UNITED STATES

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

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

| Texas                                                                   | 26-0805120                                    |
|-------------------------------------------------------------------------|-----------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) | (I.R.S.      EmployerIdentification      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 areacode)               |

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

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

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

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|   | REEF      OIL & GAS INCOMEAND      DEVELOPMENT FUND III, L.P. |                                   |
|--------|-------------------------------------------------------------------|----------------------------------------|
|   |                                                              |                                   |
|   | By:                                                     | Reef      Oil & Gas Partners, L.P. |   |
|   |                                                              |                                   |   |
|   |                                                              |                                   |   |
|   | By:                                                               | /s/ Michael J. Mauceli                 |   |
|   |                                                              | Michael J.      Mauceli                |   |
|   |                                                              | Manager      and Member                |   |
|   |                                                              | (Principal      Executive Officer)     |   |

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|                             |   |                                                                                            |                    |
|----------------------------------|--------|-------------------------------------------------------------------------------------------------|-------------------------|
| Signature                        |   | Title                                                                                           | Date                    |
|                             |   |                                                                                            |                    |
| /s/      Michael      J. Mauceli |   | Manager      and Member of the general partner of                                               | September      17, 2010 |
| Michael      J. Mauceli          |   | Reef      Oil & Gas Partners, L.P. (principal executive      officer)                       |                         |
|                             |   |                                                                                            |                    |
| /s/      Daniel C. Sibley        |   | Chief      Financial Officer and                                                                | September      17, 2010 |
| Daniel      C. Sibley            |   | General      Counsel of Reef Exploration, L.P.(principal financial and      accounting officer) |                    |

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| ExhibitNumber |   |  Description                                                                                                                                                                                                                                                                                                                                                                                              |
|---------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1           |   | Certificate      of Formation of Reef Oil & Gas Income and Development Fund III, L.P.      dated November 27, 2007 (incorporated by reference to Exhibit 3.1 to Form      10, SEC File No. 000-53795, as filed with the SEC on October 2,      2009).                                                                                                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1           |   | Second      Amended and Restated Agreement of Limited Partnership of Reef Oil &      Gas Income and Development Fund III, L.P., dated June 4, 2008      (incorporated by reference to Exhibit 4.1 to Form 10, SEC File No.      000-53795, as filed with the SEC on October 2, 2009).                                                                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.1          |   | Operating      Agreement dated January 7, 2008, by and among Reef Exploration, L.P., Reef      Oil & Gas Income and Development Fund III, L.P. and Davric Corporation      (incorporated by reference to Exhibit 10.1 to Form 10, SEC File No.      000-53795, as filed with the SEC on October 2, 2009).                                                                                                  |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.2          |   | Operating      Agreement dated May 1, 2008, by and among Reef Exploration, L.P., Reef Oil      & Gas Income and Development Fund III, L.P. and Davric Corporation      (incorporated by reference to Exhibit 10.2 to Form 10, SEC File No.      000-53795, as filed with the SEC on October 2, 2009).                                                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.3          |   | Purchase      and Sale Agreement dated January 7, 2008, by and among Sierra-Dean      Production Company L.P., Reef Oil & Gas Income and Development Fund      III, L.P., Reef Exploration, L.P. and SPI Operations LLC, as amended on      January 8, 2008 (incorporated by reference to Exhibit 10.3 to Form 10, SEC      File No. 000-53795, as filed with the SEC on October 2,    2009).              |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.4          |   | Assignment,      dated May 1, 2008, by and between Davric Corporation and Reef Oil &      Gas Income and Development Fund III, L.P. (incorporated by reference to      Exhibit 10.4 to Form 10, SEC File No. 000-53795, as filed with the SEC on      October 2, 2009).                                                                                                                                    |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.5          |   | Crude      Oil Contract, dated March 13, 2008, by and between Reef Exploration, L.P.      and Occidental Energy Marketing, Inc., as amended by Amendment No. 1,      dated June 24, 2008, by and between Reef Exploration, L.P. and Occidental      Energy Marketing, Inc. (incorporated by reference to Exhibit 10.5 to Form      10, SEC File No. 000-53795, as filed with the SEC on October 2,      2009). |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.6          |   | Consulting      Agreement, dated September 1, 2006, by and between Reef Exploration, L.P.      and William R. Dixon (incorporated by reference to Exhibit 10.6 to Form      10, SEC File No. 000-53795, as filed with the SEC on October 2,      2009).                                                                                                                                                        |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.7          |   | Casinghead      Gas Sales Contract, dated January 1, 1978, by and between Amoco Production      Company and Amoco Production Company (incorporated by reference to Exhibit      10.7 to Form 10, SEC File No. 000-53795, as filed with the SEC on      October 2, 2009).                                                                                                                                  |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.8          |   | Purchase      and Sale Agreement, dated January 19, 2010, by and between Azalea      Properties Ltd. And RCWI, L.P. (incorporated by reference to Exhibit 10.1      to the Partnership's Form 8-K, as filed with the SEC on January 22,      2010).                                                                                                                                                            |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9          |   | Purchase      and Sale Agreement, dated January 19, 2010, by and between RCWI, L.P., and      Reef Oil & Gas Income and Development Fund III, L.P. (incorporated by      reference to Exhibit 10.2 to the Partnership's Form 8-K, as filed with the      SEC on January 22,2010).                                                                                                                          |

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|                                    |   |                                                                                                                                                                                                                                                                                        |
|-----------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  10.10                             |   |  Side      Letter Agreement, dated January 19, 2010 between RCWI, L.P. and Azalea      Properties Ltd. regarding Post Closing PUDs (incorporated by reference to      Exhibit 10.3to the Partnership's Form 8-K, as filed with the SEC on      January 22, 2010).                      |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 10.11                                   |   | Side      Letter Agreement, dated January 19, 2010 between RCWI, L.P. and Azalea      Properties Ltd. Regarding Post Closing Properties/Title Defect Notice      (incorporated by reference to Exhibit 10.4 to the Partnership's Form 8-K,      as filed with the SEC on January 22, 2010). |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 10.12                                   |   | Side      Letter Agreement, dated January 19, 2010 between RCWI, L.P. and Azalea      Properties Ltd. Regarding Third Party Consents (incorporated by reference      to Exhibit 10.5 to the Partnership's Form 8-K, as filed with the SEC on      January 22, 2010).                        |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 23.2                                    |   | Consent      of William M. Cobb & Associates, Inc. (previously    filed)                                                                                                                                                                                                                |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 31.1                                    |   | Certification      of Principal Executive Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934. (previously filed)                                                                                                                                             |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 31.2                                    |   | Certification      of Principal Financial Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934. (previously filed)                                                                                                                                             |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 31.3                                    |   | Certification      of Principal Executive Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934.*                                                                                                                                                               |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 31.4                                    |   | Certification      of Principal Financial Officer pursuant to Rule 13a-14(a) under the      Securities Exchange Act of 1934.*                                                                                                                                                               |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 32.1                                    |   | Certification      of Principal Executive Officer pursuant to 18 U.S.C. §1350. (previously      filed)                                                                                                                                                                                 |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 32.2                                    |   | Certification      of Principal Financial Officer pursuant to 18 U.S.C. §1350. (previously      filed)                                                                                                                                                                                 |
|                                    |   |                                                                                                                                                                                                                                                                                        |
| 99.1                                    |   | Summary      Reserve Report of William M. Cobb & Associates, Inc. (previously      filed)                                                                                                                                                                                               |
| __________________*      Filed herewith |
|                                    |   |                                                                                                                                                                                                                                                                                        |

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