** **

**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-K**

 

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**(Mark One)**

 

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

 

**or**

 

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

** **

**For the Transition period from              to**

 

### **COMMISSION FILE NUMBER333-93399-04**

### ** **

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

(Exact name of registrantas specified in its charter)

** **

| **Nevada**                                                        | ** ** | **20-1654113**                        |
|-------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of

incorporation or  organization) | * *   | (I.R.S. Employer

Identification No.) |

 

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

 

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

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

 

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

 

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

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

 

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

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act.

 

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

 

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

 

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

 

As of March 31, 2008, theregistrant had 25.028 units held by the managing general partner, 125.000 unitsof additional general partner interest and 349.972 units of limited partnerinterest outstanding.

 

##### Documents incorporated by reference:  **None**

#####  

##### 

 

REEF GLOBAL ENERGY IV,L.P.

FORM 10-K

TABLE OF CONTENTS

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

 

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**PART I**

 

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

 

**Introduction**

 

Reef Global Energy IV,L.P. (the Partnership) is the fourth in a series of five Nevada limitedpartnerships comprising a program called Reef Global Energy Ventures (theProgram). The Partnership was formed in the state of Nevada on November 10,2004. The Partnership purchases working interests in oil and natural gasprospects and participates in the drilling of wells on those prospects. Theprimary purposes of the Partnership are to generate revenue from the productionof oil and natural gas, distribute cash to the partners, and provide taxbenefits. Reef Oil & Gas Partners, L.P. (Reef) is the managing generalpartner of the Partnership.

 

The Partnership wasformed to drill, complete and own working interests in oil and natural gaswells located primarily onshore in the continental United States or in U.S.coastal waters in the Gulf of Mexico. During 2004 and 2005, the Partnershipacquired working interests in eight developmental and five exploratoryprospects located in Texas, Louisiana, and in U.S coastal waters in the Gulf ofMexico. The Partnership drilled 13 wells on these prospects. The Partnershippurchased a minority non-operated working interest in these prospects. Reefpurchased additional interests in certain Partnership prospects for some of theother partnerships it manages. Theadditional interest purchased by Reef on nine of the Partnership prospects waslarge enough to allow OREI, Inc. (OREI), an affiliate of Reef, to serve asprospect operator. During 2006 well operator status was transferred by OREI toReef Exploration L.P. (RELP), an affiliate of Reef formed in 2005.

 

During 2006, Reef agreedto pay 100% of the costs for a working interest in a developmental well inLouisiana. This well was not successful. However, in October 2007 the well wasre-entered and successfully side-tracked. The well is currently being completedand is expected to begin production operations during the second quarter of2008. The Partnership expended no funds in connection with the drilling andcompletion of this well.

 

**Acquisition and Drilling ofUndeveloped Prospects**

 

The Partnership purchasedworking interests in eight developmental and five exploratory prospects. A “prospect”is generally defined as a contiguous oil and gas leasehold estate, or lesserinterest in a leasehold estate, upon which drilling operations may beconducted. A prospect is characterized as “exploratory” or “developmental”based upon the type of well to be drilled on the prospect. A development wellis a well drilled within a proved area of an oil or gas reservoir to the depthof a stratigraphic horizon known to be productive. Generally an exploratorywell is any well that is not a development well, including wells drilled to findand produce oil or gas in an unproven area, wells drilled to find a newreservoir in a field previously found to be productive of oil or gas, or wellsdrilled to extend a known reservoir. Thirteen wells were drilled on theprospects acquired by the Partnership.

 

The Partnership prospectswere acquired pursuant to an arrangement in which the Partnership purchasedpart of the working interest. A working interest bears a specified portion ofthe costs of development, operation and maintenance. A working interest issubject to landowners’ royalty interests and may be subject to other royaltyinterests payable to unaffiliated third parties. Where the Partnership acquiredless than 100% of the working interest, costs were reduced proportionately.

 

**Consulting Agreements forProspect Acquisitions**

 

Reefentered into three agreements (the CMI Agreements) with Challenger MineralsInc. (CMI), a subsidiary of GlobalSantaFe Corporation and a screener of oil andgas prospects in the Gulf of Mexico and North Sea regions. Under the terms ofthese agreements, Reef had the option to acquire working interests in prospectsscreened by CMI. Reef paid CMI an annual fee for the geological and geophysicalservices provided by CMI. The last of these agreements expired effective November30, 2006.

 

Projects approved for acquisition by Reefunder these agreements were assigned to this Partnership as well as otherlimited partnerships formed as part of the Program. The five partnershipsformed as a part of this Program have each reimbursed to Reef a portion of theactual 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

 

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$314,380, or 3.17% of its gross capitalcontributions of $9,924,916. This amount has been capitalized as geological andgeophysical costs in accordance with the full cost method of accounting for oiland gas properties. There are no further amounts to be reimbursed by thisPartnership under these agreements. The partnerships formed as a part of thisProgram did not reimburse Reef any amount in excess of the actual fees paid byReef.

 

**Drilling and Completion Phase ofOperations**

 

On all prospects operated by OREI and later transferred to RELP,drilling operations were contracted to independent third party drillers, andthe costs of the wells to the Partnership were determined by actual third partycosts, plus OREI’s or RELP’s monthly operator fees for the area where the wellis located.

 

The Partnership generallypays drilling and completion costs as incurred. Wells drilled that failed toresult in the discovery of oil or natural gas were plugged and abandoned inaccordance with applicable regulations. Two of the developmental wells and fourof the exploratory wells drilled by the Partnership were dry holes.

 

**Production Phase of Operations**

 

For any well capable ofproducing quantities of oil and/or natural gas in commercial quantities,production operations commence once the well has been completed by installingall surface equipment necessary to control the flow of production or to shutdown the well, and by installing any storage facilities, gathering, or saleslines required to produce and sell the oil and/or natural gas production fromthe well. The Partnership completed four developmental wells during 2005, twoof which are still producing oil and gas. The Partnership completed twodevelopmental wells and one exploratory well during 2006, two of which arestill producing oil and gas. Two developmental wells and four exploratory wellswere dry holes and have been plugged and abandoned.

 

The Partnership hasentered into agreements with third party marketers to sell the oil and/ornatural gas produced from successful wells on a competitive basis at the bestavailable terms and prices. Generally, the purchase contracts for the sale ofoil and gas are cancelable on 30 days’ notice. In certain instances thePartnership, as a minority non-operated working interest owner, has elected topermit the operator of the well to enter into sales and marketing agreementswith third party purchasers.

 

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

 

ThePartnership has not and does not expect to engage in commodity futures tradingor hedging activities, or to enter into derivative financial instrumenttransactions for trading or other speculative purposes. Accordingly, thePartnership is at risk for the volatility in commodity prices inherent in theoil and gas industry, and the level of commodity prices has a significantimpact on the Partnership’s results of operations. See “Item 7A. — Quantitativeand Qualitative Disclosures About Market Risk.”

 

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

 

**Major Customers**

 

ThePartnership sells crude oil and natural gas on credit terms to refiners,pipelines, marketers, and other users of petroleum commodities. Revenues arereceived directly from these parties or, in certain circumstances, paid to theoperator of the property who disburses to the Partnership its percentage shareof the revenues. During the year ended December 31, 2007, four marketers andone operator accounted for 41.0%, 17.2%, 16.8%, 13.4%, and 10.7% of thePartnership’s oil and gas revenues, respectively. During the year endedDecember 31, 2006, three marketers and one operator accounted for 32.9%, 21.8%,13.4%, and 23.0% of the Partnership’s oil and gas revenues, respectively.During the year ended December 31, 2005, one marketer and one operatorpurchased all of the Partnership’s 

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productsand accounted for 75.6% and 24.4% of the Partnership’s oil and gas revenues,respectively. Due to the competitive nature of the market for purchase of crudeoil and natural gas, the Partnership does not believe that the loss of anyparticular purchaser would have a material adverse impact on the Partnership.

 

**Insurance**

 

The Partnership is anamed insured under blowout, pollution, public liability and workmen’scompensation insurance policies obtained by RELP. Such insurance, however, maynot be sufficient to cover all liabilities. Each unit held by general partnersrepresents an open-ended security for unforeseen events such as blowouts, lostcirculation, stuck drill pipe, etc. that may result in unanticipated additionalliability materially in excess of a general partner’s initial investment in thePartnership.

 

The Partnership is anamed insured under various insurance policies and intends to maintain suchpolicies subject to its analysis of their premium costs, coverage and otherfactors. In the exercise of Reef ‘s fiduciary duty as managing general partner,Reef has obtained insurance on behalf of the Partnership to provide thePartnership with such coverage as Reef believes is sufficient to protect theinvestor partners against the foreseeable risks of drilling and production. Reefreviewed the Partnership insurance coverage prior to commencing drillingoperations and periodically evaluates the sufficiency of insurance. In no eventwill the Partnership maintain public liability insurance of less than two timesthe Partnership’s capitalization.****Subjectto the foregoing, Reef may, in its sole discretion, increase or decrease thepolicy limits and types of insurance from time to time as Reef deemsappropriate under the circumstances, which may vary materially.

 

Reef will notify allinvestor general partners of the Partnership at least 30 days prior to anymaterial change in the amount of the Partnership’s insurance coverage. Withinthis 30-day period and otherwise after the expiration of one year following theclosing of the offering of the Partnership, investor general partners have theright to convert their units into units of limited partnership interest bygiving Reef written notice of their intent to convert. At any time during this30-day period, upon receipt of the required written notice from an investorgeneral partner of his intent to convert, Reef will amend the PartnershipAgreement and will file the amendment with the State of Nevada prior to theeffective date of the change in insurance coverage. This amendment to thePartnership Agreement will effectuate the conversion of the interest of theformer investor general partner to that of a limited partner. Effectingconversion is subject to the express requirement that the conversion will notcause a termination of the Partnership for federal income tax purposes.Investor general partners will have limited liability as a limited partner forany Partnership operations conducted after their conversion date, effectiveupon the filing of an amendment to the Certificate of Limited Partnership ofthe Partnership. However, even after an election of conversion, the investorpartner will continue to have unlimited liability regarding partnershipactivities that occurred while he was an investor general partner.

 

**Markets**

 

The marketing of any oiland natural gas produced by the Partnership is affected by a number of factorsthat are beyond the Partnership’s control and whose exact effect cannot beaccurately predicted. These factors include:

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

 

The supply and demandbalance of crude oil and natural gas in world markets has caused significantvariations in the prices of these products over recent years. The NorthAmerican Free Trade Agreement eliminated trade and investment barriers betweenthe United States, Canada, and Mexico, resulting in increased foreigncompetition for domestic natural gas production. New pipeline projects recentlyapproved by, or presently pending before, FERC, as well as nondiscriminatoryaccess requirements, could further substantially increase the availability ofgas imports to certain U.S. markets. Such imports could have an adverse effecton both the price and volume of gas sales from Partnership wells.

 

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Members of theOrganization of Petroleum Exporting Countries (OPEC) establish prices andproduction quotas for petroleum products from time to time with the intent ofaffecting the global supply of crude oil and reducing, increasing ormaintaining certain price levels. Reef is unable to predict what effect, ifany, such actions will have on the amount of or the prices received for oilproduced and sold from the Partnership’s wells.

 

In several initiatives,FERC has required pipelines to develop electronic communication and to providestandardized access via the Internet to information concerning capacity andprices on a nationwide basis, so as to create a national market. Paralleldevelopments toward an electronic marketplace for electric power, mandated byFERC, are serving to create multi-national markets for energy productsgenerally. These systems will allow rapid consummation of natural gastransactions. Although this system may initially lower prices due to increasedcompetition, it is anticipated to expand natural gas markets and to improvetheir reliability.

 

**Regulation**

 

The Partnership’soperations are affected from time to time in varying degrees by domestic andforeign political developments, and by federal and state laws and regulations.

 

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

 

*Environmental.*ThePartnership’s drilling and production operations are also subject toenvironmental protection regulations established by federal, state, and localagencies that may necessitate significant capital outlays that, in turn, wouldmaterially affect the financial position and business operations of the Partnership.These regulations, enacted to protect against waste, conserve natural resourcesand prevent pollution, could necessitate spending funds on environmentalprotection measures, rather than on drilling operations. If any penalties orprohibitions were imposed on the Partnership for violating such regulations,the Partnership’s operations could be adversely affected.

 

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

 

*ProposedRegulation.*Various legislative proposals are beingconsidered in Congress and in the legislatures of various states, which, ifenacted, may significantly and adversely affect the petroleum and natural gasindustries. Such proposals involve, among other things, the imposition of pricecontrols on all categories of natural gas production, the imposition of landuse controls, such as prohibiting drilling activities on certain federal andstate 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 byCongress or the various state legislatures and what effect, if any, suchproposals will have on the Partnership’s operations.

 

**Employees**

 

The Partnership has no employees, and is managed by its managinggeneral partner, Reef. Through January 1, 2006, OREI employed a staff includinggeologists, petroleum engineers, landmen, and accounting personnel whoadministered all of the Partnership’s operations. On January 2, 2006, theemployees of OREI were transferred to RELP, where they continue to administerall of the Partnership’s operations. The Partnership reimburses OREI and RELPfor technical and administrative services at cost. See “Item 11 – ExecutiveCompensation.”

 

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** **

**FORWARD-LOOKINGSTATEMENTS**

 

This Annual Report onForm 10-K contains forward-looking statements that involve risks anduncertainties. You should exercise extreme caution with respect to allforward-looking statements made in this Annual Report. Specifically, thefollowing statements are forward-looking:

 

·                  statements regarding the Partnership’soverall strategy for acquiring prospects, including its intent to diversify thePartnership’s investments;

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

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

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

·                  any statementsusing the words “anticipate,” “believe,” “estimate,” “expect” and similar suchphrases or words; and

·                  any statementsof other than historical fact.

 

Reef believes that it isimportant to communicate its future expectations to the partners. Forward-lookingstatements reflect the current view of management with respect to future eventsand are subject to numerous risks, uncertainties and assumptions, including,without limitation, the factors listed in ITEM 1A of this Annual Report on Form10-K captioned “RISK FACTORS.” Although Reef believes that the expectationsreflected in such forward-looking statements are reasonable, Reef can give noassurance that such expectations will prove to have been correct. Should anyone or more of these or other risks or uncertainties materialize or should anyunderlying assumptions prove incorrect, actual results are likely to varymaterially from those described herein. There can be no assurance that theprojected results will occur, that these judgments or assumptions will provecorrect or that unforeseen developments will not occur.

 

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

 

**ITEM 1A.            RISKFACTORS**

** **

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

** **

**ThePartnership’s ability to continue as a going concern.**

 

Our independentregistered public accounting firm’s opinion on our 2007 and 2006 financialstatements included an explanatory paragraph indicating substantial doubt aboutour ability to continue as a going concern. Since its inception, thePartnership has expended its operating capital on drilling for oil and naturalgas. The Partnership has completed drilling operations with the originalcapital raised by the Partnership. In addition, drilling operations have beencompleted on the wells for which Reef has contributed 100% of the cost. Thedrilling operations of the Partnership have not resulted in the discovery orexploitation of sufficient oil and/or gas reserves to recover all of thePartnership’s investment in Partnership wells. The December 31, 2007 estimateof the Partnership’s oil and gas reserves and future cash flows raises doubtsabout the future ability of the Partnership to generate oil and gas revenues inexcess of current operating costs. During 2007, the Partnership undertook threemajor projects. The first project, a re-completion of an existing well in a newzone, was successfully completed in June 2007 and has had a positive impact oncash flow. The second project, a re-completion of an existing well in a newzone failed and the well is expected to be plugged and abandoned in 2008.Finally, Reef paid 100% of the costs for a well that began 

 

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drilling operationsduring 2006. Though the initial well was not successful, the well wassuccessfully re-entered and side-tracked beginning in October 2007. The wellhas added proved reserves to the Partnership and is expected to beginproduction operations during the second quarter of 2008.

 

The managing generalpartner is considering several options related to the Partnership, incuding thepossible sale of marketable assets, as a result of the recurring losses,erosion of partnership equity, and lack of significant cash flows fromoperations.

 

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

 

The financial condition,results of operations, and the carrying value of our oil and natural gasproperties depend primarily upon the prices received for our oil and naturalgas production. Oil and natural gas prices historically have been volatile andlikely will continue to be volatile given current geopolitical conditions. Cashflow from operations is highly dependent upon the sales prices received fromoil and natural gas production. The prices for oil and natural gas are subjectto a variety of factors beyond our control. These factors include:

 

·                  the domesticand foreign supply of oil and natural gas; consumer demand for oil and gas, andmarket expectations regarding supply and demand;

·                  the abilityof the members of  OPEC to agree to andmaintain oil price and production controls;

·                  domesticgovernment regulations and taxes;

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

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

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

·                  domestic andworldwide economic conditions.

 

These factors and thevolatility of the energy markets make it extremely difficult to predict pricemovements. Also, oil and natural gas prices do not necessarily move in tandem.Declines in oil and natural gas prices would not only reduce revenues and cashflow available for distributions to partners, but could reduce the amount ofoil and natural gas that can be economically produced from successful wellsdrilled by the Partnership, and, therefore, have an adverse effect uponfinancial condition, results of operations, oil and gas reserves, and thecarrying value of the Partnership’s oil and natural gas properties. Approximately79.7% of our estimated proved reserves at December 31, 2007 were natural gas,and, as a result, our financial results are more sensitive to fluctuations innatural gas prices.

 

The Partnership, whilenot prohibited from engaging in commodity trading or hedging activities in aneffort to reduce exposure to short-term fluctuations in the price of oil andnatural gas, has not engaged in such activities. Accordingly, the Partnershipis at risk for the volatility in oil and natural gas prices, and the level ofcommodity prices has a significant impact upon the Partnership’s results ofoperations.

 

**Oiland natural gas well drilling is a speculative activity involving numerousrisks and substantial and uncertain costs which could adversely affect thePartnership.**

 

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

 

**Weare subject to substantial operating risks that may adversely affect theresults of operations.**

 

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

 

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

 

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

 

The Partnership haslimited ability to exercise influence over and control the risks associatedwith operations on properties not operated by RELP. The failure of an operatorof our wells to adequately perform operations, an operator’s breach of theapplicable agreements, or an operator’s failure to act in ways that are in ourbest interest could reduce our production and revenues. The success and timingof drilling and development activities on properties operated by others dependsupon a number of factors outside of our control, including the operator’s

 

·                  timing andamount of capital expenditures;

·                  expertiseand financial resources;

·                  inclusion ofother participants in drilling wells; and

·                  use oftechnology.

 

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

 

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

 

 Securities and Exchange Commission (SEC) rulesrequire the Partnership to present annual estimates of reserves. Reservoirengineering is a subjective and inexact process of estimating undergroundaccumulations of oil and natural gas that cannot be measured in an exactmanner, and is based upon assumptions that may vary considerably from actualresults. Accordingly, reserve estimates may be subject to upward or downwardadjustments. Actual production, revenues and expenditures with respect toreserves will likely vary from estimates, and such variances could be material.

 

You should not assumethat any present value of future net cash flows from our producing reservesshown in this Form 10-K is the market value for our estimated oil and naturalgas reserves. The estimated discounted future net cash flows from our proved reservesare based upon prices and costs in effect at the end of the period heldconstant and discounted at 10%. Actual future prices and costs may bematerially higher or lower. Further, actual future net cash flows will beaffected by factors such as the amount and timing of actual developmentexpenditures, the rate and timing of production, and changes in governmentalregulations and tax rates.

 

**Reef andits affiliates have sponsored ventures in the past that have produced dry holesand abandoned wells.**

 

Reef Global EnergyVentures is the first public drilling program sponsored by Reef as the managinggeneral partner, and Reef Global Energy IV, L.P. is the fourth limitedpartnership offered under that Program. Reef and its affiliate, OREI, havesponsored 68 ventures from 1996 to the present. Among these ventures, (i) eightwere dedicated almost exclusively to the purchase of interests in alreadyproducing reserves, (ii) one was dedicated primarily to the purchase ofinterests in already producing reserves but has the ability to use up to 20% ofcapital raised for development purposes, and (iii) three were dedicated to boththe purchase of interests in producing wells and the use of up to 50% ofcapital raised for development of proven reserves. We refer to the programsdescribed in clause (i) in the preceding sentence as “income fund” ventures andto the programs described in clauses (ii) and (iii) as “income and developmentfund” ventures. Reef and its affiliates have also sponsored 52 drillingventures, three 3-D seismic ventures, and one salt water disposal venture since1996. Together, these ventures have drilled 132 wells 

 

8

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(104 by drillingventures and 28 by income fund and income and development fund ventures). Ofthe wells drilled by Reef and its affiliates’ ventures, 63 were exploratorywells and 69 were developmental wells. Forty-nine of the wells drilled were dryholes, and three wells were completed but were non-commercial. Of the 80 wellsthat were commercial, 60 are still owned by Reef or its affiliates’ venturesand are currently producing, eighteen have been plugged and abandoned or soldessentially for salvage value, one has been sold, and one is currently used asa salt water disposal well. Using this data, approximately 60.6% of the wellsdrilled by these ventures were completed as commercially producing and 39.4%were dry holes (including the three wells that were completed but failed tobecome commercial producers). Approximately 13.6% of the wells drilled by ourventures were subsequently abandoned or sold essentially for salvage valueprior to abandonment.

 

**The Partnership Agreement limitsReef’s liability to each partner and the Partnership and requires thePartnership to indemnify Reef against certain losses.**

 

Reef will have noliability to the Partnership or to any partner for any loss suffered by thePartnership, and will be indemnified by the Partnership against loss sustainedby it in connection with the Partnership if:

 

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

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

·        Reef’sactions did not constitute negligence or misconduct.

 

**Drilling exploratory wells isriskier than drilling developmental wells.**

 

Many of the wells drilledby Reef and its affiliates since 1996 have been exploratory wells. Drillingexploratory wells involves greater risks of dry holes and loss of the partners’investment than the drilling of developmental wells. Drilling developmentalwells generally involves less risk of dry holes, although sometimesdevelopmental acreage is more expensive and subject to greater royalties andother burdens on production. The Partnership purchased working interests infive exploratory prospects upon which five wells were drilled, four of whichwere unsuccessful.

 

**The production and producing lifeof Partnership wells is uncertain.**

 

Production will decline.It is not possible to predict the life and production of any well. The actuallife could differ from that which is anticipated. Sufficient oil or natural gasmay not be produced for a partner to receive a profit or even to recover hisinitial investment. In addition, production from the Partnership’s oil and naturalgas wells, if any, will decline over time, and does not indicate any consistentlevel of future production. This production decline may be rapid and irregularwhen compared to a well’s initial production.

 

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

 

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

 

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

 

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

 

9

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** **

**ITEM 1B.**                    UNRESOLVEDSTAFF 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 availablePartnership capital, the Partnership purchased interests in 13 prospects. Sevenprospects were in Louisiana, five were in Texas, and one was located in theGulf of Mexico off of the Texas coast. The Partnership also purchased a royaltyinterest in a field in Louisiana with three productive wells, one of whichremains productive as of the date of this report. The Partnership drilled threewells in this field, of which two were unsuccessful and one was successful buthas ceased production. The Partnership drilled 13 wells on its 13 prospects.Two developmental and four exploratory wells were unsuccessful. These six wellswere located in Galveston County, Texas, in Jefferson, St. Charles,Plaquemines, and Acadia Parish, Louisiana, and in the Gulf of Mexico. ThePartnership completed wells on six of the developmental prospects, of whichthree are currently productive. Three of the developmental wells have ceasedproduction and have or will be plugged and abandoned. The three currentproductive wells are located in Nueces and Live Oak County, Texas and AcadiaParish Louisiana. The three wells that have ceased production are located inJefferson and Cameron Parish, Louisiana and Live Oak County, Texas. ThePartnership completed one exploratory well in Galveston County, Texas. Drillingoperations were completed during 2006 with the capital raised by thePartnership.

 

In August 2006, themanaging general partner agreed to pay 100% of the costs for a working interestin a developmental well in Terrebonne Parish, Louisiana. Though the initialwell was not successful, the well was successfully re-entered and side-trackedbeginning in October 2007. The well has added proved reserves to thePartnership and is expected to begin production operations during the secondquarter of 2008. The costs of the original well and the side-track are expectedto total approximately $170,000. These costs are being paid by the Partnershipand then reimbursed to the Partnership through additional capital contributionsto the Partnership made by Reef. No Partnership funds will be expended inconnection with the original drilling and side-tracking of this well.

 

**Proved Oil and Gas Reserves**

 

The Partnership used an independent petroleum engineer to prepare itsDecember 31, 2007 estimate of net proved oil and natural gas reserves. Netproved oil and natural gas reserves as of December 31, 2007 have been estimatedby Gleason Engineering, of Arlington, Texas. Net proved reserves as of December31, 2006 and 2005 were estimated by a petroleum engineer employed by RELP. Theestimated net proved oil and natural gas reserves as of December 31, 2007,2006, and 2005 are summarized below. The quantities of proved oil and naturalgas reserves discussed in this section include only the amounts which wereasonably expect to recover in the future from known oil and gas reservoirsunder the current economic and operating conditions. Proved reserves includeonly quantities that we expect to recover commercially using current prices,costs, existing regulatory practices, and technology. Therefore, any changes infuture prices, costs, regulations, technology or other unforeseen factors couldmaterially increase or decrease the proved reserve estimates.

 
| ** **                                   | ** ** | **Oil (BBL)** | ** ** | **Gas (MCF)** | ** ** |
|----------------------------------------------|------------|--------------------|------------|--------------------|------------|
| Net proved  reserves as of December 31, 2005 |       | 4,537              |       | 401,480            |       |
| Net proved  reserves as of December 31, 2006 |       | 1,185              |       | 65,178             |       |
| Net proved  reserves as of December 31, 2007 |       | 3,175              |       | 74,811             |       |

 

The standardized measure of discounted future net cash flows as ofDecember 31, 2007, 2006 and 2005 is computed by applying year-end prices,costs, and legislated tax rates and a discount factor of 10% to net provedreserves. The standardized measure of discounted future net cash flows does notpurport to present the fair value of our oil and natural gas reserves.

 

10

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| Standardized  measure of discounted future net cash flows as of December 31, 2005 | $ | 2,524,655 |   |
|-----------------------------------------------------------------------------------|---|-----------|--------|
| Standardized  measure of discounted future net cash flows as of December 31, 2006 | $ | 139,220   |   |
| Standardized  measure of discounted future net cash flows as of December 31, 2007 | $ | 356,210   |   |

 

During the years ended December 31, 2007, 2006 and 2005, thePartnership recorded property impairment costs totaling $56,256, $2,805,385 and$5,173,969 as a result of the net capitalized costs of oil and gas propertiesexceeding the standardized measure of discounted future net cash flows.

 

**ITEM 3.****                            ****LEGAL PROCEEDINGS.**

 

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

 

**ITEM 4.****                            ****SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS.**

 

None.

 

**PART II**

 

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

 

As of December 31, 2007,the Partnership had one managing general partner, 126 investor limited partners,and 250 investor general partners. Reef holds a total of 25.028 general partnerunits and the general and limited investor partners hold 125.000 generalpartner units and 349.972 limited partner units. No established trading marketexists for the units.

 

Cash which, in the solejudgment of the managing general partner, is not required to meet thePartnership’s obligations is distributed to the partners at least quarterly inaccordance with the Partnership Agreement. Effective November 1, 2006, cashdistributions are distributed 5.96% to the managing general partner (based uponthe 1% interest not represented by units and the 4.96% interest represented byPartnership units) and 94.04% to investor partners.

 

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

 

The Partnership did not repurchase any units in 2007, 2006 and 2005 andhas 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-effectiveamendment to the Registration Statement on behalf of the Program on September14, 2001. On January 10, 2002 Reef filed a final prospectus and commenced theoffering of units in the Program. All sales of Partnership units were madethrough the Program’s dealer-manager, Reef Securities, Inc., and a number ofsoliciting dealers. The Program filed a prospectus supplement describing thePartnership on September 21, 2004 and commenced offering units. Under the termsof the offering, a minimum of 50 Partnership units at a price of $20,000 perunit were required to be sold in order to form the Partnership. Upon meetingthis requirement, the Partnership was formed on November 10, 2004. ThePartnership offering consisted of 375 units of limited partner interest and 125units of general partner interest. The offering period ended on December 2,2004, at which time all 500 allowable units had been sold. Investor partnerspurchased 349.972 limited partner units and 125 general partner units. Reefpurchased 25.028 limited partner units, equaling 5.01% of the total Partnershipunits sold. Total offering proceeds were $9,924,916. Reef also contributes 1%of all leasehold, drilling, and completion costs as incurred, and

 

11

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is reimbursing the Partnership 100% of the costs of drilling adevelopment well in Louisiana. During the years ended December 31, 2007, 2006and 2005, Reef paid $104,917, $19,918, and $63,893 in connection with theseobligations, and has a receivable from the Partnership totaling $752 atDecember 31, 2007 related to these obligations. Reef also retained the interestincome earned by the Partnership during 2004 and 2005, totaling $68,585 to beused during the drilling phase of operations.

 

All units except those purchased by Reef paid a 15% management fee toReef to pay for Partnership organization and offering costs, including salescommissions. These costs totaled $1,424,916, leaving capital contributions of$8,756,561 available for Partnership oil and gas operations. As of December 31,2007, the Partnership had expended $8,596,530 on property acquisitions and$112,843 on general and administrative expenses. Drilling operations have beencompleted on the 13 prospects owned by the Partnership, and the Partnership hasno plans to conduct further development operations on any Partnership prospect.

 

**ITEM 6.****                            ****SELECTED FINANCIAL DATA.**

 

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

 
| ** **                                       | ** ** | **December  31,** | ** ** | **December  31,** | ** ** | **December  31,** | ** ** | **Period from  Inception  (November  10, 2004) to  December  31,** | ** ** |
|--------------------------------------------------|------------|-------------------|------------|-------------------|------------|-------------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **2007**          | ** ** | **2006**          | ** ** | **2005**          | ** ** | **2004**                                                                          | ** ** |
| **Financial  Data**                              |       |              |       |              |       |              |       |                                                                              |       |
| Oil and gas  sales revenue                       |       | $                 | 231,283    |              | $          | 311,888           |       | $                                                                                 | 113,465    |   | $ | — |   |
| Interest income                                  |       | 1,155             |       | 7,175             |       | 54,820            |       | 13,765                                                                            |       |
| Costs and  expenses                              |       | (307,424          | )          | (3,260,326        | )          | (5,554,339        | )          | (54,891                                                                           | )          |
| Partnership net  loss                            |       | (74,986           | )          | (2,941,263        | )          | (5,386,054        | )          | (41,126                                                                           | )          |
|                                             |       |              |       |              |       |              |       |                                                                              |       |
| Allocation of  net loss:                         |       |              |       |              |       |              |       |                                                                              |       |
| Managing general  partner                        |       | (28,494           | )          | (161,672          | )          | (325,236          | )          | (756                                                                              | )          |
| General partner  units                           |       | (12,235           | )          | (731,514          | )          | (1,331,873        | )          | (10,624                                                                           | )          |
| Limited partner  units                           |       | (34,256           | )          | (2,048,077        | )          | (3,728,945        | )          | (29,746                                                                           | )          |
| Net loss per  managing general partner unit      |       | (1,138.48         | )          | (6,459.63         | )          | (12,994.92        | )          | (30.21                                                                            | )          |
| Net loss per  general partner unit               |       | (97.88            | )          | (5,852.12         | )          | (10,654.98        | )          | (85.00                                                                            | )          |
| Net loss per  limited partner unit               |       | (97.88            | )          | (5,852.12         | )          | (10,654.98        | )          | (85.00                                                                            | )          |
|                                             |       |              |       |              |       |              |       |                                                                              |       |
| Total assets                                     |       | 228,326           |       | 304,718           |       | 3,482,185         |       | 9,163,596                                                                         |       |
| Distributions to  managing general partner       |       | (2,170            | )          | (12,952           | )          | (11,066           | )          | —                                                                            |       |
| Distributions to  investor partners              |       | (34,280           | )          | (89,298           | )          | (60,534           | )          | —                                                                            |       |
| Distributions  per general partner unit          |       | 72.17             |       | 188.01            |       | 127.45            |       | —                                                                            |       |
| Distributions  per limited partner unit          |       | 72.17             |       | 188.01            |       | 127.45            |       | —                                                                            |       |
| Distributions  per managing general partner unit |       | 86.70             |       | 517.50            |       | 442.14            |       | —                                                                            |       |
|                                             |       |              |       |              |       |              |       |                                                                              |       |
| **Operating  Data**                              |       |              |       |              |       |              |       |                                                                              |       |
| Annual  production:                              |       |              |       |              |       |              |       |                                                                              |       |
| Gas (MCF)                                        |       | 22,447            |       | 32,636            |       | 11,019            |       | —                                                                            |       |
| Oil (BBL)                                        |       | 795               |       | 1,014             |       | 212               |       | —                                                                            |       |
|                                             |       |              |       |              |       |              |       |                                                                              |       |
| **Financial  Data**                              |       |              |       |              |       |              |       |                                                                              |       |
| Average sales  price:                            |       |              |       |              |       |              |       |                                                                              |       |
| Gas (per MCF)                                    |       | $                 | 7.77       |              | $          | 7.55              |       | $                                                                                 | 9.20       |   | $ | — |   |
| Oil (per BBL)                                    |       | $                 | 71.45      |              | $          | 64.58             |       | $                                                                                 | 57.28      |   | $ | — |   |

 

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**ITEM 7.****                          ****MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

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

 

For a discussion of risk factors that could impact the Partnership’sfinancial results, please see Item 1A of this Annual Report on Form 10-K.

 

**Critical Accounting Policies**

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States requires us to make estimates andassumptions that can affect the reporting of assets, liabilities, equity,revenues, and expenses. We base our estimates on historical experience andvarious other assumptions that are believed to be reasonable under thecircumstances. Actual results may differ from these estimates under differentassumptions or conditions. We are also required to select among alternativeacceptable accounting policies. See Note 2 to the financial statements for acomplete list of significant accounting policies.

 

**Oiland Gas Properties**

 

The Partnership followsthe full cost method of accounting for crude oil and natural gas properties.Under this method, all direct costs and certain indirect costs associated withacquisition of properties and successful as well as unsuccessful explorationand development activities are capitalized. Depreciation, depletion, andamortization of capitalized crude oil and natural gas properties and estimatedfuture development costs, excluding unproved properties, are based on the unit-of-productionmethod using estimated proved reserves. For these purposes, proved gas reservesare converted to equivalent barrels at a rate of 6 Mcf to 1 Bbl. Netcapitalized costs of crude oil and natural gas properties, as adjusted forasset retirement obligations, are limited to the lower of unamortized cost or thecost ceiling, defined as the sum of the present value of estimated future netrevenues from proved reserves based on un-escalated prices discounted at 10percent, plus the cost of properties not being amortized, if any, plus thelower of cost or estimated fair value of unproved properties included in thecosts being amortized, if any. Pursuant to full cost accounting rules, thePartnership performs a ceiling test quarterly as of the balance sheet date onits proved oil and gas properties. Excess capitalized costs are charged toproperty impairment expense. No gain or loss is recognized upon sale ordisposition of crude oil and natural gas properties, except in unusualcircumstances. Unproved properties consist primarily of drilling costs inprogress on wells drilling for unproved reserves. Investments in unprovedproperties are not depleted pending determination of the existence of provedreserves. During the years ended December 31, 2007, 2006, and 2005, thePartnership recognized property impairment expense totaling $56,256,$2,805,385, and $5,173,969, respectively.

 

The estimate of proved oil and gas reserves used to determineproperty impairment expense, and also utilized in the Partnership’s disclosuresof supplemental information regarding oil and gas producing activities,including the standardized measure of discounted cash flows, was prepared by anindependent petroleum engineer for the year ended December 31, 2007, and by a  petroleum engineer employed by RELP for theyears ended December 31, 2006 and 2005, utilizing the period end prices andcosts as promulgated by the SEC. Reserve engineering is a subjective andinexact process of estimating underground accumulations of oil and natural gasthat cannot be measured in an exact manner, and is based upon assumptions thatmay vary considerably from actual results. Accordingly, reserve estimates maybe subject to upward or downward adjustments. Actual production, revenues and expenditures with respectto reserves will likely vary from estimates, and such variances could bematerial.

 

13

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The determination of depreciation, depletion and amortizationexpense recognized in the financial statements is also dependent upon theestimates of proved oil and gas reserves and is computed using theunits-of-production method based upon this estimate of proved reserves. During theyears ended December 31, 2007, 2006 and 2005, the Partnership had depreciation,depletion, and amortization expense totaling $62,949, $247,338, and $230,123,respectively.

 

The Partnership accounts for its asset retirement obligations inaccordance with Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accountingfor Asset Retirement Obligations” (“SFAS No. 143”). Asset retirement costs andliabilities associated with future site restoration and abandonment oflong-lived assets are initially measured at fair value which approximates thecost a third party would incur in performing the tasks necessary to retire suchassets. The fair value is recognized in the financial statements as the presentvalue of expected future cash expenditures for site restoration andabandonment. Subsequent to the initial measurement, the effect of the passageof time on the liability for the net asset retirement obligation (accretionexpense) and the amortization of the asset retirement cost are recognized inthe results of operations. Upon settlement of the obligation a gain or loss is recognized to theextent actual charges are less than or exceed the liability recorded. Duringthe years ended December 31, 2007, 2006, and 2005, the Partnership recognized$0, $1,173, and $85,037 of asset retirement obligations and additionalcapitalized cost in connection with successful wells drilled by thePartnership.

 

**Recognition of Revenue**

 

The Partnership has entered intosales contracts for disposition of its share of oil and gas production fromproductive wells. Revenue is recognized based upon the metered volumesdelivered to those purchasers each month. The Partnership had no material gasimbalances at December 31, 2007, 2006, and 2005.

 

**Liquidity and Capital Resources**

 

The Partnership was funded with initial capital contributions totaling$9,924,916. Investor partners purchased 125 general partner units and 349.972limited partner units for $9,499,441. Reef purchased 25.028 units, or 5.01% ofthe total units sold, for $425,475. As of December 31, 2007, Reef has alsocontributed or accrued $187,976 in connection with its obligation to pay 1% ofall leasehold, drilling, and completion costs, and to reimburse the Partnershipfor 100% of the drilling costs of a well in Louisiana for which Reef is paying100% of the costs. Organization and offering costs totaled $1,424,916, leavingcapital contributions of $8,687,976 available for Partnership activities. Inaddition to this amount, the Partnership retained the interest income earnedduring 2004 and 2005 totaling $68,585 for use during the drilling phase ofoperations, and therefore had $8,756,561 available for Partnership activities.

 

Because the Partnership is not allowed to borrow funds or issue partnerassessments during the drilling phase of operations, the $8,756,561, plus anyadditional contributions made by Reef in connection with the two obligationsmentioned above, is the total amount available to the Partnership for drillingand administrative costs. As of December 31, 2007, drilling operations had beencompleted on all 13 wells drilled by the Partnership, and was in progress onthe well for which Reef is reimbursing 100% of well costs to the Partnership.The Partnership had expended $8,596,330 on property acquisitions and drillingand $112,843 on general and administrative expenses during the drilling phase ofoperations. Please see Item 1A of this Annual Report on Form 10-K for a list ofrisk factors that could impact the Partnership. The Partnership distributes toinvestors the interest income earned subsequent to December 31, 2005 and thenet cash flow from successful wells drilled by the Partnership. These funds arenot available for drilling activities.

 

The Partnership has working capital of $69,442 at December 31, 2007.

 

During2006, the managing general partner contributed a working interest in a well tothe Partnership and agreed to pay all costs associated with the drilling andequipping of the well. The well is located in Terrebonne Parish,

 

14

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Louisiana.The initial drilling operations were completed in May 2007 and the well wasunsuccessful, however, after reviewing the well logs and other geologic data,the wellbore was re-entered during the fourth quarter of 2007 and successfullysidetracked. Sidetrack drilling operations were completed during February 2008and the well is expected to begin production in April 2008. A workover of anexisting Partnership well that was a significant producing well during 2006 butwas shut-in for most of 2007 as a result of high water volumes was performed inFebruary 2008 in an attempt to open a new productive zone. The workover wasunsuccessful, and the well is expected to be plugged. A third partnership wellwas successfully re-completed in a new productive zone in June 2007, and cashflow from the well has significantly increased. Management believes the successof two of these three projects will enable the Partnership to operate on ashort-term basis with positive cash flow levels, based upon current productionand the estimated cash flow from the well expected to begin production in April2008. Nonetheless, the managing general partner is considering several optionsrelated to the Partnership, including the possible sale of marketable assetsand dissolution of the Partnership, as a result of the recurring losses incurredover the past several years, the erosion of partnership equity, and the lack ofsignificant cash flows from operations.

 

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

 

**Results of Operations**

 

**Comparison of the Year Ended December 31, 2007 tothe Year Ended December 31, 2006**

 

During the year ended December 31, 2007, the Partnership incurred a netloss of $76,986 compared to a net loss of $2,941,263 for 2006, and saw net cashprovided by operating activities decline from $128,663 to $55,331. Gas salesvolume declined by 31.2% during 2007, going from a sales volume of 32,636 MCFin 2006 to a sales volume of 22,447 MCF during 2007. Gas sales account for75-80% of total Partnership oil and gas revenues, and total oil and gasrevenues declined by 25.8% in conjunction with the decline in gas salesvolumes. During 2006, five productive wells accounted for 98.5% of thePartnership’s gas sales. One of these five wells ceased production duringSeptember 2006, and a second well was shut-in after three unsuccessful attemptsto decrease high water volumes. This well produced for approximately thirtydays during 2007 after a fourth attempt temporarily reduced water levels, butwill be plugged and abandoned during 2008 after a final attempt to open a new productivezone in February 2008 was unsuccessful. Sales from these two wells fell from10,100 MCF during 2006 to 2,081 MCF during 2007. Sales volumes on two otherproductive wells declined significantly during 2007. After a successfulre-completion in a new productive zone, the fifth well increased sales volumesfrom 5,990 MCF during 2006 to 12,187 MCF during 2007. While the Partnership hasa new discovery expected to provide significant gas sales beginning in April2008, only one of the five wells producing during 2006 remains a significantproducer as of December 31, 2007.

 

As a result of the significant impairment charges taken by thePartnership in both 2005 and 2006, the Partnership incurred property impairmentexpense of only $56,256 during 2007, compared to $2,805,385 during 2006. The2007 impairment expense was the result of the decrease in estimated provedreserves from properties placed in production during 2005 and 2006 as a resultof production declining at a greater rate than previously estimated.

 

As of December 31, 2007, the Partnership has one producing royaltyinterest well and four producing working interest wells, and has one additionalwell expected to begin production during April 2008.

 

**Comparison of the Year Ended December 31, 2006 tothe Year Ended December 31, 2005**

 

The Partnership incurred a net loss of $2,941,263 for 2006 compared toa loss of $5,386,054 incurred for 2005. Property impairment expense of$2,805,385 was the major reason for the 2006 loss, and was the result of twoprimary factors. First, the exploration well completed by the Partnership inMarch 2006, while successful, did not have estimated reserves sufficient torecover the costs of drilling the well, and a second exploration well that wastesting at December 31, 2005 was abandoned during 2006 as a dry hole. Secondly,the well performance of several successful Partnership wells completed in 2005did not meet engineering expectations, which resulted in a significantreduction of estimated reserves. The property impairment expense for 2005totaled $5,173,969, and resulted from the fact that the Partnership drilledfive dry holes at a cost of $3.08 million and wrote off an additional $2.09million because the value of estimated reserves discovered was less that thedrilling costs of the successful wells.

 

15

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As mentioned in our September 30, 2006 Form 10-Q, one well, which hashistorically been the most productive well for the Partnership, began producingsignificant levels of water during the second quarter of 2006. During thelatter quarters of the year, three attempts were made to reduce this waterproduction. All of the attempts proved unsuccessful, and the zone wasabandoned. A re-completion attempt in a new zone expected to be productive wasperformed in February 2008 and was unsuccessful, and the well will be pluggedand abandoned.

 

Partnership oil and gas revenues for 2006 totaled $311,888 compared to$113,465 for 2005. During 2005, the Partnership had three productive developmentwells and two productive purchased royalty interest wells, though one of theproductive development wells ceased production prior to December 31, 2005. ThePartnership had three developmental wells and one exploratory well which beganproduction during 2006. One of these developmental wells ceased production inSeptember, 2006, and one of the 2005 successful wells ceased production duringthe fourth quarter of 2006. One of the wells in which the Partnership had aroyalty interest also ceased production during 2006. As of December 31, 2006,the Partnership had four producing working interest wells and one productiveroyalty interest well. Approximately $17,000 of the 2006 lease operatingexpenses were incurred in connection with the three unsuccessful workoverattempts to reduce water or shut-off water production from the well describedin the preceding paragraph. General and administrative costs were lower during2006, primarily as a result of lower legal, accounting, and printing costsassociated with SEC filings.

 

Oil and gas sales revenues for the fourth quarter of 2006 dropped to$68,482 compared to $91,828 during the third quarter, due to decliningproduction from existing wells and because one Partnership well ceasedproduction in September 2006 and another ceased production during the fourthquarter when workover attempts were unsuccessful in reducing and/or shuttingoff water production from the well. Oil and gas revenues are expected tocontinue to decline during 2007.

 

**Off-Balance Sheet Arrangements**

 

The Partnership does not participate intransactions that generate relationships with unconsolidated entities orfinancial partnerships, such as entities often referred to as structure financeor special purpose entities (SPEs), which would have been established for thepurpose of facilitating off-balance sheet arrangements or other contractuallynarrow or limited purposes. As of December 31, 2007, 2006, and 2005, thePartnership was not involved in any unconsolidated SPE transactions.

 

**Contractual Obligations**

 

The Partnership has no obligations undernon-cancelable agreements as of December 31, 2007.

 

**ITEM 7A.****                   ****QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

 

**InterestRate Risk**

 

ThePartnership has not borrowed any funds to date. The partnership agreementprohibited bank borrowings during the Partnership’s drilling phase ofoperations. The Partnership is permitted to borrow monies or assess partnersfor developmental activities on the prospects it has drilled, however, at thistime the Partnership has no plans to conduct additional activities on any ofits existing prospects. Consequently, the Partnership is subject to interestrate risk solely to the extent that changes in interest rates affect generaleconomic conditions.

 

**CommodityPrice Risk**

 

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

 

16

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**ITEM 8.****                            ****FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA.**

 

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

 

**ITEM 9.****                            ****CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

 

None

 

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

 

**Evaluationof Disclosure Controls and Procedures**

 

As the Managing General Partner of the Partnership, Reef maintains asystem of controls and procedures designed to provide reasonable assurance asto the reliability of the financial statements and other disclosures includedin this report, as well as to safeguard assets from unauthorized use ordisposition. The Partnership, under the supervision and with participation ofits management, including the principal executive officer and principalfinancial officer of the Partnership’s general partner, Reef Oil & GasPartners, L.P., evaluated the effectiveness of its “disclosure controls andprocedures” as such term is defined in Rule 13a-15(e) under the Securities Actof 1934, as amended (the “Exchange Act”), as of the end of the period coveredby this annual report on Form 10-K. Based on that evaluation,  the principal executive officer and principalfinancial officer of our general partner have concluded that the Partnership’sdisclosure controls and procedures are effective to ensure that informationrequired to be disclosed by the Partnership in reports that it files or submitsunder the Exchange Act is recorded, processed, summarized, and reported withinthe time periods specified in Securities and Exchange Commission rules andforms, and includes controls and procedures designed to ensure that informationrequired to be disclosed by us in such reports is accumulated and communicatedto our management, including the principal executive officer and principalfinancial officer of our general partner, as appropriate to allow timelydecisions regarding financial disclosure.

 

**Management Report on Internal ControlOver Financial Reporting**

 

Management of thePartnership is responsible for establishing and maintaining adequate internalcontrol over financial reporting, as such term is defined in Exchange Act Rule13a-15(f). Our management conducted an evaluation of the effectiveness of ourinternal control over financial reporting based on the framework in InternalControl - Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. Based on this evaluation under theframework in Internal Control – Integrated Framework, management of thePartnership concluded that the Partnership’s internal control over financialreporting was effective as of December 31, 2007.

 

This annual report does not include anattestation report of the Partnership’s registered public accounting firmregarding internal control over financial reporting. Management’s report wasnot subject to attestation by the Partnership’s registered public accountingfirm pursuant to temporary rules of the SEC that permit the Partnership toprovide only management’s report in this annual report.

 

**Changes in Internal Controls**

 

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

 

17

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****ITEM 9B.********                   ********OTHER INFORMATION.****

 

****None.****

 

**PART III**

 

**ITEM 10.****                     ****DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE.**

 

The Partnership has no directors or executive officers; it is managedby Reef Oil & Gas Partners, L.P.

 

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

 

The Manager, officers andkey personnel of the managing general partner, their ages, current positionswith the managing general partner and/or RELP, and certain additionalinformation are set forth below:

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

 

**Michael J. Mauceli** is the Manager and a memberof 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 theprincipal executive officer of Reef since its formation in February 1999. Hehas served in this position with RELP since January 2006 and has served in thisposition with its predecessor entity, OREI, since 1987. Mr. Mauceli attendedthe University of Mississippi where he majored in business management andmarketing as well as the University of Houston where he received his CommercialReal Estate License. He entered the oil and natural gas business in 1976 whenhe joined Tenneco Oil & Gas Company. Mr. Mauceli moved to Dallas in 1979,where he was independently employed by several exploration and developmentfirms in planning exploration and marketing feasibility of privately sponsoreddrilling programs.

 

**Kellam Colquitt**joined RELP as ChiefOperating Officer on February 14, 2006. Mr. Colquitt has over thirty-five yearsof experience in the oil and gas industry. Prior to joining RELP, Mr. Colquittserved as Vice President-Exploration of Vintage Petroleum, Inc. in TulsaOklahoma from 2001-2006. He also served as the General Manager-Exploration ofVintage Petroleum, Inc. from 2000-2001. Prior to that, Mr. Colquitt wasemployed from 1995-2000, first as Vice President-International ExplorationWestern Hemisphere and later as Vice President-U.S. Operations for Ranger OilLimited. He is a 1971 graduate of Texas A&M University with a degree ingeology. He is a member of the American Association of Petroleum Geologists,the Houston Petroleum Club, the Tulsa Geological Society, and the HoustonGeological Society.

 

**H. Walt Dunagin** is Vice President—LandManager of RELP. He has held this position since January 2006 and has served inthis position with its predecessor entity, OREI, since 1990. He is responsiblefor all contracts with other industry partners and all land activities requiredfor exploration, development and production, including lease acquisition, titleopinions, curative, permitting, unitization, rights-of-way and environmentalissues. 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). Waltis a member of the Dallas Association of Petroleum Landmen and the Associationof International Petroleum Negotiators.

 

**Lawrence J. Harrison, Jr.**is Vice President – BusinessDevelopment of RELP. He joined RELP in October 2006 following fourteen yearswith The Oil & Gas Asset Clearinghouse, a leading acquisition anddivestiture advisory firm. Mr. Harrison has served as an independent Landman verifyingtitle ownership and acquiring leases and other agreements in support of clientsdrilling programs. He worked for Mobil Oil Corporation and several other

 

18

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companiesbefore joining The Clearinghouse. Mr. Harrison is a 1972 graduate of theUniversity of Southern Mississippi with a Bachelor of Science degree inCommunications. Mr. Harrison is a past president of the Houston Association ofProfessional Landmen and a past member of the American Association ofProfessional Landmen Executive Committee. He is currently a Director of theLouisiana Oil & Gas Association (LOGA) and a member of the ADAM EnergyForum and the Independent Petroleum Association of America.

 

**Byron H. (Howard) Dean**is Manager – Acquisitions andDivestitures of RELP and is responsible for solicitation and technicalevaluation of acquisition and development opportunities for Reef. A registeredpetroleum engineer, Mr. Dean has over 30 years of industry experience with oiland natural gas operations and reservoir engineering, both domestic onshore andoffshore. Prior to joining RELP, Mr. Dean was Senior Petroleum Engineer andAcquisition and Divestiture Specialist for PLS, Inc. and Noble Royalties, Inc.He is a 1974 graduate of the University of Texas at Arlington with a Bachelorof Science degree in Civil Engineering. Mr. Dean is an active member of theSociety of Petroleum Engineers, the Society of Petroleum Evaluation Engineers,ADAM Energy Forum, and Texas Independent Producer and Royalty OwnersAssociation.

 

**Daniel C. Sibley**became Chief Financial Officer of Reef in December 1999. Hehas served in the same position for RELP since January 2006, and has served inthis position with RELP’s predecessor entity, OREI, since 1998. Mr. Sibley wasemployed as a Certified Public Accountant with Grant Thornton from 1977 to1980. From 1980 to 1994, he was involved in the private practice of law. Hereceived a B.B.A. in accounting from the University of North Texas in 1973, alaw degree (J.D.) from the University of Texas in 1977, and a Master ofLaws-Taxation degree (L.L.M.) from Southern Methodist University in 1984.

 

**David M. Tierney** has been employed by RELPsince January 2006 and was previously with its predecessor entity, OREI, sinceMarch 2001. Mr. Tierney is the Controller of the Reef Global Energy Venturesand Reef Global Energy Ventures II partnerships. Mr. Tierney received aBachelor’s degree from Davidson College in 1974, a Masters of BusinessAdministration from Tulane University in 1976, and is a Texas Certified PublicAccountant. Mr. Tierney has worked in public accounting, and has worked in theoil and gas industry since 1979. From 1992 through 2000 he served ascontroller/treasurer of an independent oil and gas exploration company.

 

**AuditCommittee and Nominating Committee**

 

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

 

**Code ofEthics**

 

Because the Partnership has no employees, it does not have a code ofethics. Employees of the Partnership’s managing general partner, Reef, mustcomply with Reef’s Code of Ethics, a copy of which will be provided to investorpartners, 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.

 

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

 

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

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

 

19

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Reef’s “partnershipinterest,” as described in the table above, refers only to its interest asmanaging general partner and does not include the interest Reef has as theresult of its purchase of units in the Partnership, nor the 1% interest Reefhas as the result of its payment of 1% of all lease costs, intangible drillingand development costs, and well completion costs. Reef purchased 5.01% of theoutstanding Partnership units. Reef received a 10% interest as managing generalpartner of the Partnership and a 1% interest as a result of Reef’s payment of1% of all lease costs, intangible drilling and development costs, and wellcompletion costs for a total of an 11% interest. This 11% interest was notrepresented by partnership units. During 2006, Reef voluntarily gave up its 10%interest received for forming the Partnership, and now has only a 1% interestin 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 amanagement fee of $1,424,916, which is 15% of the Partnership subscriptionsexclusive of the units purchased by Reef. From this amount Reef paid all of thePartnership’s organization and offering costs, including sales commissions. ThePartnership recorded $1,374,916 of this payment as offering costs, and $50,000as organization costs in the December 31, 2004 financial statements.

 

Reef will be reimbursed for direct costs and all documentedout-of-pocket expenses incurred on behalf of the Partnership, includingadministrative costs. During the years ended December 31, 2007, 2006, and 2005,the Partnership reimbursed Reef ($1,558), $26,468 and $7,295, respectively, fortechnical services costs which have been capitalized as project costs, and$16,802, $13,666 and $10,848, respectively, for administrative costs includedas general and administrative expenses.

 

Operator fees are payable to OREI and RELP on the nine prospects whereOREI and RELP serve as operator. OREI and RELP receive fees at the competitiverate in the geographical area of the prospects during the drilling andproduction phase of operations. Often these are charged as a monthly fee perwell. During the years ended December 31, 2007, 2006, and 2005, the Partnershippaid operator fees totaling $5,657, $4,507 and $27,954 to RELP and OREI. RELP(previously OREI) serves as operator for nine Partnership prospects upon whichfive successful and four unsuccessful wells were drilled. Of the fivesuccessful wells drilled, three are currently producing and two have ceasedproduction.

 

**ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

** **

Thefollowing table sets forth information as of December 31, 2007 concerning allpersons known by Reef to own beneficially more than 5% of the interests in thePartnership. Unless expressly indicated otherwise, each partner exercises solevoting and investment power with respect to the units beneficially owned.

 
| **Person or Group**          | ** ** | **Number of Units  Beneficially  Owned** | ** ** | **Percent of Total  Partnership Units  Outstanding** | ** ** | **Percentage of  Total Partnership  Interests  Beneficially  Owned** | ** ** |
|----------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| Reef Oil &  Gas Partners, L.P. (1) |       | 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. CentralExpressway, Suite 300, Richardson, Texas 75080.

 

The managing general partner holds a 1% interest in the Partnership asa result of paying 1% of all leasehold, drilling and completion costs. Inaddition to this 1% interest not represented by Partnership units, Reefpurchased 5.01% of the 500 Partnership units and, therefore, holds 5.01% of the99% interest in the Partnership (4.96%) held by the unit holders.

 

20

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**ITEM 13.**                      CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE

** **

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

 

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

** **

The Partnership incurredprofessional audit and tax fees from its principal auditor BDO Seidman, LLP, asdisclosed in the table below:

 
| ** **          | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit fees          |       | $        | 34,066     |     | $          | 44,220 |   |
| Audit related  fees |       | $        | —     |     | $          | — |   |
| Tax fees            |       | $        | $1,000     |     | $          | $866 |   |
| Tax related fees    |       | $        | —     |     | $          | — |   |

 

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

 

**PART IV**

 

**ITEM 15.**                      EXHIBITS, FINANCIAL STATEMENT SCHEDULESAND REPORTS ON FORM 8-K.

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

 

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

 

21

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**SIGNATURES**

 

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

 
| Date:   March  31, 2008 | **REEF GLOBAL ENERGY IV, L.P.**   |
|-----------------------------------|-----------------------------------|
|                              |                              |
|                              |                              |
|                              | Reef Oil & Gas Partners, L.P. |
|                              | Managing General Partner          |
|                              |                              |
|                              | By:                               | Reef Oil & Gas Partners, GP, LLC |
|                              | General Partner                   |
|                              |                              |
|                              |                              |
|                              | By:                               | /s/ Michael J. Mauceli |
|                              |                              | Michael J. Mauceli |
|                              |                              | Manager (principal executive officer) |

 

----

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 
| **Signature**          | ** ** | **Title**                                                                                                        | ** ** | **Date**       |
|------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|----------------|
| ** **             | ** ** | ** **                                                                                                       | ** ** | ** **     |
| /s/ Michael J. Mauceli |       | Manager and Member of the general partner of Reef  Oil & Gas Partners, L.P. (*Principal Executive  Officer*) |       | March 31, 2008 |
| Michael J. Mauceli     |
|                   |       |                                                                                                             |       |           |
| /s/ Daniel C. Sibley   |       | Chief Financial Officer (*Principal  Financial Officer  and Principal Accounting Officer*)                       |       | March 31, 2008 |
| Daniel C. Sibley       |

 

----

 

Reef Global EnergyIV, L.P.

 

FinancialStatements

 

For theYears Ended December 31, 2007, 2006 and 2005

 

**Contents**

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

 

----

 

Report of Independent Registered Public AccountingFirm

 

The Partners

Reef Global Energy IV,L.P.

 

We have audited the accompanying balance sheets ofReef Global Energy IV, L.P. (the “Partnership”) as of December 31, 2007 and2006, and the related statements of operations, partnership equity, and cashflows for the years ended December 31, 2007, 2006, 2005. These financialstatements are the responsibility of the Partnership’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

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

 

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the financial position of Reef Global Energy IV, L.P. at December 31,2007, and 2006, and the results of its operations and its cash flows for theyears ended December 31, 2007, 2006, and 2005, in conformity with accountingprinciples generally accepted in the United States of America.

 

The accompanyingfinancial statements have been prepared assuming that the Partnership willcontinue as a going concern. As discussed in Note 1 to the financialstatements, the Partnership has suffered recurring losses from operations,erosion of partnership equity, and declines in cash flow from operations thatraise 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. Thefinancial statements do not include any adjustments that might result from theoutcome of this uncertainty.

 

BDO Seidman, LLP

 

 

Dallas, Texas

March 28, 2008

 

F-1

----

 

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

**Balance Sheets**

 
| **December 31,**                                                         | ** ** | **2007**    | ** **  | **2006**    | ** ** |
|-------------------------------------------------------------------------------|------------|-------------|-------------|-------------|------------|
|                                                                          |       |        |        |        |       |
| **Assets**                                                                    |       |        |        |        |       |
|                                                                          |       |        |        |        |       |
| **Current  assets:**                                                          |       |        |        |        |       |
| Cash and cash  equivalents                                                    | ** ** | $           | 75,764      |        | $          | 83,061 |   |
| Accounts  receivable from affiliates                                          |       | —      |        | 27,920      |       |
| **Total  current assets**                                                     | ** ** | **75,764**  | ** **  | **110,981** | ** ** |
|                                                                          |       |        |        |        |       |
| **Oil and  natural gas properties, full cost method of accounting:**          |       |        |        |        |       |
| Proved  properties, net of accumulated depletion of $8,393,271 and $8,456,815 |       | 152,562     |        | 139,220     |       |
| Unproved  properties                                                          |       | —      |        | 27,920      |       |
| **Net oil  and natural gas properties**                                       | ** ** | **152,562** | ** **  | **167,140** | ** ** |
| ** **                                                                    | ** ** | ** **  | ** **  | ** **  | ** ** |
| **Other  assets:**                                                            | ** ** | ** **  | ** **  | ** **  | ** ** |
| Prepaid drilling  costs                                                       |       | —      |        | 26,597      |       |
| **Total  current assets**                                                     | ** ** | **—**  | ** **  | **26,597**  | ** ** |
| ** **                                                                    | ** ** | ** **  | ** **  | ** **  | ** ** |
| **Total  assets**                                                             | ** ** | **$**       | **228,326** | ** **  | **$**      | **304,718** | ** ** |
|                                                                          |       |        |        |        |       |
| **Liabilities  and partnership equity**                                       |       |        |        |        |       |
|                                                                          |       |        |        |        |       |
| **Current  liabilities:**                                                     |       |        |        |        |       |
| Accounts payable                                                              | ** ** | $           | 82          |        | $          | 226 | ** ** |
| Accounts payable  to affiliates                                               |       | 6,240       |        | 90,336      |       |
| **Total  current liabilities**                                                | ** ** | **6,322**   | ** **  | **90,562**  | ** ** |
|                                                                          |       |        |        |        |       |
| **Long-term  liabilities:**                                                   |       |        |        |        |       |
| Asset retirement  obligation                                                  |       | 137,757     |        | 94,718      |       |
| **Total  long-term liabilities**                                              | ** ** | **137,757** | ** **  | **94,718**  | ** ** |
|                                                                          |       |        |        |        |       |
| **Commitments  and contingencies (Note 6)**                                   |       |        |        |        |       |
|                                                                          |       |        |        |        |       |
| **Partnership  equity**                                                       |       |        |        |        |       |
| General partners                                                              |       | 3,459       |        | 24,716      |       |
| Limited partners                                                              |       | 9,683       |        | 69,198      |       |
| Managing general  partner                                                     |       | 71,105      |        | 25,524      |       |
| **Partnership  equity**                                                       | ** ** | **84,247**  | ** **  | **119,438** | ** ** |
| ** **                                                                    | ** ** | ** **  | ** **  | ** **  | ** ** |
| **Total  liabilities and partnership equity**                                 | ** ** | **$**       | **228,326** | ** **  | **$**      | **304,718** | ** ** |

 

*Seeaccompanying notes to financial statements and independent registered publicaccounting firm’s report.*

 

F-2

----

 

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

**Statements of Operations**

 
| ** **                                  | ** ** | **Year ended  December 31** | ** **  | **Year ended  December 31** | ** ** | **Year ended  December 31,** | ** ** |
|---------------------------------------------|------------|---------------------------------------|-------------|---------------------------------------|------------|----------------------------------------|------------|
| ** **                                  | ** ** | **2007**                              | ** **  | **2006**                              | ** ** | **2005**                               | ** ** |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| **Revenues**                                |       | $                                     | 231,283     |                                  | $          | 311,888                                |       | $ | 113,465 |   |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| **Costs  and expenses:**                    | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| Lease operating  expenses                   |       | 59,971                                |        | 110,103                               |       | 36,583                                 |       |
| Production taxes                            |       | 14,256                                |        | 17,465                                |       | 3,024                                  |       |
| Depreciation,  depletion and amortization   |       | 62,949                                |        | 247,338                               |       | 230,123                                |       |
| Property  impairment                        |       | 56,256                                |        | 2,805,385                             |       | 5,173,969                              |       |
| Accretion of  asset retirement obligation   |       | 43,039                                |        | 5,820                                 |       | 2,688                                  |       |
| General and  administrative expenses        |       | 70,953                                |        | 74,215                                |       | 107,952                                |       |
| **Total  costs and expenses**               | ** ** | **307,424**                           | ** **  | **3,260,326**                         | ** ** | **5,554,339**                          | ** ** |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| **Loss  from operations**                   | ** ** | **(76,141**                           | **)**       | **(2,948,438**                        | **)**      | **(5,440,874**                         | **)**      |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| **Other  income:**                          | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| Interest income                             |       | 1,155                                 |        | 7,175                                 |       | 54,820                                 |       |
| **Total  other income**                     | ** ** | **1,155**                             | ** **  | **7,175**                             | ** ** | **54,820**                             | ** ** |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| **Net  loss**                               | ** ** | **$**                                 | **(74,986** | **)**                                 | **$**      | **(2,941,263**                         | **)**      | **$** | **(5,386,054** | **)** |
| ** **                                  | ** ** | ** **                            | ** **  | ** **                            | ** ** | ** **                             | ** ** |
| Net loss per  general partner unit          |       | $                                     | (97.88      | )                                     | $          | (5,852.12                              | )          | $ | (10,654.98 | ) |
| Net loss per  limited partner unit          |       | $                                     | (97.88      | )                                     | $          | (5,852.12                              | )          | $ | (10,654.98 | ) |
| Net loss per  managing general partner unit |       | $                                     | (1,138.48   | )                                     | $          | (6,459.63                              | )          | $ | (12,994.92 | ) |
|                                        |       |                                  |        |                                  |       |                                   |       |

 

*Seeaccompanying notes to financial statements and independent registered public accountingfirm’s report.*

 

F-3

----

 

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

 

**Statements of Partnership Equity**

 
| ** **                                | ** ** | **General partners** | ** ** | **Limited partners** | ** ** | **Managing general  partner** | ** ** | **Total**  | ** ** |
|-------------------------------------------|------------|---------------------------|------------|---------------------------|------------|------------------------------------|------------|------------|------------|
| ** **                                | ** ** | **Units**                 | ** ** | **Amount**                | ** ** | **Units**                          | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** | **Units** | ** ** | **Amount** | ** ** |
| Balance at  December 31, 2004             |       | 125.000                   |       | $                         | 2,127,535  |                               | 349.972    |       | $          | 5,956,620 |   | 25.028 |   | $ | 424,719 |   | 500.000 |   | $ | 8,508,874 |   |
| Partner  contributions                    |       |                      |       | —                    |       |                               |       | —     |       |   |   | 74,339 |   |   |   | 74,339 |   |
| Partner  distributions                    |       | —                    |       | (15,931                   | )          | —                             |       | (44,603    | )          | — |   | (11,066 | ) | — |   | (71,600 | ) |
| Net loss                                  |       |                      |       | (1,331,873                | )          |                               |       | (3,728,945 | )          |   |   | (325,236 | ) |   |   | (5,386,054 | ) |
| Balance at  December 31, 2005             |       | 125.000                   |       | 799,731                   |       | 349.972                            |       | 2,183,072  |       | 25.028 |   | 162,756 |   | 500.000 |   | 3,125,559 |   |
|                                      |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Distribution  amount per partnership unit |       |                      |       | 127.45                    |       |                               |       | 127.45     |       |   |   | 442.14 |   |   |   |   |   |
|                                      |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Balance at  December 31, 2005             |       | 125.000                   |       | 779,731                   |       | 349.972                            |       | 2,183,072  |       | 25.028 |   | 162,756 |   | 500.000 |   | 3,125,559 |   |
| Partner  contributions                    |       | —                    |       | —                    |       | —                             |       | —     |       | — |   | 37,392 |   | — |   | 37,392 |   |
| Partner  distributions                    |       | —                    |       | (23,501                   | )          | —                             |       | (65,797    | )          | — |   | (12,952 | ) | — |   | (102,250 | ) |
| Net loss                                  |       | —                    |       | (731,514                  | )          | —                             |       | (2,048,077 | )          | — |   | (161,672 | ) | — |   | (2,941,263 | ) |
| Balance at  December 31, 2006             |       | 125.000                   |       | 24,716                    |       | 349.972                            |       | 69,198     |       | 25.028 |   | 25,524 |   | 500.000 |   | 119,438 |   |
|                                      |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Distribution  amount per partnership unit |       |                      |       | 188.01                    |       |                               |       | 188.01     |       |   |   | 517.50 |   |   |   |   |   |
|                                      |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Balance at  December 31, 2006             |       | 125.000                   |       | 24,716                    |       | 349.972                            |       | 69,198     |       | 25.028 |   | 25,524 |   | 500.000 |   | 119,438 |   |
| Partner  contributions                    |       | —                    |       | —                    |       | —                             |       | —     |       | — |   | 76,245 |   | — |   | 76,245 |   |
| Partner  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 |   | $ | 84,247 |   |
|                                      |       |                      |       |                      |       |                               |       |       |       |   |   |   |   |   |   |   |   |
| Distribution  amount per partnership unit |       |                      |       | $                         | 72.17      |                               |       |       | $          | 72.17 |   |   |   | $ | 86.70 |   |   |   |   |   |

 

*Seeaccompanying notes to financial statements and independent registered publicaccounting firm’s report.*

 

F-4

----

 

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

**Statements of Cash Flows**

 
| ** **                                                                         | ** ** | **For the Years Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                             | ** ** | **2006** | ** ** | **2005** | ** ** |
| ** **                                                                         | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Operating  Activities**                                                          |       |                                 |       |   |   |   |   |
| Net loss                                                                           |       | $                                    | (74,986    | ) | $ | (2,941,263 | ) | $ | (5,386,054 | ) |
| Adjustments for  non-cash transactions:                                            |       |                                 |       |   |   |   |   |
| Depreciation,  depletion and amortization                                          |       | 62,949                               |       | 247,338 |   | 230,123 |   |
| Property  impairment                                                               |       | 56,256                               |       | 2,805,385 |   | 5,173,969 |   |
| Accretion of  asset retirement obligation                                          |       | 43,039                               |       | 5,820 |   | 2,688 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| (Increase)  decrease in other assets                                               |       | 26,597                               |       | (26,597 | ) | 2,919,405 |   |
| **Changes  in operating assets and liabilities:**                                  | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accounts  receivable                                                               |       | —                               |       | 356 |   | (51 | ) |
| Accounts payable                                                                   |       | (144                                 | )          | (15,670 | ) | 14,790 |   |
| Accounts payable  to affiliates                                                    |       | (58,380                              | )          | 53,294 |   | 5,862 |   |
| **Net  cash provided by operating activities**                                     | ** ** | **55,331**                           | ** ** | **128,663** | ** ** | **2,960,732** | ** ** |
|                                                                               |       |                                 |       |   |   |   |   |
| **Investing  Activities**                                                          | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Property  acquisition and development                                              |       | (131,095                             | )          | (721,253 | ) | (7,623,409 | ) |
| **Net  cash used in investing activities**                                         | ** ** | **(131,095**                         | **)**      | **(721,253** | **)** | **(7,623,409** | **)** |
|                                                                               |       |                                 |       |   |   |   |   |
| **Financing  Activities**                                                          | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Partner capital  contributions                                                     |       | 104,917                              |       | 19,918 |   | 489,368 |   |
| Partner  distributions                                                             |       | (36,450                              | )          | (102,250 | ) | (71,600 | ) |
| **Net  cash provided by (used in) financing activities**                           | ** ** | **68,467**                           | ** ** | **(82,332** | **)** | **417,768** | ** ** |
|                                                                               |       |                                 |       |   |   |   |   |
| **Net  decrease in cash and cash equivalents**                                     | ** ** | **(7,297**                           | **)**      | **(674,922** | **)** | **(4,244,909** | **)** |
| Cash and cash  equivalents at beginning of period                                  |       | 83,061                               |       | 757,983 | ** ** | **5,002,892** | ** ** |
| **Cash  and cash equivalents at end of period**                                    | ** ** | **$**                                | **75,764** | ** ** | **$** | **83,061** | ** ** | **$** | **757,983** | ** ** |
|                                                                               |       |                                 |       |   |   |   |   |
| Non-cash investing  transactions:                                                  |       |                                 |       |   |   |   |   |
| Property  additions included in accounts payable                                   | ** ** | $                                    | —     |   | $ | — |   | $ | 17,012 | ** ** |
| Property  additions included in accounts payable to affiliates                     | ** ** | $                                    | —     |   | $ | 26,468 |   | $ | 225,419 | ** ** |
| Property  additions and asset retirement obligation                                | ** ** | $                                    | —     |   | $ | 1,173 |   | $ | 85,037 | ** ** |
| Non-cash  financing transactions:                                                  |       |                                 |       |   |   |   |   |
| Managing partner  contributions included in accounts receivable from affiliates    | ** ** | $                                    | —     |   | $ | 27,920 |   | $ | 10,446 | ** ** |

 

*Seeaccompanying notes to financial statements and independent registered publicaccounting firm’s report.*

 

F-5

----

 

ReefGlobal Energy IV, L.P.

Notes to Financial Statements

December31, 2007

 

**1.Organization and Basis of Presentation**

 

ReefGlobal Energy IV, L.P. (the Partnership) is the fourth in a series of fiveNevada limited partnerships comprising a program called Reef Global EnergyVentures (the Program), pursuant to an S-1 Registration Statement declaredeffective 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 50partnership units at $20,000 per unit, including units purchased by themanaging general partner. Each partnership formed as a part of the Programoffered a maximum of 500 units for sale, consisting of a maximum of 375 limitedpartner units and a maximum of 125 general partner units. Reef Global EnergyIV, L.P. offered 500 units for sale ($10,000,000), consisting of up to 375limited partner units and up to 125 general partner units. Investor funds wereheld in escrow and were subject to reimbursement with interest if the minimumnumber of units was not sold. The Program filed a prospectus supplement withthe SEC on September 21, 2004 describing the Partnership, and commencedoffering units in the Partnership. Upon reaching the minimum subscriptionlevel, the Partnership was formed on November 10, 2004. The Partnershipoffering closed December 2, 2004, with sales to outside investors totaling 125general partner units and 349.972 limited partner units, and sales to themanaging general partner totaling 25.028 limited partner units.

 

ThePartnership is a Nevada limited partnership formed under the Nevada UniformLimited Partnership Act. Reef Oil & Gas Partners, L.P. (Reef) serves as thePartnership’s managing general partner. Partnership interests are held by themanaging general partner and investor partners who are general and limitedpartners (investor partners). The managing general partner received a 10%interest in the Partnership as compensation for forming the Partnership, andalso holds a 1% interest in the Partnership as a result of paying 1% of allleasehold, drilling and completion costs. This 11% interest was not representedby Partnership units. In addition, Reef purchased 5.01% of the Partnershipunits 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 interestit received as compensation for forming the Partnership from 10% to 5%, andeffective 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 aresult of paying 1% of all leasehold, drilling and completion costs. This 1%interest is not represented by Partnership units. Effective November 1, 2006Reef holds 5.01% of the 99% interest in the Partnership (4.96%) held by theunit holders. The Partnership primarily purchased working interests inexploratory and developmental drilling prospects and drilled oil and gas wellslocated onshore in the continental United States and in U.S. coastal waters inthe Gulf of Mexico. Other partnerships formed as a part of this Program, aswell as other private drilling partnerships managed by Reef also own interestsin some of these wells. In instances where Reef affiliated entities own amajority working interest in a well, the well may be operated by OREI, Inc.(OREI) or Reef Exploration, L.P. (RELP), affiliates of the managing generalpartner.

 

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

 

F-6

----

 

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

 

Monthlycash distributions to partners are based upon the number and type ofpartnership units held at the close of the prior month. Prior to August 1,2006, cash distributions to partners of the net cash flow from interest incomeand oil and natural gas sales revenues, less operating, general andadministrative, and other costs were distributed 15.46% to the managing generalpartner (based upon the 11% interest not represented by units and the 4.45%interest represented by Partnership units) and 84.54% to investor partners.Effective November 1, 2006, cash distributions are distributed 5.96% to themanaging general partner (based upon the 1% interest not represented by unitsand the 4.96% interest represented by Partnership units) and 94.04% to investorpartners.

 

**GoingConcern**

 

Theaccompanying financial statements have been prepared assuming the Partnershipis a going concern, which assumption contemplates the realization of assets andsatisfaction of liabilities in the normal course of business. The Partnershiphas suffered recurring losses from operations that have utilized a majorportion of partnership equity. While the Partnership appears to have adequateliquidity at December 31, 2007, there can be no assurance that such liquiditywill remain sufficient.

 

Thesefactors raise substantial doubt about the Partnership’s ability to continue asa going concern. The financial statements do not include any adjustmentsrelating to the recoverability and classification of recorded asset amounts orthe amount of liabilities that might be necessary should the Partnership beunable to continue in existence.

 

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

 

**2.Summary of Accounting Policies**

 

**Use ofEstimates**

 

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

 

F-7

----

** **

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

** **

**Cashand Cash Equivalents**

 

ThePartnership considers all highly liquid investments with maturity dates of nomore than three months from the purchase date to be cash equivalents. Cash andcash equivalents consist of demand deposits and money market investmentsinvested with a major national bank. The carrying value of the Partnership’scash equivalents approximates fair value.

 

**Risks and Uncertainties**

 

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

 

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

 

# **Oiland Natural Gas Properties**

 

The Partnership follows thefull cost method of accounting for crude oil and natural gas properties. Underthis method, all direct costs and certain indirect costs associated withacquisition of properties and successful as well as unsuccessful explorationand development activities are capitalized. Depreciation, depletion, andamortization of capitalized crude oil and natural gas properties and estimatedfuture development costs, excluding unproved properties, are based on theunit-of-production method using estimated proved reserves. For these purposes,proved gas reserves are converted to equivalent barrels at a rate of 6 Mcf to 1Bbl. Net capitalized costs of crude oil and natural gas properties, as adjustedfor asset retirement obligations, are limited to the lower of unamortized costor the cost ceiling, defined as the sum of the present value of estimatedfuture net revenues from proved reserves based on prices in effect at the endof the period held constant and discounted at 10 percent, plus the lower ofcost or fair value of unproved properties, if any. Pursuant to full costaccounting rules, the Partnership performs a ceiling test quarterly as of thebalance sheet date on its proved oil and natural gas properties. Excesscapitalized costs are charged to property impairment expense. No gain or lossis recognized upon sale or disposition of crude oil and natural gas properties,unless such a sale would significantly alter the rate of depletion andamortization. Unproved properties consist primarily of drilling costs inprogress on wells drilling for unproved reserves. Investments in unprovedproperties are not depleted pending determination of the existence of provedreserves. These unproved properties are assessed periodically to ascertainwhether impairment has occurred.

 

F-8

----

 

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

 

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

# ** **

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

 

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

 

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

 

Thefollowing table summarizes the Partnership’s asset retirement obligation forthe years ended December 31, 2007 and 2006.

 
| ** **                            | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|
| Beginning asset retirement obligation | ** ** | $        | 94,718     |     | $          | 87,725 |   |
| Additions related to new properties   |       | —   |       | 1,173    |       |
| Accretion expense                     |       | 43,039   |       | 5,820    |       |
| Ending asset retirement obligation    | ** ** | $        | 137,757    |     | $          | 94,718 | ** ** |

 

**Recognition of Revenue**

 

The Partnership enters intosales contracts for disposition of its share of oil and natural gas productionfrom productive wells. Revenues are recognized based upon the Partnership’sshare of metered volumes delivered to its purchasers each month. ThePartnership had no material gas imbalances at December 31, 2007, 2006, and2005.

 

F-9

----

 

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

 

**IncomeTaxes**

 

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

 

Asof December 31, 2007, the tax basis of the Partnership’s assets exceeds thefinancial reporting basis of the assets by approximately $2.05 million,primarily due to the difference between property impairment costs deducted forfinancial reporting purposes and intangible drilling costs deducted for incometax purposes.

 

**Fair Value of Financial Instruments**

 

The carrying amounts of the Partnership’s short-termfinancial instruments, including cash equivalents, accounts receivable andaccounts payable, approximate their fair values based on the short maturitiesof those instruments.

 

**Reclassifications**

 

Certain information provided for prior years has beenreclassified to conform to the current year presentation adopted as of December31, 2007.

 

**3.Transactions with Affiliates**

 

ThePartnership has no employees. RELP, an affiliate of Reef formed in 2005,employs a staff including geologists, petroleum engineers, landmen andaccounting personnel who administer all of the Partnership’s operations. Priorto January 2, 2006, OREI, another Reef affiliate, employed this staff ofemployees. On January 2, 2006, the employees of OREI were transferred to RELP.In addition, during 2006 RELP assumed from OREI well operator status for allwells previously operated by OREI. The Partnership reimburses RELP and OREI fortechnical and administrative services at cost. During the years ended December31, 2007, 2006, and 2005, the Partnership incurred technical services andadministrative costs totaling $15,244, $40,134, and $18,143, respectively. Ofthese amounts, ($1,558), $26,468, and $7,295 represent technical services costscapitalized as project costs, and $16,802, $13,666, and $10,848 representadministrative costs included as general and administrative expenses.

 

Accountsreceivable from affiliates totaled $27,920 as of December 31, 2006. TheDecember 31, 2006 balance consisted of drilling costs related to a Partnershipwell for which Reef is paying 100% of the drilling cost (See Note 8). ThePartnership settles its balances with Reef on a quarterly basis.

 

Accountspayable to affiliates totaled $6,240 and $90,336 at December 31, 2007 and 2006.RELP currently processes joint interest billings and revenue payments on behalfof the Partnership. The December 31, 2007 balance includes $752 due Reef forreimbursement of an

 

F-10

----

 

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

 

overpaymentmade by Reef in connection with its obligation to pay 1% of all leasehold,drilling, and completion costs incurred by the Partnership. The remainingbalance of $5,488 is due RELP for administrative service costs provided byRELP, as well as for joint interest charges net of revenue payments processedby RELP on behalf of the Partnership. The December 31, 2006 balance due is fortechnical and administrative services costs provided by RELP, as well as forjoint interest charges net of revenue payments processed by RELP on behalf ofthe Partnership. The Partnership settles its balances with RELP and Reef on a quarterlybasis.

 

Ifan affiliate of Reef serves as operator of a Partnership prospect, thenoperator fees will be payable to the affiliate. Under such circumstances, suchaffiliate will receive fees at the competitive rate in the area during thedrilling and production phase of operations. Often these are charged as amonthly fee per well as agreed to in an operating agreement signed by thePartnership as well as outside third party working interests in the well.During the years ended December 31, 2007, 2006, and 2005, the Partnership paiddrilling overhead fees totaling $0, $199, and $26,182 to RELP and OREI. Duringthe years ended December 31, 2007, 2006, and 2005, the Partnership paid $5,236,$4,308, and $1,772 in operating overhead fees to RELP and OREI.

 

**4.Prepaid Drilling Costs**

 

AtDecember 31, 2006, the Partnership had prepaid $26,597 in connection withintangible drilling costs to be incurred on a well in which the Partnership hasa working interest and which was drilling at December 31, 2006.

 

**5. MajorCustomers**

 

The Partnership sells crudeoil and natural gas on credit terms to refiners, pipelines, marketers, andother users of petroleum commodities. Revenues are received directly from theseparties or, in certain circumstances, paid to the operator of the property whodisburses to the Partnership its percentage share of the revenues. During theyear ended December 31, 2007, four marketers and one operator accounted for41.0%, 17.2%, 16.8%, 13.4%, and 10.7% of the Partnership’s oil and gasrevenues, respectively. During the year ended December 31, 2006, threemarketers and one operator accounted for 32.9%, 21.8%, 13.4%, and 23.0% of thePartnership’s oil and gas revenues, respectively. During the year endedDecember 31, 2005, one marketer and one operator purchased all of thePartnership’s products and accounted for 75.6% and 24.4% of the Partnership’soil and gas revenues, respectively. Due to the competitive nature of the marketfor purchase of crude oil and natural gas, the Partnership does not believethat the loss of any particular purchaser would have a material adverse impacton the Partnership.

 

**6. Commitments and Contingencies**

 

ThePartnership is not currently involved in any legal proceedings.

 

F-11

----

 

ReefGlobal Energy IV, L.P.

Notes to FinancialStatements (continued)

 

**7. Partnership Equity**

 

Salesof Partnership units began on September 21, 2004. Proceeds received were placedinto an interest bearing escrow account until the Partnership reached theminimum subscription level of 50 units. The Partnership was formed on November10, 2004, and the sale of Partnership units was closed on December 2, 2004 whenall 500 Partnership units were sold. The Partnership raised $9,499,441 from thesale of 474.972 Partnership units to investor partners. Reef purchased theremaining 25.028 units (5.01%) for $425,475. Reef also contributes 1% of allleasehold, drilling, and completion costs when incurred, in addition to payingits pro rata share (4.96%) of the leasehold, drilling, and completion costspaid by the Partnership. In addition, Reef has agreed to reimburse thePartnership for 100% of the costs of drilling a developmental well inLouisiana. In connection with these obligations, Reef paid $104,917, $19,918, and$63,893 during the years ended December 31, 2007, 2006, and 2005, and has areceivable from the Partnership totaling $752 at December 31, 2007.

 

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

 

Allunits, except those purchased by Reef, paid a 15% management fee to Reef to payfor Partnership organization and offering costs, including sales commissions.These costs totaled $1,424,916, leaving net capital contributions of $8,756,561available for Partnership oil and gas activities. Of the $1,424,916, offeringcosts were $1,374,916 and organization costs were $50,000.

 

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

 

**8. Partnership Projects**

 

During2004-2007, the Partnership utilized the $8,756,561 of net capital contributionsto drill thirteen wells and to purchase royalty interests in a field inLouisiana with three producing oil and natural gas properties. The Partnershipdrilled six successful developmental wells and one successful exploratory well,four of which are still productive, and drilled two developmental dry holes andfour exploratory dry holes. One of the royalty interest properties purchased bythe Partnership is still productive.

 

InAugust 2006, the managing general partner agreed to pay 100% of the costs for aworking interest in a developmental well in Louisiana. The well completeddrilling operations in May 2007 and was unsuccessful, however, after reviewingthe well logs and other geologic data, the wellbore was re-entered during thefourth quarter of 2007 and successfully sidetracked. Sidetrack drillingoperations were completed during February 2008 and the well is expected tobegin production in April 2008. Reef has agreed to continue to pay 100% of thecost of the sidetrack operations and completion. The managing general partnerreimburses these well costs to the Partnership as incurred. The total cost ofthe well and sidetrack to the managing general partner

 

F-12

----

 

ReefGlobal Energy IV, L.P.

Notesto Financial Statements (continued)

 

isexpected to total approximately $170,000. As of December 31, 2007 thePartnership had incurred and been reimbursed $103,853 of costs related to thiswell. The amounts reimbursed are classified as additional capital contributionson the accompanying balance sheet.

 

During2006, OREI transferred operator status for all properties operated by OREI toRELP. 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 whichthree are still productive at December 31, 2007.

 

**9. Subsequent Events**

 

AtDecember 31, 2007, the net capitalized costs of oil and natural gas propertiesexceeded the present value of estimated future net revenues from provedreserves based on prices in effect at the end of the period and held constantand discounted at 10 percent, which would require the Partnership to recognizeproperty impairment expense equal to the difference between these amounts.However, subsequent to December 31, 2007 the Partnership had a successfuldiscovery as a result of the completion of drilling on the sidetrack operationsreferred to in Note 8. This discovery has estimated proved reserves such that,after inclusion of these reserves, the present value of estimated future netrevenues from proved reserves based on prices in effect at the end of theperiod held constant and discounted at 10% exceeds net capitalized costs,including those capitalized costs incurred subsequent to December 31, 2007 inconnection with the drilling of this well. Therefore, the Partnership recordedno property impairment expense in the financial statements for the fourthquarter of 2007.

 

DuringFebruary 2008, the Partnership attempted a workover of a well that had beenshut-in and the current productive zone abandoned because of high waterproduction volumes. An unsuccessful attempt was made to open a new productivezone in the well. The well is expected to be plugged and abandoned.

 

**10. Supplemental Information on Oil & Natural Gas Exploration andProduction Activities (Unaudited)**

 

**Capitalized Costs**

 

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

 
| **December 31,**                                 | ** ** | **2007**      | ** **  | **2006**      | ** ** | **2005**      | ** ** |
|-------------------------------------------------------|------------|---------------|-------------|---------------|------------|---------------|------------|
| ** **                                            | ** ** | ** **    | ** **  | ** **    | ** ** | ** **    | ** ** |
| **Oil and natural gas properties:**                   | ** ** | ** **    | ** **  | ** **    | ** ** | ** **    | ** ** |
| Unproved  properties                                  | ** ** | $             | —      |          | $          | 27,920        |       | $ | — | ** ** |
| Proved  properties                                    |       | 8,545,833     |        | 8,596,035     |       | 8,117,492     |       |
| ** **                                            | ** ** | **8,545,833** | ** **  | **8,623,955** | ** ** | **8,117,492** | ** ** |
| Less:                                                 |       |          |        |          |       |          |       |
| Accumulated  depreciation, depletion and amortization |       | (357,661      | )           | (477,461      | )          | (230,123      | )          |
| Property  impairment                                  |       | (8,035,610    | )           | (7,979,354    | )          | (5,173,969    | )          |
| **Total**                                             | ** ** | **$**         | **152,562** | ** **    | **$**      | **167,140**   | ** ** | **$** | **2,713,400** | ** ** |

 

F-13

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Reef Global Energy IV,L.P.

Notesto Financial Statements (continued)

 

**Costs Incurred**

 

Thefollowing table sets forth costs incurred in oil and natural gas acquisition,exploration, and development activities during the years ended December 31,2007, 2006, and 2005:

 
| ** **                          | ** ** | **2007**   | ** **  | **2006**   | ** ** | **2005**    | ** ** |
|-------------------------------------|------------|------------|-------------|------------|------------|-------------|------------|
| ** **                          | ** ** | ** ** | ** **  | ** ** | ** ** | ** **  | ** ** |
| **Oil and natural gas properties:** | ** ** | ** ** | ** **  | ** ** | ** ** | ** **  | ** ** |
| Acquisition of  proved reserves     | ** ** | $          | —      |       | $          | —      |       | $ | 523,554 | ** ** |
| Exploration                         |       | (24        | )           | 33,439     |       | 2,591,242   |       |
| Development                         |       | 104,650    |        | 473,024    |       | 4,187,177   |       |
| **Total**                           | ** ** | **$**      | **104,626** | ** ** | **$**      | **506,463** | ** ** | **$** | **7,301,973** | ** ** |

 

**Results of Operations**

 

**The following table sets forth results of operationsfrom oil and gas producing activities for the years ended December 31, 2007,2006, and 2005:**

 
| ** **                                 | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**       | ** ** |
|--------------------------------------------|------------|------------|------------|------------|------------|----------------|------------|
| ** **                                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** |
| **Oil and gas producing activities:**      | ** ** | ** ** | ** ** | ** ** | ** ** | ** **     | ** ** |
| Oil sales                                  | ** ** | $          | 56,780     |       | $          | 65,467         |       | $ | 12,144 | ** ** |
| Natural gas  sales                         |       | 174,503    |       | 246,421    |       | 101,321        |       |
| Production  expenses                       |       | (74,227    | )          | (127,568   | )          | (39,607        | )          |
| Accretion of  asset retirement obligation  |       | (43,039    | )          | (5,820     | )          | (2,688         | )          |
| Depreciation ,  depletion and amortization |       | (62,949    | )          | (247,338   | )          | (230,123       | )          |
| Property  impairment expense               |       | (56,256    | )          | (2,805,385 | )          | (5,173,969     | )          |
| **Results of producing activities**        | ** ** | **$**      | **(5,188** | **)**      | **$**      | **(2,874,223** | **)**      | **$** | **(5,332,922** | **)** |
|                                       |       |       |       |       |       |           |       |
| Depletion rate  per BOE                    | ** ** | $          | 13.88      |       | $          | 38.33          |       | $ | 112.34 | ** ** |

 

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BOE = Barrels of OilEquivalent (6 MCF equals 1 BOE)

 

**Oil and Natural Gas Reserves**

 

The following informationdescribes changes during the year and balances of proved oil and natural gasreserves as of December 31, 2007, 2006, and 2005. The definitions used arein accordance with applicable Securities and Exchange Commission regulations.

 

Proved oil and naturalgas reserves are the estimated quantities of crude oil, natural gas and naturalgas liquids which geological and engineering data demonstrate with reasonablecertainty to be recoverable in future years from known reservoirs underexisting economic and operating conditions, that is, prices and costs as of thedate the estimate is made.

 

F-14

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Reef Global Energy IV,L.P.

Notes to FinancialStatements (continued)

 

Prices includeconsideration of changes in existing prices provided by contractualarrangements, but not escalations based upon future conditions. Additionaldevelopment costs required to recover these proved reserves are estimated atapproximately $8,857, $13,923 and $146,000 as of December 31, 2007, 2006, and2005, respectively. All of the Partnership’s reserves are located in the UnitedStates.

 
| ** **                                                              | ** ** | **Oil  (BBL) (1)** | ** ** | **Gas  (mcf)** | ** ** | **BOE (2)** | ** ** |
|-------------------------------------------------------------------------|------------|--------------------|------------|----------------|------------|-------------|------------|
| Net proved  developed reserves for properties owned by the Partnership: |       |               |       |           |       |        |       |
| Reserves at  December 31, 2004                                          |       | —             |       | —         |       | —      |       |
| Purchases of  minerals in place                                         |       | 19                 |       | 3,801          |       | 653         |       |
| New discoveries                                                         |       | 4,730              |       | 408,698        |       | 72,846      |       |
| Production                                                              |       | (212               | )          | (11,019        | )          | 2,049       | )          |
| Reserves at  December 31, 2005                                          | ** ** | **4,537**          | ** ** | **401,480**    | ** ** | **71,450**  | ** ** |
|                                                                    |       |               |       |           |       |        |       |
| Revisions of  previous estimates                                        |       | (2,395             | )          | (304,084       | )          | (53,076     | )          |
| New discoveries                                                         |       | 57                 |       | 418            |       | 127         |       |
| Production                                                              |       | (1,014             | )          | (32,636        | )          | (6,453      | )          |
| Reserves at  December 31, 2006                                          | ** ** | **1,185**          | ** ** | **65,178**     | ** ** | **12,048**  | ** ** |
|                                                                    |       |               |       |           |       |        |       |
| Revisions of  previous estimates                                        |       | (252               | )          | (40,471        | )          | (6,997      | )          |
| New discoveries                                                         |       | 3,037              |       | 72,551         |       | 15,129      |       |
| Production                                                              |       | (795               | )          | (22,447        | )          | (4,536      | )          |
| Reserves at  December 31, 2007                                          |       | 3,175              |       | 74,811         |       | 15,644      |       |

 

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(1)     Oilincludes both oil and natural gas liquids

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

 

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

 

As required by the FASB, the standardized measure ofdiscounted future net cash flows is computed by applying year-end prices, costsand legislated tax rates and a discount factor of 10 percent to net provedreserves.

 

Changes in the demand for oil and natural gas,inflation, and other factors make such estimates inherently imprecise andsubject to substantial revision. This table should not be construed to be anestimate of the current market value of the Partnership’s proved reserves.

 

F-15

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Reef Global Energy IV,L.P.

Notes to FinancialStatements (continued)

 
| **December 31,**                                     | ** ** | **2007**    | ** **  | **2006**    | ** ** | **2005**      | ** ** |
|-----------------------------------------------------------|------------|-------------|-------------|-------------|------------|---------------|------------|
| Oil and natural  gas properties owned by the Partnership: |       |        |        |        |       |          |       |
| Future cash  inflows                                      | ** ** | $           | 789,360     |        | $          | 548,350       |       | $ | 4,561,530 | ** ** |
| Future  production costs                                  |       | (310,806    | )           | (392,739    | )          | (1,081,708    | )          |
| Future  development costs                                 |       | (8,857      | )           | (13,923     | )          | (146,180      | )          |
| Future net cash  flows                                    | ** ** | **469,697** | ** **  | **141,688** | ** ** | **3,333,642** | ** ** |
| Effect of  discounting net cash flows at 10%              |       | (113,487    | )           | (2,468      | )          | (808,977      | )          |
| Discounted  future net cash flows                         | ** ** | **$**       | **356,210** | ** **  | **$**      | **139,220**   | ** ** | **$** | **2,524,665** | ** ** |

 

**Changes in the StandardizedMeasure of Discounted Future Net Cash flows Relating to Proved Oil and NaturalGas Reserves**

 
| **December 31,**                                     | ** ** | **2007**    | ** **  | **2006**       | ** ** | **2005**      | ** ** |
|-----------------------------------------------------------|------------|-------------|-------------|----------------|------------|---------------|------------|
| Oil and natural gas properties owned by the  Partnership: |       |        |        |           |       |          |       |
| **Standardized measure at beginning of period**           | ** ** | **$**       | **139,220** | ** **     | **$**      | **2,524,655** | ** ** | **$** | **—** | ** ** |
| Extensions and discoveries                                |       | 517,409     |        | 2,726          |       | 2,566,027     |       |
| Purchase of minerals in place                             |       | —      |        | —         |       | 29,798        |       |
| Net change in sales price, net of production costs        |       | 161,491     |        | (2,149,101     | )          | —        |       |
| Revisions of quantity estimates                           |       | (90,401     | )           | (673,318       | )          | —        |       |
| Net changes in estimated future development costs         |       | 10,559      |        | —         |       | —        |       |
| Changes in production timing rates                        |       | (281,973    | )           | 360,292        |       | —        |       |
| Accretion of discount                                     |       | 13,922      |        | 252,466        |       | —        |       |
| Sales net of production costs                             |       | (114,017    | )           | (178,500       | )          | (71,170       | )          |
| Net increase (decrease)                                   | ** ** | **216,990** | ** **  | **(2,385,435** | **)**      | **2,524,655** | ** ** |
| Standardized measure at end of year                       | ** ** | **$**       | **356,210** | ** **     | **$**      | **139,220**   | ** ** | **$** | **2,524,655** | ** ** |

 

F-16

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**EXHIBITINDEX**

 

3.1           Form of Limited PartnershipAgreement (incorporated by reference to Appendix A to the prospectus filed aspart 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         LetterAgreement, dated November 7, 2001, by and between Reef Partners LLC andChallenger Minerals Inc. (incorporated by reference to Exhibit 10.2 of theAnnual Report on Form 10-K of Reef Global Energy Ventures as filed withthe SEC on March 5, 2002).

 

23.2*       Consentof Gleason Engineering

 

31.1*       Certificationof Chief Executive Officer pursuant to Rule 13a-14(a) under the  Securities Exchange Act of 1934.

 

31.2*       Certificationof Chief Financial Officer pursuant to Rule 13-14(a) under theSecurities Exchange Act of 1934.

 

32.1*        Certification of Chief Executive Officerpursuant to 18 U.S.C. §1350.

 

32.2*       Certificationof Chief Financial Officer pursuant to 18 U.S.C. §1350.

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* Filed herewith

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