1
                    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 September 30, 2000

     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 Jurisdiction of              (State or Other
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)

                            (915) 686-9927
         Registrants' Telephone Number, Including Area Code:

                              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 September 30, 2000  for
Southwest Royalties, Inc                                              100.
Number  of shares of common and redeemable common stock outstanding  as  of
September 30, 2000 for Southwest Royalties Holdings, Inc        1,075,534.


<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 September 30, 2000
          (unaudited) and December 31, 1999                3

          Consolidated Statements of Operations for the
          three and  nine months ended September 30, 2000
          and 1999 (unaudited)                             5

          Consolidated Statements of Cash Flows for the three
          and nine months ended September 30, 2000
          and 1999 (unaudited)                             7

          Notes to Consolidated Financial Statements       9


Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations             22

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk                                     26

                        PART II - OTHER INFORMATION

Item 6.   Reports on Form 8-K and Exhibits                28














<PAGE>
                      PART I - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS
                   (in thousands, except per share data)

                                                September 30,December 31,
                                                     2000       1999
                                                 -----------------------
                                                 (unaudited)
ASSETS
---------------------------------------------------------
Current assets
  Cash and cash equivalents                       $ 17,630   $  16,983
  Restricted cash                                    5,943      10,003
  Accounts receivable, net of allowance of $558 and
   $440, respectively                               10,716       7,134
  Receivables from related parties                   1,664         836
  Other current assets                               2,355       1,179
                                                   -------     -------
     Total current assets                           38,308      36,135
                                                   -------     -------
Oil and gas properties, using the full cost
 method of accounting
  Proved                                           200,036     193,319
  Unproved                                           1,588       2,059
                                                   -------     -------
                                                   201,624     195,378
  Less accumulated depletion, depreciation and
   amortization                                    130,554     126,742
                                                   -------     -------
Oil and gas properties, net                         71,070      68,636
                                                   -------     -------
Rental property, net                               130,001     128,685
                                                   -------     -------
Rental property - construction in progress           5,391       3,984
                                                   -------     -------
Other property and equipment, net                    4,692       4,841
                                                   -------     -------
Other assets
  Real estate investments                            3,024       3,644
  Deferred debt costs, net of accumulated
   amortization of $4,908 and $2,005, respectively               7,762
13,816
  Noncompete covenants, net of accumulated
   amortization of $784 and $563, respectively         820       1,041
  Other, net                                         1,315       1,385
                                                   -------     -------
     Total other assets                             12,921      19,886
                                                   -------     -------
Total assets                                      $262,383   $ 262,167
                                                   =======     =======
                                                             (continued)

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

                  CONSOLIDATED BALANCE SHEETS (continued)
                   (in thousands, except per share data)

                                                September 30,December 31,
                                                     2000       1999
                                                  --------- -----------
                                                 (unaudited)
LIABILITIES, MINORITY INTEREST, REDEEMABLE
COMMON STOCK AND STOCKHOLDERS' DEFICIT
---------------------------------------------------------
Current liabilities
  Current maturities of long-term debt            $ 23,174   $  40,277
  Accounts payable                                   5,713       6,011
  Accounts payable to related parties                  884         867
  Accrued expenses                                   6,462       5,896
  Accrued interest payable                           7,772       4,774
                                                   -------     -------
     Total current liabilities                      44,005      57,825
                                                   -------     -------
Long-term debt                                     312,098     306,806
                                                   -------     -------
Other long-term liabilities                          1,671       1,220
                                                   -------     -------
Minority interest                                        -           8
                                                   -------     -------
Redeemable common stock of subsidiary                    -       1,228
                                                   -------     -------
Redeemable common stock - 129,046 shares issued              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 September 30, 2000
   and December 31, 1999                               116         116
  Additional paid-in capital                         2,196       2,196
  Accumulated deficit                             (101,259)  (110,784)
  Note receivable from an officer and
   stockholder                                     (1,624)     (1,648)
  Less:  treasury stock - at cost; 214,549 shares at
   September 30, 2000 and 214,215 at December 31, 1999         (3,110)
(3,090)
                                                   -------     -------
     Total stockholders' deficit                  (103,681)  (113,210)
                                                   -------     -------
Total liabilities, minority interest, redeemable
  common stock and stockholders' deficit          $262,383   $ 262,167
                                                   =======     =======





           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)

                                   Three months ended  Nine months ended
                                     September 30,       September 30,
                                   ------------------  -----------------
                                     2000      1999      2000      1999
                                    ------    ------    ------    ------
Operating revenues
  Oil and gas                      $14,955   $ 8,115   $39,297   $21,169
  Real estate                        7,933     7,985    23,391    23,936
  Other                                118       599       291     1,107
                                    ------    ------    ------    ------
     Total operating revenues       23,006    16,699    62,979    46,212
                                    ------    ------    ------    ------
Operating expenses
  Oil and gas production             3,969     2,871    11,152     8,502
  Real estate                        4,558     4,741    13,714    13,493
  General and administrative, net of
   related party management and
   administrative fees of $798, $934,
   $2,467 and $2,625, respectively           1,242     651       3,243
2,132
  Depreciation, depletion and
   amortization                      2,644     1,837     7,825     7,123
  Other                                165       120       754       579
                                    ------    ------    ------    ------
     Total operating expenses       12,578    10,220    36,688    31,829
                                    ------    ------    ------    ------

Operating income                    10,428     6,479    26,291    14,383
                                    ------    ------    ------    ------
Other income (expense)
  Interest and dividend income         327       269       841       681
  Interest expense                 (10,922)  (10,277)  (32,398)  (31,340)
  Other                                405       286     1,030       431
                                    ------    ------    ------    ------
                                   (10,190)  (9,722)   (30,527)  (30,228)
                                    ------    ------    ------    ------

(continued)


<PAGE>

            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                   (in thousands, except per share data)
                                (unaudited)

                                   Three months ended  Nine months ended
                                     September 30,       September 30,
                                   -----------------   -----------------
                                     2000      1999      2000      1999
                                    ------    -----     -----     -----
Income (Loss) before income taxes,
   minority interest, equity
   loss and extraordinary item   $     238 $ (3,243) $ (4,236) $(15,845)
   Income tax benefit (provision)            -         -         -
-
                                   --------- --------- --------- ---------
Income (Loss) before minority interest,
   equity loss and extraordinary item            238   (3,243)   (4,236)
(15,845)
   Minority interest in subsidiaries,
     net of tax                       (33)      (67)     1,139         -
   Equity in loss in subsidiary
     and partnerships, net of tax            -         -         -
(931)
                                   --------- --------- --------- ---------
Income (Loss) before extraordinary
   item                                205   (3,310)   (3,097)   (16,776)
   Extraordinary gain (loss) from
     early extinguishment of debt            (1,374)       (5)    12,622
(1,598)
                                   --------- --------- --------- ---------
Net income (loss)                $ (1,169) $ (3,315) $   9,525 $(18,374)
                                   ========= ========= ========= =========

Income (Loss) per common share before
   extraordinary item            $     .19 $  (3.08) $   (2.88)        $
(15.60)
   Extraordinary gain (loss) from
     early extinguishment of debt            (1.27)    (.01)     11.74
(1.49)
                                   --------- --------- --------- ---------

Income (loss) per common share   $  (1.08) $  (3.09) $    8.86 $ (17.09)
                                   ========= ========= ========= =========
Weighted average shares outstanding          1,075,868 1,075,868 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)

                                   Three months ended  Nine months ended
                                     September 30,       September 30,
                                   -----------------   -----------------
                                     2000      1999      2000      1999
                                    ------    -----     -----     -----
Cash flows from operating activities
  Net income (loss)                $(1,169)  $(3,315)  $ 9,525   $(18,374)
  Adjustments to reconcile net income
   (loss) to net cash provided by
   operating activities:
  Depreciation, depletion and
   amortization                      2,644     1,837     7,825     7,123
  Noncash interest expense           2,314     1,708     7,492     4,218
  Extraordinary (gain) loss from early
   extinguishment of debt            1,374         5   (12,622)    1,598
  Gain on sale of assets             (208)     (194)     (456)     (196)
  Equity (income) loss of subsidiary
   and partnerships                      -         -         -       187
  Impairment of equity investment            -         -         -
744
  Other noncash items                  153        77       492       839
  Amortization of lease commissions               41         -       145
-
  Bad debt expense                     100       127       240       226
  Minority interest (income) loss
   of subsidiary                        33        67   (1,139)         -
  Changes in operating assets
   and liabilities -
   Accounts receivable             (2,178)     (498)   (4,664)   (1,432)
   Other current assets              (736)       197   (1,205)     (123)
   Accounts payable and accrued
     expenses                        2,153     1,374     (195)       703
   Changes in restricted cash        2,744         -     4,956         -
   Accrued interest payable          3,202     5,386     2,998     5,133
                                    ------    ------    ------    ------
Net cash provided by operating
  activities                        10,467     6,771    13,392       646
                                    ------    ------    ------    ------
Cash flows from investing activities
  Proceeds from sale of oil and
   gas properties                      162       328       498     5,533
  Purchase of oil and gas properties         (2,934)   (1,670)   (6,744)
(2,454)
  Purchase of other property and
   equipment and rental property             (2,120)   (1,940)   (6,419)
(4,413)
  Purchase of other assets           (586)     (106)     (622)     (563)
  Proceeds from sale of real estate
   investments                         410        17     1,053       631
  Proceeds from sale of other assets              27        24        46
366
  Proceeds from sale of other property
   equipment and rental property             7         2,268     87
3,336
  Purchase of real estate investments              -         -         -
(30)
                                                              (continued)

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                              (in thousands)
                                (unaudited)

                                   Three months ended  Nine months ended
                                     September 30,       September 30,
                                   -----------------   -----------------
                                     2000      1999      2000      1999
                                    ------    -----     -----     -----
  Change in restricted cash        $  (61)   $ (500)   $ (896)   $   408
  Other                                  8         7        24        23
                                    ------    ------    ------    ------
Net cash provided by (used in)
  investing activities             (5,087)   (1,572)   (12,973)    2,837
                                    ------    ------    ------    ------
Cash flows from financing activities
  Proceeds from borrowings          54,403     2,576    75,922   105,816
  Payments on debt                 (51,893)  (2,315)   (75,655)  (98,393)
  Increase (decrease) in other
   long-term liabilities               (2)         4      (47)      (28)
  Deferred debt cost               (1,264)       (5)   (1,395)   (4,078)
  Refund of debt issue costs         1,500         -     1,500         -
  Dividends paid to minority interest
   owners                             (30)      (30)      (90)      (91)
  Prepayment penalty on early
   extinguishment of debt                -         -         -     (875)
  Purchase of minority interest of
   subsidiary                          (8)         -       (8)         -
  Other                                  -       (1)         1         3
                                    ------    ------    ------    ------
Net cash provided by
  financing activities               2,706       229       228     2,354
                                    ------    ------    ------    ------
Net increase in
  unrestricted cash and cash
  equivalents                        8,086     5,428       647     5,837

Unrestricted cash and cash equivalents -
  beginning of period                9,544    14,210    16,983    13,801
                                    ------    ------    ------    ------
Unrestricted cash and cash equivalents -
  end of period                    $17,630   $19,638   $17,630   $19,638
                                    ======    ======    ======    ======

Non-cash investing and financing activities

  Deferred debt cost incurred      $ 1,000   $     -   $ 1,000   $     -
  Increase in other long-term
   liabilities associated with
   deferred debt costs             $   500   $     -   $   500   $     -
  Increase in accrued expenses
    associated with deferred debt costs       $   500   $     -    $    500
$ -

Supplemental disclosures of cash flow
 information

  Interest paid                    $ 5,693   $ 3,185   $21,908   $21,989


           The accompanying notes are an integral part of these
                     consolidated financial statements
<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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"), Basic Energy Service, Inc. ("Basic") 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  Basic
were subsidiaries of Southwest.  Southwest paid a dividend of the shares it
owned  in  Red Oak and Basic to SRH.  After the formation of SRH, Southwest
and  Red Oak became subsidiaries of SRH and, as of July 1, 1997, Basic  was
deconsolidated.   In  May 2000, Basic changed its  name  from  Sierra  Well
Services, Inc.

  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  Basic.  Southwest  sells  its  oil  and  gas
production  to  a variety of purchasers, with the prices it receives  being
dependent  upon  oil  and  gas commodity prices.  Red  Oak  is  principally
involved  in  real estate investment and development.  Basic 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 September 30, 2000, the Company owned approximately
100%  of  Southwest, 81% of Red Oak and 100% of Blue Heel. Blue Heel  is  a
subsidiary  of  Southwest. Effective July 1, 1997, Basic was deconsolidated
and is accounted for using the equity method.  Effective November 1999, TPI
was  liquidated.  Effective August 2000, Midland Southwest Software ("MSS")
a   software  subsidiary  was  merged  into  Southwest.   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.

Estimates and Uncertainties

  Preparation  of  the  accompanying consolidated financial  statements  in
conformity   with   generally  accepted  accounting   principles   requires
management  to  make  estimates and assumptions that  affect  the  reported
amounts of assets and liabilities and disclosures 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 those estimates.

Cash and Cash Equivalents

  The  Company considers all highly liquid debt instruments purchased  with
a  maturity  of three months or less to be cash equivalents.  In  addition,
the  Company maintains its excess cash in several interest bearing accounts
in various financial institutions.


<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Restricted Cash

  Restricted  cash represents amounts required to be reserved  in  separate
accounts by financial lenders.  The interest sinking fund is cash set aside
to pay interest on 10.5% Senior Notes.  Effective August 17, 2000, with the
refinancing of the Revolving Line of Credit, the interest sinking  fund  is
no longer required to be maintained.

  Restricted  cash  accounts  have  been  established  for  the   following
purposes (in thousands):
                                                  September 30,December 31,
                                                       2000        1999
                                                       ----        ----
     Cash bonds - Red Oak                           $      -   $     35
     Certificate of Deposits - Red Oak                   118        112
     Tenant security deposits - Red Oak                  528        512
     Capital expenditures account - Red Oak            1,448        552
     Tax and insurance reserve - Red Oak               2,533      2,465
     Lockbox - Red Oak                                   278        439
     Customer service reserve - Red Oak                    8         10
     Interest reserve - Red Oak                          281          -
     Escrow fund - Southwest                             749        627
     Interest sinking - Southwest                          -      5,251
                                                       -----     ------
                                                    $  5,943   $ 10,003
                                                       =====     ======
Real Estate Revenue Recognition

  The   Company   leases   offices  and  retail  shopping   centers   under
noncancelable  operating leases.  The Company reports base  rental  revenue
for  financial  statement purposes straight-line  over  the  terms  of  the
respective  leases.  Accrued straight-line rents represent the amount  that
straight-line rental revenue exceeds rents collected in accordance with the
lease  agreements. Management, considering current information  and  events
regarding   the  tenants'  ability  to  fulfill  their  lease  obligations,
considers accrued straight-line rents to be impaired if it is probable that
the  Company  will  be  unable to collect all rents due  according  to  the
contractual lease terms.  If accrued straight-line rents associated with  a
tenant  are  considered to be impaired, the amount  of  the  impairment  is
measured  based  on  the  present  value of  expected  future  cash  flows.
Impairment losses, if any, are recorded through a loss on the write-off  of
assets.   Cash receipts on impaired accrued straight-line rents are applied
to  reduce  the  remaining  outstanding  balance  and  as  rental  revenue,
thereafter.

  Some  leases provide for percentage rents based on the tenant's  revenue.
Percentage  rents are accrued monthly based on prior experience or  current
tenant financial information.  Some leases require tenants to reimburse the
Company for certain expenses of operating the property.

Concentrations of Credit Risk

  The  Company  is  subject  to  credit risk  through  oil  and  gas  trade
receivables  and  real  estate lease receivables.  Although  a  substantial
portion  of  its customers' ability to pay is dependent upon conditions  in
the  oil  and  gas industry as well as general economic conditions,  credit
risk is reduced due to a large customer base.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Commodity Hedging and Derivative Financial Instruments

  The  Company  has  only  limited involvement  with  derivative  financial
instruments and generally does not use them for trading purposes.  They are
used  to  manage commodity price risks.  The Company is exposed  to  credit
losses  in  the  event  of  nonperformance by the  counter-parties  to  its
commodity  hedges.   The Company anticipates, however, that  such  counter-
parties  will  be  able  to  fully  satisfy  their  obligations  under  the
contracts.   The  Company does not obtain collateral or other  security  to
support  financial  instruments subject to credit  risk  but  monitors  the
credit standing of the counter-parties.

  The  derivative  financial instruments that the Company accounts  for  as
hedging  contracts must meet the following criteria:  the underlying  asset
must  expose the Company to price risk that is not offset in another  asset
or  liability,  the hedging contract must reduce that price risk,  and  the
instrument  must be designated as a hedge at the inception of the  contract
and  throughout the contract period.  In order to qualify as a hedge, there
must  be  clear  correlation between changes  in  the  fair  value  of  the
financial  instrument and the fair value of the underlying asset such  that
changes  in the market value of the financial instrument will be offset  by
the effect of price changes on the exposed items.

  Premiums paid for commodity option contracts which qualify as hedges  are
amortized   to  oil  and  gas  sales  over  the  term  of  the  agreements.
Unamortized  premiums  are  included in other assets  in  the  consolidated
balance  sheet.   Amounts receivable or payable under the commodity  option
contracts  are accrued as an increase or decrease in oil and gas sales  for
the applicable periods.

Oil and Gas Properties

  All  of  the  Company's oil and gas properties are located in the  United
States  and  are accounted for at cost under the full cost  method.   Under
this  method, all productive and nonproductive costs incurred in connection
with  the  acquisition, exploration and development of oil and gas reserves
are  capitalized.  No gain or loss is recognized on the sale of oil and gas
properties unless nonrecognition would significantly alter the relationship
between  capitalized costs and remaining proved reserves for  the  affected
amortization  base.  When gain or loss is not recognized, the  amortization
base is reduced by the amount of sales proceeds.

  Net  capitalized costs of oil and gas properties, including the estimated
future  costs to develop proved reserves, are amortized using the units  of
revenue  method, whereby the provision is computed on the basis of  current
gross  revenues from production in relation to future gross revenues, based
on  current  prices,  from  estimated production  of  proved  oil  and  gas
reserves.  Should the net capitalized costs net of related deferred  income
taxes exceed the estimated present value of oil and gas reserves discounted
at  10%  and adjusted for related income taxes, such excess costs would  be
charged  to  expense in the Consolidated Statements of  Operations.  As  of
September 30, 2000, no write down of the capitalized costs of oil  and  gas
properties was deemed necessary.

  It  is reasonably possible that the estimates of anticipated future gross
revenues,  the  remaining estimated economic life of the product,  or  both
could  change significantly in the near term due to the fluctuation of  oil
and  gas  prices or production.  Depletion estimates would also be affected
by such changes.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Property and Equipment

  Rental  property  and other property and equipment  is  stated  at  cost.
Repairs  and maintenance are charged to expense as incurred, with additions
and  improvements  being  capitalized.  Upon sale or  other  retirement  of
depreciable  property,  the cost and accumulated depreciation  are  removed
from  the  related  accounts  and any gain or  loss  is  reflected  in  the
Consolidated Statements of Operations.

  Depreciation  is  provided  on  the straight-line  method  based  on  the
estimated useful lives of the depreciable assets as follows:

     Building and improvements                    20 to 30 years
     Rental property and improvements             5 to 30 years
     Leasehold improvements                       2 to 10 years
     Machinery and equipment                      3 to 5 years
     Furniture and fixtures                       3 to 5 years
     Equipment under capital lease                3 to 5 years

Rental Property - Construction in Progress

  All  costs  associated with construction in progress are capitalized  and
subject  to  depreciation  when each project  is  completed.   Interest  is
capitalized  for  construction in progress.  The  capitalized  interest  is
recorded as part of the asset to which it relates and is amortized over the
assets useful life.  In 2000 and 1999, no interest costs were capitalized.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

  In  accordance  with the provisions of SFAS No. 121, Accounting  for  the
Impairment  of Long-Lived Assets and for Long-Lived Assets to  Be  Disposed
Of,  the  Company  reviews its long-lived assets,  excluding  oil  and  gas
properties  accounted  for using the full cost method  of  accounting,  and
certain  identifiable intangibles for impairment whenever events or changes
in  circumstances indicate that the carrying amount of an asset may not  be
recoverable.   In this circumstance, the Company recognizes  an  impairment
loss  for the amount by which the carrying amount of the asset exceeds  the
estimated fair value of the asset.

Deferred Debt Costs

  The  Company  capitalizes  certain  costs  incurred  in  connection  with
issuing debt.  These costs are being amortized to interest expense  on  the
straight-line method over the term of the related debt.

Gas Balancing

  The  Company  utilizes the sales method of accounting for over  or  under
deliveries of natural gas.  Under this method, the Company recognizes sales
revenue on all natural gas sold.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Income Taxes

  Deferred  tax  assets and liabilities are recognized  for  the  estimated
future  tax  effects  attributable  to differences  between  the  financial
statement  carrying  amount of existing assets and  liabilities  and  their
respective  tax  basis.  Deferred tax assets and liabilities  are  measured
using enacted tax rates expected to apply to taxable income in the years in
which  those temporary differences are expected to be recovered or settled.
The  effect on deferred tax assets and liabilities of a change in tax  rate
is  recognized  in income in the period that includes the  enactment  date.
Deferred tax assets are reduced, if necessary, by a valuation allowance for
the amount of tax benefits that may not be realized.

  SRH  and  its  eligible  subsidiaries file a  consolidated  U.S.  federal
income  tax  return.  Basic  (through  June  30,  1997)  and  Red  Oak  are
consolidated  for  financial reporting purposes, but beginning  January  1,
1996,  were  not eligible to be included in the consolidated  U.S.  federal
income  tax  return.   Separate  provisions  for  income  taxes  have  been
determined for these entities.

Reclassifications

  Certain  reclassifications have been made to the 1999 amounts to  conform
to the 2000 presentation.

Derivative Instruments and Hedging Activities

  In   June  1998,  the  FASB  issued  Statement  of  Financial  Accounting
Standards  No.  133  "Accounting  for Derivative  Instruments  and  Hedging
Activities"  ("SFAS  133")  which  established  standards  for   derivative
instruments,  including certain derivative instruments  embedded  in  other
contracts,  and  for  hedging  activities.   It  requires  that  an  entity
recognize  all derivatives as either assets or liabilities in the statement
of  financial  position and measure those instruments at  fair  value.   It
establishes  conditions under which a derivative may  be  designated  as  a
hedge, and establishes standards for reporting changes in the fair value of
a  derivative.   SFAS  133,  as amended by SFAS  137,  is  required  to  be
implemented  for  all fiscal quarters of all fiscal years  beginning  after
June 15, 2000.  Early adoption is permitted.  Management has initiated  the
evaluation of the possible effects of SFAS 133 on the Company and continues
to study the implications.

Income (loss) per share

  Basic  net  income  (loss)  per  share is  computed  by  dividing  income
available  to common stockholders by the weighted average number of  common
shares  outstanding for the period.  The computation of diluted net  income
(loss)  per  share  reflects the potential dilution  that  could  occur  if
securities  or  other  contracts to issue common stock  were  exercised  or
converted  into  common stock or resulted in the issuance of  common  stock
that  would then share in the earnings of the entity.  For 2000  and  1999,
the  computation  of diluted net income (loss) per share was  antidilutive;
therefore, the amounts reported for basic and diluted net income (loss) per
share were the same.

Noncompete covenants

  Noncompete  covenants are carried at cost less accumulated  amortization.
The  covenants are being amortized over their contractual lives,  generally
three to five years.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

Interim Financial Statements

  In  the  opinion  of  management,  the unaudited  consolidated  financial
statements  of  the Company as of September 30, 2000 and 1999  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 1999 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.

  SRH  has a highly leveraged capital structure with, approximately,  $34.1
million of cash interest and $23.2 million of principal due within the next
twelve months.  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 continuing  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 debt obligations,  making  it
necessary to undertake such other actions as may be appropriate to preserve
asset values.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

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.   Other  long-term liabilities at September  30,  2000  include
approximately  $663,000 for estimated future remedial actions  and  cleanup
costs.  As of September 30, 2000, 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.

  On  December 30, 1999, Southwest entered into a basket revenue protection
agreement,  which provides the Company with an oil and gas  revenue  floor.
The  contract is for the period January 1, 2000 through December 31,  2000.
The  agreement is to be calculated on a calendar year quarter as  disclosed
in the following table based on NYMEX Natural Gas and NYMEX Crude Oil:

            Notional Volumes              Strike Prices
       -------------------------  -----------------------------
           Crude      Natural        Crude    Natural              Minimum
         Oil (bbl)  Gas (MMBtu)       Oil       Gas       Boe      Revenue
         ---------- -----------      -----    -------     ----     --------
Quarter 1 269,254      976,676     $  21.12  $   1.91  $  28.76  $7,552,096
Quarter 2 263,058      910,325     $  18.88  $   1.92  $  26.56  $6,714,359
Quarter 3 257,206      857,728     $  18.00  $   1.97  $  25.88  $6,319,432
Quarter 4 251,914      813,400     $  18.00  $   2.20  $  26.80  $6,323,932

  Payments  shall  be  made no later than five business  days,  after  each
quarterly  floating price is determinable by NYMEX.  The cost of the  floor
was  approximately $638,000 and is amortized monthly as a reduction of  oil
and  gas  revenues.   The  carrying value of  the  floor  is  approximately
$150,000  at  September  30,  2000.  The  market  value  was  approximately
$160,000 at September 30, 2000.

<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

  On  September  6,  2000,  Southwest entered into a  floor  option,  which
provides the Company with a crude oil price floor. The contract is for  the
period  January  1, 2001 through December 31, 2001.  The option  is  for  a
notional  amount of 1,100 BBls of oil a day at a floor price of $25,  based
on NYMEX Light Sweet Crude.  The agreement is to be calculated on a monthly
basis,  with  payments to be made no later than five business  days,  after
calculating  period.  The  cost of the floor  was  approximately  $466,000.
Carrying value approximates market value at September 30, 2000.

5.  Long-term Debt

  Long-term debt consists of the following (in thousands):
                                                 September 30,December 31,
                                                      2000        1999
                                                     -----       -----
     10.5% Senior Notes, interest payable semi-annually due
      October 15, 2004, net of discount of $995 and $1,487,
      respectively                                  $122,690  $160,598
     Revolving Loan Facility with variable rate interest,
      due August 2003. Collateralized by oil and gas
      properties.                                     50,000    35,000
     Variable Rate Notes Payables:
     Notes payable due July 2001, accrued interest due and
      payable monthly at 7.1%, per annum with additional
      1% payable in cash or additional notes.
       Net  of  discount  of $444 and $944, respectively             17,518
15,883
     Notes payable due December 2001, accrued interest due
      and payable monthly at 7.1%, per annum with additional
      1.5% payable in cash or additional notes.
       Net  of  discount  of $1,556 and $2,556, respectively         30,482
25,298
     Notes payable due July 2002, interest at 8.5% minimum
      per annum, accrued interest due and payable monthly.
       Net  of  discount  of $2,906 and $4,229, respectively        104,841
101,835
     Other                                             9,741     8,469
                                                     -------   -------
                                                     335,272   347,083
     Less current maturities                          23,174    40,277
                                                     -------   -------
                                                    $312,098  $306,806
                                                     =======   =======


<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

10.5% Senior Notes

  In  October  1997,  the Company issued $200 million  aggregate  principal
amount of 10.5% Senior Notes due October 15, 2004 (the "Notes").  The Notes
were sold at a discount and interest is payable April 15 and October 15  of
each  year,  commencing  April 15, 1998.  The Notes are  general  unsecured
senior obligations of the Company and rank equally in right of payment with
all other senior indebtedness of the Company and senior in right of payment
of  all  existing  future subordinated indebtedness  of  the  issuer.   Net
proceeds  from  the  issuance of the Notes were  used  primarily  to  repay
existing debt of approximately $84 million, purchase oil and gas properties
for  approximately $72 million, purchase additional stock in  Red  Oak  for
approximately  $10 million, invest $1.7 million in an affiliate,  with  the
remaining balance used for working capital.

  The  Indenture imposes certain limitations on the ability of the  Company
and  its  restricted subsidiaries to, among other things, incur  additional
indebtedness or issue disqualified capital stock, make payments in  respect
to  capital  stock, enter into transactions with affiliates,  incur  liens,
sell  assets, change the nature of its business, merge or consolidate  with
any  other  person  and  sell,  lease, transfer  or  otherwise  dispose  of
substantially all of its properties or assets.  The indenture requires  the
issuer to repurchase notes under certain circumstances with the excess cash
of  certain  asset  sales.  The limitations are  subject  to  a  number  of
important  qualifications and exceptions.  The issuer must  report  to  the
Trustee on compliance with such limitations on a quarterly basis.

Revolving Loan Facility

  In  December 1999, Southwest entered into a Revolving Loan Facility  with
Bank One Texas, N.A., which provided a borrowing base of $50 million with a
maturity date of December 29, 2000.  Funds from the Revolving Loan Facility
may  be  used  for  working capital and other general  corporate  purposes,
including  the  repurchase  of a portion of Southwest's  outstanding  10.5%
Senior  Notes  due  2004.  Advances on the  Revolving  Loan  Facility  bear
interest  at the option of Southwest, based on the prime rate of  Bank  One
Texas,  N.A.  (8.5% at December 31, 1999) plus one fourth  of  one  percent
(.25%),  when the borrowing base usage is equal to or greater than  80%  or
zero  percent  (0%) when the borrowing base usage is less than  80%  or,  a
Eurodollar  rate (substantially equal to the London InterBank Offered  Rate
("LIBOR"))  plus  1.25%  up  to  2.0% based on  the  borrowing  base  usage
percentage.  The Revolving Loan Facility is secured by no less than 85%  of
Southwest's oil and gas properties.  As of December 31, 1999 Southwest  had
drawn  $35.0  million.  The remaining $15.0 million was  drawn  in  January
2000.

  The  Revolving Loan Facility imposes certain limitations on  the  ability
of Southwest to, among other things, incur additional indebtedness or issue
disqualified  capital  stock, make payments in respect  to  capital  stock,
enter  into transactions with affiliates, incur liens, sell assets,  change
the  nature of its business, merge or consolidate with any other person and
sell,  lease,  transfer or otherwise dispose of substantially  all  of  its
properties  or assets.  The Revolving Loan Facility required  Southwest  to
establish  a sinking fund account with an initial deposit of $3.5  million.
Southwest  is  to  transfer  monthly one-twelfth  of  the  annual  interest
payments  on the 10.5% Senior Notes beginning December 31, 1999  into  this
sinking  fund  account for the purpose of making interest payments  on  the
10.5% Senior Notes. Effective August 17, 2000, this Revolving Loan Facility
was  refinanced with a new lender under the Amended and Restated  Loan  and
Security  Agreement.   The new lender continues to  impose  limitations  on
Southwest  business operations, however, the sinking fund  requirement  was
eliminated.


<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

  Southwest  Royalties,  Inc.,  a  wholly  owned  subsidiary  of  Southwest
Royalties  Holdings,  Inc. successfully completed a  refinancing  of  their
Revolving Loan Facility in the amount of $50.0 million on August  17,  2000
with  a  new  lender. The Amended and Restated Loan and Security  Agreement
allows  for a prime rate of interest (based on the new lenders prime rates)
plus one and one-half percent (1.5%).  Southwest was able to extend the due
date  from  December 29, 2000 to August 17, 2003.  Southwest, in  recording
the  refinancing of the Revolving Loan Facility, recorded an  extraordinary
loss  from early extinquishment of debt in the amount of approximately $1.4
million.

Variable Rate Notes Payable

  In  June  1998, MRO N Cross, Inc., a wholly owned subsidiary of  Red  Oak
negotiated two notes payable in the amount of $13.5 million, net  of  a  $2
million discount, and $2.5 million. The $13.5 million note was used for the
acquisition  of  rental property in the amount of $12.9  million  with  the
remaining  $600,000  to  be  used for capital improvements  to  the  rental
property  purchased.   The  $2.5  million  note  is  reserved  for  capital
improvements  to  the rental property purchased of which $2.4  million  has
been  utilized  as of September 30, 2000.  The notes are collateralized  by
the property purchased.

  In  December 1998, MRO Commercial, Inc., a wholly owned subsidiary of Red
Oak  negotiated two notes payable in the amount of $21.7 million, net of  a
$4 million discount, and $9.7 million.  The $21.7 million note was used for
the  acquisition  of  a retail shopping center and the funding  of  various
escrow balances.  The $9.7 million note is for capital improvements to  the
rental  property purchased of which $5.8 million has been  utilized  as  of
September 30, 2000. The notes are collateralized by the property purchased.

  In  June 1999, MRO Southwest, Inc., a wholly owned subsidiary of Red  Oak
negotiated  two  notes  payable in the amount of  $97.5  million  and  $8.0
million, net of discounts of $5.3 million. Borrowings for both notes accrue
interest  in arrears at a rate per annum equal to the greater  of  8.6%  or
LIBOR plus 360 basis points.  The interest rate includes a servicing fee of
 .10%.  Approximately $91.4 million of the $97.5 million note  was  used  to
retire existing debt on properties contributed to MRO Southwest by Red Oak,
$1.5  million was deposited into various restricted cash accounts  and  the
remaining  proceeds  were  used for general corporate  purposes.  The  $8.0
million  note  is  for  capital improvements to rental  property  and  $5.0
million  has  been  utilized  as of September  30,  2000.   The  notes  are
collateralized by the properties owned by MRO Southwest.  The notes  impose
certain  restrictive covenants including restrictions on the incurrence  of
additional indebtedness, dissolution, termination or liquidation of all  or
substantially  all  of the assets, changes in the legal  structure  of  the
assets, making any loans or advances to any third party and commingling its
assets  with the assets of any of its affiliates or of any other person  or
entity.

Extinguishment of Debt

  In  June  1999, MRO Southwest repaid certain notes payable with  proceeds
from  the  aforementioned Variable Note Payable issued  in  June  of  1999.
Prepayment  penalties  and the remaining unamortized  deferred  debt  costs
associated with these notes resulted in an extraordinary charge  of  $1,598
million  or  $(1.49)  per  share.  Since there is no  recorded  income  tax
benefits  on continuing operations there is no income tax benefits recorded
on the extraordinary loss.


            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

  In   December  of  1999,  Southwest  purchased  approximately   19%,   or
approximately $37.9 million original face amount, of its 10.5% Senior Notes
with   the  proceeds  from  the  aforementioned  Revolving  Loan  facility.
Southwest paid approximately $22.0 million, including all fees, to purchase
the  10.5%  Senior Notes and wrote off approximately $980,000  of  deferred
loan  issue costs and approximately $349,000 of the original issue discount
to  recognize  a  $14.5 million extraordinary gain on the purchase  of  the
Notes.   Southwest has not recorded any income tax benefits  on  continuing
operations and therefore there is no income tax expense recognized  on  the
extraordinary  gain.   The extraordinary gain per  share  is  approximately
$13.48.

  In   January   of  2000,  Southwest  purchased  approximately   19%,   or
approximately $38.4 million original face amount, of its 10.5% Senior Notes
with   the  proceeds  from  the  aforementioned  Revolving  Loan  facility.
Southwest paid approximately $23.0 million, including all fees, to purchase
the  10.5%  Senior Notes and wrote off approximately $980,000  of  deferred
loan  issue costs and approximately $349,000 of the original issue discount
to  recognize  a  $14.1 million extraordinary gain on the purchase  of  the
Notes.   Southwest has not recorded any income tax provisions on continuing
operations and therefore there is no income tax expense recognized  on  the
extraordinary  gain.   The extraordinary gain per  share  is  approximately
$13.01.

  On  August  17, 2000, Southwest refinanced their Revolving Loan  Facility
and recorded an extraordinary loss from early extinguishment of debt in the
amount  of  approximately $1.4 million.  Southwest  has  not  recorded  any
income tax provisions on continuing operations and therefore, there  is  no
income tax benefit recognized on the extraordinary loss.  The extraordinary
loss per share is approximately $(1.27).

  Aggregate  maturities of all long-term debt as of December 31,  1999  are
as follows (in thousands):

     2000                                           $ 40,277
     2001                                             41,412
     2002                                            101,926
     2003                                                391
     2004                                            160,680
     Thereafter                                        2,397
                                                     -------
                                                    $347,083
                                                     =======

  Aggregate maturities of all long-term debt as of September 30,  2000  are
as follows (in thousands):

     For the twelve
     months ended
     --------------
     September 30, 2001                             $ 23,174
     September 30, 2002                              135,802
     September 30, 2003                               52,282
     September 30, 2004                                   45
     September 30, 2005                              123,098
     Thereafter                                          871
                                                     -------
                                                    $335,272
                                                     =======
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

6. 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.

                              Three months ended Nine months ended
                                September 30,      September 30,
                              ------------------ -----------------
                                 2000     1999      2000      1999
                                -----    -----     -----     -----
                                (in thousands)     (in thousands)
                                 (unaudited)        (unaudited)

 Operating Revenue
   Oil and gas              $  14,965   $ 8,644   $39,326   $21,726
   Real estate                  7,933     7,985    23,391    23,936
   Other and eliminations               108       70        262       550
                              -------    ------    ------    ------
                            $  23,006   $16,699   $62,979   $46,212
                              =======    ======    ======    ======
 Operating profit (loss)
   Oil and gas              $   9,074   $ 4,752   $22,351   $ 8,425
   Real estate                  1,785     1,699     4,918     5,918
   Other and eliminations               (431)     28        (978)     40
                              -------    ------    ------    ------
                            $  10,428   $ 6,479   $26,291   $14,383
                              =======    ======    ======    ======
 Interest Expense
   Oil and gas              $   5,528   $ 5,629   $16,837   $16,757
   Real Estate                  5,404     4,663    15,592    14,702
   Other and eliminations               (10)      (15)      (31)      (119)
                              -------    ------    ------    ------
                            $  10,922   $10,277   $32,398   $31,340
                              =======    ======    ======    ======

 Depreciation, depletion and
   amortization
   Oil and gas              $   1,394   $   697   $ 4,161   $ 3,676
   Real Estate                  1,222     1,127     3,555     3,349
   Other and eliminations               28        13        109       98
                              -------    ------    ------    ------
                            $   2,644   $ 1,837   $ 7,825   $ 7,123
                              =======    ======    ======    ======

 Capital expenditures
   Oil and gas properties           $   2,934 $   1,670 $   6,744 $   2,454
   Oil and gas, other             162        73       294       229
   Real Estate                  1,957     1,793     6,046     3,927
   Other and eliminations               1         74        79        257
                              -------    ------    ------    ------
                            $   5,054   $ 3,610   $13,163   $ 6,867
                              =======    ======    ======    ======



<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)

                                           September 30, December 31,
                                                 2000         1999
                                              ----------   ----------
Identifiable assets
  Oil and gas                                 $ 111,481   $ 115,520
  Real estate                                   151,667     150,269
  Other and eliminations                          (765)     (3,622)
                                                -------     -------
                                              $ 262,383   $ 262,167
                                                =======     =======
7.   Related Party Transactions

   Southwest  is  the  managing  general partner  for  several  public  and
private oil and gas limited partnerships, with an officer of Southwest also
serving  as a general partner for certain of the limited partnerships.   As
is  usual  in the oil and gas industry, the operator is paid an amount  for
administrative  overhead  attributable to  operating  such  properties  and
management  fees attributable to serving as managing general  partner.   As
provided  for  in  the  partnership agreements, such amounts  paid  by  the
partnerships to Southwest approximated $798,000 and $934,000 for the  three
months  ended  September 30, 2000 and 1999 respectively and $2,467,000  and
$2,625,000  for  the  nine months ended September 30,  2000  and  1999.  In
addition, Southwest and certain officers and employees may have an interest
in some of the partnership properties.

    An  affiliate  of  the company performs various oilfield  services  for
limited  partnerships  managed  by  Southwest.   Such  services  aggregated
$57,000 and $105,000 for the three months ended September 30, 2000 and 1999
and  $241,000 and $245,000 for the nine months ended September 30, 2000 and
1999.   The same affiliate performed services for Southwest that aggregated
approximately $62,000 and $76,000, for the three months ended September 30,
2000 and 1999 and $210,000 and $210,000 for the nine months ended September
30,  2000  and  1999.  In August 2000, Southwest made a prepayment  to  the
affiliate in the amount of $975,000 for oil and gas services to be provided
in the future.

    On  August 11, 2000, Southwest invested $100,000 in a Web-based company
through  a  Private Placement Offering.  Southwest holds 200,000 shares  of
Series  A Preferred Stock.  The President of the Web-based company  is  the
brother of H.H. Wommack, III, President of Southwest.


8.  Subsequent Events

   On  October  11,  2000,  Southwest entered into a  floor  option,  which
provides the Company with a crude oil price floor.  The contract is for the
period  January  1, 2001 through December 31, 2001.  The option  is  for  a
notional amount of 500 BBls of oil a day at a floor price of $27, based  on
NYMEX Light Sweet Crude.  The cost of the floor was approximately $224,000.

<PAGE>
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., Basic
Energy  Services,  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, Basic, and owns  and
manages  real  estate properties through its subsidiary, Red  Oak.  In  May
2000, Basic changed its name from Sierra Well Service, Inc.

Results of Operations

Three months and nine months ended September 30, 2000 compared to three
months and nine months September 30, 1999

  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  Nine months ended
                                   September 30,       September 30,
                                ------------------- -------------------
                                  2000       1999     2000       1999
                                 -----      -----    -----      -----
                                   (in thousands)      (in thousands)
                                    (unaudited)         (unaudited)
Production volumes:
      Oil and condensate (MBbls)               312       325       928
1,013
      Natural gas (MMcf)           1,213     1,056     3,605     3,195
Average sales prices:
      Oil and condensate (per Bbl)           30.36  $  17.42  $  27.85
$     14.47
      Natural gas (per Mcf)         4.37  $   2.27  $   3.64  $   2.01

  Revenues.  Revenues for the Company increased 38% to  $23.0  million  for
the  three months ended September 30, 2000 and 36% to $63.0 million for the
nine  months  ended  September 30, 2000, as compared to $16.7  million  and
$46.2 million for the same periods in 1999.

  Oil  and gas revenues increased 84% to $15.0 million for the three months
ended September 30, 2000 and 86% to $39.3 million for the nine months ended
September 30, 2000, as compared to $8.1 million and $21.2 million  for  the
same periods in 1999.  The increase in oil and gas revenue is due primarily
to increases in oil and gas prices.

  Oil  and gas production increased 2%, to 5,590 BOEPD for the three months
ended  September 30, 2000 and decreased 1%, or approximately 82  BOEPD,  to
5,580 BOEPD for the nine months ended September 30, 2000 as compared to the
same  periods in 1999. In an ongoing effort to increase the Company's  cash
position  and/or reduce the number of high operating expense properties  in
its  oil and gas portfolio, management has sold oil and gas properties  for
approximately $498,000 and $5.5 million in the nine months ended  September
30,  2000 and 1999, respectively. The increase in production for the  three
months ended September 30, 2000 represented an increase of approximately 7%
net of a decline from oil and gas property sales of approximately 5% or 280
BOEPD.  The decrease in production for the nine months ended September  30,
2000  is  primarily  due to oil and gas property sales  which  resulted  in
production declines of approximately 359 BOEPD, or approximately 6% and  is
partially  offset by increased production of approximately 5% or 277  BOEPD
on the remaining oil and gas properties.

<PAGE>
  Real  estate  revenues decreased 1% to $7.9 million for the three  months
ended  September 30, 2000 and 2% to $23.4 million for the nine months ended
September 30, 2000, as compared to $8.0 million and $23.9 million  for  the
same periods in 1999.

  Operating    Expenses.   Operating   expenses,   before    general    and
administrative   expense,  impairment  of  oil  and  gas   properties   and
depreciation, depletion and amortization, increased 12% to $8.7 million for
the  three months ended September 30, 2000 and 13% to $25.6 million for the
nine months ended September 30, 2000, as compared to $7.7 million and $22.6
million for the same periods in 1999.

  Oil  and  gas  operating  expense increased  approximately  38%  to  $4.0
million for the three months ended September 30, 2000 and approximately 31%
to  $11.2 million for the nine months ended September 30, 2000, as compared
to  $2.9  million  and  $8.5 million for the same  periods  in  1999.   The
increase  in  oil and gas operating expenses for the three and nine  months
periods  ended September 30, 2000 is due primarily to increased  production
taxes,  associated with the 84% and 86% increase in oil and gas revenue  as
discussed above, and increased workover expense and repairs associated with
bringing  wells  back  on  line,  which were  deemed  uneconomical  due  to
depressed  oil  and  gas prices experienced during a portion  of  the  nine
months  ended September 30, 1999.  The average operating expense  increased
34%  to $7.72 per BOE for the three months ended September 30, 2000 and 32%
to  $7.29  per BOE for the nine months ended September 30, 2000 from  $5.73
and $5.50 per BOE for the same periods in 1999.

  Real  estate operating expense decreased 4% to $4.6 million for the three
months  ended September 30, 2000 and increased 1% to $13.7 million for  the
nine months ended September 30, 2000, as compared to $4.7 million and $13.5
million for the same periods in 1999.

  General  and Administrative ("G&A") Expense. G&A expense for the  Company
increased 91% to $1.2 million for the three months ended September 30, 2000
and  approximately 52% to $3.2 million for the nine months ended  September
30, 2000, as compared to $651,000 and $2.1 million for the same periods  in
1999.

  Oil  and  gas G&A expense increased 63% to $528,000 for the three  months
ended  September 30, 2000 and 48% to $1.7 million for the nine months ended
September 30, 2000, as compared to $324,000 and $1.1 million for  the  same
periods  in 1999.  Oil and gas G&A expense per BOE increased 58%  to  $1.03
for  the three months ended September 30, 2000 and 45% to $1.09 per BOE for
the  nine months ended September 30, 2000, as compared to $.65 per BOE  and
$.73 per BOE for the same periods in 1999.  The increase in oil and gas G&A
expense  for the three months ended September 30, 2000 is due primarily  to
salary  increases, bonuses, and certain health insurance claims  pertaining
to  the  Company's partially self insured insurance structure  as  well  as
legal  and  professional  fees associated with  managements  evaluation  of
corporate  strategies  and  options for dealing with  its  highly  leverage
structure.  Increases in oil and gas G&A expense for the nine months  ended
September  30,  2000  are primarily due to salary increases,  bonuses,  and
certain health insurance claims pertaining to the Company's partially  self
insured insurance structure.

  Real  estate  G&A expense decreased 5% to $368,000 for the  three  months
ended  September  30, 2000 and increased 6% to $1.2 million  for  the  nine
months  ended September 30, 2000, as compared to $388,000 and $1.1  million
for the same periods in 1999.

  Depreciation, Depletion and Amortization ("DD&A") Expense.  DD&A  expense
for  the  Company increased 44% to $2.6 million for the three months  ended
September  30,  2000  and 10% to $7.8 million for  the  nine  months  ended
September  30, 2000, as compared to $1.8 million and $7.1 million  for  the
same periods in 1999.


<PAGE>
  Oil  and  gas  DD&A increased 100% to $1.4 million for the  three  months
ended  September 30, 2000 and 13% to $4.2 million for the nine months ended
September 30, 2000, as compared to $697,000 and $3.7 million for  the  same
periods  in 1999.  Oil and gas depletion expense on a BOE basis,  increased
112% to $2.47 per BOE for the three months ended September 30, 2000 and 16%
to  $2.49 per BOE for the nine months ended September 30, 2000, as compared
to  $1.16  per  BOE and $2.14 per BOE for the same periods  in  1999.   The
increase  is  due  to  higher and more stable commodity prices  experienced
during  the  three and nine months ended September 30, 2000 as compared  to
the  same  periods  in 1999 and an increase in the Company's  oil  and  gas
property basis due to acquisitions and developmental drilling performed  in
late 1999 and throughout 2000.

  Real  estate  DD&A  expense increased 8% to $1.2 million  for  the  three
months  ended September 30, 2000 and increased 6% to $3.6 million  for  the
nine  months ended September 30, 2000, as compared to $1.1 million and $3.3
million for the same periods in 1999.  The increase in DD&A expense for the
three  and  nine months ended September 30, 2000 is due to  the  impact  of
capitalized improvements.

  Interest Expense. Interest expense for the Company increased 6%  to  10.9
million  for the three months ended September 30, 2000 and 3% to and  $32.4
million for the nine months ended September 30, 2000, as compared to  $10.3
million and $31.3 million for the same periods in 1999.

  Oil  and gas interest expense decreased 2% to $5.5 million for the  three
months ended September 30, 2000 and remained unchanged at $16.8 million for
the  nine months ended September 30, 2000, as compared to $5.6 million  and
$16.8 million for the same periods in 1999.

  Real  estate interest expense increased 16% to $5.4 million for the three
months ended September 30, 2000 and 6% to $15.6 million for the nine months
ended September 30, 2000, as compared to $4.7 million and $14.7 million for
the  same periods in 1999.  The increase in interest expense for the  three
and nine months ended September 30, 2000 is due to increased borrowings  to
fund capital improvements and working capital.

  Equity  Loss in Partnership. The Company's direct and indirect investment
in  Basic upon recording its portion of Basic's losses for the three months
ended  March 31, 1999 was reduced to zero.  Therefore, according to General
Accepted  Accounting  Principles, the equity  method  was  suspended.   The
Company did not record their ownership percentage of Basic's losses for the
nine  months  ended  September 30, 2000.  If Basic subsequently  begins  to
report net income, the Company will resume applying the equity method  only
after its share of net income equals the share of net losses not recognized
during the period the equity method is suspended.

  Net  Income  (Loss). Due to the factors described above, net  (loss)  for
the  Company  decreased  65% to $1.2 million for  the  three  months  ended
September  30,  2000 and 152% to net income of $9.5 million  for  the  nine
months  ended September 30, 2000, as compared to a net loss of $3.3 million
and  $18.4  million for the same periods in 1999.  Oil and gas  net  income
increased  558%  to $2.5 million for the three months ended  September  30,
2000  and  336%  to $19.0 million for the nine months ended  September  30,
2000,  as compared to a net loss of $538,000 and $8.0 million for the  same
periods  in  1999.  Included in the oil and gas net income  for  the  three
months  ended September 30, 2000, is an extraordinary loss of $1.4  million
from early extinguishment of debt.  Included in oil and gas net income  for
the  nine  months  ended  September 30, 2000 is an  extraordinary  gain  of
approximately $12.7 million.  The extraordinary gain is comprised of a gain
associated with the repurchase of approximately 19% of the original  issue,
$200   million  face  10.5%  Senior  Notes  issued  in  October  1997,   of
approximately  $14.1  million  and a loss  of  approximately  $1.4  million
associated  with the early extinguishment of debt upon the  refinancing  of
the  Company's  Revolving Loan Facility in the amount of $50.0  million  on
August 17, 2000 with a new lender.  Real estate net losses increased 24% to
$3.2 million for the three months ended September 30, 2000 and decreased 1%
to  $9.5  million for the nine months ended September 30, 2000 as  compared
$2.5 million and $9.6 million for the same periods in 1999.


<PAGE>
Liquidity and Capital Resources

  Management is constantly monitoring the Company's cash position  and  its
ability  to meet its financial obligations as they become due, and in  this
effort,  is  exploring various strategies for addressing  its  current  and
future liquidity needs.  During 1999 and 1998, for instance, Southwest sold
$5.6  million and $5.7 million, respectively, of oil and gas properties  in
an  ongoing  effort to decrease its production costs and improve  its  cash
position.   In December 31, 1999 the Company also negotiated a $50  million
Revolving Line Facility with BankOne Texas, N.A. the proceeds of which were
used  to  purchase  in December 1999 and January 2000, approximately  $76.3
million  of  the  10.5%  Senior Notes due 2004.  On August  17,  2000,  the
Company  refinanced  the Revolving Loan Facility  with  a  new  lender  and
extended the maturity date out until August 17, 2003.  As of September  30,
2000,  the  Company's  consolidated cash balance  was  approximately  $23.6
million, of which $17.6 million was unrestricted.

  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, approximately,  $34.1
million of cash interest and $23.2 million of principal due within the next
twelve months.  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 continuing  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 debt obligations,  making  it
necessary to undertake such other actions as may be appropriate to preserve
asset values.

Net Cash Provided by Operating Activities

  Net  cash  provided by operating activities was $10.5 million  and  $13.4
million   for  the  three  and  nine  months  ended  September  30,   2000,
respectively,  as compared to net cash provided by operating activities  of
$6.8  million  and $646,000 for the same periods in 1999. The  increase  in
cash  provided  by  operating  activities,  is  primarily  attributable  to
increased oil and gas commodity prices.

Net Cash Provided by (Used in) Investing Activities

  Net  cash provided by (used in) investing activities by the Company  were
$(5.1)  million  and $(13.0) million for the three and  nine  months  ended
September 30, 2000, as compared to net cash provided by (used in) investing
activities of $(1.6) million and $2.8 million for the comparable periods in
1999.   Purchase of oil and gas properties as well as capital  improvements
to  Real  Estate holdings were the primary uses of funds in 2000.  Oil  and
gas  property  sales were the primary source of funds in  1999  while  Real
Estate investment sales were the primary source of funds in 2000.


<PAGE>
  SRH has tentatively budgeted $3.0 million, for the remainder of 2000,  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.

  Net  cash provided by the Company's financing activities was $2.7 million
and  $228,000  for the three and nine months ended September 30,  2000  and
$229,000 and $2.4 million for the same periods in 1999, respectively.   For
the  three  months ended September 30, 2000, proceeds from borrowings  were
$54.4  million  and were primarily used to refinance Southwest's  Revolving
Loan Facility and fund capital improvements and working capital at Red Oak.
For the nine months ended September 30, 2000, proceeds from borrowings were
$75.9 million and were primarily used to fund the buy back of a portion  of
the 10.5% Senior notes due 2004, as well as refinance Southwest's Revolving
Loan Facility and fund capital improvements and working capital at Red Oak.

Other Issues

  The  information included in "Other Issues" in Item 7 of SHR's 1999  Form
10-K regarding Information Systems for the year 2000 is incorporated herein
by  reference.   As  of  September 30, 2000, there have  been  no  material
changes in SRH's Year 2000 disclosure.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     The  following  quantitative and qualitative information  is  provided
about financial instruments to which the Company is a party as of September
30,  2000,  and from which the Company may incur future earnings  gains  or
losses from changes in market interest rates or commodity prices.

Quantitative Disclosures

     Interest  rate sensitivity.  The following table provides  information
about  the  Company's debt obligations, which are sensitive to  changes  in
interest  rates.   The table presents cash maturities by expected  maturity
dates together with the weighted average interest rates expected to be paid
on  the  debt, given current contractual terms and market conditions.   For
fixed  rate  debt,  the  weighted  average  interest  rate  represents  the
contractual  fixed rates that the Company is obligated to periodically  pay
on  the  debt; for variable rate debt, the average interest rate represents
the average rates being paid on the debt at September 30, 2000.


                                      As of September 30, 2000
                        2001    2002   2003  2004  2005Thereafter     Total
Fair Value
                        ----    ----   ----  ----  --------------     -----
----------
Total Debt
  maturities           $23,174     $ 135,802  $  52,282  $45 $123,098     $
871                 $ 335,272     $ 314,004
Fixed rate debt       $4,044 $  428 $ 698  $19  $122,707  $ 871  $  128,767
$             107,499
Weighted average
  interest rate        10.48%        10.48% 10.48%      10.48%       10.48%
8.04%
Variable rate debt    $19,130     $ 135,374  $  51,584  $26 $  391   $    -
$             206,505 $206,505
Average interest rate        10.43%  10.43%     10.97% 10.50%        10.50%
-%

      Commodity  price  sensitivity.   See  Notes  1  and  4  of  Notes  to
Consolidated  Financial  Statements  included  in  "Item  1.   Consolidated
Financial  Statements"  for  a  description of  the  accounting  procedures
followed by SRH relative to hedge derivative financial instruments and  for
specific  information  regarding  the terms  of  the  Company's  derivative
financial instrument which is sensitive to changes in natural gas and crude
oil commodity prices.

<PAGE>
  On  December 30, 1999, Southwest entered into a basket revenue protection
agreement,  which provides the Company with an oil and gas  revenue  floor.
The  contract is for the period January 1, 2000 through December 31,  2000.
The  agreement is to be calculated on a calendar year quarter as  disclosed
in the following table based on NYMEX Natural Gas and NYMEX Crude Oil:

            Notional Volumes              Strike Prices
       -------------------------  -----------------------------
           Crude      Natural        Crude    Natural              Minimum
         Oil (bbl)  Gas (MMBtu)       Oil       Gas       Boe      Revenue
         ---------- -----------      -----    -------     ----     --------
Quarter 1 269,254      976,676     $  21.12  $   1.91  $  28.76  $7,552,096
Quarter 2 263,058      910,325     $  18.88  $   1.92  $  26.56  $6,714,359
Quarter 3 257,206      857,728     $  18.00  $   1.97  $  25.88  $6,319,432
Quarter 4 251,914      813,400     $  18.00  $   2.20  $  26.80  $6,323,932

     Payments  shall be made no later than five business days,  after  each
quarterly  floating price is determinable by NYMEX.  The cost of the  floor
was  approximately $638,000 and is amortized monthly as a reduction of  oil
and  gas  revenues.   The  carrying value of  the  floor  is  approximately
$150,000 at September 30, 2000.

     On  September  6, 2000, Southwest entered into a floor  option,  which
provides  the  Company with a crude oil revenue floor. The contract  period
begins on January 1, 2001 ending on December 31, 2001.  The option is for a
notional  amount of 1,100 BBls of oil a day at a floor price of  $25.   The
agreement is to be calculated on a monthly basis, with payments to be  made
no  later than five business days, after calculating period.  The  cost  of
the floor was approximately $466,000.

Qualitative Disclosures

     Non-derivative financial instruments.  The Company is a borrower under
fixed  rate  and variable rate debt instruments that give rise to  interest
rate  risk.   The Company's objective in borrowing under fixed or  variable
rate debt is to satisfy capital requirements while minimizing the Company's
costs  of  capital.  To realize its objectives, the Company  borrows  under
fixed  and  variable  rate debt instruments, based on the  availability  of
capital  and  market  conditions.  See Note  5  of  Notes  to  Consolidated
Financial Statement included in "Item 1. Consolidated Financial Statements"
for a discussion relative to the Company's debt instruments.

     Derivative   financial  instruments.   Revenues  from  the   Company's
operations  are highly dependent on the price of oil and gas.  The  markets
for oil and natural gas are volatile and prices for oil and gas are subject
to  wide fluctuations in response to relatively minor changes in the supply
of  and demand for oil and gas and a variety of additional factors that are
beyond  SRH's control.  These factors include the level of consumer demand,
weather  conditions, domestic and foreign governmental regulations,  market
uncertainty,  the  price and availability of alternative  fuels,  political
conditions  in  the  Middle  East, foreign  imports  and  overall  economic
conditions.  It is impossible for SRH to predict future oil and gas  prices
with  any certainty.  In order to reduce the Company's exposure to oil  and
gas  price risks, from time to time the Company enters into commodity price
derivative contracts to hedge commodity price risks.

     As  of  September  30,  2000,  the Company's  primary  risk  exposures
associated  with  financial instruments to which  it  is  a  party  include
natural  gas  and crude oil price volatility and interest rate  volatility.
The  Company's primary risk exposures associated with financial instruments
have not changed significantly since December 31, 1999.




<PAGE>
                        PART II - OTHER INFORMATION

ITEM 6.   REPORTS ON FORM 8K AND EXHIBITS

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,
                            Chief Executive Officer, and Director

                      Date: November 14, 2000

  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
  ---------------------------
  H. H. Wommack, III       Chairman/President/
                           Chief Executive Officer    November 14, 2000

  /s/ Bill E. Coggin
  ---------------------------
  Bill E. Coggin           Vice President/Chief
                           Financial Officer     November 14, 2000

  /s/ H. Allen Corey
  ---------------------------
  H. Allen Corey           Director/Secretary    November 14, 2000


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

                      Date: November 14, 2000

  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
  ---------------------------
  H. H. Wommack, III       Chairman/President/
                           Chief Executive Officer    November 14, 2000

  /s/ Bill E. Coggin
  ---------------------------
  Bill E. Coggin           Vice President/Chief
                           Financial Officer     November 14, 2000

  /s/ H. Allen Corey
  ---------------------------
  H. Allen Corey           Director/Secretary    November 14, 2000


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