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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2013

or

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

For the Transition Period from              to             

Commission File Number: 333-122935-03

REEF GLOBAL ENERGY VIII, L.P.

(Exact name of registrant as specified in its charter)

(972)-437-6792

Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

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

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

As of August 12, 2013, the registrant had 32.425 units of general partner interest held by the managing general partner, and 616.076 units of limited partner interest outstanding.

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Reef Global Energy VIII, L.P.

Form 10-Q Index

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Reef Global Energy VIII, L.P.

Condensed Balance Sheets

See accompanying notes to condensed financial statements (unaudited).

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Reef Global Energy VIII, L.P.

Condensed Statements of Operations

(Unaudited)

See accompanying notes to condensed financial statements (unaudited).

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Reef Global Energy VIII, L.P.

Condensed Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed financial statements (unaudited).

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Reef Global Energy VIII, L.P.

Notes to Condensed Financial Statements (unaudited)

June 30, 2013

1. Organization and Basis of Presentation

The condensed financial statements of Reef Global Energy VIII, L.P. (the “Partnership”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to those rules and regulations. We have recorded all transactions and adjustments necessary to fairly present the financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly Report”). The adjustments are normal and recurring. The following notes describe only the material changes in accounting policies, account details, or financial statement notes during the first six months of 2013. Therefore, please read these unaudited condensed financial statements and notes to unaudited condensed financial statements together with the audited financial statements and notes to financial statements contained in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “Annual Report”). The results of operations for the three and six month periods ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Going Concern

The accompanying financial statements have been prepared assuming the Partnership is a going concern, which assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our independent registered public accounting firm’s opinion included in our Annual Report includes an explanatory paragraph indicating substantial doubt about our ability to continue as a going concern.

During the first quarter of 2013, the Partnership sold its interest in the Sand Dunes property, which was comprised of four shut-in wells, three productive wells, and one salt water disposal well. As a result of this sale, the Partnership has one remaining property, which is shut-in at June 30, 2013 awaiting a workover proposal from the operator. The Partnership currently has no plans to sell its interest in its remaining property or to drill additional wells. The Partnership also has no plans to engage in commodity futures trading or hedging activities. Finally, the estimated economic reserve life of Partnership wells is computed based upon operating revenues and costs and does not consider Partnership general and administrative costs. Future cash flows generated from the remaining Partnership well will be significantly impacted by actual prices received, and by actual production volumes. Current projections indicate that subsequent to June 30, 2013, revenues generated from crude oil and natural gas sales will not be sufficient to cover operating expenses and general and administrative costs.  Reef Oil & Gas Partners, L.P. (“Reef”), as the Partnership’s managing general partner and sole general partner, may be required to provide additional capital contributions to the Partnership should working capital and future cash generated from crude oil and natural gas sales not be sufficient to settle all remaining asset retirement obligations and general and administrative costs. These factors raise substantial doubt about the ability of the Partnership to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Partnership be unable to continue as a going concern. The managing general partner continues to evaluate several options related to the Partnership, including the possible sale of marketable assets, as a result of these declining cash flows.

2. Summary of Accounting Policies

Oil and Gas Properties

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

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In applying the full cost method, the Partnership performs a quarterly ceiling test on the capitalized costs of oil and gas properties, whereby the capitalized costs of oil and gas properties are limited to the sum of the estimated future net revenues from proved reserves using prices that are the 12-month un-weighted arithmetic average of the first-day-of-the-month price for crude oil and natural gas held constant and discounted at 10%, plus the lower of cost or estimated fair value of unproved properties, if any. If capitalized costs exceed the ceiling, an impairment loss is recognized for the amount by which the capitalized costs exceed the ceiling, and is shown as a reduction of oil and gas properties and as property impairment expense on the Partnership’s statements of operations. The Partnership does not recognize gain or loss upon sale or disposition of oil and gas properties, unless such a sale would significantly alter the rate of depletion and amortization. During the three and six month periods ended June 30, 2013, the Partnership recognized a loss of $194 and a gain of $80,061, respectively, related to the Partnership’s sale of the Sand Dunes property.  Of the recognized gain, $75,355 was attributable to the resulting reduction of asset retirement obligation. During the three and six month periods ended June 30, 2013, the Partnership recognized property impairment expense of proved properties of $179 and $179, respectively.  During the three and six month periods ended June 30, 2012, the Partnership recognized no property impairment expense of proved properties.

Estimates of Proved Oil and Gas Reserves

Estimates of the Partnership’s proved reserves at June 30, 2013 and December 31, 2012 are prepared and presented in accordance with SEC rules and accounting standards which require SEC reporting entities to prepare their reserve estimates using the un-weighted arithmetic average of the first-day-of-the-month commodity prices over the preceding 12-month period and current costs. Future prices and costs may be materially higher or lower than these prices and costs, which would impact the estimate of reserves and future cash flows.

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

Restoration, Removal, and Environmental Liabilities

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

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

The Partnership has recognized an estimated liability for future plugging and abandonment costs. A liability for the estimated fair value of the future plugging and abandonment costs is recorded with a corresponding increase in the full cost pool at the time a new well is drilled or acquired.  Depreciation expense associated with estimated plugging and abandonment costs is recognized in accordance with the full cost methodology.

The Partnership estimates a liability for plugging and abandonment costs based on historical experience and estimated well life.  The liability is discounted using the credit-adjusted risk-free rate.  Revisions to the liability could occur due to changes in well plugging and abandonment costs or well useful lives, or if federal or state regulators enact new well restoration requirements. The Partnership recognizes accretion expense in connection with the discounted liability over the remaining life of the well.

As of December 31, 2012, the Partnership recognized a portion of its asset retirement obligation as a current liability due to the short-term nature of the estimated remaining economic reserve lives of certain properties. Subsequent to the sale of the Sand Dunes property during the first quarter of 2013, the asset retirement obligation associated with the sole remaining Partnership well has been recognized as a current liability due to the short-term nature of its estimated economic reserve life.

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The following table summarizes the Partnership’s asset retirement obligation for the six month period ended June 30, 2013 and the year ended December 31, 2012.

Fair Value of Financial Instruments

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

Comprehensive Income

Comprehensive income is defined as a change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The Partnership has no items of comprehensive income other than net income in any period presented. Therefore, net income as presented in the consolidated statements of operations equals comprehensive income.

3. Transactions with Affiliates

The Partnership has no employees. Reef Exploration, L.P. (“RELP”), an affiliate of Reef, the managing general partner of the Partnership, employs a staff including geologists, petroleum engineers, landmen and accounting personnel who administer all of the Partnership’s operations. The Partnership reimburses RELP for technical and administrative services at cost.  During the three and six month periods ended June 30, 2013, the Partnership incurred administrative costs totaling $5,772 and $11,265, respectively. During the three and six month periods ended June 30, 2012, the Partnership incurred administrative costs totaling $6,283 and $17,454, respectively. The Partnership incurred no technical services costs during the three and six month periods ended June 30, 2013 and 2012. Administrative costs are included as general and administrative expenses on the condensed statements of operations.

RELP processes joint interest billings and revenue payments on behalf of the Partnership. At June 30, 2013, the Partnership owed RELP $12,417 for joint interest and general and administrative charges processed in excess of net revenues.  At December 31, 2012, RELP owed the Partnership $17,273 for net revenues processed in excess of joint interest and general and administrative charges.  The cash associated with net revenues processed by RELP is normally received by RELP from oil and gas purchasers 30-60 days after the end of the month to which the revenues pertain. The Partnership settles its balances with Reef and RELP on at least a semi-annual basis. The balance owed to RELP as of June 30, 2013 was paid by the Partnership during July 2013.

4. Commitments and Contingencies

The Partnership is not currently involved in any legal proceedings.

5. Partnership Equity

Information regarding the number of units outstanding and the net income (loss) per type of Partnership unit for the three and six month periods ended June 30, 2013 is detailed below:

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For the three months ended June 30, 2013

For the six months ended June 30, 2013

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the Partnership’s financial condition, results of operations, liquidity and capital resources. This discussion should be read in conjunction with our audited financial statements and the related notes thereto, included in the Annual Report.

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

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

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

·                                     any statements using the words “anticipate,” “believe,” “estimate,” “expect” and similar such phrases or words; and

·                                     any statements of other than historical fact.

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

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

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Overview

Reef Global Energy VIII, L.P. is a Nevada limited partnership formed to acquire, explore, develop and produce crude oil, natural gas, and natural gas liquids for the benefit of its investor partners. The Partnership’s primary purposes are to generate revenues from the production of crude oil and natural gas, distribute cash flow to investors, and provide tax benefits to investors. The Partnership purchased working interests in three developmental prospects and participated in the drilling of seventeen successful developmental wells and one unsuccessful developmental well on those prospects. The Partnership purchased working interests in three exploratory prospects and participated in the drilling of one successful exploratory well and two unsuccessful exploratory wells on those three prospects.  As of December 31, 2012, the successful exploratory well had been plugged and abandoned and eight of the seventeen successful developmental wells had been sold. Eight successful developmental wells on the Sand Dunes property were sold effective March 1, 2013 (as described below).  The remaining successful developmental well was shut-in at the end of June 2013, and a workover proposal is currently being prepared by the operator. The Partnership completed its drilling program during the second quarter of 2008, having participated in the drilling of twenty-one wells using the original capital raised by the Partnership. Subsequent to initial drilling operations, the Partnership is permitted to conduct additional drilling on existing Partnership prospects. The Partnership has not participated in and currently has no plans for participating in additional drilling activities.

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

On March 12, 2013, the Partnership, along with Reef Oil & Gas income and Development Fund II, L.P., Reef Global Energy VI, L.P., Reef Global Energy VII, L.P., and Reef Global Energy IX, L.P. (collectively, the “Sellers”), sold, transferred, assigned, and conveyed all of their rights, title and interest in the Sand Dunes property in Eddy County, New Mexico effective as of March 1, 2013 to Penroc Oil Corporation for an aggregate purchase price to the Sellers of $100,000.  The Partnership received approximately $8,600 of the purchase price, net of fees associated with the sale.  The Sand Dunes property includes eight wells, of which one had been converted into a salt water disposal well during 2010.  The Sand Dunes property accounted for approximately 5.9% of the Partnership’s total sales revenues during the year ended December 31, 2012.

Liquidity and Capital Resources

The Partnership was funded with initial capital contributions totaling $16,090,928. Reef purchased 32.425 general partner units, or 5% of the total units sold, for $689,032. Investor partners purchased 520.793 units of general partner interest and 95.283 units of limited partner interest for $15,401,896. All units of general partner interest purchased by investor partners were converted to units of limited partner interest during 2008. Reef also contributed $131,210 in connection with its obligation to pay 1% of all leasehold, drilling, and completion costs. Organization and offering costs totaled $2,310,284, leaving capital contributions of $13,911,853 available for Partnership activities. The Partnership expended $14,102,150 on prospect and property acquisitions, drilling and completion costs in connection with its participation in the drilling of twenty-one wells and expended $53,048 on general and administrative expenses during its drilling and completion phase of operations.  Expenditures in excess of Partnership capital were deducted from Partnership distributions. There are no plans to conduct any additional drilling on partnership prospects at this time; however, additional drilling activity is permitted on the Partnership prospects at the discretion of the Partnership’s managing general partner. Any additional capital expenditures would need to be funded by Partnership cash flows, if any, and would reduce Partnership distributions. The most recent distribution of cash flow to investors occurred in July 2012. The Partnership does not operate in any other industry segment, and operates solely in the United States.

The Partnership has working capital of $71,833 at June 30, 2013.  Subsequent to expending the initial available Partnership capital contributions on prospect acquisitions and drilling and completion costs of Partnership wells, the Partnership’s working capital consists primarily of cash flows from productive properties, which have been utilized to pay cash distributions to investors. Current projections indicate that no funds will be available for future distribution to investor partners unless the Partnership has available cash after settling all remaining obligations of the Partnership, including asset retirement and general and administrative costs.

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Results of Operations

The following is a comparative discussion of the results of operations for the periods indicated. It should be read in conjunction with the unaudited condensed financial statements and the related notes to the unaudited condensed financial statements included in this Quarterly Report.

The following table provides information about sales volumes and crude oil and natural gas prices for the periods indicated. Equivalent barrels of oil (“EBO”) are computed by converting 6 Mcf of natural gas to 1 barrel of crude oil.

The estimated net proved crude oil and natural gas reserves as of June 30, 2013 and 2012 are summarized below. The quantities of proved crude oil and natural gas reserves discussed in this section include only the amounts which the Partnership reasonably expects to recover in the future from known oil and gas reservoirs under the current economic and operating conditions. Proved reserves include only quantities that the Partnership expects to recover commercially using current prices, costs, existing regulatory practices, and technology. Therefore, any changes in future prices, costs, regulations, technology or other unforeseen factors could materially increase or decrease the proved reserve estimates.

Three months ended June 30, 2013 compared to the three months ended June 30, 2012

The Partnership incurred a net loss of $23,709 for the three month period ended June 30, 2013, compared to a net loss of $3,330 for the three month period ended June 30, 2012.  The increase in net loss between these comparative periods is a result of declines in production volumes from the Partnership’s remaining well and in oil sales prices, and increased lease operating and general and administrative expenses.

Partnership crude oil and natural gas production volumes are declining due to natural production declines from existing Partnership wells, the sale of Partnership wells, and the fact that the Partnership has not drilled any new productive wells since 2008. The Partnership has no plans to conduct additional drilling activity. As a result of the sale of the Sand Dunes property during March 2013, the Rob L RA SUA CL&F #1 (“Gumbo II”) well, located in Terrebonne Parish, Louisiana is the only remaining well in which the Partnership has an interest. Beginning in August 2011, as water volumes associated with the production of the crude oil and natural gas from this well began to increase, the actual production volumes of crude oil and natural gas from the well began to decrease. During the three month period ended June 30, 2012, the Partnership’s share of production volumes from the Gumbo II well were 487 barrels of crude oil and 2,879 Mcf of natural gas, or 94.7% and 98.1% of Partnership crude oil and natural gas production volumes for the period. During the three month period ended June 30, 2013, the Partnership share of production volumes from the Gumbo II well were 287 barrels of crude oil and 1,725 Mcf of natural gas, which represents all Partnership crude oil and natural gas production volumes for the period, a volume drop of approximately 40.6% on an EBO basis. At June 30, 2013, the well was shut-in awaiting a workover procedure. Production, if any, from this well will continue to decline in future quarters, and will lead to continuing declines in sales volumes in future periods.

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The sales price for crude oil decreased by 8.3%, to an average price of $80.14 per Bbl for the three month period ended June 30, 2013, compared to an average price of $87.35 for the three month period ended June 30, 2012, and the sales price for natural gas increased by 62.8%, to an average price of $3.76 per Mcf for the three month period ended June 30, 2013, compared to an average price of $2.31 per Mcf for the three month period ended June 30, 2012.

The combined effect of these factors caused total sales revenues to decrease by $22,229, or 43.0%, on a comparative period-to-period basis. The Partnership has not and is currently not engaged in commodity futures trading, hedging activities, or derivative financial instrument transactions for trading or other speculative purposes.  The Partnership sells a vast majority of its production from successful oil and gas wells on a month-to-month basis at current spot market prices. Accordingly, the Partnership is at risk for the volatility in commodity prices inherent in the oil and gas industry, and the level of commodity prices has a significant impact on the Partnership’s results of operations. At current production volume levels, which are expected to continue to decline in future periods, projections indicate that subsequent to June 30, 2013, revenues generated from crude oil and natural gas sales will not be sufficient to cover operating expenses and general and administrative costs.

Lease operating expenses increased from $4,832 during the three month period ended June 30, 2012 to $12,818 during the three month period ended June 30, 2013.  Increased ad valorem taxes and a backlog of marketing and gathering and saltwater disposal expenses on the Gumbo II well were only partially offset by lower expenses related to the sale of the Partnership’s interest in the Sand Dunes property. Production taxes decreased from $5,711 during the three months ended June 30, 2012 to $2,501 during the three months ended June 30, 2013, due primarily to the decline in sales revenues.

The Partnership incurred $5,007 of depletion, depreciation, and amortization expense during the three month period ended June 30, 2013 compared to $19,404 of depletion, depreciation, and amortization expense during the three month period ended June 30, 2012.  The decrease in depletion, depreciation, and amortization expense is due to the reduced depletable basis of the Partnership resulting primarily from property impairment taken during the third and fourth quarters of 2012.

General and administrative costs increased from $23,900 incurred during the three months ended June 30, 2012 to $32,292 incurred during the three months ended June 30, 2013.  Increased professional services fees related to processing filings with the SEC were only partially offset by decreased overhead charges from RELP. The allocation of RELP’s overhead to the Partnership is based upon several factors, including the level of drilling activity, revenues, and capital and operating expenditures of each partnership managed by Reef compared to the total levels of all such partnerships. The administrative overhead charge to the Partnership decreased from $3,746 for the three month period ended June 30, 2012 to $2,283 for the three month period ended June 30, 2013.

Six months ended June 30, 2013 compared to the six months ended June 30, 2012

The Partnership had net income of $27,997 for the six month period ended June 30, 2013, compared to net income of $9,304 for the six month period ended June 30, 2012.  This increased net income was partially due to the gain on the sale of the Sand Dunes property.  Excluding the gain resulting from the sale of the Sand Dunes property, the Partnership incurred a net loss of $52,064 for the six month period ended June 30, 2013 compared to net income of $9,304 for the six month period ended June 30, 2012.  The decrease in net income between these comparative periods is a result of declines in production volumes from the Partnership’s remaining well and in oil sales prices, and increased general and administrative expenses.

On March 12, 2013, the Partnership completed the sale of the Sand Dunes property in Eddy County, New Mexico to Penroc Oil Corporation, effective March 1, 2013.  The Partnership recognized a gain related to this transaction of $80,061 during the six month period ended June 30, 2013, $75,355 of which was attributable to the resulting reduction of asset retirement obligation.

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Partnership crude oil and natural gas production volumes are declining due to natural production declines from existing Partnership wells, the sale of Partnership wells, and the fact that the Partnership has not drilled any new productive wells since 2008. The Partnership has no plans to conduct additional drilling activity. As a result of the sale of the Sand Dunes property during March 2013, the Gumbo II well, located in Terrebonne Parish, Louisiana is the only remaining well in which the Partnership has an interest. Beginning in August 2011, as water volumes associated with the production of the crude oil and natural gas from this well began to increase, the actual production volumes of crude oil and natural gas from the well began to decrease. During the six month period ended June 30, 2012, the Partnership’s share of production volumes from the Gumbo II well were 1,547 barrels of crude oil and 8,518 Mcf of natural gas, or 93.9% and 98.2% of Partnership crude oil and natural gas production volumes for the period. During the six month period ended June 30, 2013, the Partnership share of production volumes from the Gumbo II well were 633 barrels of crude oil and 3,869 Mcf of natural gas, or 97.2% and 98.8% of Partnership crude oil and natural gas production volumes for the period, a volume drop of approximately 56.9% on an EBO basis.  At June 30, 2013, the well was shut-in awaiting a workover procedure. Production, if any, from this well will continue to decline in future quarters, and will lead to continuing declines in sales volumes in future periods.

The sales price for crude oil decreased by 9.4%, to an average price of $80.03 per Bbl for the six month period ended June 30, 2013, compared to an average price of $88.38 for the six month period ended June 30, 2012, and the sales price for natural gas increased by 44.8%, to an average price of $3.46 per Mcf for the six month period ended June 30, 2013, compared to an average price of $2.39 per Mcf for the six month period ended June 30, 2012.

The combined effect of these factors caused total sales revenues to decrease by $100,631, or 60.5%, on a comparative period-to-period basis. The Partnership has not and is currently not engaged in commodity futures trading, hedging activities, or derivative financial instrument transactions for trading or other speculative purposes.  The Partnership sells a vast majority of its production from successful oil and gas wells on a month-to-month basis at current spot market prices. Accordingly, the Partnership is at risk for the volatility in commodity prices inherent in the oil and gas industry, and the level of commodity prices has a significant impact on the Partnership’s results of operations. At current production volume levels, which are expected to continue to decline in future periods, projections indicate that subsequent to June 30, 2013, revenues generated from crude oil and natural gas sales will not be sufficient to cover operating expenses and general and administrative costs.

Lease operating expenses decreased from $35,277 during the six month period ended June 30, 2012 to $22,451 during the six month period ended June 30, 2013 due primarily to the sale of the Partnership’s interest in the Sand Dunes property. Production taxes decreased from $11,278 during the six months ended June 30, 2012 to $5,658 during the six months ended June 30, 2013, due primarily to the decline in sales revenues.

The Partnership incurred $12,808 of depletion, depreciation, and amortization expense during the six month period ended June 30, 2013 compared to $40,634 of depletion, depreciation, and amortization expense during the six month period ended June 30, 2012.  The decrease in depletion, depreciation, and amortization expense is due to the reduced depletable basis of the Partnership resulting primarily from property impairment taken during the third and fourth quarters of 2012.

General and administrative costs increased from $63,281 incurred during the six months ended June 30, 2012 to $76,252 incurred during the six months ended June 30, 2013.  Increased professional services fees related to processing filings with the SEC were only partially offset by decreased overhead charges from RELP. The allocation of RELP’s overhead to the Partnership is based upon several factors, including the level of drilling activity, revenues, and capital and operating expenditures of each partnership managed by Reef compared to the total levels of all such partnerships. The administrative overhead charge to the Partnership decreased from $11,805 for the six month period ended June 30, 2012 to $5,370 for the six month period ended June 30, 2013.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Partnership is a “smaller reporting company” as defined by Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, is not required to provide the information required under this Item.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Controls

There have not been any changes in the Partnership’s internal controls over financial reporting during the fiscal quarter ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A.  Risk Factors

There were no material changes in the Risk Factors applicable to the Partnership as set forth in the Annual Report.

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

None.

Item 3.  Default Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

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Item 6.  Exhibits

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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 the undersigned, thereunto duly authorized.

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EXHIBIT INDEX

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