23
                    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 June 30, 1999

     or

?    Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
     For the transition period from __________ to __________

     Commission file number:  000-23701

     SOUTHWEST ROYALTIES, INC.               SOUTHWEST ROYALTIES
     (Exact Name of Registrant as            HOLDINGS, INC.
     Specified in Its Charter)               (Exact Name of Registrant as
                                        Specified in Its Charter)

     Delaware                           Delaware
     (State or Other Jurisdiction of         (State or Other Jurisdiction
of
     Incorporation or Organization)          Incorporation or Organization)

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

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

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

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


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


Number  of  shares  of common stock outstanding as of  June  30,  1999  for
Southwest Royalties, Inc.                                             100.
Number  of  shares  of common stock outstanding as of  June  30,  1999  for
Southwest Royalties Holdings, Inc.                              1,075,868.


<PAGE>
                         SOUTHWEST ROYALTIES, INC.

                    SOUTHWEST ROYALTIES HOLDINGS, INC.



                             TABLE OF CONTENTS


                  PART I - FINANCIAL INFORMATION          Page

Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets as of June 30, 1999
          (unaudited) and December 31, 1998                3

          Consolidated Statements of Operations for the
          three and six months ended June 30, 1999
          and 1998 (unaudited)                             5

          Consolidated Statements of Cash Flows for the three
          and six months ended June 30, 1999
          and 1998 (unaudited)                             7

          Notes to Consolidated Financial Statements       9


Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations             17

Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk                                     20

                   PART II - OTHER INFORMATION

Item 6.   Reports on Form 8-K and Exhibits                21














<PAGE>
                      PART I - FINANCIAL INFORMATION

ITEM 1.   CONSOLIDATED FINANCIAL STATEMENTS

            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                                   June 30, December 31,
                                                     1999       1998
                                                  --------- -----------
                                                 (unaudited)
ASSETS
---------------------------------------------------------
Current assets
  Cash and cash equivalents                       $ 14,210   $  13,801
  Accounts receivable, net of allowance of $97 and
   $342, respectively                                6,591       5,248
  Receivables from related parties                     993       1,594
  Other current assets                                 912       1,624
                                                   -------     -------
     Total current assets                           22,706      22,267
                                                   -------     -------
Oil and gas properties, using the full cost
 method of accounting
  Proved                                           190,532     194,096
  Unproved                                           2,373       3,230
                                                   -------     -------
                                                   192,905     197,326
  Less accumulated depletion, depreciation and
   amortization                                    124,558     121,841
                                                   -------     -------
Oil and gas properties, net                         68,347      75,485
                                                   -------     -------
Rental property, net                               132,175     132,120
                                                   -------     -------
Other property and equipment, net                    5,015       5,888
                                                   -------     -------
Other assets
  Restricted cash                                    4,142       5,050
  Equity investment in subsidiaries                      -         931
  Real estate investments                            3,686       4,019
  Deferred debt costs, net of accumulated
   amortization of $2,439 and $3,136, respectively              10,849
8,725
  Noncompete covenants, net of accumulated
   amortization of $417 and $269, respectively       1,187       1,335
  Other, net                                         1,488       1,730
                                                   -------     -------
     Total other assets                             21,352      21,790
                                                   -------     -------
Total assets                                      $249,595   $ 257,550
                                                   =======     =======
                                                             (continued)


<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                                   June 30, December 31,
                                                     1999       1998
                                                  --------- -----------
                                                 (unaudited)
LIABILITIES, MINORITY INTEREST, REDEEMABLE
COMMON STOCK AND STOCKHOLDERS' DEFICIT
---------------------------------------------------------
Current liabilities
  Current maturities of long-term debt            $  6,913   $  12,716
  Accounts payable                                   5,507       7,116
  Accounts payable to related parties                    -         173
  Accrued expenses                                  10,329       9,737
                                                   -------     -------
     Total current liabilities                      22,749      29,742
                                                   -------     -------
Long-term debt                                     336,605     322,368
                                                   -------     -------
Other long-term liabilities                          1,765       1,797
                                                   -------     -------
Minority interest                                        8         206
                                                   -------     -------
Redeemable common stock of subsidiary                3,053       2,979
                                                   -------     -------
Redeemable common stock                              8,290       8,290
                                                   -------     -------
Stockholders' deficit
  Preferred stock - $1 par value; 5,000,000
   shares authorized; none issued                        -           -
  Common stock - $.10 par value; 5,000,000 shares
   authorized; 1,161,037 issued at June 30, 1999
   and December 31, 1998                               116         116
  Additional paid-in capital                         2,196       2,196
  Accumulated deficit                             (120,434)  (105,375)
  Note receivable from an officer and
   stockholder                                     (1,663)     (1,679)
  Less:  treasury stock - at cost; 214,215 shares at
   June 30, 1999 and December 31, 1998             (3,090)     (3,090)
                                                   -------     -------
     Total stockholders' deficit                  (122,875)  (107,832)
                                                   -------     -------
Total liabilities, minority interest, redeemable
  common stock and stockholders' deficit          $249,595   $ 257,550
                                                   =======     =======





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

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

                                   Three months ended   Six months ended
                                        June 30,            June 30,
                                   -----------------   -----------------
                                     1999      1998      1999      1998
                                    ------    -----     -----     -----
Operating revenues
  Oil and gas                      $ 6,960   $ 9,120   $13,054   $18,831
  Real estate                        7,742     5,883    15,951    10,794
  Other                                223       351       508       789
                                    ------    ------    ------    ------
     Total operating revenues       14,925    15,354    29,513    30,414
                                    ------    ------    ------    ------
Operating expenses
  Oil and gas production             2,763     5,209     5,631    10,662
  Real estate                        4,428     3,114     8,642     5,252
  General and administrative, net of
   related party management and
   administrative fees of $821,
   $1,721, $1,691 and $2,618,
   respectively                        673     1,250     1,460     2,602
  Depreciation, depletion and
   amortization                      2,542     5,223     5,286     9,488
  Impairment of oil and gas
   properties                            -    29,000         -    29,000
  Other                                246       352       459       727
                                    ------    ------    ------    ------
     Total operating expenses       10,652    44,148    21,478    57,731
                                    ------    ------    ------    ------

Operating income (loss)              4,273   (28,794)    8,035   (27,317)
                                    ------    ------    ------    ------
Other income (expense)
  Interest and dividend income         258       354       412       797
  Interest expense                 (10,375)  (8,565)   (21,063)  (16,918)
  Other                              (186)       277        14       280
                                    ------    ------    ------    ------
                                   (10,303)  (7,934)   (20,637)  (15,841)
                                    ------    ------    ------    ------
                                                                 (contin
ued)


<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                   Three months ended   Six months ended
                                        June 30,            June 30,
                                   -----------------   -----------------
                                     1999      1998      1999      1998
                                    ------    -----     -----     -----
Loss before income taxes, minority
  interest, equity income (loss) and
  extraordinary item             $ (6,030) $(36,728) $(12,602) $(43,158)
  Income tax benefit                     -       404         -     2,348
                                   --------- --------- --------- ---------
Loss before minority interest,
  equity income (loss) and
  extraordinary item               (6,030)   (36,324)  (12,602)  (40,810)
  Minority interest in subsidiaries,
   net of tax                         (87)        93        67       199
  Equity in income (loss) of subsidiary
   and partnerships net of tax           1     (759)     (187)   (1,081)
  Impairment of equity investment,
   net of tax                            -               (744)
                                   --------- --------- --------- ---------
Loss before extraordinary item     (6,116)   (36,990)  (13,466)  (41,692)
  Extraordinary loss from
   early extinguishment
   of debt                         (1,593)         -   (1,593)         -
                                   --------- --------- --------- ---------
Net loss                         $ (7,709) $(36,990) $(15,059) $(41,692)
                                   ========= ========= ========= =========
Loss per common share before
  extraordinary item             $  (5.69) $ (34.38) $ (12.52) $ (38.75)
  Extraordinary loss from
   early extinguishment
   of debt                           (1.48)        -    (1.48)         -
                                   --------- --------- --------- ---------

Loss per common share            $  (7.17) $ (34.38) $ (14.00) $ (38.75)
                                   ========= ========= ========= =========
Weighted average shares
  outstanding                      1,075,868 1,075,868 1,075,868 1,075,868
                                   ========= ========= ========= =========














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

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

                                   Three months ended   Six months ended
                                        June 30,            June 30,
                                   -----------------   -----------------
                                     1999      1998      1999      1998
                                    ------    -----     -----     -----
Cash flows from operating activities
  Net loss                         $(7,709)  $(36,990) $(15,059) $(41,692)
  Adjustments to reconcile net loss
   to net cash used in operating
   activities:
  Depreciation, depletion and
   amortization                      2,542     5,223     5,286     9,488
  Impairment of oil and gas
   properties                            -    29,000         -    29,000
  Noncash interest expense           1,347       577     2,510     1,225
  Extraordinary loss from early
   extinguishment of debt            1,593         -     1,593         -
  Gain on sale of assets             (129)     (261)     (196)     (261)
  Equity (income) loss of subsidiary
   and partnerships                    (1)       759       187     1,081
  Impairment of equity investment            -         -         744
-
  Other noncash items                  426       142       605        77
  Bad debt expense                      12       150        99       155
  Deferred income taxes                  -     (404)         -   (2,348)
  Minority interest in (income) loss
   of subsidiary                        87      (93)      (67)     (199)
  Changes in operating assets
   and liabilities-
   Accounts receivable             (1,380)        73     (934)     2,370
   Other current assets              (370)     (263)     (320)     (253)
   Accounts payable and accrued
     expenses                        1,362     1,457     (674)     (643)
   Accrued interest payable        (5,107)   (5,223)     (251)      (22)
                                    ------    ------    ------    ------

Net cash used in operating activities        (7,327)   (5,853)   (6,477)
(2,022)
                                    ------    ------    ------    ------
Cash flows from investing activities
  Proceeds from sale of oil and
   gas properties                    4,887     2,838     5,205     3,058
  Purchase of oil and gas properties           (513)   (2,275)     (784)
(6,566)
  Purchase of other property and
   equipment and rental property             (1,391)   (25,415)  (2,473)
(26,451)
  Purchase of other assets           (234)     (790)     (455)   (2,147)
  Purchase of noncompete covenants           -         -         -
(1,602)
  Proceeds from sale of real
   estate investments                  333       764       333       764
  Proceeds from sale of other assets             713     1,040       945
1,060
  Proceeds from sale of other
   property and equipment and
   rental property                     855        24     1,068        24


(continued)
<PAGE>
            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES

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

                                   Three months ended   Six months ended
                                        June 30,            June 30,
                                   -----------------   -----------------
                                     1999      1998      1999      1998
                                    ------    -----     -----     -----
  Change in restricted cash        $ 2,727   $   384   $   908   $ 1,056
  Other                                  8      (14)        16         8
                                    ------    ------    ------    ------
Net cash provided by (used in)
  investing activities               7,385   (23,444)    4,763   (30,796)
                                    ------    ------    ------    ------
Cash flows from financing activities
  Proceeds from borrowings          99,210    24,873   103,240    26,965
  Payments on debt                 (94,819)    (561)   (96,078)    (837)
  Increase (decrease) in other
   long-term liabilities              (48)        14      (32)      (35)
  Deferred debt cost               (3,986)     (637)   (4,075)     (780)
  Dividends paid to minority interest
   owners                             (30)      (30)      (61)      (61)
  Purchase of minority interest in
   subsidiary                            -     (108)         -     (305)
  Other                                  4       (3)         4       (3)
  Prepayment penalty on early
   extinguishment of debt            (875)         -     (875)         -
                                    ------    ------    ------    ------
Net cash provided by (used in)
  financing activities               (544)    23,548     2,123    24,944
                                    ------    ------    ------    ------
Net increase (decrease) in unrestricted
  cash and cash equivalents          (486)   (5,749)       409   (7,874)

Unrestricted cash and cash equivalents -
  beginning of period               14,696    25,240    13,801    27,365
                                    ------    ------    ------    ------
Unrestricted cash and cash equivalents -
  end of period                    $14,210   $19,491   $14,210   $19,491
                                   =======   =======   =======   =======
Supplemental disclosures of cash flow
  information
  Interest paid                    $14,135   $13,212   $18,804   $15,716
  Income taxes paid                $     -   $     -   $     -   $     -


           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  June  30, 1999  and  1998,  the  Company  owned
approximately  81% of Red Oak, 30% and 39% of Sierra, as  well  as  99%  of
Midland  Southwest  Software ("MSS"), 100% and 98%  of  Threading  Products
International,  LLC ("TPI"), both of which are subsidiaries  of  Southwest.
Effective  July  1, 1997, Sierra was deconsolidated and  is  accounted  for
using the equity method.  The consolidated financial statements include the
Company's  proportionate  share  of the  assets,  liabilities,  income  and
expenses  of  oil  and  gas limited partnerships for  which  it  serves  as
managing  general  partner.  The Company accounts for  its  investments  in
Southwest  Partners  II  and III using the equity method,  as  the  Company
exercises  significant influence over the operations of these partnerships.
All significant intercompany transactions have been eliminated.

Restricted Cash

  Restricted  cash represents amounts required to be reserved  in  separate
accounts  by  financial lenders.  These reserves are principally  for  real
estate  activity  and  are held in the names of Red  Oak  and  its  various
subsidiaries, but withdrawals from such accounts require the  signature  or
authorization of the lender.


<PAGE>

            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies - continued

  Restricted  cash accounts, principally for Red Oak and its  subsidiaries,
have been established for the following purposes (in thousands):
                                                     June 30,  December 31,
                                                       1999        1998
                                                       ----        ----
     Certificate of Deposits                        $    110        105
     Tenant security deposits                            488        412
     Interest reserves                                     -        707
     Capital expenditures account                        119      1,229
     Tax and insurance reserve                         1,723      1,009
     Tenant bankruptcy reserve                             -        767
     Lockbox                                           1,074        217
     Customer service reserve                             15         10
     Escrow fund                                         613        594
                                                       -----      -----
                                                    $  4,142      5,050
                                                       =====      =====
Interim Financial Statements

  In  the  opinion  of  management,  the unaudited  consolidated  financial
statements  of  the  Company  as of June 30,  1999  and  1998  include  all
adjustments  and  accruals,  consisting only of  normal  recurring  accrual
adjustments, which are necessary for a fair presentation of the results for
the  interim periods.  These interim results are not necessarily indicative
of results for a full year.

  Certain  information  and  footnote  disclosures  normally  included   in
financial  statements  prepared  in  accordance  with  generally   accepted
accounting  principles  have  been condensed  or  omitted  in  this  Report
pursuant  to  the  rules  and regulations of the  Securities  and  Exchange
Commission.   These  consolidated financial statements should  be  read  in
conjunction  with the consolidated financial statements and  notes  thereto
included in the 1998 Form 10-K of the Company.

2. Liquidity

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

  The  Company has a highly leveraged capital structure with $21.0  million
of  interest payments due by April 15, 2000 on its 10.5% Senior  Notes  and
approximately $6.9 million of principal and approximately $10.9 million  of
cash  interest  payments  due by June 30, 2000  on  its  other  obligations
(principally  related  to  Red Oak).  Due to severely  depressed  commodity
prices  experienced by the oil and gas industry during the last quarter  of
1997, throughout 1998 and continuing through the first quarter of 1999  and
lagging rental property utilization, the Company is experiencing difficulty
in  generating sufficient cash flow to meet its obligations and sustain its
operations.   Management  is attempting to renegotiate  the  terms  of  the
Company's  various  obligations with its note holders  and  lenders  and/or
attempting   to  seek  new  lenders  or  equity  investors.   Additionally,
management would consider disposing of certain assets in order to meet  its
obligations.

<PAGE>

            SOUTHWEST ROYALTIES HOLDINGS, INC. AND SUBSIDIARIES
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Liquidity - continued

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

3. Commitments and Contingencies

  The   Company   is  subject  to  extensive  federal,  state   and   local
environmental  laws  and  regulations.  These laws,  which  are  constantly
changing, regulate the discharge of materials into the environment and  may
require the Company to remove or mitigate the environmental effects of  the
disposal  or release of petroleum or chemical substances at various  sites.
Environmental expenditures are expensed or capitalized depending  on  their
future economic benefit.  Expenditures that relate to an existing condition
caused  by  past operations and that have no future economic  benefits  are
expensed.  Liabilities for expenditures of a noncapital nature are expensed
when  environmental assessment and/or remediation is probable and the costs
can be reasonably estimated.

  Management  recognizes  a  financial exposure  that  may  require  future
expenditures  presently  existing for oil  and  gas  properties  and  other
operations.  As of June 30, 1999, the Company has not been fined, cited  or
notified  of  any  environmental violations which  would  have  a  material
adverse  effect  upon  capital expenditures, earnings  or  the  competitive
position  in  the oil and gas industry. However, management does  recognize
that  by  the  very  nature  of its business, significant  costs  could  be
incurred  to  bring the Company into total compliance. The amount  of  such
future  expenditures  is not readily determinable due to  several  factors,
including  the  unknown magnitude of possible contaminations,  the  unknown
timing  and  extent of the corrective actions which may  be  required,  the
determination of the Company's liability in proportion to other responsible
parties  and  the  extent to which such expenditures are  recoverable  from
insurance   or   indemnifications  from  prior  owners  of  the   Company's
properties. It is reasonably possible this estimate could change materially
in the near term.

  In  the  normal course of its business, the Company is subject to pending
or threatened legal actions; in the opinion of management, any such matters
will  be resolved without material effect on the Company's operations, cash
flows or financial position.

4. Commodity Hedging and Derivative Financial Instruments

  The  Company,  from time to time, uses option contracts to  mitigate  the
volatility of price changes on commodities the Company produces  and  sells
as  well  as to lock in prices to protect the economics related to  certain
capital projects.


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

4.   Commodity Hedging and Derivative Financial Instruments - continued

  On  March 15, 1999, Southwest entered into a commodity swap agreements to
hedge  a  portion of its crude oil sales.  The agreement is for a  notional
amount  of 1,000 BBls of oil a day, approximately 30% of total current  oil
production, with a strike price of $14.67, based on West Texas Intermediate
-  NYMEX.   The contract is for the period April 1, 1999 through  June  30,
1999,  but  can  be extended to September 30, 1999, at the  option  of  the
counter-party.  The contract period was extended until September 30, 1999.

  The  Company  entered  into  three additional commodity  swap  agreements
subsequent to June 30, 1999 (See Note 7).

5.  Long-term Debt

     Long-term debt consists of the following (in thousands):
                                                    June 30,  December 31,
                                                      1999        1998
                                                     -----       -----
     10.5% Senior Notes, interest payable semi-annually due
      October 15, 2004, net of $1,979 and $2,116 discount,
      respectively                                  $198,021  $197,884
     13.5% Notes payable, due April 2000.  Cash interest of
      10.5% payable monthly with additional interest payable
      based on excess cash flow or through the issuance of
       additional  notes.  Collateralized by  real  estate.               -
72,273
     Revolving line of credit, variable interest, due February
       1999.   Collateralized by oil and  gas  properties                 1
40
     Capital lease obligations                             -       418
     Variable Rate Notes Payables:
     Notes payable due July 2001.  Variable interest due and
      payable monthly with additional 1% payable based on
       lock  box  agreement.  Net of $1,278 and $1,611  discount     14,230
13,891
     Note payable due December 2001.  Variable interest due and
      payable monthly with additional 1% payable based on
       lock  box  agreement.  Net of $3,222 and $3,889  discount     22,613
21,806
     Note payable due July 2002.  Variable interest due  and
      payable monthly with additional 1% payable based on
      lock box agreement.  Net of $4,740 discount     97,635         -
     Other                                            11,018    28,772
                                                     -------   -------
                                                     343,518   335,084
     Less current maturities                           6,913    12,716
                                                     -------   -------
                                                    $336,605  $322,368
                                                     =======   =======
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.

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

5.  Long-term Debt - continued

  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.

13.5% Note Payable

  In  April  1997 MRO Properties Inc. ("MROP"), a 100% owned subsidiary  of
Red  Oak entered into a $42 million credit facility maturing in April  2000
with an institutional lender (the "MROP Facility").  The MROP Facility  was
executed  in order to consolidate nine mortgage loans, originally  incurred
to  complete the acquisition of certain Red Oak properties and  to  finance
the  acquisition  of an additional real estate property.  Borrowings  under
the  facility bear interest at a rate of 13%, with 10% payable in cash  and
the  remaining  3%  payable  in  cash or additional  notes.   The  facility
contains  a  number  of  covenants that, among other things,  restrict  the
ability  of  MROP to incur additional indebtedness and dispose  of  assets.
The  facility  is secured by a first lien on substantially  all  of  MROP's
properties.  In September 1997, the Company negotiated an additional  $30.5
million in loan proceeds which was used to acquire a retail shopping center
and office building in Oklahoma City, Oklahoma and a retail shopping center
in  San  Antonio,  Texas.   The loan is collateralized  by  the  properties
purchased,  and by properties contributed by the Company.   This  note  was
repaid with a portion of the proceeds from the June 1999 Variable Rate Note
Payable.

Revolving Line of Credit

  Southwest  Credit Facility. The Southwest Credit Facility was amended  to
provide for a $75 million revolving line of credit due upon demand, 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.   During  the  second
quarter, in response to the sustained low oil price environment, the lender
issued  lower pricing parameters for the computation of the borrowing  base
for  all  of  its  oil and gas customers. Using the new  price  parameters,
Southwest has no current availability under its line of credit.  The lender
schedules  quarterly reviews of its pricing policy and  should  oil  prices
strengthen,  the Company can request a redetermination at  that  time.   At
June  30,  1999, Southwest is in violation of the minimum interest coverage
ratio.  Southwest will not seek a waiver as the violation does not create a
cross  default on any other debt and the $1,000 outstanding on  the  credit
facility is already classified as current on the Company's balance sheet.

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

5.  Long-term Debt - continued

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 for capital improvements  to
the  rental  property purchased and has not been utilized as  of  June  30,
1999.  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 rental property.  The $9.7 million note is for  capital
improvements to the rental property purchased and has not been utilized  as
of  December  31,  1998.   The  notes are collateralized  by  the  property
purchased.

  In  June 1999, MRO Southwest, Inc., a wholly owned subsidiary of Red  Oak
negotiated two notes payable in the amount of $97.5 million, net of a  $4.9
million  discount,  and  $8.0 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  basis  points  per  annum.  Approximately $93.6 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 has not been utilized as of June 30, 1999.  The  notes
are  collateralized  by the properties owned by MRO Southwest.   The  notes
impose   certain   restrictive  covenants  such  as  to  incur   additional
indebtedness, to dissolve, terminate or liquidate all or substantially  all
of  the  assets, change legal structure of the assets, make  any  loans  or
advances to any third party and commingle its assets with the assets of any
of its affiliates or of any other person or entity.

  As  of  June 30, 1999, Red Oak was in technical default on two term notes
payable  and  one  debenture,  for failure to pay  principal  and  interest
payments on the stated due dates.  These notes are classified as current in
the  Company's  consolidated balance sheet at June 30, 1999. Subsequent  to
June  30,  1999  the  principal and interest payments have  been  made  and
therefore the technical defaults have been cured.

Extinguishment of Debt

  In  June  1999,  the Company repaid certain notes payable  with  proceeds
from  the  aforementioned Variable Note Payable issued  in  June  of  1999.
Prepayment  penalties  and the remaining unamortized  deferred  debt  costs
associated with these notes resulted in an extraordinary charge  of  $1,593
million  or  $(1.48)  per  share.  Since there is no  recorded  income  tax
benefits  on continuing operations there is no income tax benefits recorded
on the extraordinary loss.

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

5.  Long-term Debt - continued

  Aggregate  maturities  of  all  long-term  debt  as  of  June  30,  1999,
including capital leases, are as follows (in thousands):

     For the twelve
     months ended
     --------------
     June 30, 2000                                  $  6,913
     June 30, 2001                                    14,478
     June 30, 2002                                    23,378
     June 30, 2003                                    98,039
     June 30, 2004                                        89
     Thereafter                                      200,621
                                                     -------
                                                    $343,518
                                                     =======
6. Lines of Business

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

                              Three months ended  Six months ended
                                   June 30,           June 30,
                              ------------------ -----------------
                                 1999     1998      1999      1998
                                -----    -----     -----     -----
                                (in thousands)     (in thousands)
                                 (unaudited)        (unaudited)
 Operating profit (loss)
   Oil and gas              $   2,564   $(30,428) $ 3,673   $(30,974)
   Real estate                  1,755     1,702     4,350     3,680
   Other and eliminations               (46)      (68)      12        (23)
                              -------    ------    ------    ------
                            $   4,273   $(28,794) $ 8,035   $(27,317)
                              =======    ======    ======    ======
 Interest Expense
   Oil and gas              $   5,601   $ 5,569   $11,128   $11,127
   Real Estate                  4,831     2,965    10,039     5,746
   Other and eliminations               (57)      31        (104)     45
                              -------    ------    ------    ------
                            $  10,375   $ 8,565   $21,063   $16,918
                              =======    ======    ======    ======

 Depreciation, depletion and
   amortization
   Oil and gas              $   1,308   $ 4,478   $ 2,979   $ 8,169
   Real Estate                  1,198       698     2,222     1,226
   Other and eliminations               36        47        85        93
                              -------    ------    ------    ------
                            $   2,542   $ 5,223   $ 5,286   $ 9,488
                              =======    ======    ======    ======

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

6. Lines of Business - continued
                              Three months ended  Six months ended
                                   June 30,           June 30,
                              ------------------ -----------------
                                 1999     1998      1999      1998
                                -----    -----     -----     -----
                                (in thousands)     (in thousands)
                                 (unaudited)        (unaudited)

 Capital expenditures
   Oil and gas              $     513   $ 2,537   $   784   $ 6,955
   Real Estate                  1,003    25,043     1,597    25,868
   Other and eliminations               -         110       -         194
                              -------    ------    ------    ------
                            $   1,516   $27,690   $ 2,381   $33,017
                              =======    ======    ======    ======

                                            June 30,December 31,
                                               1999      1998
                                            --------------------
Identifiable assets
  Oil and gas                                $102,445  $111,876
  Real estate                                149,938   148,340
  Other and eliminations                     (2,788)   (2,666)
                                             -------   -------
                                             $249,595  $257,550
                                             =======   =======
7.  Subsequent Events

  On  July  9,  1999, Southwest entered into a commodity swap agreement  to
hedge  a  portion of its crude oil sales.  The agreement is for a  notional
amount  of 1,000 BBls of oil a day, approximately 30% of total current  oil
production, with a strike price of $20.22, based on West Texas Intermediate
- NYMEX.  The contract is for the period August 1, 1999 through October 31,
1999, but can be extended to January 31, 2000, at the option of the counter-
party.

  On  July  28, 1999, Southwest entered into a commodity swap agreement  to
hedge  a portion of its natural gas sales.  The agreement is for a notional
amount of 2,250 MMBtu of gas a day, approximately 25% of total current  gas
production, with a strike price of $2.78, based on Henry Hub - NYMEX.   The
contract is for the period September 1, 1999 through November 30, 1999, but
can be extended to February 28, 2000, at the option of the counter-party.

  On  July  29, 1999, Southwest entered into a commodity swap agreement  to
hedge  a portion of its natural gas sales.  The agreement is for a notional
amount of 2,250 MMBtu of gas a day, approximately 25% of total current  gas
production, with a strike price of $2.64, based on Henry Hub - NYMEX.   The
contract is for the period September 1, 1999 through November 30, 1999.

   On  August  17,  1999,  Midland Red Oak Realty,  Inc.  sold  two  office
buildings  for approximately $2.1 million.  Approximately $1.5  million  of
the  sales  proceeds  were used to pay off mortgaged debt  associated  with
these  properties  and  approximately $500,000 were available  for  working
capital.

<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.

Results of Operations

Three months and six months ended June 30, 1999 compared to three months
and six months June 30, 1998

  The  following table summarizes production volumes, average sales  prices
and  period to period comparisons for the Company's oil and gas operations,
including the effect on revenues, for the periods indicated:
                                 Three months ended   Six months ended
                                      June 30,            June 30,
                                ------------------- -------------------
                                  1999       1998     1999       1998
                                 -----      -----    -----      -----
                                   (in thousands)      (in thousands)
                                    (unaudited)         (unaudited)
Production volumes:
       Oil and condensate (MBbls)              333       460       689
929
       Natural gas (MMcf)            988     1,488     2,139     3,010

Average sales prices:
       Oil and condensate (per Bbl)    $  14.99  $  12.99  $  13.08  $
13.66
       Natural gas (per Mcf)    $   1.94  $   1.95  $   1.88  $   1.94

  Revenues. Revenues for the Company decreased 3% to $14.9 million for  the
three months ended June 30, 1999 and 3% to $29.5 million for the six months
ended June 30, 1999, as compared to $15.4 million and $30.4 million for the
same periods in 1998.

  Oil  and gas revenues decreased 24% to $7.0 million for the three  months
ended June 30, 1999 and 31% to $13.1 million for the six months ended  June
30,  1999,  as  compared to $9.1 million and $18.8  million  for  the  same
periods  in  1998.   For  the three and six months  ended  June  30,  1999,
decreased   production   contributed  $2.6  million   and   $5.0   million,
respectively  to  the  decline  in oil  and  gas  revenues.   Oil  and  gas
production  decreased  30%, or approximately 2,313  BOEPD,  for  the  three
months  ended June 30, 1999 and 27%, or approximately 2,130 BOEPD, for  the
six months ended June 30, 1999, as compared to the same periods in 1998. 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 $7.9  million
since  July  1, 1998.  The production decline resulting from  oil  and  gas
property  sales  was  approximately  1,100  BOEPD,  or  14%  of  the  total
production  decline  for  the  three  months  ended  June  30,   1999   and
approximately 900 BOEPD, or 11% of the total production decline for the six
months ended June 30, 1999. The remainder of the production decline for the
three and six months ended June 30, 1999 are the results of natural decline
and  production being shut-in due to the devastating drop in  oil  and  gas
prices experienced by the Industry throughout 1998 and the first quarter of
1999.


<PAGE>
  Real  estate revenues increased 32% to $7.7 million for the three  months
ended June 30, 1999 and 48% to $16.0 million for the six months ended  June
30,  1999,  as  compared to $5.9 million and $10.8  million  for  the  same
periods  in  1998.   The increase in revenues is due primarily  to  several
acquisitions which were made subsequent to June 30, 1998.

  Operating    Expenses.   Operating   expenses,   before    general    and
administrative   expense,  impairment  of  oil  and  gas   properties   and
depreciation, depletion and amortization, decreased 14% to $7.4 million and
11%  to  $14.7  million for the three and six months ended June  30,  1999,
respectively, as compared to $8.7 million and $16.6 million  for  the  same
periods in 1998.

  Oil  and  gas operating expense decreased approximately 47% to  $2.8  for
the  three months ended June 30, 1999 and approximately 47% to $5.6 for the
six  months  ended June 30, 1999, due primarily to management's efforts  to
cut   expenses  through  more  efficient  operations,  and  by  selectively
eliminating  high  operating  expense  properties  from  its  oil  and  gas
portfolio. The average operating expense decreased 24% to $5.55 per BOE for
the  three months ended June 30, 1999 and 28% to $5.39 per BOE for the  six
months  ended  June  30, 1999 from $7.35 and $7.45 per  BOE  for  the  same
periods in 1998.

  Real  estate  operating expense increased 42% to  $4.4  million  for  the
three months ended June 30, 1999 and 65% to $8.6 million for the six months
ended  June 30, 1999, as compared to $3.1 million and $5.3 million for  the
same  periods  in  1998.   These increases were due  primarily  to  several
acquisitions, which were made subsequent to June 30, 1998.

  General  and  Administrative  (''G&A'')  Expense.  G&A  expense  for  the
Company decreased 46% to $673,000 for the three months ended June 30,  1999
and 44% to $1.5 million for the six months ended June 30, 1999, as compared
to  $1.3 million and $2.6 million for the same periods in 1998. Oil and gas
G&A  expense per BOE decreased 45% to $.68 for the three months ended  June
30,  1999  from  $1.24 per BOE for the same period in 1998.   For  the  six
months ended June 30, 1999, G&A expense per BOE decreased 46% to $.76  from
$1.42  per BOE for the same period in 1998, due primarily to reductions  in
oil  and  gas  technical  and  administrative  staff  in  response  to  the
significant  decrease  in oil and gas prices experienced  throughout  1998.
Real  estate  G&A expense increased 1% to $371,000 and 15% to $731,000  for
the  three  and six months ended June 30, 1999, respectively from  $369,000
and  $636,000  for  the  comparable periods of  1998.   The  increases  are
directly   related  to  administrative  staff  increases  necessitated   by
acquisitions completed in 1998.

  Depreciation,   Depletion  and  Amortization  (''DD&A'')  Expense.   DD&A
expense  for  the  Company decreased 51% to $2.5 million and  44%  to  $5.3
million for the three and six months ended June 30, 1999, respectively,  as
compared  to  $5.2 million and $9.5 million for the same periods  in  1998.
Oil  and  gas depletion expense on a BOE basis, decreased 61% to $2.37  per
BOE  for  the three months ended June 30, 1999 from $6.13 per BOE  for  the
same  period  in  1998.  For the six months ended June 30, 1999,  depletion
expense  per  BOE decreased 53% to $2.60 from $5.53 per BOE  for  the  same
period  in 1998.  The decrease in DD&A expense on an overall basis and  per
BOE  is  due  primarily  to  the reduction in the  carrying  value  of  the
Company's   oil   and  gas  properties  because  of  the   impairment,   of
approximately  $64  million, which was recorded during 1998.   Real  estate
DD&A expense increased 72% to $1.2 million and 81% to $2.2 million for  the
three  and  six months ended June 30, 1999, respectively from $698,000  and
$1.2   million  for  the  three  and  six  months  ended  June  30,   1998,
respectively, due to the impact of acquisitions.

  Interest Expense. Interest expense for the Company increased 21% and  25%
to  $10.4 million and $21.1 million for the three and six months ended June
30,  1999, respectively, as compared to $8.6 million and $16.9 million  for
the  same  periods in 1998.  The increase results from increased borrowings
incurred  to fund a portion of the Company's acquisitions and oil  and  gas
development.   Oil  and  gas  interest expense remained  constant  at  $5.6
million and $11.1 million for the three and six months ended June 30,  1999
and  1998 respectively. Real estate interest expense increased 63% to  $4.8
million  for the three months ended June 30, 1999 and 75% to $10.0  million
for  the  six  months ended June 30, 1999, as compared to $3.0 million  and
$5.7  million  for  the same periods in 1998.  The increases  were  due  to
additional debt used to finance real estate acquisitions during 1998.

<PAGE>
  Equity  in Loss of Subsidiary.  Equity in Loss of Subsidiary resulted  in
a  charge of $931,000 for the six months ended June 30, 1999.  This  amount
relates to the Company's 30% investment in Sierra.

  Net  Income. Due to the factors described above, net loss for the Company
decreased  79% and 64% to $7.7 million and $15.1 million for the three  and
six months ended June 30, 1999, respectively, as compared to a net loss  of
$37.0 million and $41.7 million for the same periods in 1998, respectively.

Liquidity and Capital Resources

  Management is constantly monitoring its cash position and its ability  to
meet  financial obligations as they become due, and as part of this effort,
is  exploring  various  strategies for addressing its  current  and  future
liquidity needs.  As of June 30, 1999, SRH's consolidated cash balance  was
approximately  $14.2  million,  of which approximately  $13.0  million  was
available to Southwest.

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

  SRH  has  a  highly  leveraged capital structure with  $21.0  million  of
interest  payments  due  by April 15, 2000 on its 10.5%  Senior  Notes  and
approximately $6.9 million of principal and approximately $10.9 million  of
cash  interest  payments  due by June 30, 2000  on  its  other  obligations
(principally  related  to  Red Oak).  Due to severely  depressed  commodity
prices  experienced by the oil and gas industry during the last quarter  of
1997, throughout 1998 and continuing through the first quarter of 1999  and
lagging  rental  property  utilization, SRH is experiencing  difficulty  in
generating  sufficient cash flow to meet its obligations  and  sustain  its
operations.   Management is currently in the process of  renegotiating  the
terms  of SRH's various obligations with its note holders and/or attempting
to  seek  new lenders or equity investors.  Additionally, management  would
consider disposing of certain assets in order to meet its obligations.

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

<PAGE>

Net Cash Used In Operating Activities

  Net  cash used in operating activities was $7.3 million and $6.5  million
for the three and six months ended June 30, 1999, respectively, as compared
to  net  cash used in operating activities of $5.8 million and $2.0 million
for  the  same  periods in 1998.  The increase in cash  used  in  operating
activities,  is  primarily  attributable  to  decreases  in  oil  and   gas
production  and  commodity  prices as well as increased  interest  expense,
offset by lower operating costs.

Net Cash Provided By Investing Activities

  Net  cash provided by (used in) investing activities by the Company  were
$7.4  million and $4.8 million for the three and six months ended June  30,
1999, as compared to $(23.4) million and $(30.8) for the comparable periods
in  1998.  Oil and gas property sales were the primary sources of funds for
both periods.

  In  response to the substantial decrease in oil prices during  1998,  SRH
has  initiated  a  short-term alternate business plan that  delays  certain
development and exploratory projects until oil and gas industry  conditions
improve.   Based on this plan, SRH has tentatively budgeted $8  million  in
capital  expenditures  at Southwest for oil and gas  development  projects.
This  budget  is subject to change based on financial strategies  currently
being  developed,  including  hedging  strategies,  divestitures  and  debt
restructuring, as well as the level of oil and gas prices in the future.

Net Cash Provided by (Used in) Financing Activities.

  Net  cash  provided by (used in) the Company's financing  activities  was
$(544,000)  and  $2.1 million for the three and six months ended  June  30,
1999  and  $23.6  million and $24.9 million for the same  period  in  1998,
respectively.   Net cash provided by financing activities, were  from  debt
refinancing and were mainly used to fund real estate operations in 1999.

Other Issues

  The  information included in "Other Issues" in Item 7 of SHR's 1998  Form
10-K regarding Information Systems for the year 2000 is incorporated herein
by  reference.  As of June 30, 1999, there have been no material changes in
SRH's Year 2000 disclosure.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

  The  information  included in "Quantitative and  Qualitative  Disclosures
About  Market  Risk"  in Item 7A of SRH's 1998 Form  10-K  is  incorporated
herein  by  reference.   Such information includes a description  of  SHR's
potential  exposure  to market risks, including commodity  price  risk  and
SHR's interest rate risk.  As of June 30, 1999, there have been no material
changes in SRH's market risk exposure from that disclosed in the 1998  Form
10-K (see Note 4 and Note 7).

<PAGE>
                        PART II - OTHER INFORMATION

ITEM 6.   REPORTS ON FORM 8K AND EXHIBITS

Reports on Form 8-K

None.


Exhibits

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


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


27*  Financial Data Schedule.

*    Filed herewith.


<PAGE>
                                SIGNATURES
                         SOUTHWEST ROYALTIES, INC.

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

                                 SOUTHWEST ROYALTIES, INC.

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

                                 Date:  August 20, 1999

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

SIGNATURE                        TITLE                   DATE
---------                        -----                   -----

/s/ H.H. Wommack, III
-----------------------------
H. H. Wommack, III               Chairman/President/
                                 Chief Executive Officer August 20, 1999

/s/ Bill E. Coggin
-----------------------------
Bill E. Coggin                   Vice President/Chief
                                 Financial Officer       August 20, 1999

/s/ H. Allen Corey
-----------------------------
H. Allen Corey                   Director/Secretary      August 20, 1999


<PAGE>
                                SIGNATURES
                    SOUTHWEST ROYALTIES HOLDINGS, INC.

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

                                 SOUTHWEST ROYALTIES HOLDINGS, INC.

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

                                 Date:  August 20, 1999

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

SIGNATURE                        TITLE                   DATE
---------                        -----                   -----

/s/ H.H. Wommack, III
-----------------------------
H. H. Wommack, III               Chairman/President/
                                 Chief Executive Officer August 20, 1999

/s/ Bill E. Coggin
-----------------------------
Bill E. Coggin                   Vice President/Chief
                                 Financial Officer       August 20, 1999

/s/ H. Allen Corey
-----------------------------
H. Allen Corey                   Director/Secretary      August 20, 1999


<PAGE>