Update on Securities Fraud Investigation Involving Reef Oil and Gas Investments

Friday, February 8th, 2013

Many individuals have experienced devastating losses in their investments in Reef Oil and Gas partnerships.

The White Law Group continues to investigate potential FINRA arbitration claims against the brokerage firms or financial professionals that recommended these investments.

Reef Oil and Gas L.P. was founded in 1987. According to its website, the company strives to develop, exploit, and produce oil and natural gas properties and operate wells drilled. The company is currently based in Richardson, Texas and has offered numerous public and private partnerships over the years.

Unfortunately for investors it appears that many financial advisors/brokerage firms that sell these investments understate or misrepresent the risks.

The following paragraph from the Reef 2012—2013 Drilling Fund, LP S-1 form filed March 16, 2011 with SEC illustrates the high risk involved in oil and gas partnerships (like Reef).

“The 54 drilling partnerships sponsored since 1996 have participated in the drilling of 140 unique wells.  The ventures and partnerships described in this paragraph acquired interests in or conducted operations on exploitation and exploratory wells, in addition to developmental wells. Of these 140 wells drilled by our partnerships since 1996, 57 were exploratory wells, 5 were exploitation wells and 78 were developmental . . . Fifty-four of these wells were dry holes, and two wells were completed but were non-commercial.  Of the 84 wells that were commercial, 38 are still owned by our drilling partnerships and producing, 27 have been plugged and abandoned, 13 were sold essentially for salvage value, three were sold for value, one is shut in, and two are currently used as salt water disposal wells.  Using this data, approximately 60% of the gross wells in which the drilling partnerships participated in drilling since 1996 were completed as commercially producing and 40% were dry holes (including the two wells that were completed but failed to become commercially productive).  Approximately 29% of the wells in which these partnerships participated in drilling were subsequently abandoned or sold essentially for salvage value prior to abandonment.  Twelve of the successful wells were drilled in conjunction with the income and development funds.”

The same S-1 form continued to reveal a number of partnerships that have had limited success.

“Of the 45 private drilling partnerships formed since January 1996, 14 were multiple well drilling partnerships and 31 were single well drilling partnerships, most of which were devoted to drilling exploratory wells.  The 9 public drilling partnerships are also multiple well drilling partnerships. As of September 30, 2010, of the 14 private oil and natural gas multiple well drilling partnerships, (i) three1 of them have made distributions to participants in excess of capital originally contributed by the participants and continue to make distributions, (ii) one2 is producing oil and gas and making distributions to participants, but it is too early in the life of the well to predict with accuracy whether distributions ultimately will exceed capital originally contributed by the participants, (iii) three3 are producing oil and gas but are not expected to achieve payout, (iv) five4 had wells which, while producing some revenue, were ultimately plugged and abandoned at a substantial loss of the participants’ capital contributions, (v) one5 drilled three unsuccessful wells, and (vi) one6 recently commenced drilling operations.”

Due to the risks associates with limited partnership investments, like those offered by Reef Oil and Gas, these investments are often only suitable for sophisticated investors.  Oil and gas partnerships, in particular, involve inherent risks that make them unsuitable investments for many (including the risk that a particular well may be completely dry).

Prior to making recommendations to an individual investor, brokerage firms are required by the Financial Industry Regulatory Authority (FINRA) to disclose all the risks of an investment. Recommendations should only be made if the investment is suitable for an individual investor given their age, investment objectives, investment experience and risk tolerance.

Brokerage firms that do not perform adequate due diligence on an investment and/or make unsuitable recommendations can be held accountable for investment losses through securities arbitration.

Reef Oil and Gas has had the following offerings over the years (among others):

Reef SWD 2007-A LP

Reef 2007—2009 Drilling Program

Reef Corpus Christi Bay Joint Venture

Reef Global Energy Ventures II

Reef Global Energy VI, L.P.

Reef Global Energy VII, L.P.

Reef Global Energy VIII, LP.

Reef Global Energy IX, L.P.

Reef Oil & Gas Income & Development Fund, L.P.

Reef Oil & Gas Income & Development Fund III, L.P.

Reef Oil & Gas Income & Development Fund IV, L.P.

Reef Oil & Gas Income Fund IX, L.P.

Reef Like Kind Exchange Program

Reef Private Drilling Venture 2006-IV Joint Venture

Reef –Terpsichore and Treasure Isle Joint Venture

Reef Treasure Isle & Hog Island Joint Venture

Reef—East Euterpe & Gumbo Joint Venture

Reef—Gumbo II Sweet Bay Grand Lake Joint Venture

Reef 2010 Drilling Fund, L.P. (formally Reef 2009 Drilling Fund, L.P.)

If you invested in a Reef Oil and Gas investment and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.

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