27
               SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON, DC  20549

                            FORM 10-Q

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

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

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

Registrants' Telephone Number, Including Area Code:  (915) 686-9
927

                         Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)


Indicate  by  check whether the registrant:  (1)  has  filed  all
reports  required  to be filed by Section  13  or  15(d)  of  the
Securities  Exchange Act of 1934 during the preceding  12  months
(or  for such shorter period that the registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days.  Yes_X_ No  ___

Number of shares of common stock outstanding as of March 31, 2000
for Southwest Royalties, Inc                                 100
Number of shares of common stock outstanding as of March 31, 2000
for Southwest Royalties Holdings, Inc.                  1,075,868




<PAGE>

                    SOUTHWEST ROYALTIES, INC.

               SOUTHWEST ROYALTIES HOLDINGS, INC.



                        TABLE OF CONTENTS




               PART I - FINANCIAL INFORMATION             Page

Item 1.   Consolidated Financial Statements

       Consolidated Balance Sheets as of March 31, 2000
(unaudited)
          and December 31, 1999                             3

       Consolidated Statements of Operations for the three months
          ended March 31, 2000 and 1999 (unaudited)         5

       Consolidated Statements of Cash Flows for the three months
          ended March 31, 2000 and 1999 (unaudited)         6

       Notes to Consolidated Financial Statements          8

Item 2.   Management's Discussion and Analysis of Financial
Condition
          and Results of Operations                        19

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk                                      24

                PART II - OTHER INFORMATION

Item 6.                  Exhibits and Reports on Form 8-K
25


















<PAGE>
                 PART I - FINANCIAL INFORMATION

ITEM 1.   Consolidated Financial Statements

       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS
                (in thousands, except share data)

                                            March 31,December 31,
                                               2000      1999
                                             -------------------
                                           (unaudited)
ASSETS
---------------------------------------------------
Current assets
  Cash and cash equivalents                  $ 5,877   $16,983
  Restricted cash                             13,869    10,003
  Accounts receivable, net of allowance
   of $440 and $440, respectively              8,157     7,134
  Receivables from related parties               640       836
  Other current assets                         1,079     1,179
                                             -------   -------
     Total current assets                     29,622    36,135
                                             -------   -------

Oil and gas properties, using the full cost
 method of accounting
  Proved                                     194,690   193,319
  Unproved                                     1,521     2,059
                                             -------   -------
                                             196,211   195,378
  Less accumulated depletion, depreciation
   and amortization                          128,358   126,742
                                             -------   -------
     Oil and gas properties, net              67,853    68,636
                                             -------   -------
Rental property, net                         127,620   128,685
                                             -------   -------
Rental property - construction in progress             5,042
3,984
                                             -------   -------
Other property and equipment, net              4,766     4,841
                                             -------   -------
Other assets
  Real estate investments                      3,234     3,644
  Deferred debt costs, net of accumulated
   amortization of $8,341 and $5,681,
   respectively                               11,161    13,816
  Noncompete covenants, net of accumulated ,
   amortization of $637 and 563, respectively              967
1,041
  Other, net                                   1,345     1,385
                                             -------   -------
     Total other assets                       16,707    19,886
                                             -------   -------
Total assets                                 $251,610  $262,167
                                             =======   =======
                                                    (continued)







      The accompanying notes are an integral part of these
                consolidated financial statements

<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                            March 31,December 31,
                                               2000      1999
                                             -------------------
                                           (unaudited)
LIABILITIES, MINORITY INTEREST, REDEEMABLE
COMMON STOCK AND STOCKHOLDERS' DEFICIT
---------------------------------------------------------
Current liabilities
  Current maturities of long-term debt       $55,274   $40,277
  Accounts payable                             5,035     6,011
  Accounts payable to related parties            829       867
  Accrued expenses                            10,030    10,670
                                             -------   -------
     Total current liabilities                71,168    57,825
                                             -------   -------
Long-term debt                               271,524   306,806
                                             -------   -------
Other long-term liabilities                    1,196     1,220
                                             -------   -------
Minority interest                                  6         8
                                             -------   -------
Redeemable common stock of subsidiary            839     1,228
                                             -------   -------
Redeemable common stock                        8,290     8,290
                                             -------   -------
Stockholders' deficit
  Preferred stock - $1 par value; 5,000,000
   shares authorized; none issued                  -         -
  Common stock - $.10 par value; 5,000,000 shares
   authorized; 1,161,037 issued at March 31, 2000
   and December 31, 1999                         116       116
  Additional paid-in capital                   2,196     2,196
  Accumulated deficit                        (98,995)  (110,784)
  Note receivable from an officer and stockholder      (1,640)
(1,648)
  Less:  treasury stock - at cost; 214,215 shares
   at March 31, 2000 and December 31, 1999             (3,090)
(3,090)
                                             -------   -------
     Total stockholders' deficit             (101,413) (113,210)
                                             -------   -------
Total liabilities, minority interest, redeemable
  common stock and stockholders' deficit     $251,610  $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)

                                    For the three months ended March 31,
------------------------------------
                                               2000      1999
                                              -----     -----
Operating revenues
  Oil and gas                              $  11,319 $   6,094
  Real estate                                  8,014     8,209
  Other                                           96       285
                                             --------- ---------
     Total operating revenues                 19,429    14,588
                                             --------- ---------
Operating expenses
  Oil and gas production                       3,418     2,868
  Real estate                                  4,574     4,214
  General and administrative, net of related
   party management and administrative fees of
   $848 and $870, respectively                   705       787
  Depreciation, depletion and amortization             2,910
2,744
  Other                                          330       213
                                             --------- ---------
     Total operating expenses                 11,937    10,826
                                             --------- ---------
Operating income                               7,492     3,762
                                             --------- ---------
Other income (expense)
  Interest and dividend income                   249       154
  Interest expense                           (10,570)  (10,688)
  Other                                          260       200
                                             --------- ---------
                                             (10,061)  (10,334)
                                             --------- ---------
Loss before income taxes, minority interest,
  equity loss and extraordinary item         (2,569)   (6,572)
  Income tax benefit (provision)                   -         -
                                             --------- ---------
Loss before minority interest, equity loss
  and extraordinary item                     (2,569)   (6,572)
  Minority interest in subsidiaries, net of tax            362
154
  Equity loss in subsidiary and partnerships,
   net of tax                                      -     (188)
  Impairment of equity investment, net of tax                -
(744)
                                             --------- ---------
Loss before extraordinary item               (2,207)   (7,350)
Extraordinary gain from early extinguishment
  of debt                                     13,996         -
                                             --------- ---------
Net income (loss)                          $  11,789 $ (7,350)
                                             ========= =========
Income (loss) per common share
  Income (loss) per common share before
   extraordinary item                      $    (2.05)     $
(6.83)
  Extraordinary gain per common share from early
   extinguishment of debt                       13.00
-
                                             --------- ---------
Income (loss) per common share             $    10.95      $
(6.83)
                                           ==========  ==========
Weighted average shares outstanding        1,075,868   1,075,868
                                           ==========  ==========

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

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

                                    For the three months ended March 31,
------------------------------------
                                               2000      1999
                                              -----     -----
Cash flows from operating activities
  Net income (loss)                          $11,789   $(7,350)
  Adjustments to reconcile net income (loss) to
   net cash provided by (used in)
   operating activities:
  Depreciation, depletion and amortization             2,910
2,744
  Noncash interest expense                     2,741     1,163
  Extraordinary gain from early extinguishment
   of debt                                   (13,996)        -
  Gain on sale of assets                       (240)     (189)
  Equity loss of subsidiary and partnerships           -
188
  Impairment of equity investment                  -       744
  Other noncash items                            179       218
  Amortization of lease commissions               51       131
  Bad debt expense                               105        87
  Minority interest in loss of subsidiary      (362)     (154)
  Changes in operating assets and liabilities-
   Accounts receivable                         (925)       446
   Other current assets                         (83)        50
   Accounts payable and accrued expenses     (3,962)   (2,037)
   Change in restricted cash                 (3,595)         -
   Accrued interest payable                    2,308     4,857
                                             --------  -------
Net cash (used in) provided by operating
  activities                                 (3,080)       898
                                             --------  -------
Cash flows from investing activities
  Proceeds from sale of oil and gas properties             154
318
  Purchase of oil and gas properties           (987)     (271)
  Purchase of other property and equipment and
   rental property                              (81)   (1,082)
  Increase in construction in progress       (1,058)         -
  Purchase of other assets                      (22)     (221)
  Proceeds from sale of other assets              17       184
  Proceeds from sale of real estate investments            643
-
  Proceeds from sale of other property and
   equipment                                       1       213
  Change in restricted cash                    (271)   (1,819)
  Other                                            8         8
                                             --------  -------
Net cash used in investing activities        (1,596)   (2,670)
                                             --------  -------

(continued)










<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                    For the three months ended March 31,
------------------------------------
                                               2000      1999
                                              -----     -----
Cash flows from financing activities
  Proceeds from borrowings                    16,914     4,030
  Payments on debt                           (23,285)  (1,259)
  Payments on other long-term liabilities       (24)      (23)
  Increase in other long-term liabilities          -        39
  Deferred debt cost                             (5)      (89)
  Dividends paid to minority interest owners           (30)
(31)
                                             --------  -------
Net cash (used in) provided by financing
  activities                                 (6,430)     2,667
                                             --------  -------
Net increase (decrease) in unrestricted cash
  and cash equivalents                       (11,106)      895

Unrestricted cash and cash equivalents-
  beginning of period                         16,983    13,801
                                             --------  -------
Unrestricted cash and cash equivalents -
  end of period                              $ 5,877   $14,696
                                             ========  =======

Supplemental disclosures of cash flow information
  Interest paid                              $ 5,521   $ 4,669
































      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"), Sierra Well Service Inc. ("Sierra") and Midland Red Oak
Realty, Inc. ("Red Oak") (collectively, the "Company"). Each shareholder of
Southwest  was  issued one share in SRH for each share of  Southwest  stock
held.   Prior to the formation of SRH, Red Oak and Sierra were subsidiaries
of  Southwest.  Southwest paid a dividend of the shares it owned in Red Oak
and Sierra to SRH. After the formation of SRH, Southwest and Red Oak became
subsidiaries of SRH and, as of July 1, 1997, Sierra was deconsolidated.

   Southwest  is  principally  involved in the  business  of  oil  and  gas
development  and production, as well as organizing and serving as  managing
general partner for various public and private limited partnerships engaged
in  oil  and  gas  acquisitions, exploration, development  and  production.
Southwest  is also the general partner of Southwest Partners  II  and  III,
which  own  common  stock  in Sierra.  Southwest  sells  its  oil  and  gas
production  to  a variety of purchasers, with the prices it receives  being
dependent  upon  the oil and gas commodity prices. Red Oak  is  principally
involved  in  real estate investment and development. Sierra is principally
involved in the business of oil and gas well services.

Principles of Consolidation

   The  consolidated financial statements include the accounts of  SRH  and
its  subsidiaries.  As  of  March 31, 2000  and  1999,  the  Company  owned
approximately 81% of Red Oak, 39% of Sierra, 100% of Blue Heel, 99% of  MSS
and  100%  and  99%,  respectively, of TPI.  Blue Heel,  MSS  and  TPI  are
subsidiaries   of   Southwest.  Effective  July   1,   1997,   Sierra   was
deconsolidated  and  is accounted for using the equity  method.   Effective
November  1999,  TPI was liquidated. 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 the 10.5% Senior Notes.

   Restricted  cash  accounts  have  been  established  for  the  following
purposes (in thousands):
                                                    March 31,  December 31,
                                                       2000        1999
                                                       ----        ----
     Cash bonds                                     $      -   $    35
     Certificate of Deposits                             115       112
     Tenant security deposits                            518       512
     Capital expenditures account                      1,329       552
     Tax and insurance reserve                         1,953     2,465
     Lockbox                                             472       439
     Customer service reserve                              9        10
     Escrow fund                                         636       627
     Interest sinking                                  8,837     5,251
                                                      ------    ------
                                                    $ 13,869   $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.

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.

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

   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 March 31, 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.

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.


<PAGE>

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

   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. As of December 31, 1999, 1998  and  1997,
the  Company was underproduced by approximately 587 MMcf, 620 MMcf and  697
MMcf, respectively.

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  bases.  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.

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

   SRH  and  its  eligible  subsidiaries file a consolidated  U.S.  federal
income  tax  return.  Sierra  (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.

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 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.

Interim Financial Statements

   In  the  opinion  of  management, the unaudited  consolidated  financial
statements  of  the  Company  as of March 31, 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.

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

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, $32.1
million  of  cash  interest and $55.3 million of  principal  due  in  2000.
Management is currently in the process of renegotiating the terms of  SRH's
various  obligations with its note holders and/or attempting  to  seek  new
lenders  or  equity  investors.  Additionally,  management  would  consider
disposing of certain assets in order to meet its obligations.

   There can be no assurance that SRH's debt restructuring efforts will  be
successful  or  that  the note holders will agree to  a  course  of  action
consistent with SRH's requirements in restructuring the obligations.   Even
if  such  agreement is reached, it may require approval of additional  note
holders,  or possibly, agreements of other creditors of SRH, none of  which
is  assured.   Furthermore, there can be no assurance  that  the  sales  of
assets can be successfully accomplished on terms acceptable to SRH.   Under
current circumstances, SRH's ability to continue as a going concern depends
upon  its  ability  to  (1)  successfully restructure  its  Revolving  Loan
Facility, the 10.5% Senior Notes and other obligations or obtain additional
financing  as  may  be  required, (2) maintain  compliance  with  all  debt
covenants, (3) generate sufficient cash flow to meet its obligations  on  a
timely  basis, and (4) achieve satisfactory levels of future earnings.   If
SRH  is  unsuccessful  in  its  efforts, it  may  be  unable  to  meet  its
obligations on the Revolving Loan Facility, the 10.5% Senior Notes, as well
as  other obligations, making it necessary to undertake such other  actions
as may be appropriate to preserve asset values.

<PAGE>
            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  March  31,  2000  includes
approximately  $663,000 for estimated future remedial actions  and  cleanup
costs.  As  of  March 31, 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
flow 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     $  18.80  $   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
$459,000 at March 31, 2000.

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

5. Lines of Business

   The  Company operates in two major segments: Oil and Gas Activities (oil
and  gas  acquisition, development, exploration and production, as well  as
organizing  and serving as managing general partner for various public  and
private  limited  partnerships  engaged in  oil  and  gas  development  and
production)  and  Real Estate Investment and Management (owns  and  manages
retail  shopping  centers  and  office  buildings).   Other  items  include
eliminations, manufacturing, computer service and the holding Company.

                                           For the Three Months
                                             Ended March 31,
                                               2000      1999
                                              -----     -----
                                              (in thousands)
                                               (unaudited)
Operating profit (loss)

  Oil and gas                                $ 5,837   $ 1,109
  Real estate                                  1,886     2,595
  Other and eliminations                       (231)        58
                                              ------    ------
                                             $ 7,492   $ 3,762
                                              ======    ======
Interest Expense

  Oil and gas                                $ 5,583   $ 5,527
  Real Estate                                  4,997     5,208
  Other and eliminations                        (10)      (47)
                                              ------    ------
                                             $10,570   $10,688
                                              ======    ======

Depreciation, depletion and amortization

  Oil and gas                                $ 1,731   $ 1,671
  Real Estate                                  1,139     1,024
  Other and eliminations                          40        49
                                              ------    ------
                                             $ 2,910   $ 2,744
                                              ======    ======

Capital expenditures

  Oil and gas properties                     $   987   $   271
  Oil and gas, other                              19        56
  Real estate                                  1,059       982
  Other                                           61        44
                                             -------   -------
                                             $ 2,126   $ 1,353
                                             =======   =======
Identifiable assets
  Oil and gas                                $107,102  $109,619
  Real estate                                148,500   149,516
  Other and eliminations                     (3,992)   (2,915)
                                             -------   -------
                                             $251,610  $256,220
                                             =======   =======

<PAGE>

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

6.  Long-term Debt

     Long-term debt consists of the following (in thousands):
                                                    March 31,December 31,
                                                    --------------------
                                                       2000      1999
                                                      -----     -----
     10.5% Senior Notes, interest payable semi-annually due
      October 15, 2004, net of discount of $1,091 and $1,487,
      respectively                                  $122,594  $160,598
     Revolving Loan Facility with variable rate interest,
      due December 2000.  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 $778 and $944, respectively             16,645
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 $2,222 and $2,556, respectively         26,076
25,298
     Notes payable due July 2002, interest at 8.5% minimum
      per annum, accrued interest due and payable monthly.
       Net  of  discount  of $3,785 and $4,229, respectively        103,172
101,835
     Other                                             8,311     8,469
                                                     -------   -------
                                                     326,798   347,083
     Less current maturities                          55,274    40,277
                                                     -------   -------
                                                    $271,524  $306,806
                                                     =======   =======
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.

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

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.

   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.

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 $1.9  million  has
been  utilized as of March 31, 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 $2.2 million has been  utilized  as  of
March 31, 2000.  The notes are collateralized by the property purchased.

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

   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  $4.2
million   has  been  utilized  as  of  March  31,  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,
approximately, $1,598,000 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.

   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  $14.0 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
$13.01.

     Aggregate maturities of all long-term debt as of March 31, 2000 are as
follows (in thousands):

     For the twelve
     months ended
     --------------
     March 31, 2001                                 $ 55,274
     March 31, 2002                                   42,807
     March 31, 2003                                  103,256
     March 31, 2004                                    1,579
     March 31, 2005                                  123,015
     Thereafter                                          867
                                                     -------
                                                    $326,798
                                                     =======
<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., Sierra
Well  Service, Inc. and Midland Red Oak Realty, Inc.  SRH is an independent
oil  and gas company engaged in the acquisition, development and production
of oil and gas properties, primarily in the Permian Basin of West Texas and
southeastern  New  Mexico, through its wholly-owned subsidiary,  Southwest.
Since 1983, Southwest has grown primarily through selective acquisitions of
producing oil and gas properties, both directly and through the oil and gas
partnerships  it  manages.  SRH also participates  in  the  well  servicing
industry  through its affiliate, Sierra, and owns and manages  real  estate
properties through its subsidiary, Red Oak.


<PAGE>
Results of Operations

Three Months Ended March 31, 2000 compared to Three Months Ended March  31,
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
                                       March 31,    PercentageRevenue
                                    -------------    IncreaseIncrease
                                      2000    1999   (Decrease)(Decrease)
                                     -----   -----   -------------------
Production volumes:
  Oil and condensate (MBbls)          306       356  (14%) $   (1,297)
  Natural gas (MMcf)                1,195     1,152     4%     $   121

Average sales prices:
  Oil and condensate (per Bbl)      $26.01   $11.29   130%     $ 5,234
  Natural gas (per Mcf)             $2.75    $ 1.83    50%     $ 1,059

   Revenues.  Revenues for the Company increased 33% to $19.4  million  for
the three months ended March 31, 2000 from 14.6 million for the same period
in 1999.

   Oil  and gas revenue increased 86% to $11.3 million for the three months
ended  March 31, 2000 from $6.1 million for the same period in  1999.   The
increase  in oil and gas revenue is due primarily to increases in  oil  and
gas  prices,  which were partially offset by decreases in  oil  production.
Increases in oil and gas prices resulted in increased oil and gas  revenues
of  approximately $6.3 million. Decreases in production offset the increase
in prices by approximately $1.3 million.

   Oil  and  gas  production decreased 9% or approximately  550  BOEPD,  to
5,550  BOEPD  for the three months ended March 31, 2000 from  approximately
6,100  BOEPD for the same period in 1999. In an ongoing effort to  increase
the Company's cash position and reduce the number of high operating expense
properties  in its oil and gas portfolio, management has sold oil  and  gas
properties  for  approximately $5.6 and $5.7  million  in  1999  and  1998,
respectively.  The production decline resulting from oil and  gas  property
sales  was  approximately  450  BOEPD, or approximately  7%  of  the  total
decline.   The remainder of the production decline of approximately  2%  is
mostly  results of natural decline.  The average sales price per barrel  of
oil was $26.01 and the average sales price of natural gas was $2.75 per Mcf
for  the  three months ended March 31, 2000, representing a  130%  and  50%
increase, respectively, compared to same period in 1999 sales price levels.

   Real  estate revenues decreased 2% to $8.0 million for the three  months
ended  March 31, 2000 from $8.2 million for the same period in 1999.  Other
operating  revenues  decreased 66% to $96,000 for the  three  months  ended
March 31, 2000 from $285,000 for the same period in 1999.

   Operating   Expenses.    Operating   expenses,   before   general    and
administrative expense, impairment of oil and gas properties, depreciation,
depletion  and  amortization, increased 14% to $8.3 million for  the  three
months ended March 31, 2000 from $7.3 million for the same period in 1999.

   Oil  and  gas  operating  expense increased approximately  19%  to  $3.4
million for the three months ended March 31, 2000 from $2.9 million for the
same  period  in  1999.   Approximately 9% of the  total  increase  is  due
primarily to increased production taxes associated with the 86% increase in
oil  and  gas revenue as discussed above.  The remaining 10% of  the  total
increase  is due to increased workover expense and repairs associated  with
bringing  wells  back on line which where deemed uneconomical  due  to  the
severely  depressed oil and gas prices experienced during the three  months
ended March 31, 1999.  The average operating expense increased 29% to $6.77
per  BOE for the three months ended March 31,2000 from $5.24 per BOE during
the same period in 1999.

<PAGE>
   Real  estate  operating  expense  increased  approximately  9%  to  $4.6
million  for  the  three months ended March 31, 2000 from $4.2  million  in
1999.     The  increase  is due primarily to increase in  property  leasing
commissions.   Other operating expenses increased 55% to $330,000  for  the
three  months  ended March 31, 2000 from $213,000 for the  same  period  in
1999.

   General  and  Administrative  ("G&A")  Expense.   G&A  expense  for  the
Company decreased 10% to $705,000 for the three months ended March 31, 2000
from  $787,000  for  the  same period in 1999.  Oil  and  gas  G&A  expense
decreased  26% to $343,000 for the three months ended March 31,  2000  from
$463,000 for the same period in 1999. Oil and gas G&A expense averaged $.68
per  BOE for the three months ended March 31, 2000, a 20% decrease compared
to  $.85  per BOE for the same period in 1999.  The decline in oil and  gas
G&A  is  the result of a reduction in legal, accounting, professional  fees
and  travel  incurred  during the three months  ended  March  31,  2000  as
compared to the same period in 1999.  The three months ended March 31, 1999
reflected larger expenditures in these areas due to management's evaluation
of  corporate  strategies  and alternatives in  dealing  with  it's  highly
leveraged  financial  position  and limited  working  capital  during  that
period.    Real estate G&A expense increased 15% to $415,000 for the  three
months ended March 31, 2000 from $360,000 for the same period in 1999.  The
increase in real estate G&A relates primarily to bonuses.

   Depreciation,   Depletion  and  Amortization  ("DD&A")  Expense.    DD&A
expense  for the Company increased 6% to $2.9 million for the three  months
ended  March 31, 2000 from $2.7 million for the same period in  1999.   Oil
and  gas  DD&A  expense increased 4% to $1.7 million for the  three  months
ended  March 31, 2000 from $1.7 million for the same period in  1999.   Oil
and  gas  depletion expense on a BOE basis, increased 14% to $3.20 per  BOE
for  the three months ended March 31, 2000 from $2.81 per BOE for the  same
period in 1999. Real estate DD&A expense increased 11% to $1.1 million  for
the three months ended March 31, 2000 from $1.0 million for the same period
in 1999 due to the impact of Capitalized improvements.

   Interest  Expense.  Interest expense for the  Company  decreased  1%  to
$10.6  million for the three months ended March 31, 2000 from $10.7 million
for the same period in 1999.  Oil and gas interest expense increased 1%  to
$5.6  million  for the three months ended March 31, 2000 from $5.5  million
for the same period in 1999.  Real estate interest expense decreased 4%  to
$5.0  million  for the three months ended March 31, 2000 from $5.2  million
for the same period in 1999.

   Equity  in  Loss  of  Subsidiary.  The  Company's  direct  and  indirect
investment in Sierra upon recording its portion of Sierra'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
Sierra's  losses  for  the  quarter  ended  March  31,  2000.   If   Sierra
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.
Equity  in  Loss  of Subsidiary for the three months ended March  31,  1999
resulted  in a charge of $931,000 of which, $744,000 was a non-cash  charge
for the impairment of the equity investment in Sierra.  This amount relates
to SRH's 39% direct and indirect investment in Sierra.

   Net  Income (Loss).  Due to the factors described above, net income  for
the  Company  increased 260% to $11.8 million for the  three  months  ended
March 31, 2000 from a net loss of $7.3 million for the same period in 1999.
Oil and gas net income was approximately $14.6 million for the three months
ended March 31, 2000 as compared to a net loss of $5.0 million for the same
period in 1999. Included in the oil and gas net income for the three months
ended  March  31,  2000  is  an  extraordinary  gain  associated  with  the
repurchase  of approximately 19% of the original issue, $200  million  face
10.5%  senior  notes  issued  in October of 1997,  of  approximately  $14.0
million.  Real estate net losses increased 9% to $2.8 million for the three
months ended March 31, 2000 from $2.6 million for the same period 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  of credit 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.  As of March  31,  2000,
SRH's  consolidated cash balance was approximately $19.7 million, of  which
$14.7 million was available to Southwest.

   SRH  financial  statements have been prepared on a going concern  basis,
which  contemplates  the  realization of assets  and  the  satisfaction  of
liabilities  in the normal course of business.  The consolidated  financial
statements  do  not include any adjustments relating to the  recoverability
and  classification of liabilities that might be necessary  should  SRH  be
unable to continue as a going concern.

   SRH  has a highly leveraged capital structure with, approximately  $32.1
million  of  cash interest payments and $55.3 million of principal  due  in
2000.  Management is currently in the process of renegotiating the terms of
SRH's  various obligations with its note holders and/or attempting to  seek
new  lenders or equity investors.  Additionally, management would  consider
disposing of certain assets in order to meet its obligations.

   There can be no assurance that SRH's debt restructuring efforts will  be
successful  or  that  the note holders will agree to  a  course  of  action
consistent with SRH's requirements in restructuring the obligations.   Even
if  such  agreement is reached, it may require approval of additional  note
holders,  or possibly, agreements of other creditors of SRH, none of  which
is  assured.   Furthermore, there can be no assurance  that  the  sales  of
assets can be successfully accomplished on terms acceptable to SRH.   Under
current circumstances, SRH's ability to continue as a going concern depends
upon  its  ability  to  (1)  successfully restructure  its  Revolving  Loan
Facility, the 10.5% Senior Notes and other obligations or obtain additional
financing  as  may  be  required, (2) maintain  compliance  with  all  debt
covenants, (3) generate sufficient cash flow to meet its obligations  on  a
timely  basis, and (4) achieve satisfactory levels of future earnings.   If
SRH  is  unsuccessful  in  its  efforts, it  may  be  unable  to  meet  its
obligations on the Revolving Loan Facility, the 10.5% Senior Notes, as well
as  other obligations, making it necessary to undertake such other  actions
as may be appropriate to preserve asset values.


<PAGE>

Net Cash Provided by Operating Activities

  Cash  flows used in operating activities by the Company were $3.1 million
for  the  three  months  ended  March 31, 2000.   Cash  flows  provided  by
operating activities were $898,000 for the three months ended 1999.

  Net  cash flows used in operating activities, for oil and gas operations,
for the three months ended March 31, 2000, were approximately $1.4 million.
Increased  oil  and  gas revenues provided approximately  $2.2  million  in
operating  cash flows, but were offset by increases in restricted  cash  of
approximately $3.6 million to satisfy interest sinking fund requirements.

  Net  cash flows used in operating activities, for real estate operations,
were  approximately $1.7 million.  The primary uses of funds  were  to  pay
down accounts payable and accrued expenses.

Net Cash Used in Investing Activities

  Cash  flows used in investing activities by the Company were $1.6 million
for  the  three  months  ended March 31, 2000  and  $2.6  million  for  the
comparable period in 1999.

  Net  cash flows used in investing activities, for oil and gas operations,
for  the  three  months ended March 31, 2000, were approximately  $830,000.
Acquisitions  of  oil  and  gas properties and other  plant,  property  and
equipment, of approximately $1.0 million, were the primary uses  of  funds.
Proceeds  from  the  sale of oil and gas properties and  other  assets,  of
approximately $174,000, were the primary source of funds.

  Net  cash flows used in investing activities, for real estate operations,
for  the  three  months ended March 31, 2000, were approximately  $679,000.
Increases  in  construction in progress of approximately $1.1  million  and
increases  in restricted cash of approximately $271,000 where  the  primary
uses of funds.  Sale proceeds from the sale of real estate investments  and
other assets of approximately $651,000 were the primary source of funds.

Net Cash Provided by Financing Activities.

  Cash  used  by the Company's financing activities was approximately  $6.4
million  for the three months ended March 31, 2000.  Cash provided  by  the
Company's financing activities was approximately $2.7 million for the three
months ended 1999.

  Cash  used  by  financing activities for oil and gas operations  for  the
three  months  ended  March  31,  2000  were  approximately  $8.1  million.
Proceeds from borrowings were $15.0 million and were used to partially fund
the  buy back of a portion of the 10.5% Senior Notes due 2004. Payments  on
debt  and  other long-term liabilities of approximately $23.1 million  were
the primary uses of funds.

  Cash provided by financing activities for real estate operations for  the
three  months  ended  March  31,  2000  were  approximately  $1.6  million.
Proceeds  from  borrowings  were $1.9 million  and  were  used  to  finance
construction  in progress.  Payments on debt of $247,000 and  dividends  of
$30,000 were the primary uses of funds.

  In  January  of 2000, Southwest drew down the remaining $15.0 million  on
the  Revolving Loan Facility and applied the proceeds towards the  purchase
of an additional 19% or approximately $38.4 million original face amount of
its  10.5%  Senior  Notes.   Southwest paid  approximately  $23.0  million,
including  all fees, to purchase the 10.5% Senior Notes and  wrote  off  an
additional $980,000 of deferred loan issue costs and an additional $349,000
of  the  original issue discount to recognize an additional  $14.0  million
extraordinary  gain  on  the  purchase of the  notes.   Southwest  has  not
recorded any income tax benefits on the continuing operations and therefore
there is no income tax expense recognized on the extraordinary gain.

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 March 31, 2000, there have been no material changes in
SRH's Year 2000 disclosure.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

  The  information  included in "Quantitative and  Qualitative  Disclosures
About  Market  Risk"  in Item 7A of SRH's 1999 Form  10-K  is  incorporated
herein  by  reference.   Such information includes a description  of  SHR's
potential  exposure  to market risks, including commodity  price  risk  and
SHR's  interest  rate  risk.  As of March 31,  2000,  there  have  been  no
material changes in SRH's market risk exposure from that disclosed  in  the
1999 Form 10-K.

<PAGE>

                        PART II - OTHER INFORMATION

Item 6.

Reports on Form 8-K

  None.

Exhibits

  The  following instruments and documents are included as Exhibits to this
Report.    Exhibits  incorporated  by  reference  are   so   indicated   by
parenthetical information.


   Exhibit Number                       Description
   --------------                       -----------

  27*                                  Financial Data Schedule.

  *Filed herewith.


<PAGE>
                                SIGNATURES
                         SOUTHWEST ROYALTIES, INC.

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

                            SOUTHWEST ROYALTIES, INC.

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

                      Date: May 15, 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
  ----------------------   Chairman/President/     May 15, 2000
  H. H. Wommack, III       Chief Executive Officer

  /s/ J Steven Person
  ----------------------   Vice President, Marketing/
  J Steven Person          Chief Financial Officer May 15, 2000

  /s/ H. Allen Corey
  ----------------------
  H. Allen Corey           Director/Secretary      May 15, 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,
                            and Chief Executive Officer

                      Date: May 15, 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
  ----------------------   Chairman/President/     May 15, 2000
  H. H. Wommack, III       Chief Executive Officer

  /s/ J Steven Person
  ----------------------   Vice President, Marketing/
  J Steven Person          Chief Financial Officer May 15, 2000

  /s/ H. Allen Corey
  ----------------------
  H. Allen Corey           Director/Secretary      May 15, 2000
















<PAGE>