  unproved properties, if any. If
capitalized costs exceed the ceiling, an impairment loss is recognized for the
amount by which the capitalized costs exceed the ceiling, and is shown as a
reduction of oil and gas properties and as property impairment expense on the
Partnership’s statement of operations. No gain or loss is recognized upon sale
or disposition of oil and gas properties, unless such a sale would significantly
alter the rate of depletion and amortization. During the years ended December
31, 2009, 2008, and 2007, the Partnership recognized property impairment expense
of proved properties totaling $52,189, $0, and $56,256,
respectively.





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





The
determination of depreciation, depletion and amortization expense recognized in
the financial statements is also dependent upon the estimates of proved crude
oil and natural gas reserves and is computed using the units-of-production
method based upon this estimate of proved reserves. During the years ended
December 31, 2009, 2008, and 2007, the Partnership had depreciation, depletion,
and amortization expense totaling $43,995, $59,234, and $62,949,
respectively.


15


Asset
retirement costs and liabilities associated with future site restoration and
abandonment of long-lived assets are initially measured at fair value which
approximates the cost a third party would incur in performing the tasks
necessary to retire such assets. The fair value is recognized in the financial
statements as the present value of expected future cash expenditures for site
restoration and abandonment. Subsequent to the initial measurement, the effect
of the passage of time on the liability for the net asset retirement obligation
(accretion expense) and the amortization of the asset retirement cost are
recognized in the results of operations. During the years ended December 31,
2009, 2008, and 2007, the Partnership recognized $0, $410, and $0 of asset
retirement obligations and additional capitalized cost in connection with
successful wells drilled by the Partnership.





Recognition
of Revenue





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





Recently Adopted Accounting
Pronouncements





Modernization
of Oil and Gas Reporting





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009. In addition to expanding the definition and disclosure requirements
for crude oil and natural gas reserves, the new rule changes the requirements
for determining quantities of crude oil and natural gas reserves. The new rule
also changes certain accounting requirements under the full cost method of
accounting for oil and gas activities. The changes are designed to modernize the
requirements for the determination of crude oil and natural gas reserves,
aligning them with current practices and updating them for changes in
technology. The effect of applying the un-weighted arithmetic average of the
first-day-of-the-month commodity prices for the preceding 12-month period,
compared to the use of end-of-period prices and costs, decreased net proved
reserves by 11.1%. The standardized measure of discounted future net cash flows
for the year ended December 31, 2009 was lower by $167,140 as a result of using
the new rule as compared to amounts calculated using the previous rules. The
effect of applying the new rule resulted in increased depletion expense of $713
but no additional impairment expense.





Accounting
Standards Codification




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





Fair
Value Measurement of Liabilities




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


16


Subsequent
Events





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





Recognition
and Presentation of Other-Than-Temporary Impairments





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





Interim
Reporting of Fair Value of Financial Instruments





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





Liquidity and Capital
Resources





The
Partnership was funded with initial capital contributions totaling $9,924,916.
Investor partners purchased 125 general partner units and 349.972 limited
partner units for $9,499,441. Reef purchased 25.028 units, or 5.01% of the total
units sold, for $425,475. As of December 31, 2009, Reef has also contributed
$273,440 in connection with its obligation to pay 1% of all leasehold, drilling,
and completion costs, and to reimburse the Partnership for 100% of the drilling
costs of an unsuccessful developmental well in Louisiana, and 100% of the
drilling and completion costs for a successful sidetrack of this developmental
well. The Partnership also retained $68,585 of interest income earned for use
during the drilling phase of operations.  Organization and offering
costs totaled $1,424,916, leaving capital contributions of $8,842,025 available
for Partnership activities.





The
Partnership Agreement does not allow the Partnership to borrow funds or issue
partner assessments during the drilling phase of its operations. Therefore, the
$8,842,025 was the total amount available to the Partnership for drilling and
administrative costs during the drilling phase of its operations. As of December
31, 2009, drilling operations had been completed on the 13 wells drilled by the
Partnership, and also on the developmental well and sidetrack to the
developmental well for which Reef is reimbursing 100% of drilling and completion
costs to the Partnership. The Partnership expended $8,640,194 on prospect and
property acquisitions, drilling and completion costs and $112,843 on general and
administrative expenses during the drilling phase of operations. The Partnership
retained $88,988 for plugging and abandonment costs of productive
wells.





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


17


The
Partnership Agreement allows the Partnership to borrow funds or issue
assessments of up to $20,000 per unit to the investor partners for subsequent
operations deemed necessary to fully develop any of the initial Partnership
prospects. The Partnership has no plans for subsequent operations on any of its
prospects.





The
Partnership has working capital of $29,392 at December 31, 2009. Subsequent to
expending the initial available Partnership capital contributions on prospect
and property acquisitions and drilling and completion costs of Partnership
wells, the Partnership has minimal working capital, consisting primarily of cash
flow from productive properties utilized to pay cash distributions to
investors.





During
2006, Reef contributed a working interest in a well to the Partnership and
agreed to pay all costs associated with the drilling and equipping of the well.
The well is located in Terrebonne Parish, Louisiana. The initial drilling
operations were completed in May 2007 and the well was unsuccessful, however,
after reviewing the well logs and other geologic data, the wellbore was
re-entered during the fourth quarter of 2007 and successfully sidetracked.
Sidetrack drilling operations were completed during February 2008 and the well
began production operations in May 2008. A workover of an existing Partnership
well that was a significant producing well during 2006 but was shut-in for most
of 2007 as a result of high water volumes was performed in February 2008 in an
attempt to open a new productive zone. The workover was unsuccessful, and the
well was plugged and abandoned. A third partnership well was successfully
re-completed in a new productive zone in June 2007, and production volumes from
the well were increased.





The
success of the two projects above, combined with significant increases in the
average prices received for crude oil and natural gas during 2008, enabled the
Partnership to operate with positive cash flow levels during 2008. During the
latter half of 2008, prices began moving downward to a level which reached a low
point during the first quarter of 2009. While management does not expect to see
a return to the average pricing levels received during 2008, there was positive
movement of prices during 2009. Sales of crude oil and natural gas from
productive wells declined on an equivalent barrel of crude oil basis by
approximately 10% from 2008 to 2009. The ability of the Partnership to generate
positive cash flows during 2010 will primarily depend upon crude oil and natural
gas pricing. The Partnership is expected to generate positive cash flows during
the first quarter of 2010. The managing general partner is considering several
options related to the Partnership, including the possible sale of marketable
assets and dissolution of the Partnership, as a result of the recurring losses
incurred over the past several years, the erosion of partnership equity, and the
lack of significant cash flows from operations.





Results
of Operations





Comparison
of the Year Ended December 31, 2009 to the Year Ended December 31,
2008





The
Partnership had a net loss of $121,691 for the year ended December 31, 2009,
compared to net income of $66,155 for the year ended December 31, 2008. The
decline in operating results was primarily due to the decline in average prices
received for the Partnership’s crude oil and natural gas production. The average
prices received for crude oil sales declined from $97.98 per barrel in 2008 to
$52.76 per barrel in 2009, a decrease of 46.2%. The average price received for
natural gas sales decreased from $9.88 per MCF in 2008 to $4.43 per MCF received
during 2009, a decrease of 55.2%. These decreases in pricing led to an overall
51.5% decrease in sales revenues from $315,781 in 2008 to $153,080 in 2009.
Crude oil sales volume increased from 1,305 barrels sold in 2008 to 1,727
barrels sold in 2009. The volume increase was the result of a full year of
production from the Partnership’s final well, which began production operations
in May 2008. Crude oil sales volume from this well totaled 1,197 barrels during
2009. Natural gas volumes dropped from 19,016 MCF sold in 2008 to 14,000 MCF
sold in 2009. While the Partnership had natural gas sales of 6,297 MCF from the
well that began production operations in May 2008, two other wells ceased
production at the end of 2008, and the Partnership experienced natural
production declines from other productive wells. Overall, the Partnership had an
approximate 10% decline in total sales volume on an equivalent barrel of crude
oil basis.


18


General
and administrative costs decreased from $115,784 incurred during the year ended
December 31, 2008 to $109,641 incurred during the year ended December 31, 2009.
Effective April 1, 2008 Reef implemented a new method for allocating overhead
that takes actual overhead and allocates it based upon the summation of
revenues, expenses, and actual capital costs incurred. Accordingly, the
administrative overhead charge to the Partnership decreased along with revenues
and expenses during the period, from $40,593 in the year ended December 31, 2008
to $20,120 for the year ended December 31, 2009.





Comparison
of the Year Ended December 31, 2008 to the Year Ended December 31,
2007





The
Partnership had net income of $66,155 for the year ended December 31, 2008,
compared to a net loss of $74,986 for the year ended December 31, 2007. The
improvement in operating results was primarily due to sales prices received for
the Partnership’s crude oil and natural gas production. The average price
received for crude oil sales jumped from $71.45 per barrel in 2007 to $97.98 per
barrel in 2008, an increase of 37.1%. The average price received for natural gas
sales increased from $7.77 per MCF in 2007 to $9.88 per MCF received during
2008, an increase of 27.2%. These increases in pricing led to an overall 36.5%
increase in sales revenues from $231,283 in 2007 to $315,781 in 2008. Crude oil
sales volume increased from 795 barrels sold in 2007 to 1,305 barrels sold in
2008. The volume increase was the result of the Partnership’s final well
beginning production operations in May 2008. Crude oil sales volume from this
well totaled 553 barrels during 2008. Natural gas volumes dropped from 22,447
MCF sold in 2007 to 19,016 MCF sold in 2008. While the Partnership had gas sales
of 4,221 MCF from the well that began production operations, the Partnership
lost approximately 4,500 MCF from two wells which ceased production during 2008,
and experienced natural production declines from other productive wells. The
Partnership had one developmental well cease production in January 2008, and had
no production during 2008 from a second well which underwent an unsuccessful
workover attempt in February 2008.





General
and administrative costs increased during 2008 as a result of a change in method
for allocating overhead to Partnerships. Reef implemented a new method for
allocating overhead that takes actual overhead and allocates it based upon the
summation of revenues, expenses and capital costs incurred. Under the prior
method of allocating overhead, not all allocable general and administrative
expenses were charged to the Partnership during 2007. The administrative
overhead charge to the Partnership for the year ended December 31, 2008 was
$44,370, compared to $16,802 for the year ended December 31, 2007.





The rapid
decline in crude oil and natural gas prices that occurred during the fourth
quarter of 2008 caused the Partnership to incur a net loss during the fourth
quarter of 2008 totaling $12,066. Pricing continued to decline into the first
quarter of 2009, and the Partnership also expects to incur a net loss during the
first quarter of 2009.





Off-Balance
Sheet Arrangements





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





Contractual
Obligations





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





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK.




Interest
Rate Risk





The Partnership has not borrowed any
funds to date. The partnership agreement prohibited bank borrowings during the
Partnership's drilling phase of operations. The Partnership is permitted to
borrow monies or assess partners for developmental activities on the prospects
it has drilled, however, at this time the Partnership has no plans to conduct
additional activities on any of its existing prospects. Consequently, the
Partnership is subject to interest rate risk solely to the extent that changes
in interest rates affect general economic conditions.


19


Commodity
Price Risk





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





Assuming
the production levels we attained during the year ended December 31, 2009, a 10%
change in the price received for our crude oil would have had an approximate
$9,100 impact on our crude oil revenues, and a 10% change in the price received
for our natural gas would have resulted in an approximate $6,240 impact on our
natural gas revenues.




ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA.




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





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




None.




ITEM
      9A(T).
            CONTROLS
      AND PROCEDURES.




Evaluation
of Disclosure Controls and Procedures





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





Management
Report on Internal Control Over Financial Reporting





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





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


20


Changes
in Internal Controls





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




ITEM
      9B.
            OTHER
      INFORMATION.




None.





PART
III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.




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





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





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





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





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





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





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




21




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





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




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





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





Audit
Committee and Nominating Committee





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





Code
of Ethics





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


22


ITEM
      11.
            EXECUTIVE
      COMPENSATION.





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





Recipient
              
              Form of Compensation
              
              AmountManaging
      General Partner
              
              Partnership
      interest (excluding any partnership interest resulting from the purchase
      of units)
              
              10%
      interestManaging
      General Partner
              
              Management
      fee
              
              15%
      of subscriptionsManaging
      General Partner and its Affiliates
              
              Direct
      and administrative costs
              
              Reimbursement
      at costAffiliate
      of the Managing General Partner
              
              Operator's
      per-well charges
              
              Competitive
      pricesManaging
      General Partner and its Affiliates
              
              Payment
      for equipment, supplies, marketing, and other services
              
              Cost
      or competitive prices





Reef's
"partnership interest," as described in the table above, refers only to its
interest as managing general partner and does not include the interest Reef has
as the result of its purchase of units in the Partnership, nor the 1% interest
Reef has as the result of its payment of 1% of all lease costs, intangible
drilling and development costs, and well completion costs. Reef purchased 5.01%
of the outstanding Partnership units. Reef received a 10% interest as managing
general partner of the Partnership and a 1% interest as a result of Reef’s
payment of 1% of all lease costs, intangible drilling and development costs, and
well completion costs for a total of an 11% interest.  This 11%
interest was not represented by partnership units. During 2006, Reef voluntarily
gave up its 10% interest received for forming the Partnership, and now has only
a 1% interest in the Partnership that is not represented by partnership
units.  As a result, Reef has a total interest in the Partnership of
5.96%.





Reef
received a management fee of $1,424,916, which is 15% of the Partnership
subscriptions exclusive of the units purchased by Reef. From this amount Reef
paid all of the Partnership's organization and offering costs, including sales
commissions. The Partnership recorded $1,374,916 of this payment as offering
costs, and $50,000 as organization costs in the December 31, 2004 financial
statements.





Reef is
reimbursed for direct costs and all documented out-of-pocket expenses incurred
on behalf of the Partnership, including administrative costs. During the years
ended December 31, 2009, 2008, and 2007, the Partnership reimbursed Reef $0,
$4,721, and ($1,558), respectively, for technical services costs which have been
capitalized as project costs, and $42,468, $44,370, and $16,802, respectively,
for administrative costs included as general and administrative
expenses.





Operator
fees are payable to RELP on the nine prospects where RELP serves as operator.
RELP receives fees at the competitive rate in the geographical area of the
prospects during the drilling and production phase of operations. These fees are
charged as a monthly fee per well as agreed to in an operating agreement signed
by the Partnership as well as outside third party working interest owners in the
wells. During the years ended December 31, 2009, 2008, and 2007, the Partnership
paid operator fees totaling $4,690, $4,361, and $5,236 to RELP. RELP serves as
operator for nine Partnership prospects upon which five successful and four
unsuccessful wells were drilled. Of the five successful wells drilled, two are
currently producing and three have ceased production.





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





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


23




Person or Group
                      
                      Number of Units
                        Beneficially
                        Owned
                      
                      
                      Percent of Total
                        Partnership Units
                        Outstanding
                      
                      
                      Percentage of
                        Total Partnership
                        Interests
                        Beneficially
                        OwnedReef
      Oil & Gas Partners, L.P. (1)
                      
                      
                      25.028
                      
                      
                      
                      5.01
                      %
                      
                      
                      4.96
                      %Reef
      Oil & Gas Partners, L.P. (1)
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      1.00
                      %





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





The
managing general partner holds a 1% interest in the Partnership as a result of
paying 1% of all leasehold, drilling and completion costs. In addition to this
1% interest not represented by Partnership units, Reef purchased 5.01% of the
500 Partnership units and, therefore, holds 5.01% of the 99% interest in the
Partnership (4.96%) held by the unit holders.





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





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





ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.





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





2009
                  
                  
                  2008Audit
      fees
                  
                  $
                  48,825
                  
                  
                  $
                  35,075Audit
      related fees
                  
                  $
                  —
                  
                  
                  $
                  —Tax  fees
                  
                  $
                  —
                  
                  
                  $
                  1,397Tax
      related fees
                  
                  $
                  —
                  
                  
                  $
                  —





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





PART
IV





ITEM
15.                      EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.





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





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


24




SIGNATURES





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





Date:
      April 2, 2010
                          REEF
      GLOBAL ENERGY IV, L.P.Reef
      Oil & Gas Partners, L.P.Managing
      General PartnerBy:
                          Reef
      Oil & Gas Partners, GP, LLCGeneral
      PartnerBy:
                          /s/
      Michael J. MauceliMichael
      J. MauceliManager
      (principal executive
      officer)


25





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




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


26





EXHIBIT
INDEX





3.1(a)(i)
                
                Certificate
      of Limited Partnership of Reef Global Energy IV, L.P., dated November 10,
      2004.3.1(a)(ii)
                
                Certificate
      of Amendment to the Certificate of Limited Partnership of Reef Global
      Energy IV, L.P., dated August 27, 2008 (incorporated by reference to
      Exhibit 3.1(i)(a) to Form 8-K, SEC File No. 000-53539, 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 IV, L.P., dated August 28, 2008 (incorporated by reference to
      Exhibit 3.1(i)(b) to Form 8-K, SEC File No. 000-53539, as filed with the
      SEC on September 3, 2008).3.2
                
                Form of Limited Partnership Agreement
      (incorporated by reference to Appendix A to the prospectus filed
      as part of Post-Effective Amendment
      No. 1 to Registration Statement on  Form S-1, SEC File
      No.333-93399, as filed with the SEC on September 14,
      2001).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 Forrest A. Garb & Associates, Inc.31.1*
                
                Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a) under the
      Securities Exchange Act of 1934.31.2*
                
                Certification
      of Principal Financial Officer pursuant to Rule 13-14(a) under the
      Securities Exchange Act of 1934.32.1*
                
                Certification
      of Principal Executive Officer pursuant to 18 U.S.C.
  §1350.32.2*
                
                Certification
      of Principal Financial Officer pursuant to 18 U.S.C.
  §1350.99.1*
                
                Summary
      Reserve Report of Forrest A. Garb & Associates,
  Inc.





*
Attached herewith


27





Reef
Global Energy IV, L.P.





Financial
Statements





Years
Ended December 31, 2009, 2008 and 2007




Contents




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




28





Report of
Independent Registered Public Accounting Firm





The
Partners


Reef
Global Energy IV, L.P.





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





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





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


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


The
accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 1 to the
financial statements, the Partnership has suffered significant impairment
losses, erosion of partnership equity, and projected declines in cash flow from
operations that raise substantial doubt about its ability to continue as a going
concern. Management’s plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





BDO
Seidman, LLP





Dallas,
Texas


April 2,
2010


F-1





Reef
Global Energy IV, L.P.


Balance
Sheets





December 31,
                
                2009
                
                
                2008AssetsCurrent
      assets:Cash
      and cash equivalents
                
                $
                91,957
                
                
                $
                106,454Total
      current assets
                
                
                91,957
                
                
                
                106,454Oil
      and natural gas properties, full cost method of
accounting:Proved
      properties, net of accumulated depletion of $8,581,474 and
      $8,470,972
                
                
                140,593
                
                
                
                245,613Net
      oil and natural gas properties
                
                
                140,593
                
                
                
                245,613Total
      assets
                
                $
                232,550
                
                
                $
                352,067Liabilities
      and partnership equityCurrent
      liabilities:Accounts
      payable
                
                $
                1,017
                
                
                $
                436Accounts
      payable to affiliates
                
                
                61,548
                
                
                
                16,801Total
      current liabilities
                
                
                62,565
                
                
                
                17,237Long-term
      liabilities:Asset
      retirement obligation
                
                
                93,805
                
                
                
                122,213Total
      long-term liabilities
                
                
                93,805
                
                
                
                122,213Commitments
      and contingencies (Note 5)Partnership
      equityLimited
      partners
                
                
                (52,528
                )
                
                
                11,300Managing
      general partner
                
                
                128,708
                
                
                
                201,317Partnership
      equity
                
                
                76,180
                
                
                
                212,617Total
      liabilities and partnership equity
                
                $
                232,550
                
                
                $
                352,067





See
accompanying notes to financial statements.


F-2





Reef
Global Energy IV, L.P.


Statements
of Operations





For the Years Ended December
      31,2009
                
                
                2008
                
                
                2007Revenues
                
                $
                153,080
                
                
                $
                315,781
                
                
                $
                231,283Costs
      and expenses:Lease
      operating expenses
                
                
                58,866
                
                
                
                51,904
                
                
                
                59,971Production
      taxes
                
                
                7,916
                
                
                
                19,858
                
                
                
                14,256Depreciation,
      depletion and amortization
                
                
                43,995
                
                
                
                59,324
                
                
                
                62,949Property
      impairment
                
                
                52,189
                
                
                
                —
                
                
                
                56,256Accretion
      of asset retirement obligation
                
                
                2,905
                
                
                
                3,519
                
                
                
                43,039General
      and administrative expenses
                
                
                109,641
                
                
                
                115,783
                
                
                
                70,953Total
      costs and expenses
                
                
                275,512
                
                
                
                250,388
                
                
                
                307,424Income
      (loss) from operations
                
                
                (122,432
                )
                
                
                65,393
                
                
                
                (76,141
                )Other
      income:Interest
      income
                
                
                741
                
                
                
                762
                
                
                
                1,155Net
      income (loss)
                
                $
                (121,691
                )
                
                $
                66,155
                
                
                $
                (74,986
                )Net
      income (loss) per general partner unit
                
                $
                —
                
                
                $
                122.41
                
                
                $
                (97.88
                )Net
      income (loss) per limited partner unit
                
                $
                (86.36
                )
                
                $
                235.70
                
                
                $
                (97.88
                )Net
      loss per managing general partner unit
                
                $
                (3,223.15
                )
                
                $
                (1,829.83
                )
                
                $
                (1,138.48
                )





See
accompanying notes to financial statements.




F-3


Reef
Global Energy IV, L.P.


Statements
of Partnership Equity


General partners
                  
                  
                  Limited partners
                  
                  
                  Managing general
                    partner
                  
                  
                  TotalUnits
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  Amount
                  
                  
                  Units
                  
                  
                  AmountBalance
      at December 31, 2006
                  
                  
                  125.000
                  
                  
                  $
                  24,716
                  
                  
                  
                  349.972
                  
                  
                  $
                  69,198
                  
                  
                  
                  25.028
                  
                  
                  $
                  25,524
                  
                  
                  
                  500.000
                  
                  
                  $
                  119,438Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  76,245
                  
                  
                  
                  —
                  
                  
                  
                  76,245Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  (9,022
                  )
                  
                  
                  —
                  
                  
                  
                  (25,258
                  )
                  
                  
                  —
                  
                  
                  
                  (2,170
                  )
                  
                  
                  —
                  
                  
                  
                  (36,450
                  )Net
      loss
                  
                  
                  —
                  
                  
                  
                  (12,235
                  )
                  
                  
                  —
                  
                  
                  
                  (34,257
                  )
                  
                  
                  —
                  
                  
                  
                  (28,494
                  )
                  
                  
                  —
                  
                  
                  
                  (74,986
                  )Balance
      at December 31, 2007
                  
                  
                  125.000
                  
                  
                  
                  3,459
                  
                  
                  
                  349.972
                  
                  
                  
                  9,683
                  
                  
                  
                  25.028
                  
                  
                  
                  71,105
                  
                  
                  
                  500.000
                  
                  
                  
                  84,247Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  72.17
                  
                  
                  
                  
                  
                  
                  $
                  72.17
                  
                  
                  
                  
                  
                  
                  $
                  86.70Balance
      at December 31, 2007
                  
                  
                  125.000
                  
                  
                  
                  3,459
                  
                  
                  
                  349.972
                  
                  
                  
                  9,683
                  
                  
                  
                  25.028
                  
                  
                  
                  71,105
                  
                  
                  
                  500.000
                  
                  
                  
                  84,247Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  183,215
                  
                  
                  
                  —
                  
                  
                  
                  183,215Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  (10,148
                  )
                  
                  
                  —
                  
                  
                  
                  (103,646
                  )
                  
                  
                  —
                  
                  
                  
                  (7,206
                  )
                  
                  
                  —
                  
                  
                  
                  (121,000
                  )Net
      income (loss)
                  
                  
                  —
                  
                  
                  
                  15,302
                  
                  
                  
                  —
                  
                  
                  
                  96,650
                  
                  
                  
                  —
                  
                  
                  
                  (45,797
                  )
                  
                  
                  —
                  
                  
                  
                  66,155Conversion
      of general partner units into limited partner units (Note
    1)
                  
                  
                  (125.000
                  )
                  
                  
                  (8,613
                  )
                  
                  
                  125.000
                  
                  
                  
                  8,613
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Balance
      at December 31, 2008
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  474.972
                  
                  
                  $
                  11,300
                  
                  
                  
                  25.028
                  
                  
                  $
                  201,317
                  
                  
                  
                  500.000
                  
                  
                  $
                  212,617Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  81.18
                  
                  
                  
                  
                  
                  
                  $
                  239.58
                  
                  
                  
                  
                  
                  
                  $
                  287.92Balance
      at December 31, 2008
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  474.972
                  
                  
                  
                  11,300
                  
                  
                  
                  25.028
                  
                  
                  
                  201,317
                  
                  
                  
                  500.000
                  
                  
                  
                  212,617Partner
      contributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  9,504
                  
                  
                  
                  —
                  
                  
                  
                  9,504Partner
      distributions
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (22,806
                  )
                  
                  
                  —
                  
                  
                  
                  (1,444
                  )
                  
                  
                  —
                  
                  
                  
                  (24,250
                  )Net
      loss
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (41,022
                  )
                  
                  
                  —
                  
                  
                  
                  (80,669
                  )
                  
                  
                  —
                  
                  
                  
                  (121,691
                  )Balance
      at December 31, 2009
                  
                  
                  —
                  
                  
                  $
                  —
                  
                  
                  
                  474.972
                  
                  
                  $
                  (52,528
                  )
                  
                  
                  25.028
                  
                  
                  $
                  128,708
                  
                  
                  
                  500.000
                  
                  
                  $
                  76,180Distribution
      amount per partnership unit
                  
                  
                  
                  
                  
                  $
                  —
                  
                  
                  
                  
                  
                  
                  $
                  48.02
                  
                  
                  
                  
                  
                  
                  $
                  57.70




See
accompanying notes to financial statements .




F-4


Reef
Global Energy IV, L.P.


Notes to
Financial Statements





Reef
Global Energy IV, L.P.


Statements
of Cash Flows





For the Years Ended December
      31,2009
                
                
                2008
                
                
                2007Operating
      ActivitiesNet
      income (loss)
                
                $
                (121,691
                )
                
                $
                66,155
                
                
                $
                (74,986
                )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Plugging
      and abandonment costs paid from ARO
                
                
                (16,994
                )
                
                
                (1,096
                )
                
                
                —Adjustments
      for non-cash transactions:Depreciation,
      depletion and amortization
                
                
                43,995
                
                
                
                59,324
                
                
                
                62,949Property
      impairment
                
                
                52,189
                
                
                
                —
                
                
                
                56,256Accretion
      of asset retirement obligation
                
                
                2,905
                
                
                
                3,519
                
                
                
                43,039Changes
      in operating assets and liabilities:Accounts
      payable
                
                
                581
                
                
                
                354
                
                
                
                (144
                )Accounts
      payable to affiliates
                
                
                39,264
                
                
                
                11,313
                
                
                
                (58,380
                )Net
      cash provided by operating activities
                
                
                249
                
                
                
                139,569
                
                
                
                28,734Investing
      ActivitiesProperty
      acquisition and development
                
                
                —
                
                
                
                (170,342
                )
                
                
                (104,498
                )Net
      cash used in investing activities
                
                
                —
                
                
                
                (170,342
                )
                
                
                (104,498
                )Financing
      ActivitiesPartner
      capital contributions
                
                
                9,504
                
                
                
                182,463
                
                
                
                104,917Partner
      distributions
                
                
                (24,250
                )
                
                
                (121,000
                )
                
                
                (36,450
                )Net
      cash provided by (used in) financing activities
                
                
                (14,746
                )
                
                
                61,463
                
                
                
                68,467Net
      increase (decrease) in cash and cash equivalents
                
                
                (14,497
                )
                
                
                30,690
                
                
                
                (7,297
                )Cash
      and cash equivalents at beginning of period
                
                
                106,454
                
                
                
                75,764
                
                
                
                83,061Cash
      and cash equivalents at end of period
                
                $
                91,957
                
                
                $
                106,454
                
                
                $
                75,764Non-cash
      investing transactions:Property
      additions included in accounts payable to affiliates
                
                $
                5,483
                
                
                $
                —
                
                
                $
                —Property
      additions and asset retirement obligation
                
                $
                —
                
                
                $
                410
                
                
                $
                —Adjustment
      to asset retirement obligation
                
                $
                14,319
                
                
                $
                18,377
                
                
                $
                —Non-cash
      financing transactions:Managing
      partner contributions included in accounts receivable from or accounts
      payable to affiliates
                
                $
                —
                
                
                $
                —
                
                
                $
                752





See
accompanying notes to financial statements.


F-5


Reef
Global Energy IV, L.P.


Notes to
Financial Statements





1.
Organization and Basis of Presentation





Reef
Global Energy IV, L.P. (the “Partnership”) is the fourth in a series of five
Nevada limited partnerships comprising a program called Reef Global Energy
Ventures (the “Program”), pursuant to an S-1 Registration Statement declared
effective by the Securities and Exchange Commission (the “SEC”) on May 31, 2001.
In order to be formed, each partnership was required to sell a minimum of 50
partnership units at $20,000 per unit, including units purchased by the managing
general partner. Each partnership formed as a part of the Program offered a
maximum of 500 units for sale, consisting of a maximum of 375 limited partner
units and a maximum of 125 general partner units. Reef Global Energy IV, L.P.
offered 500 units for sale ($10,000,000), consisting of up to 375 limited
partner units and up to 125 general partner units. Investor funds were held in
escrow and were subject to reimbursement with interest if the minimum number of
units were not sold. The Program filed a prospectus supplement with the SEC on
September 21, 2004 describing the Partnership, and commenced offering units in
the Partnership. Upon reaching the minimum subscription level, the Partnership
was formed on November 10, 2004. The Partnership offering closed December 2,
2004, with sales to outside investors totaling 125 general partner units and
349.972 limited partner units, and sales to the managing general partner
totaling 25.028 limited partner units.





The
Partnership is a Nevada limited partnership formed under the Nevada Uniform
Limited Partnership Act. Reef Oil & Gas Partners, L.P. (“Reef”) serves as
the Partnership’s managing general partner. Partnership interests are held by
the managing general partner and non-Reef partners who are general and limited
partners (“investor partners”). The managing general partner received a 10%
interest in the Partnership as compensation for forming the Partnership, and
also holds a 1% interest in the Partnership as a result of paying 1% of all
leasehold, drilling and completion costs. This 11% interest was not represented
by Partnership units. In addition, Reef purchased 5.01% of the Partnership units
and, therefore, held 5.01% of the 89% interest in the Partnership (4.46%) held
by the unit holders. Effective August 1, 2006, Reef reduced the interest it
received as compensation for forming the Partnership from 10% to 5%, and
effective November 1, 2006 it reduced this interest from 5% to 0%. Therefore,
effective November 1, 2006, Reef holds a 1% interest in the partnership as a
result of paying 1% of all leasehold, drilling and completion costs. This 1%
interest is not represented by Partnership units. Effective November 1, 2006
Reef holds 5.01% of the 99% interest in the Partnership (4.96%) held by the unit
holders. The Partnership primarily purchased working interests in exploratory
and developmental drilling prospects and drilled oil and gas wells located
onshore in the continental United States and in U.S. coastal waters in the Gulf
of Mexico. Other partnerships formed as a part of this Program, as well as other
private drilling partnerships managed by Reef also own interests in some of
these wells. In instances where Reef affiliated entities own a majority working
interest in a well, the well may be operated by OREI, Inc. (“OREI”) or Reef
Exploration, L.P. (“RELP”), affiliates of the managing general
partner.





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





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





Quarterly
cash distributions to partners are based upon the number and type of partnership
units held at the close of the quarter. Prior to August 1, 2006, cash
distributions to partners of the net cash flow from interest income and crude
oil and natural gas sales revenues, less operating, general and administrative,
and other costs were distributed 15.46% to the managing general partner (based
upon the 11% interest not represented by units and the 4.46% interest
represented by Partnership units) and 84.54% to investor partners. Effective
November 1, 2006, cash distributions are distributed 5.96% to the managing
general partner (based upon the 1% interest not represented by units and the
4.96% interest represented by Partnership units) and 94.04% to investor
partners.




F-6


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)





Going
Concern





The
accompanying financial statements have been prepared assuming the Partnership is
a going concern, which assumption contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Partnership
has suffered losses from operations that have utilized a major portion of
partnership equity. While the Partnership appears to have adequate liquidity at
December 31, 2009, there can be no assurance that such liquidity will remain
sufficient.





These
factors raise substantial doubt about the Partnership’s ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or the amount
of liabilities that might be necessary should the Partnership be unable to
continue in existence.





The
managing general partner is considering several options related to the
Partnership, including the possible sale of marketable assets, as a result of
the recurring losses incurred over the past several years, the erosion of
partnership equity, and the lack of significant cash flows from
operations.





2.
Summary of Accounting Policies





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.





Cash
and Cash Equivalents





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





Risks
and Uncertainties





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





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





Oil
and Gas Properties





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




F-7


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)




In
applying the full cost method at December 31, 2009, the Partnership performs a
quarterly ceiling test on the capitalized costs of oil and gas properties,
whereby the capitalized costs of oil and gas properties are limited to
the  sum of the estimated future net revenues from proved reserves
using prices that are the 12-month un-weighted arithmetic average of the
first-day-of-the-month price for crude oil and natural gas held constant and
discounted at 10%, plus the lower of cost or estimated fair value of unproved
properties, if any. If capitalized costs exceed the ceiling, an impairment loss
is recognized for the amount by which the capitalized costs exceed the ceiling,
and is shown as a reduction of oil and gas properties and as property impairment
expense on the Partnership’s statements of operations. No gain or loss is
recognized upon sale or disposition of oil and gas properties, unless such a
sale would significantly alter the rate of depletion and amortization. During
the years ended December 31, 2009, 2008, and 2007, the Partnership recognized
property impairment expense of proved properties totaling $52,189, $0, and
$56,256, respectively.




Estimates
of Proved Oil and Gas Reserves




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




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




The
adoption of the new SEC rules and accounting standards at December 31, 2009
resulted in a downward adjustment of $167,140 to the estimated discounted future
cash flows from proved reserves, and in a reduction of 1,840 BOE equivalent of
proved reserves. Additionally, the change resulted in additional depletion
expense of $713, but no additional impairment expense,  in the fourth
quarter of 2009.




Restoration,
Removal, and Environmental Liabilities




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





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





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


F-8


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)





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





2009
                  
                  
                  2008Beginning
      asset retirement obligation
                  
                  $
                  122,213
                  
                  
                  $
                  137,757Additions
      related to new properties
                  
                  
                  —
                  
                  
                  
                  410Accretion
      expense
                  
                  
                  2,905
                  
                  
                  
                  3,519Retirement
      related to property abandonment and restoration
                  
                  
                  (31,313
                  )
                  
                  
                  (19,473
                  )Ending
      asset retirement obligation
                  
                  $
                  93,805
                  
                  
                  $
                  122,213





Recognition
of Revenue





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





Income
Taxes





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





As of
December 31, 2009, the tax basis of the Partnership’s assets exceeds the
financial reporting basis of the assets by approximately $1.77 million,
primarily due to the difference between property impairment costs deducted for
financial reporting purposes and intangible drilling costs deducted for income
tax purposes.





Accounting
for Uncertainty in Income Taxes





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





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





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





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





Fair
Value of Financial Instruments





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


F-9


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)





Reclassifications





Certain
information provided for prior years has been reclassified to conform to the
current year presentation adopted as of December 31, 2009.





Recently
Adopted Accounting Pronouncements





Modernization
of Oil and Gas Reporting





In
January 2009, the SEC adopted new rules related to modernizing reserve
calculation and disclosure requirements for oil and gas companies, which became
effective prospectively for annual reporting periods ending on or after December
31, 2009. In addition to expanding the definition and disclosure requirements
for crude oil and natural gas reserves, the new rule changes the requirements
for determining quantities of crude oil and natural gas reserves. The new rule
requires disclosure of crude oil and natural gas proved reserves by geographical
area, using the unweighted arithmetic average of first-day-of-the-month
commodity prices over the preceding 12-month period, rather than end-of-period
prices, and allows the use of reliable technologies to estimate proved crude oil
and natural gas reserves, if those technologies have been demonstrated to result
in reliable conclusions about reserve volumes.  In addition, in
January 2010, the FASB issued guidance relating to crude oil and natural gas
reserve estimation and disclosures to provide consistency with the new SEC
rules.  The Partnership adopted the new standards effective December
31, 2009.  The new standards are applied prospectively as a change in
estimate. The effect of applying the un-weighted arithmetic average of
first-day-of-the-month commodity prices over the preceding 12-month period,
versus applying the 2009 end-of-period price, decreased net proved reserves by
11.1%. The standardized measure of discounted future net cash flows for the year
ended December 31, 2009 was lower by $167,140 using the new rule as compared to
amounts calculated using the previous rules.  The effect of applying
the new rule resulted in additional depletion expense of $713, but no additional
impairment expense.





Accounting
Standards Codification





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





Fair
Value Measurement of Liabilities




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




F-10


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)




Subsequent Events




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





Recognition
and Presentation of Other-Than-Temporary Impairments





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





Interim
Reporting of Fair Value of Financial Instruments





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





3.
Transactions with Affiliates





The
Partnership has no employees. RELP, an affiliate of Reef formed in 2005, employs
a staff including geologists, petroleum engineers, landmen and accounting
personnel who administer all of the Partnership’s operations. The Partnership
reimburses RELP for technical and administrative services at cost. During the
years ended December 31, 2009, 2008, and 2007, the Partnership incurred
technical services and administrative costs totaling $42,468, $49,091, and
$15,244, respectively. Of these amounts, $0, $4,721, and ($1,558) represent
technical services costs capitalized as project costs, and $42,468, $44,370, and
$16,802 represent administrative costs included as general and administrative
expenses.





Reef
contributed 1% of all leasehold, drilling, and completion costs when incurred
during the drilling and completion phases of Partnership operations. During the
year ended December 31, 2008, this 1% obligation totaled $11. Reef also
purchased 5.01% of the Partnership units and pays 5.01% of the 99% of these
costs paid by the unit holders (4.96%). In addition, Reef agreed to reimburse
the Partnership for the workover of a Partnership well which occurred during the
first quarter of 2008, and 100% of the costs of drilling and completing a well
in Terrebonne Parish, Louisiana. Reef contributed $380,694 related to these
obligations, $9,504 of which was contributed during the year ended December 31,
2009.  Of these total cumulative obligations, $107,254 related to the
reimbursement of 100% of the costs of drilling and completing a well in
Terrebonne Parish, Louisiana.  Reef has no remaining obligations
related to these additional costs subsequent to December 31, 2008.





RELP
processes joint interest billings and revenue payments on behalf of the
Partnership. At December 31, 2009 and 2008, the Partnership owed RELP $61,548
and $16,801, respectively, for joint interest and technical and administrative
charges processed in excess of revenues.




F-11


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)





If an
affiliate of Reef serves as operator of a Partnership prospect, then operator
fees are payable to the affiliate. Under such circumstances, such affiliate
receives fees at the competitive rate in the geographical area where the
prospect is located during the drilling and production phase of operations.
These fees are charged as a monthly fee per well as agreed to in an operating
agreement signed by the Partnership as well as outside third party working
interest owners in the well. During the years ended December 31, 2009, 2008, and
2007, the Partnership paid operator fees of $4,690, $4,361, and $5,236,
respectively, to RELP in connection with this obligation.





4.
Major Customers





The
Partnership sells crude oil and natural gas on credit terms to refiners,
pipelines, marketers, and other users of petroleum commodities. Revenues are
received directly from these parties or, in certain circumstances, paid to the
operator of the property who disburses to the Partnership its percentage share
of the revenues. During the year ended December 31, 2009, two marketers and one
operator accounted for 25.3%, 18.5%, and 54.9% of the Partnership’s crude oil
and natural gas revenues, respectively. During the year ended December 31, 2008,
three marketers and one operator accounted for 34.2%, 17.9%, 11.0%, and 29.7% of
the Partnership’s crude oil and natural gas revenues, respectively. During the
year ended December 31, 2007, four marketers and one operator accounted for
41.0%, 17.2%, 16.8%, 13.4%, and 10.7% of the Partnership’s crude oil and natural
gas revenues, respectively.  Due to the competitive nature of the
market for purchase of crude oil and natural gas, the Partnership does not
believe that the loss of any particular purchaser would have a material adverse
impact on the Partnership.




5.
Commitments and Contingencies




The
Partnership is not currently involved in any legal proceedings.





6.
Partnership Equity





Sales of
Partnership units began on September 21, 2004. Proceeds received were placed
into an interest bearing escrow account until the Partnership reached the
minimum subscription level of 50 units. The Partnership was formed on November
10, 2004, and the sale of Partnership units was closed on December 2, 2004 when
all 500 Partnership units were sold. The Partnership raised $9,499,441 from the
sale of 474.972 Partnership units to investor partners. Reef purchased the
remaining 25.028 units (5.01%) for $425,475. Reef also contributed 1% of all
leasehold, drilling, and completion costs as incurred, in addition to having
paid its pro rata share (4.96%) of the leasehold, drilling, and completion costs
paid by the Partnership. In addition, Reef reimbursed the Partnership for 100%
of the costs of drilling an unsuccessful developmental well and 100% of the
costs of drilling and completing a successful sidetrack to the unsuccessful
developmental well in Louisiana. In connection with these obligations, Reef had
contributed $273,440 to the Partnership at December 31, 2009.





The
Partnership also retained the interest income earned during 2004 and 2005,
totaling $68,585, for use during the drilling phase of the
Partnership.





All
units, except those purchased by Reef, paid a 15% management fee to Reef to pay
for Partnership organization and offering costs, including sales commissions.
These costs totaled $1,424,916, leaving net capital contributions of $8,842,025
available for Partnership oil and gas activities. Of the $1,424,916, offering
costs were $1,374,916 and organization costs were $50,000.





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





7.
Partnership Projects





During
2004-2006, the Partnership utilized the $8,640,194 of net capital contributions
to drill thirteen wells and to purchase royalty interests in a field in
Louisiana with two producing oil and gas properties. The Partnership drilled six
successful developmental wells and one successful exploratory well, two of which
are still productive, and drilled two developmental dry holes and four
exploratory dry holes. One of the royalty interest properties purchased by the
Partnership is still productive.


F-12


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)





In August
2006, the managing general partner agreed to pay 100% of the costs for a working
interest in a developmental well in Louisiana. The well completed drilling
operations in May 2007 and was unsuccessful, however, after reviewing the well
logs and other geologic data, the wellbore was re-entered during the fourth
quarter of 2007 and successfully sidetracked. Sidetrack drilling operations were
completed during February 2008 and the well began production in May 2008. Reef
agreed to pay 100% of the cost of the successful sidetrack operations and
completion costs. As of December 31, 2009 the Partnership had incurred and been
reimbursed $189,303 of costs related to this well. The amounts reimbursed are
classified as additional capital contributions on the accompanying balance
sheet.





RELP
serves as operator of nine of the wells drilled by the Partnership. Four of
these wells were unsuccessful and five were successful wells, of which three are
still productive at December 31, 2009.





8.
Supplemental Information on Oil & Natural Gas Exploration and Production
Activities


(Unaudited)





Capitalized
Costs





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





December
      31,
                
                2009
                
                
                2008
                
                
                2007Oil
      and natural gas properties:Unproved
      properties
                
                $
                —
                
                
                $
                —
                
                
                $
                —Proved
      properties
                
                
                8,722,067
                
                
                
                8,716,585
                
                
                
                8,545,8338,722,067
                
                
                
                8,716,585
                
                
                
                8,545,833Less:Accumulated
      depreciation, depletion and amortization
                
                
                (493,675
                )
                
                
                (435,362
                )
                
                
                (357,661
                )Property
      impairment
                
                
                (8,087,799
                )
                
                
                (8,035,610
                )
                
                
                (8,035,610
                )Total
                
                $
                140,593
                
                
                $
                245,613
                
                
                $
                152,562




Costs
Incurred





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





2009
                
                
                2008
                
                
                2007Oil
      and natural gas properties:Exploration
                
                $
                262
                
                
                $
                1,474
                
                
                $
                (24
                )Development
                
                
                5,220
                
                
                
                169,278
                
                
                
                104,650Total
                
                $
                5,482
                
                
                $
                170,752
                
                
                $
                104,626




F-13




Reef
Global Energy IV, L.P.
 Notes to
Financial Statements (continued)




Results
of Operations





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





2009
                
                
                2008
                
                
                2007Oil
      and gas producing activities:Oil
      sales
                
                $
                91,100
                
                
                $
                127,875
                
                
                $
                56,780Natural
      gas sales
                
                
                61,980
                
                
                
                187,906
                
                
                
                174,503Production
      expenses
                
                
                (66,782
                )
                
                
                (71,762
                )
                
                
                (74,227
                )Accretion
      of asset retirement obligation
                
                
                (2,905
                )
                
                
                (3,519
                )
                
                
                (43,039
                )Depreciation
      , depletion and amortization
                
                
                (43,995
                )
                
                
                (59,324
                )
                
                
                (62,949
                )Property
      impairment expense
                
                
                (52,189
                )
                
                
                —
                
                
                
                (56,256
                )Results
      of  producing activities
                
                $
                (12,791
                )
                
                $
                181,176
                
                
                $
                (5,188
                )Depletion
      rate per BOE
                
                $
                10.84
                
                
                $
                13.26
                
                
                $
                13.88


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





Crude
Oil and Natural Gas Reserves





Recent
SEC and FASB Rule Making Activity





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





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





The new
rules resulted in the use of lower prices at December 31, 2009 for both crude
oil and natural gas than would have been used under the previous rules, and
resulted in a downward adjustment of approximately 1,840 BOE to our proved
reserves as of December 31, 2009, as compared to the old end-of-period prices
rule.





Net
Proved Developed Reserve Summary





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




F-14




Reef
Global Energy IV, L.P.
 Notes to
Financial Statements (continued)




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





Oil
                      (BBL) (1)
                    
                    
                    Gas
                      (mcf)
                    
                    
                    BOE (2)Net
      proved developed reserves for properties owned by the
      Partnership:Reserves
      at December 31, 2006
                    
                    
                    1,185
                    
                    
                    
                    65,178
                    
                    
                    
                    12,048Revisions
      of previous estimates
                    
                    
                    (252
                    )
                    
                    
                    (40,471
                    )
                    
                    
                    (6,997
                    )New
      discoveries
                    
                    
                    3,037
                    
                    
                    
                    72,551
                    
                    
                    
                    15,129Production
                    
                    
                    (795
                    )
                    
                    
                    (22,447
                    )
                    
                    
                    (4,536
                    )Reserves
      at December 31, 2007
                    
                    
                    3,175
                    
                    
                    
                    74,811
                    
                    
                    
                    15,644Revisions
      of previous estimates
                    
                    
                    3,911
                    
                    
                    
                    27,378
                    
                    
                    
                    8,474Production
                    
                    
                    (1,305
                    )
                    
                    
                    (19,016
                    )
                    
                    
                    (4,475
                    )Reserves
      at December 31, 2008
                    
                    
                    5,781
                    
                    
                    
                    83,173
                    
                    
                    
                    19,643Revisions
      of previous estimates
                    
                    
                    466
                    
                    
                    
                    (7,553
                    )
                    
                    
                    (793
                    )Production
                    
                    
                    (1,727
                    )
                    
                    
                    (14,000
                    )
                    
                    
                    (4,060
                    )Reserves
      at December 31, 2009
                    
                    
                    4,520
                    
                    
                    
                    61,620
                    
                    
                    
                    14,790


(1)
            Oil
      includes both oil and natural gas
liquids


(2)
            BOE
      (barrels of oil equivalent) is calculated by converting 6 MCF of natural
      gas to 1 BBL of crude 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





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




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




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





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





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


F-15


Reef
Global Energy IV, L.P.


Notes to
Financial Statements (continued)




December
      31,
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Oil
      and natural gas properties owned by the Partnership:Future
      cash inflows
                  
                  $
                  563,230
                  
                  
                  $
                  769,676
                  
                  
                  $
                  789,360Future
      production costs
                  
                  
                  (268,210
                  )
                  
                  
                  (338,637
                  )
                  
                  
                  (310,806
                  )Future
      development costs
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (8,857
                  )Future
      net cash flows
                  
                  
                  295,020
                  
                  
                  
                  431,039
                  
                  
                  
                  469,697Effect
      of discounting net cash flows at 10%
                  
                  
                  (47,600
                  )
                  
                  
                  (91,295
                  )
                  
                  
                  (113,487
                  )Discounted
      future net cash flows
                  
                  $
                  247,420
                  
                  
                  $
                  339,744
                  
                  
                  $
                  356,210





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





December
      31,
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007Oil
      and natural gas properties owned by the Partnership:Standardized
      measure at beginning of period
                  
                  $
                  339,744
                  
                  
                  $
                  356,210
                  
                  
                  $
                  139,220Extensions
      and discoveries
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  517,409Purchase
      of minerals in place
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Net
      change in sales price, net of production costs
                  
                  
                  (32,664
                  )
                  
                  
                  (106,619
                  )
                  
                  
                  161,491Revisions
      of quantity estimates
                  
                  
                  (14,778
                  )
                  
                  
                  204,318
                  
                  
                  
                  (90,401
                  )Net
      changes in estimated future development costs
                  
                  
                  —
                  
                  
                  
                  (25,096
                  )
                  
                  
                  10,559Changes
      in production timing rates
                  
                  
                  4,537
                  
                  
                  
                  115,810
                  
                  
                  
                  (281,973
                  )Accretion
      of discount
                  
                  
                  33,974
                  
                  
                  
                  35,621
                  
                  
                  
                  13,922Sales
      net of production costs
                  
                  
                  (83,393
                  )
                  
                  
                  (240,500
                  )
                  
                  
                  (114,017
                  )Net
      increase (decrease)
                  
                  
                  (92,324
                  )
                  
                  
                  (16,466
                  )
                  
                  
                  216,990Standardized
      measure at end of year
                  
                  $
                  247,420
                  
                  
                  $
                  339,744
                  
                  
                  $
                  356,210




F-16