Transactions with Affiliates

12 Months Ended

Dec. 31, 2013

Transactions with Affiliates

Transactions with Affiliates

3. Transactions with Affiliates

The Partnership has no employees. RELP 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 years ended December 31, 2013, 2012, and 2011 the Partnership incurred administrative costs totaling $23,116, $38,536, and $116,958, respectively. The Partnership incurred no technical services costs during the years ended December 31, 2013, 2012, and 2011. Administrative costs are included as general and administrative expenses on the statements of operations.

RELP processes joint interest billings and revenue payments on behalf of the Partnership. At December 31, 2013, the Partnership owed RELP $25,407 for joint interest and general and administrative charges processed in excess of net revenues. At December 31, 2012, RELP owed the Partnership $40,789 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.

If an affiliate of Reef serves as operator of a Partnership prospect, then operator fees are payable to the affiliate. Under such circumstances, such affiliate receives fees at the competitive rate in the geographical area where the prospect is located during the drilling and production phase of operations. These fees are charged as a monthly fee per well as agreed to in an operating agreement signed by the Partnership as well as outside third party working interest owners in the well. During the years ended December 31, 2013, 2012, and 2011, the Partnership paid operating overhead fees totaling $2,140, $7,019, and $35,004 to RELP, respectively.

The Partnership reimbursed to Reef legal fees totaling $16,046 and $11,612, respectively, during the years ended December 31, 2013 and 2012 pertaining to the ongoing “Stevenson” litigation matter described in Note 5 below.  The partners who brought the lawsuit are partners in several Reef affiliates, including this Partnership, and their claims involve their participation in these partnerships, including this Partnership.  Pursuant to the Partnership Agreement of the Partnership, Reef is indemnified against litigation such as this, and the associated legal fees are being reimbursed to Reef by each of the partnerships involved on a quarterly basis.