** **

**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

**___________________**

** **

**FORM 10-Q**

** **

**___________________**

** **

**QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF**

**THE SECURITIES EXCHANGE ACT OF1934**

** **

**For the quarterly period ended March 31, 2005**

** **

**Commission File Number: 333-93399-04**

 

**___________________**

 

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

(Exact name of registrant asspecified in its charter)

 
| **Nevada**                                                               | ** ** | **20-1654113**                        |
|--------------------------------------------------------------------------|------------|---------------------------------------|
| (State or  other jurisdiction of                                         |       | (I.R.S.  employer                     |
| incorporation  or organization)                                          |       | identification  no.)                  |
| ** **                                                               | ** ** | ** **                            |
| **1901 N.  Central Expressway, Suite 300  Richardson, Texas 75080** | ** ** | **(972) 437-6792**                    |
| (Address of  principal executive offices,                                |       | (Registrant’s  telephone number, |
| including  zip code)                                                     |       | including  area code)                 |

 

**__________________**

 

Indicate by ý whether theregistrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes  ý      No o 

 

Indicate by ýwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). Yes o     No ý

** **

**As of May 15, 2005, theregistrant had**25.027956 units held by themanaging general partner, 125.00 units ofadditional general partner interest and 349.972044units of limited partner interestoutstanding.

** **

 

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

**Index**

 
| **PART I — FINANCIAL INFORMATION**                                                            |   |
|---------------------------------------------------------------------------------------------------------|--------|
|                                                                                                    |   |
| **ITEM 1. FINANCIAL STATEMENTS (Unaudited)**                                                            |   |
|                                                                                                    |   |
| *Condensed Balance Sheets*                                                                              |   |
| *Condensed Statement of Operations*                                                                     |   |
| *Condensed Statement of Cash Flows*                                                                     |   |
| *Notes to Condensed Financial Statements*                                                               |   |
|                                                                                                    |   |
| **ITEM 2. MANAGEMENT’S DISCUSSION AND  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |   |
|                                                                                                    |   |
| **ITEM 3. QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK**                                 |   |
|                                                                                                    |   |
| **ITEM 4. CONTROLS AND PROCEDURES**                                                                     |   |
|                                                                                                    |   |
| **PART II — OTHER INFORMATION**                                                               |   |
|                                                                                                    |   |
| **ITEM 1. LEGAL PROCEEDINGS**                                                                           |   |
|                                                                                                    |   |
| **ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                 |   |
|                                                                                                    |   |
| **ITEM 3. DEFAULTS UPON SENIOR SECURITIES**                                                             |   |
|                                                                                                    |   |
| **ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                         |   |
|                                                                                                    |   |
| **ITEM 5. OTHER INFORMATION**                                                                           |   |
|                                                                                                    |   |
| **ITEM 6. EXHIBITS**                                                                                    |   |
|                                                                                                    |   |
| **SIGNATURES**                                                                                          |   |

 

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# **PART I FINANCIAL INFORMATION**

# ** **

## **Item1.** Financial Statements

## ** **

**ReefGlobal Energy IV, L.P.**

**Condensed Balance Sheets**

 
| ** **                                              | ** ** | **March 31,** | ** **    | **December 31,** | ** ** |
|---------------------------------------------------------|------------|--------------------|---------------|-----------------------|------------|
| ** **                                              | ** ** | **2005**           | ** **    | **2004**              | ** ** |
| ** **                                              | ** ** | **(Unaudited)**    | ** **    | ** **            | ** ** |
| **Assets**                                              | ** ** | ** **         | ** **    | ** **            | ** ** |
| **Current  assets:**                                    |       |               |          |                  |       |
| Cash and  cash equivalents                              |       | $                  | 4,067,852     |                  | $          | 5,002,892 |   |
| Accounts  receivable                                    |       | 7,931              |          | —                |       |
| Accounts  receivable from affiliates                    |       | —             |          | 425,475               |       |
| Accrued  interest receivable                            |       | —             |          | 305                   |       |
| **Total  current assets**                               | ** ** | **4,075,783**      | ** **    | **5,428,672**         | ** ** |
|                                                    |       |               |          |                  |       |
| **Property  and equipment:**                            |       |               |          |                  |       |
| Oil and gas  properties, full cost method of accounting |       | 3,453,045          |          | 815,519               |       |
| Prepaid  drilling costs                                 |       | 1,806,671          |          | 2,919,405             |       |
| Accumulated  depreciation and depletion                 |       | (3,057             | **)**         | **—**            | ** ** |
| **Net  property and equipment**                         | ** ** | **5,256,659**      | ** **    | **3,734,924**         | ** ** |
| ** **                                              | ** ** | ** **         | ** **    | ** **            | ** ** |
| **Total  assets**                                       | ** ** | **$**              | **9,332,442** | ** **            | **$**      | **9,163,596** | ** ** |
|                                                    |       |               |          |                  |       |
| **Liabilities  and partners’ equity**              |       |               |          |                  |       |
| **Current  liabilities:**                               |       |               |          |                  |       |
| Accounts  payable                                       |       | $                  | 43,518        |                  | $          | 1,106 |   |
| Accounts  payable to affiliates                         |       | 775,450            |          | 653,616               |       |
| **Total  current liabilities**                          | ** ** | **818,968**        | ** **    | **654,722**           | ** ** |
|                                                    |       |               |          |                  |       |
| **Non-current  liabilities:**                           |       |               |          |                  |       |
| Asset  retirement obligation                            | ** ** | **38,790**         | ** **    | **—**            | ** ** |
|                                                    |       |               |          |                  |       |
| **Partners’  equity:**                             |       |               |          |                  |       |
| General partners                                        |       | 2,118,498          |          | 2,127,535             |       |
| Limited  partners                                       |       | 5,931,319          |          | 5,956,620             |       |
| Managing  general partner                               |       | 424,867            |          | 424,719               |       |
| **Total  partners’ equity**                        | ** ** | **8,474,684**      | ** **    | **8,508,874**         | ** ** |
| ** **                                              | ** ** | ** **         | ** **    | ** **            | ** ** |
| **Total  liabilities and partners’ equity**        | ** ** | **$**              | **9,332,442** | ** **            | **$**      | **9,163,596** | ** ** |

 

*Seeaccompanying notes to condensed financial statements.*

 

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**ReefGlobal Energy IV, L.P.**

**Condensed Statement of Operations**

 
| ** **                                  | ** ** | **March 31,** | ** **  |
|---------------------------------------------|------------|--------------------|-------------|
| ** **                                  | ** ** | **2005**           | ** **  |
| ** **                                  | ** ** | **(Unaudited)**    | ** **  |
| **Revenues:**                               |       |               |        |
| Oil and gas  sales                          |       | $                  | 8,217       |   |
| Interest  income                            |       | 15,701             |        |
| **Total  revenues**                         | ** ** | **23,918**         | ** **  |
|                                        |       |               |        |
| **Costs  and expenses:**                    |       |               |        |
| Lease  operating expenses                   |       | 51                 |        |
| Production  taxes                           |       | 286                |        |
| General and  administrative                 |       | 49,270             |        |
| Depreciation  and depletion                 |       | 3,057              |        |
| **Total  costs and expenses**               | ** ** | **52,664**         | ** **  |
|                                        |       |               |        |
| **Net loss**                                | ** ** | **$**              | **(28,746** | **)** |
|                                        |       |               |        |
| Net loss per  general partner unit          |       | $                  | (48.09      | ) |
| Net loss per  limited partner unit          |       | $                  | (48.09      | ) |
| Net loss per  managing general partner unit |       | $                  | (235.97     | ) |

 

*See accompanying notes to condensed financialstatements.*

 

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**ReefGlobal Energy IV, L.P.**

**Condensed Statement of Cash Flows**

 
| ** **                                                                       | ** ** | **March 31,** | ** **    |
|----------------------------------------------------------------------------------|------------|--------------------|---------------|
| ** **                                                                       | ** ** | **2005**           | ** **    |
| ** **                                                                       | ** ** | **(Unaudited)**    | ** **    |
| **Operating Activities**                                                         | ** ** | ** **         | ** **    |
| **Net loss**                                                                     | ** ** | **$**              | **(28,746**   | **)** |
| Adjustments  for non-cash transactions:                                          |       |               |          |
| Depreciation  and depletion                                                      |       | 3,057              |          |
| Adjustments  to reconcile net loss to net cash provided by operating activities: |       |               |          |
| **Changes  in operating assets and liabilities:**                                |       |               |          |
| Accounts  receivable                                                             |       | (7,626             | )             |
| Accounts  payable                                                                |       | 41,750             |          |
| Accounts  payable to affiliates                                                  |       | 6,396              |          |
| **Net cash  provided by operating activities**                                   | ** ** | **14,831**         | ** **    |
| ** **                                                                       | ** ** | ** **         | ** **    |
| **Investing  Activities**                                                        |       |               |          |
| Property  acquisition and development                                            |       | (2,482,636         | )             |
| Prepaid  drilling costs                                                          |       | 1,112,734          |          |
| **Net cash  used in investing activities**                                       | ** ** | **(1,369,902**     | **)**         |
|                                                                             |       |               |          |
| **Financing  Activities**                                                        |       |               |          |
| Partner  capital contributions                                                   |       | 433,631            |          |
| Distributions  to partners                                                       |       | (13,600            | )             |
| **Net cash  provided by financing activities**                                   | ** ** | **420,031**        | ** **    |
| ** **                                                                       | ** ** | ** **         | ** **    |
| **Net  decrease in cash and cash equivalents**                                   | ** ** | **(935,040**       | **)**         |
| Cash and  cash equivalents at December 31, 2004                             |       | 5,002,892          |          |
| **Cash and  cash equivalents at March 31, 2005**                            | ** ** | **$**              | **4,067,852** | ** ** |
| ** **                                                                       | ** ** | ** **         | ** **    |
| **Non-cash  investing transactions:**                                            | ** ** | ** **         | ** **    |
| Additions to  property included in accounts payable                              | ** ** | **$**              | **(662**      | **)** |
| Additions to  property included in accounts payable to affiliates                | ** ** | **(764,342**       | **)**         |
| Additions to  asset retirement obligation                                        | ** ** | **(38,790**        | **)**         |
| **Total  non-cash investing transactions**                                       | ** ** | **$**              | **(803,794**  | **)** |

 

*See accompanying notes to condensed financialstatements.*

 

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**ReefGlobal Energy IV, L.P.**

**Notes to Condensed Financial Statements (unaudited)**

**March 31,2005**

 

**1. Organization and Basis of Presentation**

 

The financial statements have been prepared in accordance with theinstructions to Form 10-Q and do not include all disclosures required byaccounting principles generally accepted in the United States. However, we haverecorded all transactions and adjustments necessary to fairly present thefinancial statements included in this Form 10-Q. The adjustments arenormal and recurring. The following notes describe only the material changes inaccounting policies, account details, or financial statement notes during thefirst three months of 2005. Therefore, please read these condensed financialstatements and notes to condensed financial statements together with theaudited financial statements and notes to financial statements contained in thePartnership’s Report on Form 10-K for the period ended December 31,2004 (the 2004 10-K). The Partnership began oil and gas drilling activities in December 2004.  Because the future results of the Partnershipare dependent upon the success of drilling operations which will occur duringthe next nine months, the results for the first quarter cannot necessarily beused to project results for the full year.

 

**2. Summary of Accounting Policies**

 

# **Oil and Gas Properties**

# ** **

The Partnership follows the full cost method ofaccounting for crude oil and natural gas properties. Under this method, alldirect costs and certain indirect costs associated with acquisition ofproperties and successful as well as unsuccessful exploration and developmentactivities are capitalized. Depreciation, depletion, and amortization ofcapitalized crude oil and natural gas properties and estimated futuredevelopment costs, excluding unproved properties, are based on the unit-of-productionmethod using proved reserves.  Proved gasreserves are 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 orthe cost ceiling, defined as the sum of the present value of estimated futurenet revenues 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. Excess costs are charged to property impairmentexpense. No gain or loss is recognized upon sale or disposition of crude oiland natural gas properties, except in unusual circumstances. There is noproperty impairment expense for the first quarter of 2005.

 

**Restoration, Removal, and Environmental Liabilities**

 

In June 2001, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No. 143, “Accountingfor Retirement Obligations” (SFAS 143). SFAS 143 addresses accounting andreporting for obligations associated with the retirement of tangible long-livedassets and the associated asset retirement costs. SFAS 143 requires that thefair value of a liability for an asset’s retirement obligation be recorded inthe period in which it is incurred and the corresponding cost capitalized byincreasing the carrying amount of the related long-lived asset. The liabilityis accreted to its then present value each period, and the capitalized cost isdepreciated over the useful life of the related asset. SFAS 143 is effectivefor the Partnership as of its inception date. During the first quarter of 2005,the Partnership recognized $38,790 of asset retirement obligation andadditional capitalized cost in connection with the successful drilling of fourPartnership wells.

 

**New Accounting Pronouncements**

 

In September 2004, the Securities and Exchange Commission issued “StaffAccounting Bulletin No. 106” (SAB No. 106). SAB No. 106 appliesto entities using the full cost method of accounting for crude oil and naturalgas properties. SAB No. 106 affects the way in which entities calculatetheir full cost ceiling limitation (including asset retirement cost related toproved developed properties in the calculation of the ceiling) and the wayentities calculate depletion on oil and gas properties (only asset retirementcost for new re-completions and new wells will be 

 

4

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included infuture development costs in calculating depletion rates). The Partnership doesnot anticipate that SAB No. 106 will have a significant impact on itsfinancial position or results of operations.

 

**3.  Transactions with Affiliates**

 

At March 31, 2005, the Partnership had eight wells in variousstages of drilling or completion that are operated by Reef Exploration, Inc.(REI), an affiliate of Reef. Accounts payable to affiliates at March 31consists primarily of the Partnership’s share of drilling and completion costsbilled to the Partnership by REI. The Partnership has paid REI for these costssubsequent to March 31.

 

If an affiliate of Reef serves as operator of a Partnership prospect,then operator fees will be payable to the affiliate. Under such circumstances,such affiliate 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. At March 31,2005 and December 31, 2004, there were eight and two wells, respectively,being drilled which are operated by REI. At March 31, 2005 and December 31,2004, the Partnership has capitalized as drilling costs $9,957 and $752 ofoperator fees, respectively, incurred in connection with the drilling of thesewells.

 

**4. Partnership Equity**

 

Information regarding the number of units outstanding and the net lossper type of Partnership unit for the quarter ending March 31, 2005 isdetailed below:

 
| **Type of Unit**                | ** ** | **Number of   Units** | ** ** | **Net loss** | ** ** | **Net loss  per unit** | ** ** |
|---------------------------------|------------|-----------------------|------------|--------------|------------|------------------------|------------|
| Managing  general partner units |       | 25.027956             |       | $            | (5,906     | )                      | $          | (235.97 | ) |
| General  partner units          |       | 125.000000            |       | (6,011       | )          | (48.09                 | )          |
| Limited  partner units          |       | 349.972044            |       | (16,829      | )          | (48.09                 | )          |
| Total                           |       | 500.000000            |       | $            | (28,746    | )                      |       |   |
|                                 |            |                       |            |              |            |                        |            |  |  |

 

**5. Subsequent Events**

 

ThePartnership has committed funds to four exploratory and nine developmentalwells. At March 31, 2005, drilling and completion operations were inprogress on ten of these wells.

 

As of May 15,2005, the Partnership had completed drilling operations on three of theexploratory wells. One of the wells is currently being completed with firstproduction expected during the second half of May 2005. Two otherexploratory wells have been plugged and abandoned. The fourth exploratory wellis currently drilling.

 

As of May 15, 2005 the Partnershiphad completed drilling operations on four of the nine developmental wells. Oneof the wells began production on April 8, 2005. Two of the wells arecurrently being completed as productive wells, and the fourth is awaitingcompletion operations. Two developmental wells are currently drilling, andthree additional developmental wells are expected to drill during the third andfourth quarters of 2005.

 

**Item 2.****  Management’s Discussion****and Analysis of FinancialCondition and Results of Operations.**

 

The following discussionwill assist you in understanding the Partnership’s financial position andresults of operations. The information below should be read in conjunction withthe condensed financial statements and the related notes to the condensedfinancial statements.

 

This Report on Form 10-Q contains forward-looking statements thatinvolve risks and uncertainties.  You should exercise extreme caution withrespect to all forward-looking statements made in this Report. Specifically, the following statements are forward-looking:

 

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•                                     statementsregarding the Partnership’s overall strategy for acquiring prospects, includingits intent to co-invest with major independent oil companies and its intent todiversify the Partnership’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 statements using the words “anticipate,” “believe,” “estimate,”“expect” and similar such phrases or words; and

 

•                                     any statements of other than historical fact.

 

Reef believes that it is important to communicate its futureexpectations to the partners.  Forward-looking statements reflect thecurrent view of management with respect to future events and are subject tonumerous risks, uncertainties and assumptions, including, without limitation,the factors listed in the section captioned “RISK FACTORS” contained inthe 2004 10-K. Although Reef believes that the expectations reflected in suchforward-looking statements are reasonable, Reef can give no assurance that suchexpectations will prove to have been correct.  Should any one or more ofthese or other risks or uncertainties materialize or should any underlyingassumptions prove incorrect, actual results are likely to vary materially fromthose described herein.  There can be no assurance that the projectedresults will occur, that these judgments or assumptions will prove correct orthat unforeseen developments will not occur.

 

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

 

**Overview**

 

Reef Global Energy IV, L.P. is a Nevada limited partnership formed toexplore, develop, acquire and produce crude oil, natural gas, and natural gasliquids for the benefit of its investor partners. The Partnership’s primarypurposes are to generate revenues from the production of oil and gas,distribute cash flow to investors, and provide tax benefits to investors. Whilethe majority of the partnership’s proceeds have been used to purchase prospectsupon which the Partnership will conduct drilling operations, a small portion ofcapital has be used to purchase existing reserves.

 

The Partnership currently operates solely in the United States,although there are no restrictions regarding prospect locations. REI, anaffiliate of the managing general partner, has expertise and has drilledprimarily in Texas and Louisiana since its inception in 1987, and thePartnership has acquired properties primarily in these areas to date. Many ofthe projects taken in Texas and Louisiana offer the potential for both naturalgas and condensate production, and the quality of both the natural gas and condensateoften bring premium prices. The Partnership has focused more heavily on naturalgas than oil prospects, due to its belief that costs of production aregenerally lower for natural gas and that the price of natural gas is lessinfluenced than the price of oil by foreign factors such as the Organization ofPetroleum Exporting Countries (OPEC) production quotas. In addition, the areasin which the Partnership will focus its drilling have a highly developedpipeline system and a highly competitive market for sale of the Partnership’sproduction.

 

6

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Through its agreements with Challenger Minerals Inc. (CMI), thePartnership hopes to benefit from the expertise of larger oil and gas industryparticipants in other areas such as the Gulf of Mexico. The Partnership willactively seek participation in prospects and projects reviewed and developed byboth CMI and other independent and major oil and gas industry participants.Such participation will allow the Partnership to benefit from the expertise ofthese entities and increase the diversity and therefore lessen the overalldrilling risk to the investors.

 

The Partnership will not operate in any other industry segment. Shouldany prospect in which the Partnership has an interest be determined to warrantadditional development activity, the Partnership may call for voluntaryadditional partner assessments of up to $20,000 per unit.The Partnership is not allowed to borrow funds during the drilling phase ofPartnership operations, and therefore will not be impacted by interest ratefluctuations.  In addition, the Partnership has not engaged in commodityfutures trading or hedging activities, and therefore is subject to commodityprice risk.   See “Item 3—Quantitative and Qualitative DisclosuresAbout Market Risk.”

 

**CriticalAccounting Policies**

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires us to make estimates and use assumptionsthat can affect the reporting of assets, liabilities, equity, revenues, andexpenses. We base our estimates on historical experience and various otherassumptions that are believed to be reasonable under the circumstances. Actualresults may differ from these estimates under different assumptions orconditions. We are also required to select among alternative acceptableaccounting policies. See Note 2 to the audited financial statements in thePartnership’s 2004 10-K for a complete list of significant accounting policies.

 

**NewAccounting Pronouncements**

 

In September 2004, the Securities and Exchange Commission issued “StaffAccounting Bulletin No. 106” (SAB No. 106). SAB No. 106 appliesto entities using the full cost method of accounting for crude oil and natural gasproperties. SAB No. 106 affects the way in which entities calculate theirfull cost ceiling limitation (including asset retirement cost related to proveddeveloped properties in the calculation of the ceiling) and the way entitiescalculate depletion on oil and gas properties (only asset retirement cost fornew re-completions and new wells will be included in future development costsin calculating depletion rates). The Partnership does not anticipate that SAB No. 106will have a significant impact on its financial position or results ofoperations.

 

**Off-Balance Sheet Arrangements**

 

The Partnership does not participate in transactions that generaterelationships with unconsolidated entities or financial partnerships, such asentities often referred to as structure finance or special purpose entities(SPEs) which would have been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limitedpurposes.  As of March 31, 2005, the Partnership was not involved inany unconsolidated SPE transactions.

 

**Contractual Obligations Table**

 

The Partnership has no obligations under non-cancelable agreements at March 31,2005.

 

**Risks and Uncertainties**

 

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

 

The Partnership has not engaged in commodity futures trading or hedgingactivities and has not entered 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 will have a significantimpact on the Partnership’s results of operations.

 

7

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# **Oil and Gas Properties**

# ** **

The Partnership follows the full cost method of accounting for crude oiland natural gas properties. Under this method, all direct costs and certainindirect costs associated with acquisition of properties and successful as wellas unsuccessful exploration and development activities are capitalized.Depreciation, depletion, and amortization of capitalized crude oil and naturalgas properties and estimated future development costs, excluding unprovedproperties, are based on the unit-of-production method using provedreserves.  Proved gas reserves areconverted to equivalent barrels at a rate of 6 Mcf to 1 Bbl. Net capitalizedcosts of crude oil and natural gas properties, as adjusted for asset retirementobligations, are limited to the lower of unamortized cost or the cost ceiling,defined as the sum of the present value of estimated future net revenues fromproved reserves based on un-escalated prices discounted at 10 percent, plus thecost of properties not being amortized, if any, plus the lower of cost orestimated fair value of unproved properties included in the costs beingamortized, if any. Excess costs are charged to property impairment expense. Nogain or loss is recognized upon sale or disposition of crude oil and naturalgas properties, except in unusual circumstances. There is no propertyimpairment expense for the first quarter of 2005.

 

**Restoration, Removal, and Environmental Liabilities**

 

In June 2001, the Financial Accounting Standards Board (FASB)issued Statement of Financial Accounting Standards No. 143, “Accountingfor Retirement Obligations” (SFAS 143). SFAS 143 addresses accounting andreporting for obligations associated with the retirement of tangible long-livedassets and the associated asset retirement costs. SFAS 143 requires that thefair value of a liability for an asset’s retirement obligation be recorded inthe period in which it is incurred and the corresponding cost capitalized byincreasing the carrying amount of the related long-lived asset. The liabilityis accreted to its then present value each period, and the capitalized cost isdepreciated over the useful life of the related asset. SFAS 143 is effectivefor the Partnership as of its inception date. During the first quarter of 2005,the Partnership recognized $38,790 of asset retirement obligation andadditional capitalized cost in connection with the successful drilling of fourPartnership wells.

 

**Liquidity and Capital Resources**

 

The Partnership was funded with initialcontributions totaling $9,924,916.  Reefpurchased 25.027956 Partnership units for a total of $425,475. Investorpartners purchased 125 general partner units for $2,500,000 and 349.972044limited partner units for $6,999,441. Syndication and organization costs of$1,424,916 were incurred leaving available cash of $8,500,000 for Partnershipactivities.  The Partnership was formedon November 10, 2004 and the last partner was admitted to the Partnershipon December 2, 2004, which was the date the offering of Partnership unitsended.

 

The Partnership also earned approximately$29,000 in interest income during the period from inception (November 10,2004) thru March 31, 2005. Drilling operations began in December 2004and are expected to continue thru the end of 2005. During this period, thePartnership expects to utilize the $8,500,000 plus interest income earned forlease acquisition, drilling activities, and general and administrativeexpenses. The Partnership will pay 100% of general and administrative costs and99% of the lease acquisition, drilling and completion costs from these funds.Reef, the managing general partner, will make additional capital contributionstotaling 1% of all lease acquisition, drilling and completion costs incurred,in addition to the 4.95% share of costs it will pay for as a unit holder. ThePartnership expects to purchase non-operated working interests in approximatelyfifteen exploratory and development drilling projects. The Partnership hasalready committed monies to thirteen drilling projects. Drilling and otheractivities will be conducted solely with the funds raised plus interest earned.The Partnership Agreement prohibits bank borrowings during the Partnership’sdrilling phase of operations, and the Partnership expects to distribute netproceeds, if any, from successful oil and gas activities directly to thepartners.

 

The thirteen projects to which thePartnership has currently committed funds have estimated expenditures totaling$6,588,000. General and administrative costs, which consist primarily of legaland accounting fees, as well as administrative time of REI personnel, areestimated at approximately $200,000 during the drilling phase of operations.Current uncommitted capital as of March 31, 2005 is approximately$1,741,000. At March 31, 2005, the Partnership had approximately$3,257,000 of working capital with which to pay remaining budgeted anduncommitted expenditures.

 

8

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The Partnership Agreement allows for theassessment of up to $20,000 per unit for subsequent operations deemed necessaryto fully develop any of the initial Partnership prospects. Until initialdrilling operations are completed it is not known whether any additionalpartner assessments will be made.

 

**Results of Operations**

 

Because the Partnership was formed on November 10, 2004, there isno comparable information for the three month period ended March 31, 2004.

 

The Partnership incurred a net loss of $28,746 during the secondquarter. The Partnership had $15,701 of interest income earned from investmentof Partnership capital contributions and $8,217 of oil and gas revenue from thetwo productive royalty interest wells purchased in January 2005. Generaland administrative charges totaled $49,270. Approximately $37,000 of thisamount represents auditing and tax review fees of the Partnership’s independentregistered accounting firm in connection with the audit and tax review of the2004 financial statements. The Partnership also incurred $6,000 in legal feesin connection with the filing of its annual Form 10-K report, andapproximately $4,500 in accounting fees in connection with preparation ofinvestor tax information at December 31, 2004. Administrative time chargedby REI personnel totaled approximately $1,900. The Partnership expects legaland accounting fees to decrease during the next two quarters, but expectsgeneral and administrative costs charged by REI personnel administering fundoperations to increase as Partnership drilling activity increases andproductive wells are placed in service. The primary components of general andadministrative costs will continue to be third party legal and accounting costsassociated with financial statement preparation and required SEC filings, anddirect and administrative costs for personnel provided by REI.

 

The Partnership’s first productive well in which it owns a workinginterest was placed into service on April 8, 2005. The Partnership expectsthat two or three additional wells will be placed into production prior to June 30,2005. The Partnership expects results of operations for the second quarter toshow improvement as a result of the increased revenues and an expected decreasein overall general and administrative expenses.

 

**Item 3.****  Quantitativeand Qualitative****Disclosuresabout Market Risk.**

 

*Interest Rate Risk*

 

The Partnership Agreement prohibits bank borrowings during thePartnership’s drilling phase of operations. However, to the extent that changesin interest rates affect general economic conditions, the Partnership will beaffected by such changes.

 

*Commodity Price Risk*

 

The Partnership has not engaged in commodity futures trading or hedgingactivities and has not entered into derivative financial instrumenttransactions for trading or other speculative purposes.  The Partnership expects to sell a vastmajority of its production from successful oil and gas wells on amonth-to-month basis at current spot market prices. Accordingly, thePartnership is at risk for the volatility in commodity prices inherent in theoil and gas industry, and the level of commodity prices will have a significantimpact on the Partnership’s results of operations.

 

*Exchange Rate Risk*

 

The Partnership currently has not committed funds to any foreignprojects and has no income from foreign sources or operations in foreign countriesthat would subject it to currency exchange rate risk.

 

**Item 4.****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. As of the end of the period covered by this report, Reef’s ChiefExecutive Officer and Chief Financial Officer have evaluated the effectivenessof the design and operation of the Partnership’s disclosure controls andprocedures (as defined in Rule 13a-15(e) under the 

 

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Securities Exchange Act of 1934) with the assistanceand participation of other members of management.Based upon that evaluation, Reef’s Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures are effective forgathering, analyzing and disclosing the information the Partnership is requiredto disclose in the reports it files under the Securities Exchange Act of 1934within the time periods specified in the SEC’s rules and forms. During ourfiscal quarter ended March 31, 2005, no change occurred in our internalcontrol over financial reporting (as defined in Rule 13a-15(f) underthe Securities Exchange Act of 1934) that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

**PART II– OTHER INFORMATION**

 

**Item 1.****  Legal Proceedings**

 

None

 

**Item 2.****  Unregistered Sales****of Equity Securities and Use of Proceeds**

 

*Useof Proceeds*

 

In connection with theRegistration Statement filed on form S-1 (No. 333-93399) and declaredeffective May 31, 2001, Reef filed a post-effective amendment to theRegistration Statement on behalf of the Program on September 14, 2001. On January 10,2002 Reef filed a final prospectus and commenced the offering of units in theProgram. All sales of Partnership units were made through the Program’sdealer-manager, Reef Securities, Inc., and a number of soliciting dealers.The Program filed a prospectus supplement describing Reef Global Energy IV,L.P. on September 21, 2004 and commenced offering units. The offeringperiod ended on December 2, 2004, at which time all 500 allowable unitshad been sold. Under the terms of the offering, a minimum of 50 Partnershipunits at a price of $20,000 per unit were required to be sold in order to formthe Partnership. The maximum Partnership units offered were 375 units oflimited partner interest and 125 units of general partner interest.

 

The Partnership sold500 units of partnership interest, consisting of 375 units of limited partnerinterest and 125 units of additional general partner interest. Reef purchased25.027956 limited partner units, equaling 5.01% of the total Partnership unitssold. Total offering proceeds were $9,924,916.

 

All units except thosepurchased by Reef paid a 15% management fee to Reef to pay for the Partnershiporganization and offering costs, including sales commissions. These coststotaled $1,424,916, leaving capital contributions of $8,500,000 available forPartnership oil & gas operations. As of March 31, 2005, thePartnership had expended $3,414,255 on oil and gas operations, includingamounts in accounts payable at March 31, 2005, and had made prepayments ofintangible drilling costs totaling $1,806,671. The Partnership intends toutilize all available Partnership capital during 2005.

 

**Item 3.****  Defaults Upon****Senior Securities**

 

None

 

**Item 4.****  Submission of****Matters to a Vote of Security Holders**

 

None

 

**Item 5.****  Other Information**

 

None

 

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**Item 6.****  Exhibits**

 

(a)  Exhibits

 
|  31.1 |   | Certification of Chief Executive Officer required  by Rule 13a-14(a)/15d-14(a) pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.                                 |
|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                                                                      |
|  31.2 |   | Certification of Chief Financial Officer  required by Rule 13a-14(a)/15d-14(a) pursuant to Section 302  of the Sarbanes-Oxley Act of 2002.                                 |
|       |   |                                                                                                                                                                                      |
|  32   |   | Certification of Chief Executive Officer  and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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**SIGNATURES**

 

Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.

 
|       |              | REEF GLOBAL ENERGY IV, L.P. |
|------------|-------------------|-----------------------------|
|       |              |                        |   |   |
|       |              | By:                         | Reef Oil & Gas Partners LLC, |   |
|       |              |                        | Managing General Partner |   |
|       |              |                        |   |   |
|       |              |                        |   |   |
| Dated:     | June 6, 2005 | By:                         | /s/ Michael J. Mauceli |   |   |
| ** ** | ** **        | ** **                  | **Michael J. Mauceli** |   |
|       |              |                        | Manager and Member |   |
|       |              |                        | (*Principal Executive Officer)* |   |
|       |              |                        |   |   |
|       |              |                        |   |   |
| Dated:     | June 6, 2005 | By:                         | /s/ Daniel C. Sibley |   |   |
| ** ** | ** **        | ** **                  | **Daniel C. Sibley** |   |
|       |              |                        | Chief Financial Officer |   |
|       |              |                        | (*Principal Financial and Accounting Officer)* |   |
|            |                   |                             |  |  |  |  |

 

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**ExhibitsIndex**

 
| 31.1   |   | Certification of Chief Executive Officer required by Rule 13a-14(a)/15d-14(a) pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                      |
| 31.2   |   | Certification of Chief Financial Officer required by Rule 13a-14(a)/15d-14(a) pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.                                  |
|   |   |                                                                                                                                                                                      |
| 32     |   | Certification of Chief Executive Officer and Chief Financial Officer  pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906  of the Sarbanes-Oxley Act of 2002. |

 

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