Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2014

Organization and Basis of Presentation

Organization and Basis of Presentation

1. Organization and Basis of Presentation

The condensed financial statements of Reef Global Energy VII, 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 three months of 2014. 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, 2013 (the “Annual Report”).  The results of operations for the three month period ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

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.

The Partnership had two remaining properties at December 31, 2013, one of which was shut-in. During the first quarter of 2014, the Partnership transferred its working interest and associated asset retirement obligation in the shut-in well to other working interest owners interested in attempting to deepen the well. The Partnership declined to participate in the well deepening operation after having participated in two prior unsuccessful workover attempts to restore production in the third and fourth quarters of 2013. The Partnership’s sole remaining property at March 31, 2014 is productive, and has an estimated remaining economic reserve life of five months utilizing current prices, costs, and projected production volumes at March 31, 2014. The Partnership expects to plug and abandon or otherwise dispose of this property during 2014 and cease business operations. The Partnership has no plans to engage in commodity futures trading or hedging activities. Revenues generated from crude oil and natural gas sales are currently not sufficient to cover operating expenses and general and administrative costs, and are not expected to cover operating expenses and general and administrative subsequent to March 31, 2014. Reef Oil & Gas Partners, L.P. (“Reef”), as the Partnership’s managing general partner and sole general partner, will 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 pay operating and general and administrative costs.