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 March 31, 1998

     or

o    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)

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, 1998
for Southwest Royalties, Inc......100
Number of shares of common stock outstanding as of March 31, 1998
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, 1998 (unaudited)
         and December 31, 1997                             3

     Consolidated Statements of Operations for the three months
ended
         March 31, 1998 and 1997 (unaudited)               5

     Consolidated Statements of Cash Flows for the three months
ended
         March 31, 1998 and 1997 (unaudited)               7

     Notes to Consolidated Financial Statements            9


Item 2.   Management's Discussion and Analysis of  Financial
Condition and
     Results of Operations                                  13



                PART II - OTHER INFORMATION

Item 6.                                              Exhibits and
Reports on Form 8-K                                         17













<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 3
1,
                              ASSETS                     1998
1997
-----------------------------------------------------------------
--------------------------------------  -------------
                                            (unaudited)
Current assets
 Cash and cash equivalents                    $25,240  $27,365
  Accounts  receivable,  net  of  allowance  of  $230  and  $254,
respectively                                   6,587    8,376
 Receivables from related parties              2,042    2,556
 Other current assets                          1,351    1,209
                                                       ----------
---------
      Total    current    assets                           35,220
39,506
                                                       ----------
---------

Oil and gas properties, using the full cost method of accounting
       Proved                                             192,510
188,432
 Unproved                                      4,547    4,554
                                                       ----------
---------
                                                          197,057
192,986
   Less  accumulated  depletion,  depreciation  and  amortization
45,810                                         42,240
                                                       ----------
---------
     Oil   and   gas  properties,   net                   151,247
150,746
                                                       ----------
---------
Rental     property,     net                               81,689
81,373
                                                       ----------
---------
Other property and equipment, net              5,600    5,556
                                                       ----------
---------
Other assets
 Restricted cash                               7,392    8,064
 Equity investment in subsidiary               1,951    2,443
 Real estate investments                       4,187    4,203
 Deferred debt costs, net of accumulated amortization of
   $1,414 and $903, respectively               9,015    9,382
 Noncompete covenants, net of accumulated amortization
   of $18                                      1,584        -
 Other, net                                    5,320    4,170
                                                       ----------
---------                                   Total  other   assets
29,449                                         28,262
                                                       ----------
---------
Total   assets                                   $   303,205    $
305,443
                                               =======  ======
                                                    (continued)
                                
                                
                                
                                
                                
                                
<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
             CONSOLIDATED BALANCE SHEETS (continued)
                (in thousands, except share data)

LIABILITIES, MINORITY INTEREST, REDEEMABLE
                 COMMON STOCK AND STOCKHOLDERS' DEFICIT
March 31,  December 31,
-----------------------------------------------------------------
-------------------           1998              1997
                                                       ----------
                                         ----------
                                           (unaudited)
Current liabilities
  Current maturities of long-term debt        $2,924    $ 1,878
    Accounts  payable                                       5,430
7,119
  Accounts payable to related parties                  -      64
    Accrued  expenses                                       3,698
4,049
   Accrued  interest  payable                              10,601
5,401
  Deferred income taxes                                -      254
                                                       ----------
----------
    Total current liabilities                   22,653  18,765
                                                       ----------
----------
Long-term debt                                  282,572        28
1,764
                                                       ----------
----------
Other long-term liabilities                     1,760     1,809
                                                      -----------
----------
Deferred income taxes                            238     2,094
                                                      -----------
----------
Minority interest                               1,490    1,861
                                                      -----------
----------
Redeemable common stock of subsidiary           2,703    2,666
                                                      -----------
----------
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, 1998 and December  31,  1997
116                                             116
  Additional paid-in capital                    2,196    2,196
   Accumulated deficit                           (14,023)      (9
,321)
   Note receivable from an officer and stockholder             (1
,700)                                         (1,707)
  Less:  treasury stock - at cost; 214,215
     shares at March 31, 1998 and December 31, 1997            (3
,090)                                         (3,090)
                                                -----------   ---
--------
    Total stockholders' deficit               (16,501)(11,806)
                                              -----------------
Total liabilities, minority interest, redeemable common stock
      and  stockholders' deficit                $ 303,205       $
305,443
                                              ======    ======
                                
                                
                                
                                
                                
                                
                                
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,
--------------------------------------------------
                                                   1998      1997
----------                                    ----------
Operating revenues

  Oil and gas                            $     9,711   $9,583
  Well servicing                                   -    3,131
  Real estate                                  4,911    1,365
  Other                                          438      244
                                          ----------   ----------
Total operating revenues                      15,060   14,323
                                                       ----------
----------
Operating expenses
  Oil and gas production                       5,453    4,002
  Well servicing                                   -    2,432
  Real estate                                  2,138      554
  General and administrative, net of related party management
     and administrative fees of $897 and
      $885,  respectively                         1,352     1,254
Depreciation,  depletion  and  amortization                 4,265
2,717
  Other                                          375      295
                                                       ----------
---------
     Total operating expenses                 13,583   11,254
                                                       ----------
---------
Operating  income                                 1,477     3,069
----------                                             ----------
(continued)
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
<PAGE>
       SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                                
       CONSOLIDATED STATEMENTS OF OPERATIONS  (continued)
              (in thousands, except per share data)

                                     For the three months ended March 31,
-------------------------------------------------
                                                  1998       1997
------------                                   -----------
Other income (expense)
  Interest and dividend income                   443      186
  Interest expense                           (8,353)   (2,988)
  Other                                            3     (33)
                                           ----------- ----------
-
                                             (7,907)   (2,835)
                                           ----------- ----------
-
Income (loss) before income taxes, minority interest and
  equity earnings                            (6,430)      234
  Income tax benefit (provision)               1,944     (75)
                                           ----------- ----------
-
Income   (loss)  before  minority  interest  and    equity   loss
(4,486)                                    159
   Minority  interest in subsidiaries, net of  tax            106
48
   Equity  in  loss of subsidiary, net of  tax              (322)
-
                                           ----------- ----------
-

Net income (loss)                      $     (4,702)   $  207
                                             =======   =======

Income (loss) per common share         $       (4.37)  $  .19
                                             =======   =======
Weighted average shares outstanding        1,075,868   1,083,294
                                             =======   =======




                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
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,
---------------------------------------------------
                                                1998      1997
------------                                ------------
Cash flows from operating activities
 Net income (loss)                         $ (4,702)   $  207
 Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
 Depreciation, depletion and amortization              4,265
2,717                                        Noncash interest
expense                                          648      158
Equity loss of subsidiary                        322        -
 Other noncash items                            (65)       33
 Bad debt expense                                  5        -
 Deferred income taxes                       (1,944)     (64)
 Minority interest in loss of subsidiary               (106)
(48)
 Changes in operating assets and liabilities-
   Accounts receivable                         2,297   (5,318)
Other current assets                              10    (560)
Accounts payable and accrued expenses        (2,100)    3,266
   Accrued interest payable                    5,201      403
   Income taxes payable                            -                (30)
                                             ------------           ---------
Net cash provided by operating activities              3,831        764
                                             ------------           ---------
Cash flows from investing activities
 Proceeds from sale of oil and gas properties             220
20
 Purchase of oil and gas properties          (4,291)   (10,667)
 Purchase of other property and equipment and rental property
(1,036)                                      (4,243)
 Purchase of other assets                    (1,357)    (446)
 Purchase of noncompete covenants           (1,602)        -
 Proceeds from sale of other assets              20      176
 Proceeds from sale of other property and equipment        -
 117
 Purchase of real estate investments              -    (329)
 Change in restricted cash                      672    (547)
 Other                                           22        7
                                            ------------    ---
 ------
 Net cash used by investing activities      (7,352)   (15,912)
                                            ------------    ---
 ------

(continued)
                                












<PAGE>
                            SOUTHWEST ROYALTIES HOLDINGS, INC.
AND SUBSIDIARIES
                                
        CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                         (in thousands)
                           (unaudited)
                                
                                     For the three months ended March 31,
--------------------------------------------------
                                                1998     1997
-------------                              -------------
 Cash flows from financing activities
 Proceeds from borrowings                      2,092   12,701
 Payments on debt                              (276)   (1,914)
 Payments on other long-term liabilities               (49)
(22)
 Increase in other long-term liabilities               -
547
 Cash received on subscriptions receivable             -
2,710
 Purchase of treasury stock                        -    (552)
 Issuance of redeemable common stock, net of issue costs
-                                            2
 Deferred debt cost                            (143)     (52)
Dividends paid to minority interest owners             (31)
(30)
 Purchase of minority interest in subsidiary            (197)
-
                                              ------------------
Net cash provided by financing activities             1,396
13,390

---------                               ---------
Net decrease in unrestricted cash and cash equivalents
(2,125)                                 (1,758)

Unrestricted cash and cash equivalents-
   beginning of period                        27,365    8,284
                                              ---------
---------
Unrestricted cash and cash equivalents - end of period
$ 25,240                                $   6,526
                                               =====    =====

Supplemental disclosures of cash flow information
  Interest paid                              $ 2,504  $  2,427
  Income taxes received                      $     -  $    89


















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

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

  Southwest  is principally involved in the business of  oil  and
gas development and production.  Southwest is 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, each of which are wholly owned, except
for  Red Oak, Sierra, Midland Southwest Software (`Software") and
Threading  Products International, LLC ("TPI"), a  subsidiary  of
Southwest.  As of March 31, 1998, the Company owned approximately
81%  of Red Oak, 39% of Sierra, 99% of Software and 98%  of  TPI.
Effective  July  1,  1997,  Sierra  was  deconsolidated  and   is
accounted   for  using  the  equity  method.   The   consolidated
financial statements include the Company's proportionate share of
the  assets,  liabilities, income and expenses  of  oil  and  gas
limited  partnerships  for which it serves  as  managing  general
partner.   The  Company accounts for its investments  in  Sierra,
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.

Commodity Hedging and Derivative Financial Instruments

   The  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.
   
   Since  the  contracts  are accounted for as  hedges,  premiums
paid  for such contracts 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 under the commodity option contracts are accrued as an
increase in oil and gas sales for the applicable periods.

Interim Financial Statements

   In  the  opinion  of  management, the  unaudited  consolidated
financial statements of the Company as of March 31, 1998 and 1997
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  amounts  in  the  prior  period  financial
statements  have  been reclassified to conform with  the  current
period presentation.

<PAGE>
   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 1997 Form 10-K of the Company.
  
Noncompete covenants
  
   Noncompete  covenants  are carried at  cost  less  accumulated
amortization.   The  covenants are  being  amortized  over  their
contractual lives of 15 years.
   
Reporting comprehensive income.
   
   In   June   1997,  the  FASB  issued  Statement  of  Financial
Accounting  Standards  No. 130 "Reporting  Comprehensive  Income"
("SFAS  130")  which  establishes  standards  for  reporting  and
display of comprehensive income and its components in a full  set
of  general-purpose financial statements.  Specifically, SFAS 130
requires   that  an  enterprise  (i)  classify  items  of   other
comprehensive income by their nature in a financial statement and
(ii)  display  the  accumulated balance  of  other  comprehensive
income  separately from retained earnings and additional  paid-in
capital  in  the  equity  section of  a  statement  of  financial
position.   The  effect of  this statement is immaterial  to  the
Company.
   
Segment Reporting.

   In   June   1997,  the  FASB  issued  Statement  of  Financial
Accounting Standards No. 131 "Disclosures about Segments  of  and
Enterprise   and   Related  Information"   ("SFAS   131")   which
establishes   standards  for  public  business  enterprises   for
reporting   information  about  operating  segments   in   annual
financial  statements and requires that such  enterprises  report
selected   information  about  operating  segments   in   interim
financial  reports issued to shareholders.  This  statement  also
establishes standards for related disclosures about products  and
services,  geographic areas, and major customers.   SFAS  131  is
effective  for  financial statements for periods beginning  after
December 15, 1997.
  
2.   Subsidiaries, Acquisitions and Dispostions
  
   In   February  1998,  Red  Oak  acquired  a  real  estate  fee
management  and brokerage company in Texas, for a  cost  of  $1.6
million.   The  transaction was accounted for using the  purchase
method.   The  results of operations of the acquired company  are
included  in the consolidated statements of operations  from  the
close date of the acquisition.
  
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.
  
  
  
  
  
  
  
  
  <PAGE>
  Management  recognizes a financial exposure  that  may  require
future expenditures presently existing for oil and gas properties
and other operations.   As of March 31, 1998, 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
reduce  the  effect  of  the  volatility  of  price  changes   on
commodities the Company produces and sells as well as to lock  in
prices  to  protect  the  economics related  to  certain  capital
projects.  In March 1998, the Company purchased put options on  a
total  of  13,000  MMBTU of natural gas per day,  establishing  a
floor price of $1.90 for 6,500 MMBTU per day and a floor price of
$1.70 for the remaining 6,500 MMBTU per day, for the period  from
April 1, 1998 through October 31, 1998.
  
5.   Lines of Business
  
  The  Company  operates  in three 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), Oil and  Gas
Well  Servicing  (provides  well  completion,  recompletion   and
production equipment, transportation services, tank supply rental
services  and  other  support and well  maintenance  services  to
operating  oil and gas companies) and Real Estate Investment  and
Management  (owns and manages retail shopping centers and  office
buildings).   Other  items  include eliminations,  manufacturing,
computer  service  and  broker/dealer and  the  holding  Company.
Effective  July  1, 1997, Sierra, the oil and gas well  servicing
business,   was   deconsolidated,  therefore   income   statement
information  for  the three months ended March 31,  1998  is  not
displayed  in  the  tables and no balance  sheet  information  is
displayed.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  <PAGE>
                                           For the Three Months
                                              Ended March 31,
                                               1998     1997
                                          ---------------------
                                               (in thousands)
  Operating profit (loss)                       (unaudited)
  
    Oil and gas                              $(546)   $2,913
    Well service                                  -     (45)
    Real estate                               1,978      455
    Other and eliminations                       45    (254)
                                                        ---------
--------
                                             $1,477   $3,069
                                             ======    =====
  Interest Expense
    Oil and gas                              $5,558   $2,183
    Well Service                                  -       55
    Real Estate                               2,781      739
    Other and eliminations                       14       11
                                                       ----------
--------
                                             $8,353   $2,988
                                             ======    =====

  Depreciation, depletion and amortization
     Oil  and  gas                               $3,691    $2,097
Well Service                                       -      315
    Real Estate                                 528      266
    Other and eliminations                       46       39
                                                       ----------
---------
                                             $4,265   $2,717
                                             ======   ======
   Capital expenditures
     Oil and gas                              $4,291   $10,667
     Well service                                  -    3,715
     Real estate                                 528       53
                                                       ----------
----------
                                              $4,819   $14,435
                                             ======   ======
  
                                             March  31,  December
31,
                                                  1998       1997
----------                                   ----------
  Identifiable assets
    Oil and gas                              $202,111 $205,054
     Real estate                              99,973   98,890
     Other and eliminations                    1,121    1,499
                                                       ----------
----------                                               $303,205
$      305,443                                             ======
======
<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.  References in this  report  to
the  "Company"  are  to  SRH  and its consolidated  subsidiaries,
including  Southwest,  Red  Oak  and  Sierra,  an  unconsolidated
affiliate.
  
  Southwest  has  grown principally through  the  acquisition  of
producing   properties,  establishing  a  substantial   base   of
producing  and undeveloped properties in the Permian  Basin   The
Company  intends to increase its oil and gas reserves, production
and  cash  flow by concentrating on drilling low-risk development
wells and by conducting additional development activities such as
recompletions.   During the first quarter of  1998,  the  Company
drilled  15 gross (6.4 net) wells, of which all were successfully
completed as productive.
  
  The   Company   places   emphasis  on  profitable   acquisition
opportunities as long as such opportunities exist.  However,  the
Company  understands  the cyclical nature  of  the  oil  and  gas
industry.  Therefore, the Company also actively seeks to  develop
its  inventory  of  existing proved developed  non-producing  and
proved  undeveloped reserves.  The Company's staff and operations
can  easily  shift  emphasis  between  acquisitions  and  reserve
development   depending  on  market  conditions.   A  significant
portion of the Company's reserves are proved undeveloped and  are
therefore available for development.
  
  Southwest's   revenue,  profitability   and   cash   flow   are
substantially dependent upon prevailing prices for crude oil  and
natural  gas  and  the volumes of crude oil and  natural  gas  it
produces.  In addition, Southwest's proved reserves and  oil  and
gas  production  will decline as crude oil and  natural  gas  are
produced  unless  Southwest is successful in acquiring  producing
properties  or  conducts successful exploration  and  development
activities.

  In  March 1998, the Company purchased put options on a total of
13,000  MMBTU of natural gas per day, establishing a floor  price
of  $1.90 for 6,500 MMBTU per day and a floor price of $1.70  for
the  remaining 6,500 MMBTU per day, for the period April 1,  1998
through October 31, 1998.
  
  Southwest  uses  the  full cost method of  accounting  for  its
investment in oil and gas properties. Under the full cost  method
of   accounting,  all  costs  of  acquisition,  exploration   and
development of oil and gas reserves are capitalized into a ''full
cost  pool'' as incurred, and properties in the pool are depleted
and  charged to operations using the gross revenues method  based
on  the  ratio  of current gross revenues to total proved  future
gross  revenues,  computed based on current  prices.  Significant
downward revisions of quantity estimates or declines in  oil  and
gas prices that are not offset by other factors could result in a
write  down  for  impairment  of oil  and  gas  properties.  Once
incurred,  a  write-down  of  oil  and  gas  properties  is   not
reversible  at  a later date, even if oil or natural  gas  prices
increase.   During  most of 1996 and 1997, the Company  benefited
from  higher oil prices as compared to previous years.   However,
during  the  first quarter of 1998, oil prices were significantly
lower.   A continuation of the oil price environment  experienced
during  the first quarter of 1998 will have an adverse affect  on
the  Company's  revenues and operating cash flow.  Also,  further
declines in oil prices could result in a decrease in the carrying
value of the Company's oil and gas properties.
   
   
   
   <PAGE>
   Red  Oak  was  formed by the Company in 1992  to  acquire  and
manage  neighborhood and community shopping centers, other retail
and  commercial properties and office buildings. These properties
are  primarily  leased,  on a long-term basis,  to  major  retail
companies,   local  specialty  retailers  and  professional   and
business  tenants  throughout  secondary  urban  markets  in  the
southwestern United States. As of March 31, 1998, Red  Oak  owned
and  operates 14 shopping centers, three office buildings and raw
land held for future development.
  
   Effective  July  1, 1997, Sierra was deconsolidated  from  the
financial  statements of SRH and is subsequently  reported  using
the equity method of accounting.  As such, comparisons of revenue
and  expenses for the three months ended 1998 to the three months
ended  1997 are not relevant and therefore no discussion of  such
results of operations are provided.

Results of Operations

Three  Months Ended March 31, 1998 compared to Three Months Ended
March 31, 1997
  
  Revenues. Revenues for the Company increased $737,000,  or  5%,
for the three months ended March 31, 1998 as compared to the same
period  in  1997, reflecting increased revenues in  each  of  the
Company's  businesses, with the exception  of  Sierra  which  was
deconsolidated.
  
  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
                           1998      1997           (Decrease)
(Decrease)
                        ------- ------- --------------      --------------
  
  Production volumes:
   Oil and condensate (MBbls)       469      272      72% $4,190
   Natural gas (MMcf)     1,522   1,322        15%      510
  
  Average sales prices:
   Oil and condensate (per Bbl)       $       14.33   $  21.27(33)%  $(3,255)
   Natural gas (per Mcf)   1.93    2.55       (24)%   (944)
  
  
  Oil  and gas revenues increased $128,000, or 1%, for the  three
months  ended  March 31, 1998 as compared to the same  period  in
1997, due to increases in oil and gas production and decrease  in
average  prices. Oil and gas production increased  72%  and  15%,
respectively, due to several acquisitions throughout 1997  and  a
non-recurring   settlement  with  an   unrelated   operator   for
approximately  10,300  barrels of  oil.   Changes  in  production
contributed  $4.7 million to increased oil and gas revenues.  The
average  price per barrel of oil was $14.33, a decrease  of  33%,
and  the  average  price of natural gas  was  $1.93  per  Mcf,  a
decrease  of  24%.   These lower oil and gas prices,  offset  the
increase   in   oil  and  gas  revenue  due  to   production   by
approximately $4.2 million.
  
  Real  estate  revenues  increased $3.5 million,  or  260%,  due
primarily to acquisitions completed in the last quarter of  1997.
Other operating revenues increased $194,000.
  
  <PAGE>
  Operating  Expenses.  Operating expenses,  before  general  and
administrative   expense   and   depreciation,   depletion    and
amortization,  increased $683,000, or 9%, for  the  three  months
ended March 31, 1998 as compared to the same period in 1997,  due
primarily  to  costs associated with the growth in the  Company's
businesses through acquisitions.
  
  Oil  and gas operating expense increased $1.5 million, or  36%,
due  primarily  to  an  increase in the number  of  oil  and  gas
properties  owned by the Company during the period.  The  average
operating  expense was $7.54 per Boe for the three  months  ended
March 31, 1998, a decrease of 7% from $8.13 per Boe for the  same
period  in 1997.  The decrease on a Boe basis is due to a ongoing
effort to decrease operating costs.
  
  Real  estate operating expense increased $1.6 million, or 286%,
for the three months ended March 31, 1998 as compared to the same
period  in  1997, due primarily to acquisitions. Other  operating
expenses increased $80,000.
  
  General  and Administrative (''G&A'') Expense. G&A expense  for
the  Company increased $98,000, or 8%, for the three months ended
March  31,  1998  as  compared to the same period  in  1997,  due
primarily  to  an increase in the Company's activities  resulting
from  recent  acquisitions.  Oil and gas  G&A  expense  increased
approximately  $544,000,  or 89%,  and  was  $1.60  per  Boe,  an
increase  of  29%  due  primarily to additions  to  oil  and  gas
technical  and administrative staff in conjunction with increases
in  oil  and  gas  acquisition and development activities.   Real
estate G&A expense increased $176,000, or 193%, due primarily  to
administrative  staff  increases  necessitated   by   Red   Oak's
significant  growth. The G&A expenses for the  first  quarter  of
1998  excluded  Sierra,  which accounted  for  $518,000  for  the
comparable period in 1997.
  
  Depreciation,  Depletion and Amortization  (''DD&A'')  Expense.
DD&A expense for the Company increased $1.5 million, or 57%,  for
the  three months ended March 31, 1998 due to growth in  each  of
the  Company's  businesses. Oil and gas  DD&A  expense  increased
approximately  $1.6 million, or 76%.  Oil and gas  depletion  was
$4.94  per Boe, an increase of 21% from the same period in  1997.
The  increase in DD&A expense on an overall basis and per Boe  is
due primarily to the decrease in the oil price used in the period
end  reserve  reports for March 31, 1998 compared to the  reserve
reports  used for the same period in 1997, which led to a  higher
depletion  rate  under the units of revenue depreciation  method.
Real  estate  DD&A expense increased approximately  $262,000,  or
98%, attributable primarily to the impact of acquisitions.
  
  Interest  Expense.  Interest expense for the Company  increased
$5.4  million,  or  180%,  primarily as  a  result  of  increased
borrowings   incurred  to  fund  a  portion  of   the   Company's
acquisitions  and oil and gas development. Oil and  gas  interest
expense  increased  approximately $3.4 million,  or  155%,  as  a
result  of  increased  borrowings for  development  drilling  and
acquisitions  made in 1997.  The average interest  rate  paid  on
these  borrowings also increased by approximately 1%. Real estate
interest  expense  increased  $2.0  million,  or  276%,  due   to
increased  debt used to finance acquisitions as compared  to  the
same period in the prior year.
  
  Net  Income. Due to the factors described above, net income for
the  Company decreased $4.9 million to a loss of $4.7 million for
the three months ended March 31, 1998.
  
  Liquidity and Capital Resources
  
  As  of  March 31, 1998, the Company's consolidated cash balance
was  $25.2  million, of which $23.3 was available  to  Southwest.
Funding  for  the Company's business activities has  historically
been  provided by operating cash flows, bank borrowings and  debt
issuance,  reserve-based  financing and  sales  of  equity.   Any
future acquisitions may require additional financing and will  be
dependent upon financing arrangements available at the time.
  
  
  
  
  
  <PAGE>
  As  discussed  previously,  as of July  1,  1997,  Sierra  Well
Service  was  deconsolidated  from SRH  and  is  currently  being
accounted  for using the equity method of accounting;  therefore,
cash flow information for Sierra is reported for the three months
ended March 31, 1997.  For the comparable period in 1998, no cash
flow information for Sierra was reported.
  
Net Cash Provided by Operating Activities

   Cash   flows  provided  by  operating  activities   from   the
Company's operations were $3.8 million and $800 thousand for  the
three  months  ended March 31, 1998 and 1997, respectively.   The
increase  is primarily attributable to increases in oil  and  gas
production  and revenues resulting principally from  acquisitions
in  all  the Company's businesses, which was offset by lower  oil
prices, higher operating costs and interest expense.
  
Net Cash Used in Investing Activities

   Cash  flows  used in investing activities by the Company  were
$7.4  million for the three months ended March 31, 1998 and $15.9
million  for the comparable period in 1997. Acquisitions and  oil
and gas development activities were the primary uses of funds for
both periods.
  
  In  response  to  the decline in oil prices,  the  Company  has
implemented an alternate short-term business plan for its oil and
gas   operations   that  delays  discretionary  development   and
exploratory projects until the oil prices strengthen. The Company
is  pursuing  a $5.8 million capital expenditure budget for 1998,
revised  from its previous $17.8 million budget for oil  and  gas
activities.  Further revisions may be necessary during  the  year
in response to market conditions. No amount has been budgeted for
oil  and gas acquisitions, although the Company will continue  to
search  for strategic and complementary oil and gas acquisitions.
The  Company anticipates capital expenditures in 1998 for Red Oak
of  approximately $7.2 million for capital improvements, of which
$528,000 was expended in the first quarter of 1998. Red  Oak  has
not  specified  an  amount  for their  1998  acquisition  budget;
however, any acquisitions would be funded by non-recourse debt.
  
Net Cash Provided by Financing Activities.

   Cash  provided by the Company's financing activities was  $1.4
million  and $13.4 million for the three months ended  March  31,
1998  and  1997,  respectively.  Net cash provided  by  financing
activities  was mainly used to fund  real estate acquisitions  in
1998.
  
  Southwest  Credit Facility. The Southwest Credit  Facility  was
amended  to  provide for a $75 million revolving line  of  credit
maturing in February 1999,  subject to semi-annual borrowing base
redetermination.  The initial borrowing base of  $40  million  is
subject  to  a $15 million available sub-limit for  oil  and  gas
acquisitions,  with the balance of the borrowing  base  available
for  general  corporate purposes. Borrowings accrue  interest  at
LIBOR  plus a margin ranging from 1.75% to 2.50% and the facility
incurs a quarterly commitment fee of three-eighths of one percent
(3/8%) per annum on the daily average of the unadvanced amount of
the  borrowing base. The Southwest Credit Facility is secured  by
substantially  all of Southwest's proved oil and gas  properties.
The  facility contains a number of covenants that limit loans and
advances,  investments,  and dividends,  as  well  as  setting  a
minimum  interest coverage ratio for SRH.   The Company  and  its
lenders are currently reviewing the Southwest Credit Facility  in
light  of  current oil prices and expect to be completed  in  May
1998. On March 27, 1998, the covenants were amended to remove the
tangible  net  worth  requirement, increase  allowable  sales  of
assets  from  $250,000  to at least $10 million  and  revise  the
minimum interest coverage ratio to .7 to 1.0.  It is possible, in
response  to the downward trend in oil and gas prices experienced
in  the  last  quarter of 1997 and continuing through  the  first
quarter   of   1998,  that  the  borrowing  base   may   decrease
significantly and therefore limit the Company's ability  to  fund
future  capital  expenditures, acquisitions  or  general  working
capital through the Southwest Credit Facility.
  
  
  <PAGE>
  For   the  remainder  of  1998,  Red  Oak  intends  to  acquire
additional   real  estate  properties.  Funding  will  likely  be
obtained  through an additional increase in the MROP Facility  or
from other sources.
  
  The  Company  believes that availability  under  the  Southwest
Credit  Facility, the Red Oak Acquisition Facilities,  cash  flow
from operations and current cash balances, will be sufficient for
planned  operating and capital expenditure requirements  for  the
remainder   of   1998.    However,  if  the  Company   identifies
acquisitions in any of its businesses, additional financing  will
be  needed  and  the  Company expects to evaluate  all  available
funding sources including equity and debt financing alternatives.

Other Issues
  
  The  Company has reviewed and evaluated its information systems
to  determine if its systems accurately process data  referencing
the   year   2000.    Substantially  all  necessary   programming
modifications  to  correct  year  2000  referencing  in  internal
accounting  and operating systems have been made.   However,  the
Company  has  not  completed its evaluation of  its  vendors  and
suppliers  systems  to determine the effect,  if  any,  the  non-
compliance  of such systems would have on the operations  of  the
Company.   The Company expects to have all evaluations  completed
by early 1999.

   
   Comprehensive  income consists of the change in  equity  of  a
business  enterprise during a period from transactions and  other
events  and  circumstances from nonowner sources.   Specifically,
this includes net income and other comprehensive income, which is
made up of certain changes in assets and liabilities that are not
reported  in  a statement of operations but are included  in  the
balances within a separate component of equity in a statement  of
financial position. Such changes include, but are not limited to,
unrealized  gains for marketable securities and future contracts,
foreign  currency  translation adjustments  and  minimum  pension
liability adjustments.
   
   
   
                   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 14, 1998
  
  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 14, 1998
  H. H. Wommack, III       Chief Executive Officer
  
  /s/ Bill E. Coggin
  -----------------------------                              Vice
President/Chief             May 14, 1998
  Bill E. Coggin           Financial Officer
  
  /s/ H. Allen Corey
  -----------------------------
  H. Allen Corey           Director/Secretary    May 14, 1998
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  <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 14, 1998
  
  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 14, 1998
  H. H. Wommack, III       Chief Executive Officer
  
  /s/ Bill E. Coggin
  -----------------------------                              Vice
President/Chief             May 14, 1998
  Bill E. Coggin           Financial Officer
  
  /s/ H. Allen Corey
  -----------------------------
  H. Allen Corey           Director/Secretary    May 14, 1998
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  <PAGE>