18
               SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC  20549
                                
                            FORM 10-Q

(Mark One)
X    Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
     For the quarterly period ended March 31, 1999

     or

?    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:  000-23701

     SOUTHWEST ROYALTIES, INC.               SOUTHWEST ROYALTIES
     (Exact Name of Registrant as            HOLDINGS, INC.
     Specified in Its Charter)               (Exact Name of
Registrant as
                                        Specified in Its Charter)
     
     Delaware                           Delaware
     (State or Other                         State or Other
     Jurisdiction of                         (Jurisdiction of
     Incorporation or Organization)          Incorporation or
     Organization)

     75-1917432                              75-2724264
     (I.R.S. Employer                        (I.R.S. Employer
     Identification Number)             Identification Number)

     407 North Big Spring, Suite 300
     Midland, Texas                          79701
     (Address of Principal Executive Offices)     (Zip Code)

Registrants' Telephone Number, Including Area Code:  (915) 686-9
927
                    
                         Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)


Indicate  by  check 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  ___

Number of shares of common stock outstanding as of March 31, 1999
for Southwest Royalties, Inc                                 100
Number of shares of common stock outstanding as of March 31, 1999
for Southwest Royalties Holdings, Inc.                  1,075,868
     
     
     
     
<PAGE>

                    SOUTHWEST ROYALTIES, INC.
                                
               SOUTHWEST ROYALTIES HOLDINGS, INC.
                                
                                
                                
                        TABLE OF CONTENTS




               PART I - FINANCIAL INFORMATION             Page

Item 1.   Consolidated Financial Statements

       Consolidated Balance Sheets as of March 31, 1999
(unaudited)
          and December 31, 1998                             3

       Consolidated Statements of Operations for the three months
          ended March 31, 1999 and 1998 (unaudited)         5

       Consolidated Statements of Cash Flows for the three months
          ended March 31, 1999 and 1998 (unaudited)         6

       Notes to Consolidated Financial Statements          8


Item 2.   Management's Discussion and Analysis of Financial
Condition
          and Results of Operations                        12

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk                                      15

                PART II - OTHER INFORMATION

Item 6.                  Exhibits and Reports on Form 8-K
16


















<PAGE>
                 PART I - FINANCIAL INFORMATION

ITEM 1.   Consolidated Financial Statements
                                
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
                   CONSOLIDATED BALANCE SHEETS
                (in thousands, except share data)

                                            March 31,December 31,
                                               1999      1998
                                             -------------------
                                           (unaudited)
ASSETS
---------------------------------------------------
Current assets
  Cash and cash equivalents                  $14,696   $13,801
  Accounts receivable, net of allowance
   of $263 and $342, respectively              4,928     5,248
  Receivables from related parties             1,393     1,594
  Other current assets                         1,342     1,624
                                             -------   -------
     Total current assets                     22,359    22,267
                                             -------   -------

Oil and gas properties, using the full cost
 method of accounting
  Proved                                     194,798   194,096
  Unproved                                     2,481     3,230
                                             -------   -------
                                             197,279   197,326
  Less accumulated depletion, depreciation
   and amortization                          123,377   121,841
                                             -------   -------
     Oil and gas properties, net              73,902    75,485
                                             -------   -------
Rental property, net                         132,093   132,120
                                             -------   -------
Other property and equipment, net              5,720     5,888
                                             -------   -------
Other assets
  Restricted cash                              6,869     5,050
  Equity investment in subsidiary
   and partnerships                                -       931
  Real estate investments                      4,019     4,019
  Deferred debt costs, net of accumulated
   amortization of $3,751 and $3,136,
   respectively                                8,218     8,725
  Noncompete covenants, net of accumulated
   amortization of $343 and 269, respectively            1,261
1,335
  Other, net                                   1,779     1,730
                                             -------   -------
     Total other assets                       22,146    21,790
                                             -------   -------
Total assets                                 $256,220  $257,550
                                             =======   =======
                                                    (continued)

<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
             CONSOLIDATED BALANCE SHEETS (continued)
                (in thousands, except share data)

                                            March 31,December 31,
                                               1999      1998
                                             -------------------
                                           (unaudited)
LIABILITIES, MINORITY INTEREST, REDEEMABLE
COMMON STOCK AND STOCKHOLDERS' DEFICIT
---------------------------------------------------------
Current liabilities
  Current maturities of long-term debt       $ 5,991   $12,716
  Accounts payable                             4,971     7,116
  Accounts payable to related parties              -       173
  Accrued expenses                            14,875     9,737
                                             -------   -------
     Total current liabilities                25,837    29,742
                                             -------   -------
Long-term debt                               332,431   322,368
                                             -------   -------
Other long-term liabilities                    1,813     1,797
                                             -------   -------
Minority interest                                  7       206
                                             -------   -------
Redeemable common stock of subsidiary          3,016     2,979
                                             -------   -------
Redeemable common stock                        8,290     8,290
                                             -------   -------
Stockholders' deficit
  Preferred stock - $1 par value; 5,000,000
   shares authorized; none issued                  -         -
  Common stock - $.10 par value; 5,000,000 shares
   authorized; 1,161,037 issued at March 31, 1999
   and December 31, 1998                         116       116
  Additional paid-in capital                   2,196     2,196
  Accumulated deficit                        (112,725) (105,375)
  Note receivable from an officer and stockholder      (1,671)
(1,679)
  Less:  treasury stock - at cost; 214,215 shares
   at March 31, 1999 and December 31, 1998             (3,090)
(3,090)
                                             -------   -------
     Total stockholders' deficit             (115,174) (107,832)
                                             -------   -------
Total liabilities, minority interest, redeemable
  common stock and stockholders' deficit     $256,220  $257,550
                                             =======   =======
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
      The accompanying notes are an integral part of these
                consolidated financial statements

<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
              CONSOLIDATED STATEMENTS OF OPERATIONS
              (in thousands, except per share data)
                           (unaudited)
                                
                                    For the three months ended March 31,
------------------------------------
                                               1999      1998
                                              -----     -----
Operating revenues
  Oil and gas                              $   6,094 $   9,711
  Real estate                                  8,209     4,911
  Other                                          285       438
                                             --------- ---------
     Total operating revenues                 14,588    15,060
                                             --------- ---------
Operating expenses
  Oil and gas production                       2,868     5,453
  Real estate                                  4,214     2,138
  General and administrative, net of related
   party management and administrative fees of
   $870 and $897, respectively                   787     1,352
   Depreciation, depletion and amortization            2,744
4,265
  Other                                          213       375
                                             --------- ---------
     Total operating expenses                 10,826    13,583
                                             --------- ---------
Operating income                               3,762     1,477
                                             --------- ---------
Other income (expense)
  Interest and dividend income                   154       443
  Interest expense                           (10,688)  (8,353)
  Other                                          200         3
                                             --------- ---------
                                             (10,334)  (7,907)
                                             --------- ---------
Loss before income taxes, minority
 interest and equity loss                    (6,572)   (6,430)
Income tax benefit (provision)                     -     1,944
                                             --------- ---------
Loss before minority interest and equity
 loss                                        (6,572)   (4,486)
Minority interest in subsidiaries, net of tax              154
106
Equity in loss of subsidiary and partnerships,
 net of tax                                    (188)     (322)
Impairment of equity investment, net of tax            (744)
-
                                             --------- ---------

Net Loss                                   $ (7,350) $ (4,702)
                                             ========= =========
Loss per common share                      $    (6.83)     $
(4.37)
                                           ==========  ==========
Weighted average shares outstanding        1,075,868   1,075,868
                                           ==========  ==========
                                
                                
      The accompanying notes are an integral part of these
                consolidated financial statements
                                
<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (in thousands)
                           (unaudited)

                                    For the three months ended March 31,
------------------------------------
                                               1999      1998
                                              -----     -----
Cash flows from operating activities
  Net loss                                   $(7,350)  $(4,702)
  Adjustments to reconcile net loss to
   net cash provided by operating activities:
  Depreciation, depletion and amortization             2,744
4,265
  Noncash interest expense                     1,163       648
  Equity loss of subsidiary and partnerships           188
322
  Impairment of equity investment                744         -
  Other noncash items                            112      (65)
  Bad debt expense                                87         5
  Deferred income taxes                            -   (1,944)
  Minority interest in loss of subsidiary      (154)     (106)
  Changes in operating assets and liabilities-
   Accounts receivable                           446     2,297
   Other current assets                           50        10
   Accounts payable and accrued expenses     (2,037)   (2,100)
   Accrued interest payable                    4,857     5,201
                                             --------  -------
Net cash provided by operating activities        850     3,831
                                             --------  -------
Cash flows from investing activities
  Proceeds from sale of oil and gas properties             318
220
  Purchase of oil and gas properties           (271)   (4,291)
  Purchase of other property and equipment and
   rental property                           (1,082)   (1,036)
  Purchase of other assets                     (221)   (1,357)
  Purchase of noncompete covenants                 -   (1,602)
  Proceeds from sale of other assets             232        20
  Proceeds from sale of other property and
   equipment                                     213         -
  Change in restricted cash                  (1,819)       672
  Other                                            8        22
                                             --------  -------
Net cash used by investing activities        (2,622)   (7,352)
                                             --------  -------

(continued)
                                









<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
       CONSOLIDATED STATEMENTS OF CASH FLOWS - (continued)
                         (in thousands)
                           (unaudited)
                                
                                    For the three months ended March 31,
------------------------------------
                                               1999      1998
                                              -----     -----
Cash flows from financing activities
  Proceeds from borrowings                     4,030     2,092
  Payments on debt                           (1,259)     (276)
  Payments on other long-term liabilities       (23)      (49)
  Increase in other long-term liabilities         39         -
  Deferred debt cost                            (89)     (143)
  Dividends paid to minority interest owners           (31)
(31)
  Purchase of minority interest in subsidiary                -
(197)
                                             --------  -------
Net cash provided by financing activities      2,667     1,396
                                             --------  -------
Net increase (decrease) in unrestricted cash
  and cash equivalents                           895   (2,125)

Unrestricted cash and cash equivalents-
  beginning of period                         13,801    27,365
                                             --------  -------
Unrestricted cash and cash equivalents -
  end of period                              $14,696   $25,240
                                             ========  =======

Supplemental disclosures of cash flow information
  Interest paid                              $ 4,669   $ 2,504
























      The accompanying notes are an integral part of these
                consolidated financial statements
                                
<PAGE>
1. Organization and Summary of Significant Accounting Policies

Business

   Southwest Royalties Holdings, Inc. ("SRH"), a Delaware corporation,  was
formed  in  June 1997 to serve as a holding company for Southwest Royalties
Inc. ("Southwest"), Sierra Well Service Inc. ("Sierra") and Midland Red Oak
Realty, Inc. ("Red Oak") (collectively, the "Company"). Each shareholder of
Southwest  was  issued one share in SRH for each share of  Southwest  stock
held.   Prior to the formation of SRH, Red Oak and Sierra were subsidiaries
of  Southwest.  Southwest paid a dividend of the shares it owned in Red Oak
and Sierra to SRH. After the formation of SRH, Southwest and Red Oak became
subsidiaries of SRH and, as of July 1, 1997, Sierra was deconsolidated.
   
   Southwest  is  principally  involved in the  business  of  oil  and  gas
development  and production, as well as organizing and serving as  managing
general partner for various public and private limited partnerships engaged
in  oil  and  gas  acquisitions, exploration, development  and  production.
Southwest  is also the general partner of Southwest Partners  II  and  III,
which  own  common  stock  in Sierra.  Southwest  sells  its  oil  and  gas
production  to  a variety of purchasers, with the prices it receives  being
dependent  upon  the oil and gas commodity prices. Red Oak  is  principally
involved  in  real estate investment and development. Sierra is principally
involved in the business of oil and gas well services.
     
Principles of Consolidation
     
   The  consolidated financial statements include the accounts of  SRH  and
its  subsidiaries.  As  of  March 31, 1999  and  1998,  the  Company  owned
approximately  81%  of  Red Oak, 39% of Sierra as  well  as  99%  and  98%,
respectively  of Midland Southwest Software ("MSS") and Threading  Products
International,  LLC ("TPI"), both of which are subsidiaries  of  Southwest.
Effective  July  1, 1997, Sierra was deconsolidated and  is  accounted  for
using the equity method.  The consolidated financial statements include the
Company's  proportionate  share  of the  assets,  liabilities,  income  and
expenses  of  oil  and  gas limited partnerships for  which  it  serves  as
managing  general  partner.  The Company accounts for  its  investments  in
Southwest  Partners  II  and III using the equity method,  as  the  Company
exercises  significant influence over the operations of these partnerships.
All significant intercompany transactions have been eliminated.
   
Restricted Cash

   Restricted  cash represents amounts required to be reserved in  separate
accounts  by  financial lenders.  These reserves are principally  for  real
estate  activity  and  are held in the names of Red  Oak  and  its  various
subsidiaries, but withdrawals from such accounts require the  signature  or
authorization of the lender.
   
   Restricted  cash accounts, principally for Red Oak and its subsidiaries,
have been established for the following purposes (in thousands):
                                                    March 31,  December 31,
                                                       1999        1998
                                                       ----        ----
     Certificate of Deposits                        $    110       105
     Tenant security deposits                            415       412
     Interest reserves                                   710       707
     Capital expenditures account                      3,104     1,229
     Tax and insurance reserve                         1,070     1,009
     Tenant bankruptcy reserve                           767       767
     Lockbox                                              78       217
     Customer service reserve                              8        10
     Escrow fund                                         607       594
                                                       -----      -----
                                                    $  6,869      5,050
                                                       =====      =====
<PAGE>
Interim Financial Statements

   In  the  opinion  of  management, the unaudited  consolidated  financial
statements  of  the  Company  as of March 31, 1999  and  1998  include  all
adjustments  and  accruals,  consisting only of  normal  recurring  accrual
adjustments, which are necessary for a fair presentation of the results for
the  interim periods.  These interim results are not necessarily indicative
of results for a full year.
   
   Certain  information  and  footnote  disclosures  normally  included  in
financial  statements  prepared  in  accordance  with  generally   accepted
accounting  principles  have  been condensed  or  omitted  in  this  Report
pursuant  to  the  rules  and regulations of the  Securities  and  Exchange
Commission.   These  consolidated financial statements should  be  read  in
conjunction  with the consolidated financial statements and  notes  thereto
included in the 1998 Form 10-K of the Company.
   
2. Liquidity

   The  accompanying consolidated financial statements have  been  prepared
on  a going concern basis, which contemplates the realization of assets and
the  satisfaction  of liabilities in the normal course  of  business.   The
consolidated  financial statements do not include any adjustments  relating
to  the  recoverability  and classification of liabilities  that  might  be
necessary should the Company be unable to continue as a going concern.
   
   The  Company has a highly leveraged capital structure with $21.0 million
of   interest  payments  due  in  1999  on  its  10.5%  Senior  Notes   and
approximately $6.0 million of principal and approximately $12.3 million  of
cash  interest  payments due in 1999 on its other obligations  (principally
related  to  Red  Oak).   Due to severely depressed  commodity  prices  and
lagging rental property utilization, the Company is experiencing difficulty
in  generating sufficient cash flow to meet its obligations and sustain its
operations.   Management  is attempting to renegotiate  the  terms  of  the
Company's  various  obligations with its note holders  and  lenders  and/or
attempting   to  seek  new  lenders  or  equity  investors.   Additionally,
management would consider disposing of certain assets in order to meet  its
obligations.
   
   There  can be no assurance that the Company's debt restructuring efforts
will  be  successful or that the note holders or lenders will  agree  to  a
course   of   action   consistent  with  the  Company's   requirements   in
restructuring the obligations.  Even if such agreement is reached,  it  may
require  approval  of additional note holders, or possibly,  agreements  of
other  creditors  of  the Company, none of which is assured.   Furthermore,
there  can  be  no  assurance that the sale of assets can  be  successfully
accomplished   on   terms   acceptable  to  the  Company.   Under   current
circumstances, the Company's ability to continue as a going concern depends
upon its ability to (1) successfully restructure its 10.5% Senior Notes and
other  obligations or obtain additional financing as may be  required,  (2)
maintain  compliance with all debt covenants, (3) generate sufficient  cash
flow  to  meet  its  obligations  on  a  timely  basis,   and  (4)  achieve
satisfactory levels of future earnings.  If the Company is unsuccessful  in
its  efforts, it may be unable to meet its obligations on the 10.5%  Senior
Notes, as well as other obligations, making it necessary to undertake  such
other actions as may be appropriate to preserve asset values.
   
<PAGE>
3. Commitments and Contingencies
   
   The   Company  is  subject  to  extensive  federal,  state   and   local
environmental  laws  and  regulations.  These laws,  which  are  constantly
changing, regulate the discharge of materials into the environment and  may
require the Company to remove or mitigate the environmental effects of  the
disposal  or release of petroleum or chemical 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  benefits  are
expensed.  Liabilities for expenditures of a noncapital nature are expensed
when  environmental assessment and/or remediation is probable and the costs
can be reasonably estimated.
   
   Management  recognizes  a  financial exposure that  may  require  future
expenditures  presently  existing for oil  and  gas  properties  and  other
operations. As of March 31, 1999, the Company has not been fined, cited  or
notified  of  any  environmental violations which  would  have  a  material
adverse  effect  upon  capital expenditures, earnings  or  the  competitive
position  in  the oil and gas industry. However, management does  recognize
that  by  the  very  nature  of its business, significant  costs  could  be
incurred  to  bring the Company into total compliance. The amount  of  such
future  expenditures  is not readily determinable due to  several  factors,
including  the  unknown magnitude of possible contaminations,  the  unknown
timing  and  extent of the corrective actions which may  be  required,  the
determination of the Company's liability in proportion to other responsible
parties  and  the  extent to which such expenditures are  recoverable  from
insurance   or   indemnifications  from  prior  owners  of  the   Company's
properties. It is reasonably possible this estimate could change materially
in the near term.
   
   In  the normal course of its business, the Company is subject to pending
or threatened legal actions; in the opinion of management, any such matters
will  be resolved without material effect on the Company's operations, cash
flows or financial position.
   
4. Commodity Hedging and Derivative Financial Instruments
  
   The  Company,  from time to time, uses option contracts to mitigate  the
volatility of price changes on commodities the Company produces  and  sells
as  well  as to lock in prices to protect the economics related to  certain
capital projects.  In August 1998, the Company purchased a put option on  a
total  of 15,000 MMBtu of natural gas per day with a strike price of  $2.00
per  MMBtu.  The option is based on the El Paso Natural Gas Co.  -  Permian
Basin  Index and is for the period from November 1, 1998 through March  31,
1999.
   
   On  March 15, 1999, Southwest entered into a commodity swap agreement to
hedge  a  portion of its crude oil sales.  The agreement is for a  notional
amount  of  1,000  BBls  of  oil  a day, approximately  25%  of  total  oil
production, with a strike price of $14.67, based on West Texas Intermediate
-  NYMEX.   The contract is for the period April 1, 1999 through  June  30,
1999,  but  can  be extended to September 30, 1999, at the  option  of  the
counter-party.
  
  
<PAGE>
5. Lines of Business
  
   The  Company operates in two major segments: Oil and Gas Activities (oil
and  gas  acquisition, development, exploration and production, as well  as
organizing  and serving as managing general partner for various public  and
private  limited  partnerships  engaged in  oil  and  gas  development  and
production)  and  Real Estate Investment and Management (owns  and  manages
retail  shopping  centers  and  office  buildings).   Other  items  include
eliminations, manufacturing, computer service and the holding Company.

                                           For the Three Months
                                             Ended March 31,
                                               1999      1998
                                              -----     -----
                                              (in thousands)
                                               (unaudited)
Operating profit (loss)

  Oil and gas                                $ 1,109   $ (546)
  Real estate                                  2,595     1,978
  Other and eliminations                          58        45
                                              ------     -----
                                             $ 3,762   $ 1,477
                                              ======     =====
Interest Expense

  Oil and gas                                $ 5,527   $ 5,558
  Real Estate                                  5,208     2,781
  Other and eliminations                        (47)        14
                                              ------     -----
                                             $10,688   $ 8,353
                                              ======     =====

Depreciation, depletion and amortization

  Oil and gas                                $ 1,671   $ 3,691
  Real Estate                                  1,024       528
  Other and eliminations                          49        46
                                               -----     -----
                                             $ 2,744   $ 4,265
                                               =====     =====
Capital expenditures

  Oil and gas                                $   271   $ 4,291
  Real estate                                    594       528
                                               -----     -----
                                             $   865   $ 4,819
                                               =====     =====
<PAGE>
5. Lines of Business - continued
                                           March 31,December 31,
                                               1999      1998
                                            --------------------
Identifiable assets
  Oil and gas                                $109,619  $111,876
  Real estate                                149,516   148,340
  Other and eliminations                     (2,915)   (2,666)
                                             -------   -------
                                             $256,220  $257,550
                                             =======   =======
6.  Subsequent Events

   On  March  25,  1999,  SRH  entered into an agreement  to  sell  various
interests in certain oil and gas properties to an unrelated third party for
approximately $4.2 million.  The sale closed on April 5, 1999.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
  
General
  
   Southwest  Royalties Holdings, Inc., a Delaware corporation, was  formed
in 1997 to serve as a holding company for Southwest Royalties, Inc., Sierra
Well  Service, Inc. and Midland Red Oak Realty, Inc.  SRH is an independent
oil  and gas company engaged in the acquisition, development and production
of oil and gas properties, primarily in the Permian Basin of West Texas and
southeastern  New  Mexico, through its wholly-owned subsidiary,  Southwest.
Since 1983, Southwest has grown primarily through selective acquisitions of
producing oil and gas properties, both directly and through the oil and gas
partnerships  it  manages.  SRH also participates  in  the  well  servicing
industry  through its affiliate, Sierra, and owns and manages  real  estate
properties through its subsidiary, Red Oak.
   
Results of Operations

Three Months Ended March 31, 1999 compared to Three Months Ended March  31,
1998
   
   Revenues.  Revenues for the Company decreased $472,000, or 3%,  for  the
three months ended March 31, 1999 as compared to the same period in 1998.
   
   The  following table summarizes production volumes, average sales prices
and  period to period comparisons for the Company's oil and gas operations,
including the effect on revenues, for the periods indicated:
   
                                     Three Months
                                        Ended
                                       March 31,    PercentageRevenue
                                    -------------    IncreaseIncrease
                                      1999    1998   (Decrease)(Decrease)
                                     -----   -----   -------------------
Production volumes:
  Oil and condensate (MBbls)          356       469  (24%)   $ (1,619)
  Natural gas (MMcf)                1,152     1,522  (24%)       (714)
  
Average sales prices:
  Oil and condensate (per Bbl)      $11.29   $14.33  (21)%   $ (1,082)
  Natural gas (per Mcf)              1.83      1.93   (5)%       (115)

<PAGE>
   Oil  and  gas  revenues decreased $3.6 million, or 37%,  for  the  three
months ended March 31, 1999 as compared to the same period in 1998, due  to
decreases  in oil and gas production and decreases in average  price.   Oil
and  gas  production  decreased 24% or approximately 1,943  BOEPD  for  the
comparable  period.   In an ongoing effort to increase the  Company's  cash
position and reduce the number of high operating expense properties in  its
oil  and  gas  portfolio, management has sold oil and  gas  properties  for
approximately $5.8 million since April 1, 1998.  The oil and  gas  property
sales  account  for approximately 800 BOEPD or 10% decrease  in  production
with  the remaining 14% being attributable to production being shut-in  due
to the severe decline in oil and gas prices and natural decline.  Decreases
in  production contributed $2.3 million to decreased oil and gas  revenues.
Lower  oil  and  gas  prices  contributed  approximately  $1.2  million  to
decreased oil and gas revenue.
   
   Real  estate  revenues increased $3.3 million, or 67%, due primarily  to
nine  acquisitions  completed subsequent to March  31,  1998  for  a  total
purchase  price  of  approximately $39 million.  Other  operating  revenues
decreased $153,000.
  
   Operating    Expenses.   Operating   expenses,   before   general    and
administrative  expense  and  depreciation,  depletion  and   amortization,
decreased  $671,000, or 8%, for the three months ended March  31,  1999  as
compared to the same period in 1998.
  
     Oil and gas operating expense decreased approximately $2.6 million, or
47%,  due  primarily  to  management efforts to cut expenses  through  more
efficient operations, and by selectively eliminating high operating expense
properties  from  its oil and gas portfolio. The average operating  expense
was $5.24 per Boe for the three months ended March 31, 1999, a decrease  of
31% from $7.54 per Boe for the same period in 1998.

   Real  estate operating expense increased approximately $2.1 million,  or
97%,  for  the three months ended March 31, 1999 as compared  to  the  same
period  in  1998,  due primarily to acquisitions. Other operating  expenses
decreased approximately $162,000.
   
   General  and  Administrative ("G&A") Expense.  Consolidated G&A  expense
for  SRH  decreased $565,000, or 42%, for the three months ended March  31,
1999.  Oil and gas G&A expense decreased approximately $691,000, or 60%, as
compared to the same period in 1998, and averaged $.85 per Boe in  1999,  a
47%  decrease compared to 1998, due primarily to reductions in oil and  gas
technical and administrative staff in response to significant decreases  in
oil  and  gas prices experienced in the last quarter of 1997 and throughout
1998.  Real estate G&A expense increased approximately $93,000, or 35%, for
the  three  months  ended March 31, 1999, due primarily  to  administrative
staff increases necessitated by Red Oak's growth during 1998.
   
   Depreciation,  Depletion  and  Amortization  (''DD&A'')  Expense.   DD&A
expense  for the Company decreased approximately $1.5 million, or 36%,  for
the  three months ended March 31, 1999.  Oil and gas DD&A expense decreased
approximately $2 million, or 55%.  Oil and gas depletion was $2.80 per Boe,
a  decrease  of  43% from the same period in 1998.  The  decrease  in  DD&A
expense  on an overall basis and per Boe is due primarily to the  reduction
in  the  carrying value of the Company's oil and gas properties because  of
the  impairment,  of  approximately $64 million which was  recorded  during
1998.   Real estate DD&A expense increased approximately $496,000, or  94%,
attributable primarily to the impact of acquisitions.
   
   Interest  Expense.  Interest  expense for  the  Company  increased  $2.3
million,  or  28%.   Oil  and gas interest expense decreased  approximately
$31,000,  or  1%.  Real estate interest expense increased $2.4 million,  or
87%, due to increased debt used to finance acquisitions throughout 1998.
   
   Net  Income.  Due  to  the factors described above,  net  loss  for  the
Company increased approximately $2.6 million to a loss of $7.3 million  for
the three months ended March 31, 1999.

<PAGE>
  
Liquidity and Capital Resources
  
  Management is constantly monitoring its cash position and its ability  to
meet  its  financial obligations as they become due, and as  part  of  this
effort,  is  exploring various strategies for addressing  its  current  and
future  liquidity  needs.   As of March 31, 1999, SRH's  consolidated  cash
balance  was  approximately  $14.7 million, of  which  approximately  $13.6
million was available to Southwest.
     
  SRH  financial  statements have been prepared on a going  concern  basis,
which  contemplates  the  realization of assets  and  the  satisfaction  of
liabilities  in the normal course of business.  The consolidated  financial
statements  do  not include any adjustments relating to the  recoverability
and  classification of liabilities that might be necessary  should  SRH  be
unable to continue as a going concern.
  
  SRH  has  a  highly  leveraged capital structure with  $21.0  million  of
interest  payments due in 1999 on its 10.5% Senior Notes and  approximately
$6.0  million of principal and approximately $12.3 million of cash interest
payments due in 1999 on its other obligations (principally related  to  Red
Oak).   Due  to  severely  depressed commodity prices  and  lagging  rental
property   utilization,  SRH  is  experiencing  difficulty  in   generating
sufficient  cash  flow to meet its obligations and sustain its  operations.
Management is currently in the process of renegotiating the terms of  SRH's
various  obligations with its note holders and/or attempting  to  seek  new
lenders  or  equity  investors.  Additionally,  management  would  consider
disposing of certain assets in order to meet its obligations.
  
  There  can be no assurance that SRH's debt restructuring efforts will  be
successful  or  that  the note holders will agree to  a  course  of  action
consistent with SRH's requirements in restructuring the obligations.   Even
if  such  agreement is reached, it may require approval of additional  note
holders,  or possibly, agreements of other creditors of SRH, none of  which
is  assured.   Furthermore, there can be no assurance  that  the  sales  of
assets can be successfully accomplished on terms acceptable to SRH.   Under
current circumstances, SRH's ability to continue as a going concern depends
upon its ability to (1) successfully restructure its 10.5% Senior Notes and
other  obligations or obtain additional financing as may be  required,  (2)
maintain  compliance with all debt covenants, (3) generate sufficient  cash
flow   to  meet  its  obligations  on  a  timely  basis,  and  (4)  achieve
satisfactory  levels  of future earnings.  If SRH is  unsuccessful  in  its
efforts,  it  may  be unable to meet its obligations on  the  10.5%  Senior
Notes, as well as other obligations, making it necessary to undertake  such
other actions as may be appropriate to preserve asset values.
  
  
<PAGE>
  
Net Cash Provided by Operating Activities

  Cash   flows   provided  by  operating  activities  from  the   Company's
operations were $850,000 and $3.8 million for the three months ended  March
31, 1999 and 1998, respectively.  The decrease is primarily attributable to
decreases  in  oil  and  gas production and commodity  prices  as  well  as
increased interest expense, offset by lower operating costs.
  
Net Cash Used in Investing Activities

  Cash  flows used in investing activities by the Company were $2.6 million
for  the  three  months  ended March 31, 1999  and  $7.4  million  for  the
comparable   period  in  1998.   Acquisitions  and  deposits   to   capital
improvement  escrow accounts for real estate operations  were  the  primary
uses of funds for 1999.
  
  In  response to the substantial decrease in oil prices during  1998,  SRH
has  initiated  a  short-term alternate business plan that  delays  certain
development and exploratory projects until oil and gas industry  conditions
improve.   Based on this plan, SRH has tentatively budgeted $8  million  in
capital  expenditures  at Southwest for oil and gas  development  projects.
This  budget  is subject to change based on financial strategies  currently
being  developed,  including  hedging  strategies,  divestitures  and  debt
restructuring, as well as the level of oil and gas prices in the future.
  
Net Cash Provided by Financing Activities.

  Cash  provided  by  the Company's financing activities was  approximately
$2.7 million and $1.4 million for the three months ended March 31, 1999 and
1998,  respectively.  Net cash provided by financing activities was  mainly
used to fund real estate operations in 1999.
  
Other Issues
  
  The  information included in "Other Issues" in Item 7 of SHR's 1998  Form
10-K regarding Information Systems for the year 2000 is incorporated herein
by reference.  As of March 31, 1999, there have been no material changes in
SRH's Year 2000 disclosure.
  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk

  The  information  included in "Quantitative and  Qualitative  Disclosures
About  Market  Risk"  in Item 7A of SRH's 1998 Form  10-K  is  incorporated
herein  by  reference.   Such information includes a description  of  SHR's
potential  exposure  to market risks, including commodity  price  risk  and
SHR's  interest  rate  risk.  As of March 31,  1999,  there  have  been  no
material changes in SRH's market risk exposure from that disclosed  in  the
1998 Form 10-K.

<PAGE>
   
                        PART II - OTHER INFORMATION

Item 6.

Reports on Form 8-K
  
  None.
  
Exhibits
  
  The  following instruments and documents are included as Exhibits to this
Report.    Exhibits  incorporated  by  reference  are   so   indicated   by
parenthetical information.
  
  
   Exhibit Number                       Description
   --------------                       -----------
   
  27*                                  Financial Data Schedule.

  *Filed herewith.

  
<PAGE>
                                SIGNATURES
                         SOUTHWEST ROYALTIES, INC.
  
  Pursuant  to  the requirements of Section 13 or 15(d) of  the  Securities
Exchange  Act  of 1934, the registrant has duly caused this  report  to  be
signed on its behalf by the undersigned, thereto duly authorized.
  
                            SOUTHWEST ROYALTIES, INC.

                      By:   /s/ H. H. Wommack, III
                            ----------------------------------------
                            H.H. Wommack, III, Chairman, President,
                            and Chief Executive Officer

                      Date: May 17, 1999
  
  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/ H.H. Wommack, III
  ----------------------   Chairman/President/   May 17, 1999
  H. H. Wommack, III       Chief Executive Officer
  
  /s/ Bill E. Coggin
  ----------------------   Vice President/Chief  May 17, 1999
  Bill E. Coggin           Financial Officer
  
  /s/ H. Allen Corey
  ----------------------
  H. Allen Corey           Director/Secretary    May 17, 1999
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
<PAGE>
  
  
                                SIGNATURES
                  SOUTHWEST ROYALTIES HOLDINGS, INC.
  
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
  
                            SOUTHWEST ROYALTIES HOLDINGS, INC.

                      By:
                            --------------------------------------
                            H.H. Wommack, III, Chairman, President,
                            and Chief Executive Officer

                      Date: May 17, 1999
  
  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
  ---------                ------                -----
  
  
  ----------------------   Chairman/President/   May 17, 1999
  H. H. Wommack, III       Chief Executive Officer
  
  
  ----------------------   Vice President/Chief  May 17, 1999
  Bill E. Coggin           Financial Officer
  
  
  ----------------------
  H. Allen Corey           Director/Secretary    May 17, 1999
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
<PAGE>