UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

MARK ONE
     |X|              ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                                    For the Fiscal Year Ended December 31, 1996

     |_|              TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-11313


                         MAY DRILLING PARTNERSHIP 1983-3
                         MAY LIMITED PARTNERSHIP 1983-3
             (Exact name of registrant as specified in its charter)



                                                                      75-1915681
                  Texas                                               75-1915685
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                            Identification Number)
  4582 South Ulster Street Parkway
                  Suite 1700
              Denver, Colorado                                             80237
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (303) 850-7373

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                           Name of each exchange
Title of each class                                          on which registered
     None                                                                   None

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Units of Participation, $1,000 Per Unit
                                (Title of Class)

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  |_|

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|


                                  Page 1 of 24


<PAGE>



                                       DOCUMENTS INCORPORATED BY REFERENCE:




                                                         Part of Form 10-K into
Document                                               which it is incorporated

The General Partnership Agreement and the Limited
Partnership Agreement filed as an Exhibit to
Registration Statement No. 0-11313                                       Part IV


                                                        -2-

<PAGE>



                                     PART I


ITEM 1 - BUSINESS

May Drilling Partnership 1983-3 (the "Drilling or General  Partnership") and May
Limited  Partnership  1983-3 (the "Limited  Partnership")  were organized by May
Petroleum Inc. ("May") to explore for and develop oil and gas reserves primarily
in Texas, Oklahoma and Louisiana. Funds received from the sale and production of
oil and gas reserves are used to pay the obligations of the Limited Partnership.
Funds not required by the Limited Partnership as working capital are distributed
to the participants in the Drilling Partnership and the general partner.

The general partner of the Limited Partnership is EDP Operating, Ltd.,
which is one of the operating  partnerships for Hallwood Energy Partners,  L. P.
("HEP").  The Drilling  Partnership  is the sole limited  partner of the Limited
Partnership. The Limited Partnership does not have any subsidiaries, nor does it
engage in any other kind of business.  The Limited  Partnership has no employees
and is operated by Hallwood  Petroleum,  Inc.  ("HPI"),  a subsidiary of HEP. In
February 1997, HPI employed 127 full-time employees.

Pursuant  to the terms of the  general  partnership  agreement  and the  limited
partnership  agreement,  HEP is  obligated,  from  time to time,  to  contribute
certain  amounts,  in property,  cash or unreimbursed  services,  to the Limited
Partnership.  As of December 31, 1996, all such required  contributions had been
made.

Participation in Expenses and Revenues

The principal expenses and revenues of the Limited Partnership are shared by the
general  partner  and the  Drilling  Partnership  as set forth in the  following
table.  The charges and credits to participants in the Drilling  Partnership are
shared  among the  participants  in  proportion  to their  ownership of units of
participation.


                                        Drilling               General
                                      Partnership              Partner

Abandonment expenses (1)                   99%                     1%
Noncapital expenses                        99%                     1%
Direct expenses                            99%                     1%
Lease acquisition expenses                                       100%
Capital expenses                                                 100%
Oil and gas revenues                       (2)                    (2)
Operating expenses                         (2)                    (2)
Special projects                           (2)                    (2)
General and administrative overhead        (2)                    (2)

     (1) Includes   expenses   that  would   otherwise  be  allocated  as  lease
         acquisition  expenses  and/or  capital  expenses  but  that  relate  to
         abandoned properties.

     (2) Such items were shared 70% by the Drilling  Partnership  and 30% by the
         general partner until December 31, 1984. As of December 31, 1984 and as
         of  December 31 of each year  thereafter,  the sharing of such items is
         adjusted so the general partner's  allocation will equal the percentage
         that the  amount  of  Limited  Partnership  expenses  allocated  to the
         general  partner bears to the aggregate  amount of Limited  Partnership
         expenses allocated to the general partner and the Drilling Partnership,
         plus 15 percentage  points,  but in no event will the general partner's
         allocation  exceed 50%.  The  sharing  ratio for each of the last three
         years was:


                                                        -3-

<PAGE>




                                 1996               1995               1994
                                ------             ------             -----

Limited Partner                  57.7%              57.9%              58.1%
General Partner                  42.3%              42.1%              41.9%

In 1997, the sharing ratio will be 57.5% to the limited partner and 42.5% to the
general partner.

To  the  extent  that  the  characterization  of  any  expense  of  the  Limited
Partnership  depends on its deductibility  for federal income tax purposes,  the
proper  characterization  is determined by the general partner (according to its
intended  characterization  on the  Limited  Partnership's  federal  income  tax
return) in good faith at the time the expense is to be charged or credited. Such
characterization  will  control  related  charges  and  credits to the  partners
regardless of any subsequent  determination by the Internal Revenue Service or a
court of law that the reported  expenses should be otherwise  characterized  for
tax purposes.

Competition

Oil and gas must  compete with coal,  atomic  energy,  hydro-electric  power and
other  forms of energy.  See also  "Marketing"  for a  discussion  of the market
structure for oil and gas sales.

Regulation

Production and sale of oil and gas is subject to federal and state  governmental
regulations in a variety of ways including environmental regulations, labor law,
interstate  sales,  excise  taxes and federal,  state and Indian  lands  royalty
payments.  Failure  to  comply  with  these  regulations  may  result  in fines,
cancellation of licenses to do business and  cancellation  of federal,  state or
Indian leases.

The  production of oil and gas is subject to regulation by the state  regulatory
agencies in the states in which the Limited  Partnership  does  business.  These
agencies  make and enforce  regulations  to prevent  waste of oil and gas and to
protect the rights of owners to produce oil and gas from a common reservoir. The
regulatory  agencies  regulate  the amount of oil and gas  produced by assigning
allowable production rates to wells capable of producing oil and gas.

Federal Income Tax Considerations

The Limited Partnership and the General Partnership are partnerships for federal
income tax purposes.  Consequently,  they are not taxable entities;  rather, all
income, gains, losses,  deductions and credits are passed through and taken into
account by the  partners on their  individual  federal  income tax  returns.  In
general,  distributions are not subject to tax so long as such  distributions do
not exceed the partner's  adjusted tax basis. Any distributions in excess of the
partner's adjusted tax basis are taxed generally as capital gains.

Marketing

The oil and gas produced from the  properties  owned by the Limited  Partnership
has typically been marketed  through normal channels for such products.  Oil has
generally  been sold to  purchasers  at field  prices  posted  by the  principal
purchasers of crude oil in the areas where the producing properties are located.
The majority of the Limited  Partnership's  gas  production  is sold on the spot
market and is transported in intrastate and interstate  pipelines.  Both oil and
natural gas are purchased by refineries,  major oil companies,  public utilities
and other users and processors of petroleum products.


                                                        -4-

<PAGE>



Factors  which,  if they were to  occur,  might  adversely  affect  the  Limited
Partnership  include  decreases  in oil and gas prices,  the  availability  of a
market  for  production,  rising  operational  costs of  producing  oil and gas,
compliance  with and changes in  environmental  control  statutes and increasing
costs and difficulties of transportation.

Significant Customer

For the years ended December 31, 1996, 1995 and 1994, purchases by the following
company  exceeded  10% of  the  total  oil  and  gas  revenues  of  the  Limited
Partnership:


                                  1996               1995               1994
                                 ------             ------             -----

Conoco Inc.                        88%                94%                62%

Although the Limited  Partnership  sells the majority of its  production  to one
purchaser,  there are numerous other  purchasers in the area, so the loss of its
significant  customer  would not  adversely  affect  the  Limited  Partnership's
operations.

Environmental Considerations

The  exploration  for, and  development  of, oil and gas involve the extraction,
production and transportation of materials which, under certain conditions,  can
be  hazardous or can cause  environmental  pollution  problems.  In light of the
present general interest in environmental  problems,  the general partner cannot
predict what effect  possible  future  public or private  action may have on the
business of the Limited  Partnership.  The general partner is continually taking
all action it believes  necessary in its  operations to ensure  conformity  with
applicable  federal,  state and  local  environmental  regulations  and does not
presently  anticipate  that  the  compliance  with  federal,   state  and  local
environmental  regulations  will have a material  adverse  effect  upon  capital
expenditures, earnings or the competitive position of the Limited Partnership in
the oil and gas industry.

Insurance Coverage

The Limited  Partnership is subject to all the risks inherent in the exploration
for,  and  development  of,  oil and gas,  including  blowouts,  fires and other
casualties. The Limited Partnership maintains insurance coverage as is customary
for  entities of a similar  size  engaged in  operations  similar to the Limited
Partnership's,  but  losses can occur  from  uninsurable  risks or in amounts in
excess of existing insurance  coverage.  The occurrence of an event which is not
insured  or not fully  insured  could have an adverse  impact  upon the  Limited
Partnership's earnings and financial position.


ITEM 2 - PROPERTIES

The Limited  Partnership's oil and gas reserves are concentrated in prospects in
south Louisiana.  The Limited  Partnership's  reserves are predominantly natural
gas,  which  accounts for 90% of estimated  future gross revenues in the Limited
Partnership's reserve report as of December 31, 1996.

Significant Prospects

At December 31, 1996, the following prospects accounted for approximately 91% of
the Limited  Partnership's proved oil and gas reserves.  Reserve quantities were
obtained from the December 31, 1996 reserve report  prepared by HPI's  petroleum
engineers.


                                                        -5-

<PAGE>



Boudreaux Prospect. The Boudreaux prospect is located in Lafayette Parish,
Louisiana.  The Limited Partnership's interest in the prospect has remaining net
proved  reserves of 29,800 bbls of oil and  1,413,000  mcf of gas as of December
31, 1996,  all of which are developed  and  producing at December 31, 1996.  The
Limited Partnership's working interest in this prospect ranges up to 2.4%.

Meaux Prospect.  The Meaux prospect is located in Lafayette  Parish,  Louisiana.
The Limited  Partnership's  interest in the  prospect has  remaining  net proved
reserves of 200 bbls of oil and 86,500 mcf of gas as of December 31,  1996,  all
of which  are  developed  and  producing  at  December  31,  1996.  The  Limited
Partnership's working interest in this prospect is 27.8%.


ITEM 3 - LEGAL PROCEEDINGS

For a description of legal proceedings affecting the Limited Partnership, please
refer to Item 8 - Note 4.


ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

No matter was submitted to a vote of  participants  during the fourth quarter of
1996.


                                                      PART II


ITEM 5 -      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS

     a) The registrant's  securities consist of partnership  interests which are
not traded on any exchange and for which no  established  public  trading market
exists.

     b) As of December 31, 1996, there were  approximately 772 holders of record
of partnership interests in the Drilling Partnership.

     c)  Distributions  paid by the  Limited  Partnership  were as  follows  (in
thousands):


                         General            Limited
                         Partner            Partner

       1996                $305               $419
       1995                 144                144
       1994                 386                542



                                                        -6-

<PAGE>



ITEM 6 - SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                For the Limited Partnership
                                                          As of or for the Year Ended December 31,
                                                         -----------------------------------------
                                        1996              1995              1994              1993              1992
                                       ------            ------            ------            ------            -----
                                                                       (In thousands)

<S>                                           <C>             <C>               <C>               <C>               <C>   
Total revenues                                $ 960           $  628            $  661            $1,183            $1,230
Oil and gas revenues                            951              619               648             1,170             1,221
Net income                                      625              255               282               339               679
Working capital                                 297              316               258               779               646
Total assets                                  1,010            1,110             1,150             2,117             1,809
Partners' capital                               985            1,084             1,117             1,763             1,774

</TABLE>

ITEM 7 -      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

Liquidity and Capital Resources

Material changes in the Limited  Partnership's cash position for the years ended
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>


                                                             1996               1995
                                                            ------             -----
                                                                  (In thousands)

<S>                                                                <C>               <C>   
Cash provided by operating activities                              $ 766             $  293
Distributions to partners                                          (724)              (288)
Additions to oil and gas properties                                 (38)               (39)
                                                                   ----              -----
Increase (decrease) in cash                                       $    4            $  (34)
                                                                   =====             =====
</TABLE>

Cash provided by operating  activities in 1996 was used for distributions to the
partners and additions to oil and gas  properties.  The Limited  Partnership has
net working capital of $297,000 as of December 31, 1996.  This working  capital,
together with future net cash flows  generated  from  operations  may be used to
fund future  distributions.  Future distributions depend on, among other things,
continuation of current or higher oil and gas prices, markets for production and
future development costs.

The Limited  Partnership's ability to generate funds adequate to meet its future
needs will be largely  dependent upon its ability to continue to further develop
its existing reserves. Proved reserves and discounted future net revenues valued
at year-end  prices  (discounted  at 10% and before  general and  administrative
expenses)  from proved  reserves were estimated at 32,000 bbls and 1,644,000 mcf
valued  at  $5,430,000  in 1996 and  39,000  bbls and  1,844,000  mcf  valued at
$3,206,000  in 1995.  The  increase in  discounted  future net  revenues and the
fluctuation in the quantities  resulted from an increase in year end oil and gas
prices as well as changes in the estimated rates of production on certain wells.


                                                        -7-

<PAGE>



Results of Operations

1996 Compared to 1995

Oil Revenue

Oil revenue increased $15,000 during 1996 as compared with 1995. The increase is
comprised of an increase in the average oil price from $17.68 per barrel in 1995
to $21.70 per barrel in 1996, partially offset by a 5% decrease in production as
shown in the table below.  The decrease in production is primarily due to normal
production declines.

Gas Revenue

Gas revenue  increased  $317,000 during 1996 as compared with 1995. The increase
is due to an increase in the average gas price from $1.84 per mcf during 1995 to
$2.93 per mcf during 1996,  combined  with a 1% increase in  production as shown
below. The increase in production is due to increased state allowable production
limits, partially offset by normal production declines.

The following  table  summarizes the Limited  Partnership's  share of production
from the Limited Partnership's significant properties for 1996 and 1995.
<TABLE>
<CAPTION>


                                                                            Net Production
                                                                           ---------------
                                                              1996                                  1995
                                                             ------                                -----
                                                     Oil                Gas                Oil                Gas
County, State and Well                             (Bbls)              (Mcf)             (Bbls)              (Mcf)

     Lafayette, Louisiana
<S>                                                          <C>            <C>                   <C>             <C>   
         Hutchinson #1                                       75             31,424                142             25,750
         Meaux Prospect
         --------------
         Richard #1                                         461             32,704                410             36,876
         Boudreaux Prospect
         ------------------
         A. L. Boudreaux #1                               3,809            188,515              4,419            209,316
         G. S. Boudreaux Estate #1                           63              3,228                 85              4,352
         Hallwood Fontenot #1                                20              2,055                 11              1,368

     Other Properties                                       737             27,818                398              5,245
                                                         ------           --------              -----            -------
         Total Net Production                             5,165            285,744              5,465            282,907
                                                          =====            =======              =====            =======
</TABLE>

Lease Operating

Lease  operating  expense  decreased  $13,000  during 1996 as compared with 1995
primarily due to lower operating  expenses  resulting from the implementation of
cost saving measures during 1996.

Production Taxes

Production  taxes increased $2,000 during 1996 as compared with 1995 as a result
of the increase in gas production as described above.

General and Administrative

General and  administrative  expenses  decreased  $5,000 during 1996 as compared
with 1995 due to a decrease  in the  allocation  of  overhead  from the  general
partner.


                                                        -8-

<PAGE>




Depletion

Depletion  expense  decreased  $12,000  during 1996 as compared with 1995 due to
production declines and lower capitalized costs during 1996.

Litigation Settlement

Litigation  settlement expense during 1996 represents amounts paid in connection
with the settlement of the Lamson lawsuit further described in Item 8 - Note 4.

1995 Compared to 1994

Oil Revenue

Oil revenue increased $11,000 during 1995 as compared with 1994. The increase is
comprised of an increase in the average oil price from $16.03 per barrel in 1994
to $17.68 per barrel in 1995  combined with a 2% increase in production as shown
in the table  below.  The  increase  in  production  is due to  increased  state
allowable  production limits,  partially offset by normal production declines as
well as the  temporary  abandonment  of one well and sale of another  during the
second quarter of 1994.

Gas Revenue

Gas revenue decreased $40,000 during 1995 as compared with 1994. The decrease is
due to a decrease  in the  average  gas price from $2.15 per mcf during  1994 to
$1.84 per mcf during 1995,  partially  offset by an 8% increase in production as
shown below.  The increase in  production  is due to increased  state  allowable
production limits, partially offset by normal production declines as well as the
temporary  abandonment  of one well and the sale of  another  during  the second
quarter of 1994.

The following  table  summarizes the Limited  Partnership's  share of production
from the Limited Partnership's significant properties for 1995 and 1994.

<TABLE>
<CAPTION>

                                                                            Net Production
                                                                           ---------------
                                                              1995                                  1994
                                                             ------                                -----
                                                     Oil                Gas                Oil                Gas
County, State and Well                             (Bbls)              (Mcf)             (Bbls)              (Mcf)

     Lafayette, Louisiana
<S>                                                         <C>             <C>                   <C>             <C>   
         Hutchinson #1                                      142             25,750                165             32,188
         Meaux Prospect
         --------------
         Richard #1                                         410             36,876                480             42,223
         Warwick Richard #1                                                                        44              2,343
         Middle Bayou Cannes
         -------------------
         Duhon #1                                                                                  67              4,058
         Boudreaux Prospect
         ------------------
         A. L. Boudreaux #1                               4,419            209,316              4,085            170,357
         G. S. Boudreaux Estate #1                           85              4,352                 74              3,626
         Hallwood Fontenot #1                                11              1,368                  4                510

     Other Properties                                       398              5,245                463              5,964
                                                          -----            -------              -----            -------
         Total Net Production                             5,465            282,907              5,382            261,269
                                                          =====            =======              =====            =======

</TABLE>

                                                        -9-

<PAGE>



Lease Operating

Lease  operating  expense  decreased  $23,000  during 1995 as compared with 1994
primarily due to the sale of the Warwick Richard #1 during the second quarter of
1994 and the temporary abandonment of the Duhon #1.

Production Taxes

Production taxes increased $16,000 during 1995 as compared with 1994 as a result
of the settlement of a lawsuit which resulted in lower  production  taxes during
1994.

General and Administrative

General and  administrative  expenses  decreased $27,000 during 1995 as compared
with 1994 due to a decrease  in the  allocation  of  overhead  from the  general
partner.

Depletion

Depletion  expense  increased $12,000 during 1995 as compared with 1994 due to a
higher  depletion rate caused by the increase in oil and gas  production  during
1995.

Litigation Settlement

Litigation  settlement expense during 1995 primarily  represents amounts paid in
connection with the settlement of a royalty dispute on the Duhon #1 well.


                                                       -10-

<PAGE>



ITEM  8 -     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

                                           INDEX TO FINANCIAL STATEMENTS

                                                                                                               Page

FINANCIAL STATEMENTS:

<S>                                                                                                              <C>
     Independent Auditors' Report                                                                                12

     Balance Sheets at December 31, 1996 and 1995 -
         May Drilling Partnership 1983-3                                                                         13

     Balance Sheets at December 31, 1996 and 1995 -
         May Limited Partnership 1983-3                                                                          14

     Statements of Operations for the Years Ended
         December 31, 1996, 1995 and 1994 -
         May Limited Partnership 1983-3                                                                          15

     Statements of Changes in Partners' Capital for the Years Ended December 31,
         1996, 1995 and 1994 -
         May Limited Partnership 1983-3                                                                          16

     Statements of Cash Flows for the Years Ended
         December 31, 1996, 1995 and 1994 -
         May Limited Partnership 1983-3                                                                          17

     Notes to Financial Statements - May Drilling Partnership 1983-3
         and May Limited Partnership 1983-3                                                                   18-21

SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)                                                         22


</TABLE>


                                                       -11-

<PAGE>



                                           INDEPENDENT AUDITORS' REPORT



To the Partners of May Drilling Partnership 1983-3 and
     May Limited Partnership 1983-3:

We have audited the  financial  statements  of May Drilling  Partnership  1983-3
("General   Partnership")   and  May  Limited   Partnership   1983-3   ("Limited
Partnership")  as of December  31, 1996 and 1995 and for each of the three years
in the period ended December 31, 1996, listed in the accompanying  index at Item
8.  These  financial  statements  are the  responsibility  of the  Partnerships'
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the General  Partnership  and the Limited
Partnership  at December 31, 1996 and 1995,  and the results of  operations  and
cash flows of the Limited  Partnership for each of the three years in the period
ended  December  31,  1996 in  conformity  with  generally  accepted  accounting
principles.



DELOITTE & TOUCHE LLP

Denver, Colorado
February 28, 1997



                                                       -12-

<PAGE>

<TABLE>
<CAPTION>


                                          MAY DRILLING PARTNERSHIP 1983-3
                                                  BALANCE SHEETS
                                                  (In thousands)



                                                                      December 31,                December 31,
                                                                          1996                         1995

ASSETS
<S>                                                                       <C>                         <C> 
Investment in May Limited Partnership 1983-3                              $530                        $613
                                                                           ===                         ===


PARTNERS' CAPITAL
Partners' Capital                                                         $530                        $613
                                                                           ===                         ===






<FN>

Note:    The  statements of  operations,  changes in partners'  capital and cash
         flows for May Drilling  Partnership  1983-3 are not  presented  because
         such  information  is  equal  to the  Limited  Partners'  share of such
         activity as presented in the May Limited  Partnership  1983-3 financial
         statements.  The May Drilling Partnership carries its investment in May
         Limited  Partnership  1983-3  on the  equity  method.  The May  Limited
         Partnership  1983-3 financial  statements should be read in conjunction
         with this balance sheet.

</FN>




















<FN>


                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                       -13-

<PAGE>

<TABLE>
<CAPTION>


                                          MAY LIMITED  PARTNERSHIP 1983-3
                                                  BALANCE SHEETS
                                                  (In thousands)



                                                                      December 31,                December 31,
                                                                          1996                        1995

ASSETS
CURRENT ASSETS
<S>                                                                              <C>                         <C>      
     Cash and cash equivalents                                                   $     157                   $     153
     Accrued oil and gas revenues                                                      165                         150
     Due from affiliate                                                                                             39
                                                                                ----------                   ---------
              Total                                                                    322                         342
                                                                                  --------                    --------

OIL AND GAS PROPERTIES, using the
     full cost method of accounting                                                 16,547                      16,509
         Less accumulated depletion                                               (15,859)                    (15,741)
                                                                                  -------                     -------
              Net oil and gas properties                                               688                         768
                                                                                  --------                    --------

TOTAL ASSETS                                                                      $  1,010                    $  1,110
                                                                                   =======                     =======

LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
     Accounts payable and accrued liabilities                                   $       21                  $       26
     Due to affiliate                                                                    4
                                                                                 ---------
              Total                                                                     25                          26
                                                                                 ---------                   ---------

PARTNERS' CAPITAL
     General partner                                                                   455                         471
     Limited partner                                                                   530                         613
                                                                                  --------                    --------
              Total                                                                    985                       1,084
                                                                                  --------                     -------

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                           $  1,010                    $  1,110
                                                                                   =======                     =======














<FN>

                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                       -14-

<PAGE>

<TABLE>
<CAPTION>


                                          MAY LIMITED  PARTNERSHIP 1983-3
                                             STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                         (In thousands, except for Units)



                                                             1996                   1995                  1994
                                                            ------                 ------                -----

REVENUES
<S>                                                               <C>                   <C>                   <C>      
     Oil revenue                                                  $    112              $      97             $      86
     Gas revenue                                                       839                    522                   562
     Interest income                                                     9                      9                    13
                                                                  --------               --------              --------
              Total                                                    960                    628                   661
                                                                   -------                -------               -------

COSTS AND EXPENSES
     Lease operating                                                    78                     91                   114
     Production taxes                                                   39                     37                    21
     General and administrative                                         88                     93                   120
     Depletion                                                         118                    130                   118
     Litigation settlement                                               3                     13
     Professional services and other                                     9                      9                     6
                                                                  --------               --------              --------
              Total                                                    335                    373                   379
                                                                   -------                -------               -------

NET INCOME                                                        $    625               $    255              $    282
                                                                   =======                =======               =======

ALLOCATION OF NET INCOME:
     General Partner                                              $    289               $    135              $    143
                                                                   =======                =======               =======
     Limited Partner                                              $    336               $    120              $    139
                                                                   =======                =======               =======
     Per initial $1,000 Limited Partner
         investment                                                $ 28.89                $ 10.32               $ 11.95
                                                                    ======                 ======                ======
     Weighted average initial $1,000 Limited
         Partner investment units outstanding                       11,629                 11,629                11,629
                                                                    ======                 ======                ======
















<FN>

                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                       -15-

<PAGE>

<TABLE>
<CAPTION>


                                          MAY LIMITED PARTNERSHIP 1983-3
                                    STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                               FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                                  (In thousands)



                                                            General                Limited
                                                            Partner                Partner                Total

<S>                                                                 <C>                    <C>                   <C>   
BALANCE, December 31, 1993                                          $  723                 $1,040                $1,763
     Net income                                                        143                    139                   282
     Distributions                                                   (386)                  (542)                 (928)
                                                                    -----                 ------                ------

BALANCE, December 31, 1994                                             480                    637                 1,117
     Net income                                                        135                    120                   255
     Distributions                                                   (144)                  (144)                 (288)
                                                                    -----                 ------                ------

BALANCE, December 31, 1995                                             471                    613                 1,084
     Net income                                                        289                    336                   625
     Distributions                                                   (305)                  (419)                 (724)
                                                                    -----                 ------                 -----

BALANCE, December 31, 1996                                          $  455                $   530                $  985
                                                                     =====                 ======                 =====


























<FN>

                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                       -16-

<PAGE>
<TABLE>
<CAPTION>



                                          MAY LIMITED PARTNERSHIP 1983-3
                                             STATEMENTS OF CASH FLOWS
                               FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                                  (In thousands)



                                                             1996                   1995                  1994
                                                            ------                 ------                -----

OPERATING ACTIVITIES:
<S>                                                                <C>                    <C>                   <C>    
     Net income                                                    $   625                $   255               $   282
     Adjustment to reconcile net income
         to net cash provided by operating
         activities:
              Depletion                                                118                    130                   118
                                                                    ------                 ------                ------
                  Cash from operations before
                      working capital changes                          743                    385                   400

     Changes in assets and liabilities provided (used) cash:
         Accrued oil and gas revenues                                 (15)                   (57)                   113
         Due from affiliate                                             39                   (28)                   360
         Accounts payable and accrued
              liabilities                                              (5)                    (7)                 (321)
         Due to affiliate                                                4
                                                                   -------
                  Net cash provided by
                      operating activities                             766                    293                   552
                                                                    ------                 ------                ------

INVESTING ACTIVITIES:
     Proceeds from sale of oil and gas
         properties                                                                                                  16
     Additions to oil and gas properties                              (38)                   (39)                   (9)
                                                                  -------                 ------                ------
                  Net cash provided by (used in)
                      investing activities                            (38)                   (39)                     7
                                                                  -------                 ------                 ------

FINANCING ACTIVITIES:
     Distributions to partners                                       (724)                  (288)                 (928)
                                                                   ------                 ------                ------

NET INCREASE (DECREASE) IN CASH
     AND CASH EQUIVALENTS                                                4                   (34)                 (369)

CASH AND CASH EQUIVALENTS:

     BEGINNING OF YEAR                                                 153                    187                   556
                                                                    ------                 ------                ------

     END OF YEAR                                                   $   157                $   153               $   187
                                                                    ======                 ======                ======




<FN>

                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                       -17-

<PAGE>



                                         MAY DRILLING PARTNERSHIP 1983-3
                                                        AND
                                          MAY LIMITED PARTNERSHIP 1983-3

                                           NOTES TO FINANCIAL STATEMENTS


(1)  ACCOUNTING POLICIES AND OTHER MATTERS

         General Partnership

         May Drilling  Partnership  1983-3,  a Texas  general  partnership  (the
         "General Partnership"), was organized by May Petroleum Inc. ("May") for
         the purpose of oil and gas exploration  through May Limited Partnership
         1983-3 (the "Limited Partnership").  The General Partnership was formed
         on November 7, 1983,  with  investors  ("Participants")  subscribing an
         aggregate  of  $11,629,000  in  assessable  $1,000  units.   After  the
         expenditure  of  the  initial   contributions   of  the   Participants,
         additional mandatory assessments from each Participant are provided for
         under the terms of the general partnership agreement in an amount up to
         25% of the  initial  contribution  of the  Participant.  No  additional
         assessments were made.

         The general partnership  agreement requires that the manager,  Hallwood
         Energy  Partners,  L.  P.  ("HEP"),  offer  to  repurchase  partnership
         interests  from  Participants  for cash at amounts to be  determined by
         appraisal  (as set forth in the  partnership  agreement) of the Limited
         Partnership's  net assets no later than  December 31, 1988,  and during
         each succeeding year, if such net assets are positive.  The manager has
         made  repurchase  offers in all years  since 1989 and intends to make a
         repurchase offer in 1997.

         As the General  Partnership is the sole limited  partner of the Limited
         Partnership,  its results of operations,  changes in partners'  capital
         and cash flows are equal to the limited  partner's share of the Limited
         Partnership's  results of operations,  changes in partners' capital and
         cash  flows as set forth  herein.  Therefore,  separate  statements  of
         operations,  changes  in  partners'  capital  and  cash  flows  are not
         presented for the General Partnership.

         Limited Partnership

         The Limited Partnership, a Texas limited partnership,  was organized by
         May  and  the  General  Partnership,  for  the  purpose  of oil and gas
         exploration and the production of crude oil,  natural gas and petroleum
         products. The Limited Partnership's oil and gas reserves are located in
         prospects  in south  Louisiana.  Among other  things,  the terms of the
         Limited  Partnership  agreement  (the  "Agreement")  give  the  general
         partner the authority to borrow funds. The Agreement also requires that
         the  general  partner's  total  capital  contributions  to the  Limited
         Partnership as of each year end, including  unrecovered general partner
         acreage and  equipment  advances,  must be  compared  to total  Limited
         Partnership   expenditures   from   inception  to  date,  and  if  such
         contributions  are less than 15% of such  expenditures,  an  additional
         contribution  in the amount of the deficiency is required.  At December
         31, 1996, no  additional  contributions  were  necessary to comply with
         this requirement.

         On June 30, 1987,  May sold to HEP all of its economic  interest in the
         Limited  Partnership  and  account  receivable  balances  due  from the
         Limited  Partnership.  HEP became the  general  partner of the  Limited
         Partnership in 1988.



                                                       -18-

<PAGE>



         Sharing of Costs and Revenues

         Capital costs, as defined by the Agreement, for commercially productive
         wells  and  the  costs  related  to the  organization  of  the  Limited
         Partnership  are borne by the  general  partner.  Noncapital  costs and
         direct  expenses,  as defined by the  Agreement,  are charged 1% to the
         general  partner  and 99% to the  limited  partner.  Oil and gas sales,
         operating expenses and general and  administrative  overhead are shared
         so that the general partner's allocation will equal the percentage that
         the amount of Limited Partnership  expenses,  as defined,  allocated to
         the  general   partner  bears  to  the  aggregate   amount  of  Limited
         Partnership  expenses  allocated to the general partner and the limited
         partner,  plus 15 percentage  points,  but in no event will the general
         partner's allocation exceed 50%. The sharing ratio for each of the last
         three years was as follows:
<TABLE>
<CAPTION>


                                            1996               1995               1994
                                           ------             ------             -----

<S>                                        <C>                <C>                <C>  
Limited Partnership                        57.7%              57.9%              58.1%
General Partner                            42.3%              42.1%              41.9%
</TABLE>

         Significant Customer

         For the years ended December 31, 1996, 1995 and 1994,  purchases by the
         following company exceeded 10% of the total oil and gas revenues of the
         Limited Partnership:


                                1996               1995               1994
                               ------             ------             -----

Conoco Inc.                      88%                94%                62%

         Although the Limited  Partnership  sells the majority of its production
         to one purchaser,  there are numerous other  purchasers in the area, so
         the loss of its  significant  customer  would not adversely  affect the
         Limited Partnership's operations.

         Income Taxes

         No  provision  for federal  income  taxes is included in the  financial
         statements  of  the  Limited  Partnership  or the  General  Partnership
         because,  as  partnerships,  they are not subject to federal income tax
         and the tax effects of their  activities  accrue to the  partners.  The
         partnerships' tax returns, the qualification of the General and Limited
         Partnerships as partnerships  for federal income tax purposes,  and the
         amount of taxable  income or loss are subject to examination by federal
         and state taxing authorities. If such examinations result in changes to
         the  partnerships'  taxable  income or loss,  the tax  liability of the
         partners could change accordingly.

         Oil and Gas Properties

         The Limited  Partnership follows the full cost method of accounting for
         oil  and  gas  properties  and,  accordingly,   capitalizes  all  costs
         associated  with  the  exploration  and  development  of  oil  and  gas
         reserves.

         The capitalized costs of evaluated properties,  including the estimated
         future costs to develop proved  reserves,  are amortized on the unit of
         production  basis.  Full cost  amortization per dollar of gross oil and
         gas revenues was $.12 in 1996, $.21 in 1995 and $.18 in 1994.

         Capitalized  costs are  limited to an amount not to exceed the  present
         value of estimated  future net cash flows. No valuation  adjustment was
         required  in 1996,  1995 or 1994.  Significant  price  declines  in the
         future  could cause the Limited  Partnership  to  experience  valuation
         adjustments  and could reduce the amount of future cash flow  available
         for distributions and operations.


                                                       -19-

<PAGE>



         Generally no gains or losses are  recognized on the sale or disposition
         of oil and gas properties.  Maintenance and repairs are charged against
         income when incurred.

         Gas Balancing

         The Limited  Partnership  uses the sales method for  accounting for gas
         balancing.  Under  this  method,  the  Limited  Partnership  recognizes
         revenue on all of its sales of production,  and any over  production or
         under production is recovered at a future date.

         As of December 31, 1996,  the net imbalance to the Limited  Partnership
         interest is not considered material.  Current imbalances can be made up
         with production from existing wells or from wells which will be drilled
         as offsets to current producing wells.

         Use of Estimates

         The preparation of the financial statements for the Limited Partnership
         and  General   Partnership  in  conformity   with  generally   accepted
         accounting   principles  requires  management  to  make  estimates  and
         assumptions  that affect the reported amounts of assets and liabilities
         and disclosure of contingent  assets and liabilities at the date of the
         financial  statements and the reported amounts of revenues and expenses
         during the  reporting  period.  Actual  results could differ from these
         estimates.

         Related Party Transactions

         Hallwood Petroleum,  Inc. ("HPI"), a subsidiary of the general partner,
         pays all costs and  expenses of  operations  and  receives all revenues
         associated with the Limited Partnership's properties. At month end, HPI
         distributes revenues in excess of costs to the Limited Partnership.

         The amount due to HPI was $4,000 at  December  31,  1996 and the amount
         due from HPI was  $39,000  as of  December  31,  1995.  These  balances
         represent net revenues less operating costs and expenses.

         Cash Flows

         All highly liquid  investments  purchased with an original  maturity of
         three months or less are considered to be cash equivalents.

         Reclassifications

         Certain  reclassifications  have been made to prior  years'  amounts to
         conform to the classifications used in the current year.


(2)  GENERAL AND ADMINISTRATIVE OVERHEAD

         HPI conducts the day to day operations of the Limited  Partnership  and
         other  affiliated  partnerships  of HEP.  The  costs of  operating  the
         entities are allocated to each entity based upon the time spent on that
         entity.  General and  administrative  overhead  allocated by HPI to the
         Limited  Partnership  totaled  $65,000  in  1996,  $80,000  in 1995 and
         $103,000 in 1994.




                                                       -20-

<PAGE>



(3)  INCOME TAXES

         As a result of the  differences in the accounting  treatment of certain
         items for  income  tax  purposes  as  opposed  to  financial  reporting
         purposes, primarily depreciation, depletion and amortization of oil and
         gas properties and the  recognition of intangible  drilling costs as an
         expense or capital item, the income tax basis of oil and gas properties
         differs  from the  basis  used for  financial  reporting  purposes.  At
         December 31, 1996 and 1995,  the income tax bases of the  Partnership's
         oil  and gas  properties  were  approximately  $264,000  and  $290,000,
         respectively.


(4)  LEGAL PROCEEDINGS

         In June 1996,  the  Partnership  and the other  parties to the lawsuits
         styled Lamson Petroleum Corporation v. Hallwood Petroleum,  Inc. et al.
         settled the lawsuits.  The plaintiffs in the lawsuits  claimed they had
         valid  leases  covering  streets  and  roads  in the  units of the A.L.
         Boudreaux  #1 well,  G.S.  Boudreaux  #1 well,  Paul  Castille #1 well,
         Evangeline  Shrine  Club #1 well and Duhon #1 well,  which  represented
         approximately  3%  to  4%  of  the  Partnership's   interest  in  these
         properties,  and they were entitled to a portion of the production from
         the wells dating from February 1990. In the settlement, the Partnership
         and the plaintiffs  agreed to cross-convey  interests in certain leases
         to one  another,  and the  Partnership  agreed  to pay  the  plaintiffs
         $75,000. The Partnership has not recognized revenue attributable to the
         contested leases since January 1993. These revenues,  totaling $72,000,
         had been placed in escrow pending the  resolution of the lawsuits.  The
         excess of the cash paid over the  escrowed  amounts,  is  reflected  as
         litigation settlement expense in the accompanying financial statements.
         The  cross-conveyance  of the  interests  in the leases  resulted  in a
         decrease  in the  Partnership's  reserves  of  $45,000  in  future  net
         revenues, discounted at 10%.

                                                       -21-

<PAGE>



                                   SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION
                                                    (Unaudited)


The following  tables contain certain costs and reserve  information  related to
the Limited Partnership's oil and gas activities. The Limited Partnership has no
long-term  supply  agreements  and all  reserves  are located  within the United
States.

Costs Incurred -

<TABLE>
<CAPTION>

                                                                      For the Years Ended December 31,
                                                             1996                   1995                   1994
                                                            ------                 ------                 -----
                                                                               (In thousands)

<S>                                                           <C>                    <C>                   <C> 
Development costs                                             $ 38                   $ 39                  $  9
                                                                ===                    ===                   ===
</TABLE>
<TABLE>
<CAPTION>

Oil and Gas Reserves (valued at year-end prices discounted at 10%) -


                                                           1996                            1995                            1994
                                                          ------                          ------                          -----
                                           Bbls            Mcf             Bbls            Mcf             Bbls            Mcf

Total Proved Reserves:
<S>                                          <C>          <C>                <C>          <C>                <C>          <C>  
     Beginning of period                     39           1,844              39           1,870              46           2,279
     Revisions to previous estimates        (2)              86               5             257             (2)           (127)
     Sale of reserves in place                                                                                             (21)
     Production                             (5)           (286)             (5)           (283)             (5)           (261)
                                           ----         ------             ---          ------             ---          ------
         End of Period                       32           1,644              39           1,844              39           1,870
                                            ===           =====             ===           =====             ===           =====

Proved Developed Reserves:
         Beginning of period                 39           1,844              39           1,870              46           2,267
                                            ===           =====             ===           =====             ===           =====
         End of period                       32           1,644              39           1,844              39           1,870
                                            ===           =====             ===           =====             ===           =====
</TABLE>

Certain reserve value  information is provided  directly to partners pursuant to
the Agreement. Accordingly, such information is not presented herein.


                                                       -22-

<PAGE>



ITEM 9 -      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
              DISCLOSURE

              None.


                                                     PART III


ITEM 10 -     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

              The Drilling  Partnership  and Limited  Partnership are managed by
              affiliates of HEP and do not have directors or executive officers.


ITEM 11 -     EXECUTIVE COMPENSATION

              The partnerships  pay no salaries or other direct  remuneration to
              officers,  directors or key  employees  of the general  partner or
              HPI. The Limited  Partnership  reimburses the general  partner for
              general  and  administrative  costs  incurred  on  behalf  of  the
              partnerships. See Note 2 to the Financial Statements.


ITEM 12 -     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              To the knowledge of the general partner,  no person owns of record
              or  beneficially  more  than  5%  of  the  Drilling  Partnership's
              outstanding units, other than HEP, the address of which is 4582 S.
              Ulster  Street  Parkway,   Denver,   Colorado  80237,   and  which
              beneficially owns  approximately  37.2% of the outstanding  units.
              The general partner of HEP is HEPGP Ltd.


ITEM 13 -     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              For  information  with respect to the Limited  Partnership and its
              relationships and transactions with the general partner,  see Part
              I, Item 1 and Part II, Item 7.


                                                      PART IV


ITEM 14 -     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         a.   Financial Statements and Schedules:
              See Index at Item 8.

         b.   Reports on Form 8-K - None.

         c.   Exhibits:

     3.1 The General Partnership Agreement and the Limited Partnership Agreement
filed as an Exhibit to  Registration  Statement No.  0-11313,  are  incorporated
herein by reference.


                                                       -23-

<PAGE>


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  as amended,  the  Partnerships  have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized.


                         MAY DRILLING PARTNERSHIP 1983-3
                         MAY LIMITED PARTNERSHIP 1983-3
                           By:      EDP OPERATING, LTD., GENERAL PARTNER
                           By:      HALLWOOD G.P., Inc.
                                        General Partner



                           By: /s/William L. Guzzetti
                               William L. Guzzetti
                                 President, Chief Executive Officer and Director


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


Signature                      Title                           Date



/s/Robert S. Pfeiffer         Vice President                  February 28, 1997
----------------------      -----------------
Robert S. Pfeiffer        (Principal Accounting Officer)


:\WP51\DOC\MAY83-3K.DOC
                                                       -24-

<PAGE>