UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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, 1997

     |_|              TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
                      SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 0-19931


                   HALLWOOD CONSOLIDATED RESOURCES CORPORATION
             (Exact name of registrant as specified in its charter)



            Delaware
(State or other jurisdiction of                                       84-1176750
incorporation or organization)                                  (I.R.S. Employer
                                                          Identification Number)
  4582 South Ulster Street Parkway
            Suite 1700
         Denver, Colorado                                                 80237
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (303) 850-7373

Indicate by check mark 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  |_|

Shares of Common Stock outstanding at August 14, 1997                 2,977,542







                                  Page 1 of 21


<PAGE>

<TABLE>
<CAPTION>


PART I.  FINANCIAL  INFORMATION
ITEM 1.  FINANCIAL  STATEMENTS

                                  HALLWOOD  CONSOLIDATED  RESOURCES  CORPORATION
                                           CONSOLIDATED BALANCE  SHEETS
                                                    (Unaudited)
                                           (In thousands except Shares)



                                                                                     June 30,              December 31,
                                                                                       1997                    1996

CURRENT ASSETS
<S>                                                                                <C>                     <C>        
    Cash and cash equivalents                                                      $       987             $       628
    Accrued oil and gas revenue                                                          3,218                   4,808
    Due from affiliates                                                                  1,697                     897
    Prepaid and other assets                                                               120                     493
    Current assets of affiliates                                                         3,145                   3,976
          Total current assets                                                           9,167                  10,802

PROPERTY, PLANT AND EQUIPMENT, at cost
    Oil and gas properties (full cost method)
       Proved oil and gas properties                                                   284,830                 278,581
       Unproved mineral interests - domestic                                             1,758                   1,240
          Total                                                                        286,588                 279,821
    Less - accumulated depreciation, depletion,
       amortization and impairment                                                   (216,537)               (212,536)
          Net property, plant and equipment                                             70,051                  67,285

OTHER ASSETS
    Deferred tax asset                                                                     350                     350
    Noncurrent assets of affiliates                                                         23                      31
          Total other assets                                                               373                     381

TOTAL ASSETS                                                                         $  79,591               $  78,468














<FN>

                                         (Continued on the following page)
</FN>
</TABLE>

                                                        -2-

<PAGE>
<TABLE>
<CAPTION>



                                    HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                                            CONSOLIDATED BALANCE SHEETS
                                                    (Unaudited)
                                           (In thousands except Shares)



                                                                                      June 30,              December 31,
                                                                                        1997                    1996

CURRENT LIABILITIES
<S>                                                                                 <C>                     <C>       
    Accounts payable and accrued liabilities                                        $    2,536              $    2,273
    Current portion of contract settlement obligation                                      992
    Current portion of long-term debt                                                                            3,750
    Current liabilities of affiliates                                                    5,198                   4,826
          Total current liabilities                                                      8,726                  10,849

NONCURRENT LIABILITIES
    Contract settlement obligation                                                                                 948
    Long-term debt                                                                      17,000                  16,250
    Long-term obligations of affiliates                                                  6,596                   7,243
    Deferred liability                                                                     102                     117
          Total noncurrent liabilities                                                  23,698                  24,558

          Total liabilities                                                             32,424                  35,407

STOCKHOLDERS' EQUITY
    Common stock, par value $.01; 10,000,000 shares
       authorized; 2,977,542  shares issued in 1997 and 1996                                30                      30
    Additional paid-in capital                                                          80,060                  80,071
    Accumulated deficit                                                               (29,049)                (33,166)
    Treasury stock - 259,278 shares in 1997 and 1996                                   (3,874)                 (3,874)
          Stockholders' equity - net                                                    47,167                  43,061

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $  79,591               $  78,468














<FN>

                                    The    accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                        -3-

<PAGE>

<TABLE>
<CAPTION>


                                    HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)
                                       (In thousands except per Share data)



                                                                                        For the Three Months Ended
                                                                                                    June 30,
                                                                                         1997                    1996

REVENUES:
<S>                                                                                    <C>                     <C>    
    Oil revenue                                                                        $ 2,951                 $ 4,380
    Gas revenue                                                                          3,360                   3,643
    Pipeline and other                                                                     628                     362
    Contract settlement                                                                      8                      11
    Interest income                                                                         77                      26
                                                                                         7,024                   8,422

EXPENSES:
    Production operating                                                                 2,432                   2,556
    General and administrative                                                             884                     797
    Interest                                                                               566                     604
    Depreciation, depletion and amortization                                             1,934                   2,350
    Other                                                                                                          116
                                                                                         5,816                   6,423

INCOME BEFORE INCOME TAXES                                                               1,208                   1,999

PROVISION FOR INCOME TAXES:
    Current                                                                                 56                      36

NET INCOME                                                                             $ 1,152                 $ 1,963

NET INCOME PER SHARE                                                                 $     .41               $     .72

WEIGHTED AVERAGE COMMON SHARES AND
   COMMON SHARE EQUIVALENTS OUTSTANDING                                                  2,790                   2,712









<FN>



                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                        -4-

<PAGE>

<TABLE>
<CAPTION>


                                    HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)
                                       (In thousands except per Share data)



                                                                                          For the Six Months Ended
                                                                                                    June 30,
                                                                                         1997                    1996

REVENUES:
<S>                                                                                   <C>                     <C>     
    Oil revenue                                                                       $  6,865                $  8,453
    Gas revenue                                                                          8,134                   7,774
    Pipeline and other                                                                   1,028                     708
    Contract settlement                                                                     15                      21
    Interest income                                                                        117                      43
                                                                                        16,159                  16,999

EXPENSES:
    Production operating                                                                 4,947                   5,230
    General and administrative                                                           1,785                   1,621
    Interest                                                                             1,162                   1,344
    Depreciation, depletion and amortization                                             4,001                   4,907
    Other                                                                                                          116
                                                                                        11,895                  13,218

INCOME BEFORE INCOME TAXES                                                               4,264                   3,781

PROVISION FOR INCOME TAXES:
    Current                                                                                147                      68

NET INCOME                                                                            $  4,117                $  3,713

NET INCOME PER SHARE                                                                 $    1.47               $    1.35

WEIGHTED AVERAGE COMMON SHARES AND
   COMMON SHARE EQUIVALENTS OUTSTANDING                                                  2,793                   2,748










<FN>


                                   The     accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                        -5-

<PAGE>
<TABLE>
<CAPTION>




                                   HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (Unaudited)
                                                  (In thousands)



                                                                                        For the Six Months Ended
                                                                                                  June 30,
                                                                                       1997                    1996

OPERATING ACTIVITIES:
<S>                                                                                  <C>                     <C>      
    Net income                                                                       $   4,117               $   3,713
    Adjustments to reconcile net income
       to net cash provided by operating activities:
       Depreciation, depletion and amortization                                          4,001                   4,907
       Noncash interest expense                                                             44                      21
       Undistributed earnings of affiliates                                            (2,131)                 (3,123)
       Recoupment of take-or-pay liability                                                (15)                    (62)

              Cash provided by operations before
                 working capital changes                                                 6,016                   5,456

    Changes in  assets  and  liabilities  provided  (used)  cash net of  noncash
       activity:
          Accrued oil and gas sales                                                      1,590                   (824)
          Due from affiliates                                                            (870)                 (1,305)
          Prepaid and other assets                                                         373                   (137)
          Accounts payable and accrued liabilities                                         263                 (1,790)

              Net cash provided by operating activities                                  7,372                   1,400

INVESTING ACTIVITIES:
    Additions to oil and gas properties                                                (1,498)                   (393)
    Exploration and development costs incurred                                         (3,102)                 (3,270)
    Proceeds from oil and gas property sales                                                26                   1,296
    Refinance of Spraberry investment                                                                          (6,338)
    Distributions received from affiliates                                                 572                     572
    Other                                                                                 (11)

              Net cash  used in investing activities                                   (4,013)                 (8,133)

FINANCING ACTIVITIES:
    Repurchase and retirement of common stock                                                                  (1,752)
    Proceeds from long-term debt                                                                                 8,000
    Payments on long-term debt                                                         (3,000)
    Payments on contract settlement obligation                                                                   (119)

              Net cash provided by (used in) financing activities                      (3,000)                   6,129

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       359                   (604)

CASH AND CASH EQUIVALENTS:

BEGINNING OF PERIOD                                                                        628                   1,139

END OF PERIOD                                                                        $     987               $     535


<FN>

                                    The    accompanying  notes  are an  integral
                                           part of the financial statements.
</FN>
</TABLE>

                                                        -6-

<PAGE>



                   HALLWOOD CONSOLIDATED RESOURCES CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 -      ORGANIZATION AND BASIS OF PRESENTATION

Hallwood  Consolidated  Resources  Corporation  ("HCRC" or the  "Company")  is a
Delaware   corporation  engaged  in  the  development,   production,   sale  and
transportation of oil and gas, and in the acquisition,  exploration, development
and operation of oil and gas properties.  The Company's properties are primarily
located in the Rocky Mountain,  Mid- Continent,  Texas and Gulf Coast regions of
the United States.

The  interim  financial  data  in  the  accompanying  financial  statements  are
unaudited;  however, in the opinion of management,  the interim data include all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair  presentation  of the  results  for the interim  periods.  These  financial
statements  should be read in  conjunction  with the  financial  statements  and
accompanying  notes included in the Company's December 31, 1996 Annual Report on
Form 10-K.


NOTE 2 -      ACCOUNTING POLICIES

Consolidation

The  Company   accounts  for  its  interest  in  affiliated   oil  and  gas
partnerships   and  limited   liability   companies   using  the   proportionate
consolidation  method  of  accounting.  The  accompanying  financial  statements
include the  activities of the Company and its pro rata share of the  activities
of Hallwood Energy Partners, L. P. ("HEP").

Treasury Stock

At June 30, 1997 and December 31, 1996 the Company owns approximately 19% of the
outstanding  units of HEP which owns  approximately  46% of the Company's common
stock;  consequently,  the Company has an interest in 259,278 of its own shares.
These  shares  are  treated  as  treasury  stock in the  accompanying  financial
statements.

Computation of Net Income Per Share

Net income per share is computed by dividing net income by the weighted  average
number of common  shares and common  share  equivalents  outstanding  during the
reporting  period.  All share and per share  information  has been  restated  to
reflect the  three-for-one  stock split  described in Note 7. The stock  options
granted during 1995 are considered to be common share  equivalents since January
1, 1996  because the market  price of the common stock has exceeded the exercise
price of the options since that date. The number of common share equivalents was
computed  using the treasury stock method which assumes that the increase in the
number of common  shares is reduced by the number of common  shares  which could
have been  repurchased by the Company with the proceeds from the exercise of the
options (which were assumed to have been made at the average market price of the
common stock during the reporting period).

During February 1997, the Financial  Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). SFAS
128 establishes standards for computing and presenting earnings per share (EPS),
and supersedes APB Opinion No. 15 and its related  interpretations.  It replaces
the presentation of primary EPS with a presentation of basic EPS, which excludes
dilution,  and  requires  dual  presentation  of basic and  diluted  EPS for all
entities with complex capital  structures.  Diluted EPS is computed similarly to
fully  diluted EPS pursuant to Opinion No. 15. SFAS 128 is effective for periods
ending after  December 15, 1997,  including  interim  periods,  and will require
restatement of all prior period EPS data presented;  earlier  application is not
permitted.

                                                        -7-

<PAGE>



A comparison of EPS shown in the  accompany  financial  statements  with the pro
forma amounts that would have been  determined in accordance with SFAS 128 is as
follows:
<TABLE>
<CAPTION>


                                                   For the Quarter Ended June 30,             For the Six Months Ended June 30,
                                                    1997                  1996                  1997                   1996

Primary (Basic):
<S>                                                  <C>                   <C>                  <C>                   <C>  
    As reported                                      $.41                  $.72                 $1.47                 $1.35
    Pro forma                                         .42                   .72                  1.51                  1.35

Fully Diluted (Diluted):
    As reported                                       .41                   .72                  1.47                  1.35
    Pro forma                                         .41                   .70                  1.45                  1.32
</TABLE>

Reclassifications

Certain  reclassifications have been made to the prior period amounts to conform
to the classifications used in the current period.


NOTE 3 -      DEBT

During the second quarter of 1997 the Company and its banks amended their Credit
Agreement to extend the maturity  date to May 31, 1999.  The  borrowing  base is
currently  $25,000,000,  and as of June  30,  1997,  the  Company  has  borrowed
$17,000,000 against the credit line. HCRC's borrowing base is further reduced by
an outstanding contract settlement obligation of $992,000; therefore, its unused
borrowing base totaled $7,008,000 at August 14, 1997.

Borrowings against the credit line bear interest,  at the option of the Company,
at either (i) the banks' Certificate of Deposit rate plus from 1.375% to 1.875%,
(ii) the  Euro-Dollar  rate plus from  1.25% to 1.75% or (iii) the higher of the
prime  rate of  Morgan  Guaranty  Trust  or the sum of  one-half  of 1% plus the
Federal funds rate, plus .75%. The applicable interest rate was 7.2% at June 30,
1997.  Interest is payable at least quarterly,  and quarterly principal payments
of $1,062,500  commence May 31, 1999. The credit  facility is secured by a first
lien on approximately 80% in value of the Company's oil and gas properties.

HCRC has  entered  into  contracts  to  hedge  its  interest  rate  payments  on
$10,000,000  of its debt for  each of 1997 and 1998 and  $5,000,000  for each of
1999 and 2000. HCRC does not use the hedges for trading purposes, but rather for
the  purpose of  providing a measure of  predictability  for a portion of HCRC's
interest payments under its debt agreement,  which has a floating interest rate.
In general,  it is HCRC's goal to hedge 50% of the principal  amount of its debt
for the next two years and 25% for each year of the remaining  term of the debt.
HCRC has  entered  into four  hedges,  of which one is an  interest  rate collar
pursuant to which it pays a floor rate of 7.55% and a ceiling rate of 9.85%, and
the others are interest rate swaps with fixed rates ranging from 5.75% to 6.57%.
The  amounts  received  or  paid  upon  settlement  of  these  transactions  are
recognized as interest expense at the time the interest payments are due.


NOTE 4 -       STATEMENTS OF CASH FLOWS

Cash paid for  interest  during the six months  ended June 30, 1997 and 1996 was
$772,000 and $604,000, respectively.




                                                        -8-

<PAGE>



NOTE 5 -      STOCK OPTION PLAN

During the second  quarter of 1997,  the  Company  adopted a stock  option  plan
covering  159,000  shares of Common  Stock and  granted  options  for all of the
shares under the plan. The terms of this plan are generally  consistent with the
terms of the Company's existing 1995 Stock Option Plan. The options were granted
effective  June 17,  1997 at an  exercise  price of $20.33 per share,  which was
equal to the fair  market  value of the  Common  Stock on the day of grant.  The
options  expire on June 17,  2007,  unless  sooner  terminated  pursuant  to the
provisions of the plan. The options are exercisable  one-third on June 17, 1997,
an additional  one-third June 17, 1998, and the remaining  one-third on June 17,
1999.


NOTE 6 -      LEGAL PROCEEDING

On April 23,  1992,  a lawsuit  was filed in the  Chancery  Court for New Castle
County,  Delaware,  styled Tappe v. Hallwood Consolidated Resources Corporation,
Hallwood  Consolidated  Partners,  L. P.,  Hallwood Oil and Gas, Inc.,  Hallwood
Energy  Partners,  L.P., and Hallwood  Petroleum,  Inc.  (C.A.  No. 12536).  The
lawsuit seeks to rescind the conversion of Hallwood Consolidated Partners,  L.P.
("HCP") into the Company  ("Conversion")  and to recover  damages in unspecified
amounts.  The plaintiff also seeks class  certification  to represent  similarly
situated HCP  unitholders.  In general,  the suit  alleges  that the  defendants
breached  fiduciary duties to HCP unitholders by, among other things,  proposing
allocation  of common  stock in the  Conversion  on a basis  that the  plaintiff
alleges is unfair,  failing to require  that the  allocation  be  approved by an
independent  third party,  causing the costs of proposing  the  Conversion to be
borne  indirectly  by the  partners  of HCP  whether or not the  Conversion  was
completed   and   failing  to   disclose   certain   matters   in  the   Consent
Statement/Prospectus  soliciting  consents  to the  Conversion.  The  defendants
believe that they fully  considered  and disclosed all material  information  in
connection with the Conversion, and they believe that the suit is without merit.
HCRC plans to  vigorously  defend this case,  but  because of its early  stages,
cannot  predict  the outcome of this  matter or any  possible  effect an adverse
outcome might have.


NOTE 7 -      SUBSEQUENT EVENT

During July 1997, the stockholders of HCRC approved an increase in the number of
authorized  shares of its Common Stock from 2,000,000 to  10,000,000.  HCRC also
declared a three-for-one  split of its outstanding Common Stock. The stock split
was effected by issuing,  as a stock dividend,  two additional  shares of Common
Stock for every share currently outstanding.  The stock dividend record date was
August 4 and the  payable  date was August 11. The stock  traded  with Due Bills
from August 4 until  August 11 and traded  Ex-Dividend  on August 12.  After the
stock split,  HCRC has 2,977,542 shares of Common Stock  outstanding.  All share
and per share information has been restated to reflect this three-for-one  stock
split.


ITEM 2 -      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

Liquidity and Capital Resources

Cash Flow

The Company generated  $7,372,000 of cash flow from operating  activities during
the first six months of 1997.  The other  primary  cash  inflow was  $572,000 in
distributions received from affiliates. Cash was primarily used for additions to
property and  exploration  and  development  costs of $4,600,000 and payments on
long-term debt of $3,000,000.

This  resulted  in an  increase in the  Company's  cash of $359,000  for the six
months  ended June 30, 1997 from  $628,000  at December  31, 1996 to $987,000 at
June 30, 1997.


                                                        -9-

<PAGE>



Development Projects and Acquisitions

Through June 30, 1997, HCRC incurred  approximately  $4,600,000 for exploration,
development and acquisition costs toward the 1997 capital budget of $15,500,000.
The expenditures were comprised of approximately  $3,102,000 for exploration and
development and approximately $1,498,000 for property acquisitions.

HCRC's 1997  capital  budget is  allocated  to the  following:  Permian/Delaware
Basins,  Gulf Coast Region,  Rocky Mountain Region, and Mid-Continent  Region. A
description of HCRC's  significant  exploration,  exploitation,  and development
projects to date in 1997 follows.

Permian/Delaware Basins

HCRC has allocated 44% (approximately  $6,800,000) of its 1997 capital budget to
the  Permian/Delaware  Basins located in Texas and Southeastern New Mexico. Thus
far in 1997, HCRC spent  approximately  $1,900,000  drilling 22 exploitation and
development  wells  plus  five  exploration  wells,  and on the  acquisition  of
undeveloped  acreage and geological and geophysical data. Of the wells that were
drilled,  22 (82%) are a success.  During the  remainder of 1997,  HCRC plans to
drill 36 additional  exploitation  and  development  wells and nine  exploration
wells. In July, HCRC acquired  additional  interests in 34 of its existing wells
with potential net volumes of approximately 127,500 equivalent barrels of oil. A
discussion of several of the larger projects within the Basins follows.

In 1996,  HCRC  became  active in the Garden  City/Mills  project  in  Glasscock
County, Texas. This project included the acquisition and processing of 66 square
miles of  nonproprietary  3-D seismic  data and the  drilling of one  successful
exploratory  well  prior to the end of  1996.  In 1997,  HCRC  drilled  a second
successful 10,000 foot delineation well which is currently  producing at a gross
rate of 230 equivalent  barrels of oil per day. HCRC's working  interest in this
well is 25%.  A third  well in this area  recently  failed.  HCRC's  1997  costs
incurred in this area to date are approximately  $220,000.  HCRC will attempt to
drill one additional exploitation well during the remainder of 1997.

The  nonoperated  Merkel Project  consists of 10 square miles of proprietary 3-D
seismic  data in  Jones,  Taylor  and  Nolan  Counties,  Texas.  HCRC  began its
involvement in this area in 1995 with the successful  completion of one well. In
1996, HCRC  participated  in the drilling of eight  additional  wells,  seven of
which were  successful.  In 1997,  HCRC  continued  its  participation  with the
drilling of two more successful  wells,  and four additional wells are currently
underway.  HCRC's  1997  costs  for  these  wells  to date  total  approximately
$130,000. HCRC owns an average 12.5% working interest in this area.

Based on the success in the nonoperated Merkel area, HCRC acquired 74 additional
miles of proprietary  3-D seismic data adjacent to the  nonoperated  area.  HCRC
owns an average 30% working  interest in these wells,  and HPI is the  operator.
HCRC has drilled three successful wells and two unsuccessful  wells in the area.
Ten  additional  wells are scheduled to be drilled during the remainder of 1997.
HCRC's 1997 costs to date for drilling and acreage in the area are approximately
$315,000.

HCRC  purchased an interest in a 3-D seismic  shoot  covering 85 square miles of
acreage for the Griffin Project in Gaines County,  Texas for $455,000.  HCRC has
developed a number of prospects  incorporating different geologic ideas which it
plans to pursue in 1997 and future  years.  The first  prospect,  a 12,800  foot
Devonian/Silurian  well  was  drilled  and  subsequently  plugged  at a cost  of
approximately  $165,000.  HCRC plans to drill 3 additional  exploratory wells in
the area in 1997.

In 1996,  HCRC acquired 106 square miles of 3-D seismic data on the Cowden Ranch
in Crane  County,  Texas.  In early 1997, an  exploratory  well was drilled at a
total cost of approximately  $230,000. This well was dry, and HCRC does not plan
to continue exploration in this area.

HCRC  drilled  three  successful  development  and  exploitation  wells  in  the
Spraberry  area of Texas and plans to drill an  additional 10 wells during 1997.
In 1997, HCRC has spent approximately $225,000 in this area.


                                                       -10-

<PAGE>



Rocky Mountain Region

At the  current  date,  HCRC  has  allocated  approximately  14%  (approximately
$2,100,000) of its 1997 capital  budget to the Rocky Mountain  Region located in
Colorado, Montana, North Dakota, Northwest New Mexico and Wyoming. To date, HCRC
spent approximately  $650,000 on drilling and recompletion of 12 development and
exploitation   wells,  one  exploration  well,  and  acquiring   geological  and
geophysical data. Seven of these wells are a success, and HCRC plans to drill an
additional  16 wells in this  region in 1997.  A  discussion  of major  projects
within the region follows.

In the Lone  Tree  area of  Montana,  HCRC  drilled  one  exploitation  well and
performed two  recompletions;  one well was a success.  Work on a fourth well in
the area increased production on a gross basis by 50 barrels per day. Total 1997
costs for these Montana projects were approximately $95,000.

HCRC  also  purchased  a  12.5%  interest  in the  Hudson  Ranch  project.  This
multi-objective  exploration project focuses on several formations.  HCRC's 1997
costs to date for the project are approximately  $315,000. The first well in the
project is scheduled to be drilled in 1998.

Gulf Coast Region

HCRC's 1997 capital budget allocation for the Gulf Coast Region in Louisiana and
South and East Texas is approximately 13% (approximately  $2,000,000).  In 1997,
HCRC spent  approximately  $200,000 to drill two exploration  wells.  Both wells
were dry. HCRC plans to drill four additional wells within the region during the
remainder of 1997.

In 1997,  HCRC  spent  approximately  $110,000  for tubing  repairs,  additional
perforations  and  miscellaneous  maintenance  costs.  In  addition,  HCRC spent
approximately  $170,000 in 1997 for a 14,500 foot  exploration well in the South
Scott Field of Louisiana, which was unsuccessful.

Other

HCRC's 1997 capital budget  allocation for all other areas is approximately  29%
(approximately  $4,600,000).  To date, HCRC successfully recompleted four wells.
HCRC plans to drill 15 wells in the remainder of 1997.

HCRC is currently  participating in the Stealth  Exploration  Prospect in Garter
County,  Oklahoma.  This  structural  test of two reservoirs will be 19,000 feet
deep and will take  nearly  nine  months  to drill.  HCRC has the right of first
refusal on five additional prospects developed by the same operator in the area.
In 1997, HCRC's cost is approximately $80,000 for its 5% interest in the well.

Projects  begun in the  fourth  quarter  of 1996 have  cost  HCRC  approximately
$525,000  through  the  second  quarter  of 1997.  These  additional  costs  are
comprised primarily of approximately  $200,000 for two unsuccessful  exploratory
wells in the Gulf Coast Region and in the Permian/Delaware Basins.

Financing

During the second  quarter of 1997,  the  Company  and its banks  amended  their
Credit Agreement to extend the maturity date to May 31, 1999. The borrowing base
is  currently  $25,000,000,  and as of June 30,  1997,  the Company has borrowed
$17,000,000 against the credit line. HCRC's borrowing base is further reduced by
an outstanding contract settlement obligation of $992,000; therefore, its unused
borrowing base totaled $7,008,000 at August 14, 1997.

Borrowings against the credit line bear interest,  at the option of the Company,
at either (i) the banks' Certificate of Deposit rate plus from 1.375% to 1.875%,
(ii) the  Euro-Dollar  rate plus from  1.25% to 1.75% or (iii) the higher of the
prime  rate of  Morgan  Guaranty  Trust  or the sum of  one-half  of 1% plus the
Federal funds rate, plus .75%. The applicable interest rate was 7.2% at June 30,
1997.  Interest is payable at least quarterly,  and quarterly principal payments
of $1,062,500  commence May 31, 1999. The credit  facility is secured by a first
lien on approximately 80% in value of the Company's oil and gas properties.

                                                       -11-

<PAGE>



HCRC has  entered  into  contracts  to  hedge  its  interest  rate  payments  on
$10,000,000  of its debt for  each of 1997 and 1998 and  $5,000,000  for each of
1999 and 2000. HCRC does not use the hedges for trading purposes, but rather for
the  purpose of  providing a measure of  predictability  for a portion of HCRC's
interest  payments under its debt agreement which has a floating  interest rate.
In general,  it is HCRC's goal to hedge 50% of the principal  amount of its debt
for the next two years and 25% for each year of the remaining  term of the debt.
HCRC has  entered  into four  hedges,  of which one is an  interest  rate collar
pursuant to which it pays a floor rate of 7.55% and a ceiling rate of 9.85%, and
the others are interest rate swaps with fixed rates ranging from 5.75% to 6.57%.
The  amounts  received  or  paid  upon  settlement  of  these  transactions  are
recognized as interest expense at the time the interest payments are due.

Cautionary Statement Regarding Forward-Looking Statements

In the interest of providing the Company's  stockholders and potential investors
with certain  information  regarding the Company's  future plans and operations,
certain  statements  set forth in this Form 10-Q relate to  management's  future
plans and objectives.  Such statements are  "forward-looking  statements" within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section 21E of the  Securities  Exchange Act of 1934,  as amended.  Although any
forward-looking statements contained in this Form 10-Q or otherwise expressed by
or on behalf of the Company  are, to the  knowledge  and in the  judgment of the
officers and  directors  of the  Company,  expected to prove true and to come to
pass,  management  is not able to predict  the future with  absolute  certainty.
Forward-looking  statements  involve known and unknown  risks and  uncertainties
which may cause the Company's actual performance and financial results in future
periods to differ materially from any projection, estimate or forecasted result.
These risks and uncertainties include, among other things, volatility of oil and
gas prices, competition, risks inherent in the Company's oil and gas operations,
the  inexact  nature of  interpretation  of  seismic  and other  geological  and
geophysical  data,  imprecision of reserve  estimates,  the Company's ability to
replace and expand oil and gas reserves,  and such other risks and uncertainties
described from time to time in the Company's  periodic  reports and filings with
the Securities and Exchange Commission. Accordingly,  stockholders and potential
investors are cautioned that certain events or circumstances  could cause actual
results to differ materially from those projected, estimated or predicted.


                                                       -12-

<PAGE>



Inflation and Changing Prices

Prices

Prices obtained for oil and gas production depend upon numerous factors that are
beyond the control of the Company,  including the extent of domestic and foreign
production,  imports of foreign  oil,  market  demand,  domestic  and  worldwide
economic and political  conditions,  and  government  regulations  and tax laws.
Prices for both oil and gas fluctuated significantly throughout 1996 and through
the second quarter of 1997. The following table sets forth the weighted  average
price  received  each  quarter by the  Company  and the  effects of the  hedging
transactions described below:
<TABLE>
<CAPTION>


                                        Oil                   Oil                    Gas                    Gas
                                   (excluding the        (including the        (excluding the         (including the
                                     effects of            effects of            effects of             effects of
                                      hedging               hedging                hedging                hedging
                                   transactions)         transactions)          transactions)          transactions)
                                     (per bbl)             (per bbl)              (per mcf)              (per mcf)

<S>                                   <C>                    <C>                    <C>                    <C>  
First quarter 1996                    $17.92                 $17.86                 $2.00                  $1.94
Second quarter 1996                    21.00                  20.56                  1.80                   1.80
Third quarter 1996                     21.39                  20.43                  1.99                   1.94
Fourth quarter 1996                    24.00                  22.00                  2.66                   2.27
First quarter 1997                     23.56                  20.49                  2.64                   2.41
Second quarter 1997                    17.85                  17.88                  1.91                   1.87
</TABLE>

The Company has entered into numerous financial  contracts to hedge the price of
its oil and  natural  gas.  The  purpose of the hedges is to provide  protection
against  price  decreases  and to provide a measure of stability in the volatile
environment  of oil and natural gas spot pricing.  The revenue  associated  with
these  contracts  is  recognized  as oil or gas  revenue  at the time the hedged
volumes are sold.

The following  table provides a summary of the Company's  outstanding  financial
contracts:


                                     Oil
                                     Percent of Direct           Contract
            Period                   Production Hedged         Floor Price
                                                                (per bbl)

Last six months of 1997                     44%                   $17.88
1998                                        16%                    15.07
1999                                         5%                    15.88

Between  16% and 100% of the oil  volumes  hedged in each year are  subject to a
participating  hedge whereby HCRC will receive the contract  price if the posted
futures  price is lower than the contract  price,  and will receive the contract
price plus between 25% and 75% of the difference  between the contract price and
the  posted  futures  price if the  posted  futures  price is  greater  than the
contract  price.  Between  35% and 100% of the  volumes  hedged in each year are
subject to a collar  agreement  whereby HCRC will receive the contract  price if
the spot price is lower than the contract price, the cap price if the spot price
is higher  than the cap price,  and the spot price if that price is between  the
contract price and the cap price. The cap prices range from $17.00 to $19.35 per
barrel.


                                                       -13-

<PAGE>




                                     Gas
                                     Percent of Direct           Contract
            Period                    Production Hedged        Floor Price
                                                                (per mcf)

Last six months of 1997                     44%                    $1.89
1998                                        40%                     1.91
1999                                        24%                     1.67
2000                                        12%                     1.86

Between  0% and 37% of the gas  volumes  hedged  in each year are  subject  to a
collar agreement  whereby HCRC will receive the contract price if the spot price
is lower than the contract price, the cap price if the spot price is higher than
the cap price,  and the spot price if that price is between the  contract  price
and the cap price. The cap prices range from $2.78 to $2.93 per mcf.

During the third quarter  through July 24, 1997, the weighted  average oil price
(for  barrels not hedged) was  approximately  $18.50 per barrel and the weighted
average  price of natural gas (for mcf not hedged) was  approximately  $2.10 per
mcf.

Inflation

Inflation  did not have a  material  impact  on the  Company  in 1996 and is not
anticipated to have a material impact on the Company in 1997.

Results of Operations

The  following  tables are  presented to contrast  HCRC's  revenue,  expense and
earnings for discussion purposes.  Significant fluctuations are discussed in the
accompanying narrative.

The "direct owned" column represents HCRC's direct royalty and working interests
in oil and gas  properties.  The "HEP"  column  represents  HCRC's  share of the
results of operations of HEP; HCRC owned  approximately  19% of the  outstanding
limited partner units of HEP during 1996 and 1997.


                                                       -14-

<PAGE>



                                                       
<TABLE>
<CAPTION>

                                     TABLE OF HCRC EARNINGS FOR MANAGEMENT DISCUSSION
                                                (In thousands except price)



                                              For the Quarter Ended June 30, 1997       For the Quarter Ended June 30, 1996
                                                Direct                                Direct
                                                Owned        HEP         Total        Owned               HEP               Total

<S>                                             <C>          <C>         <C>         <C>                 <C>               <C>
Oil production (bbl)                               134          31          165         169                 44                213
Gas production (mcf)                             1,365         433        1,798       1,477                546              2,023

Average oil price (per bbl)                     $17.96      $17.58       $17.88      $20.73             $19.91             $20.56
Average gas price (per mcf)                     $ 1.84      $ 1.96       $ 1.87      $ 1.76             $ 1.92            $  1.80

Oil revenue                                    $ 2,406    $    545      $ 2,951     $ 3,504           $    876            $ 4,380
Gas revenue                                      2,513         847        3,360       2,597              1,046              3,643
Pipeline and other                                 434         194          628         235                127                362
Contract settlement                                  8                        8          11                                    11
Interest income                                     53          24           77           2                 24                 26
                                                 -------     ------       ------      ------             -----              ------
       Total revenue                             5,414       1,610        7,024       6,349              2,073              8,422
                                                 -------     ------       ------      ------             -----              ------
Production operating                             1,941         491        2,432       2,055                501              2,556
General and administrative                         696         188          884         674                123                797
Interest                                           414         152          566         418                186                604
Depreciation, depletion and amortization         1,661         273        1,934       1,772                578              2,350
Other                                                                                    70                 46                116
                                                 ------      -----        -----       ------             ------             ------
       Total expense                             4,712       1,104        5,816       4,989              1,434              6,423
                                                 ------      -----        ------      ------             ------             ------
Income before income taxes                         702         506        1,208       1,360                639              1,999
                                                 ------       -----       -----       ------             ------             ------
Provision for income taxes:
    Current                                         56                       56          36                                    36
                                                 ------       -----       ------      ------              -----              -----
       Net income                             $    646    $    506      $ 1,152     $ 1,324           $    639            $ 1,963
                                                 ======       ======      ======     =======              =====             ======
</TABLE>

                                                           -15-

<PAGE>


<TABLE>
<CAPTION>

                                                          

                                     TABLE OF HCRC EARNINGS FOR MANAGEMENT DISCUSSION
                                                (In thousands except price)



                                             For the Six Months Ended June 30, 1997          For the Six Months Ended June 30, 1996
                                                Direct                                        Direct                   
                                                Owned        HEP           Total              Owned         HEP          Total

<S>                                              <C>          <C>           <C>                <C>           <C>          <C>
Oil production (bbl)                               287          69            356                348           93           441
Gas production (mcf)                             2,835         942          3,777              3,037        1,114         4,151

Average oil price (per bbl)                     $19.29      $19.26         $19.28             $19.24       $18.88        $19.17
Average gas price (per mcf)                     $ 2.13      $ 2.22         $ 2.15             $ 1.81       $ 2.05       $  1.87

Oil revenue                                   $  5,536     $ 1,329       $  6,865            $ 6,697      $ 1,756       $ 8,453
Gas revenue                                      6,044       2,090          8,134              5,491        2,283         7,774
Pipeline and other                                 694         334          1,028                446          262           708
Contract settlement                                 15                         15                 21                         21
Interest income                                     71          46            117                  6           37            43
                                                ------       -----         ------             ------       ------        -------
       Total revenue                            12,360       3,799         16,159             12,661        4,338        16,999
                                                ------       -----         ------             ------       ------        -------
Production operating                             3,918       1,029          4,947              4,135        1,095         5,230
General and administrative                       1,375         410          1,785              1,287          334         1,621
Interest                                           860         302          1,162                947          397         1,344
Depreciation, depletion and amortization         3,240         761          4,001              3,700        1,207         4,907
Other                                                                                             70           46           116
                                                 ------      -----        -------            -------        ------      -------
       Total expense                             9,393       2,502         11,895             10,139        3,079        13,218
                                                 ------      ------       -------             -------       ------      -------
Income before income taxes                       2,967       1,297          4,264              2,522        1,259         3,781
                                                 -----       ------        ------             -------       ------      -------
Provision for income taxes:
    Current                                        147                        147                 68                         68
                                                 ------      ------        ------              -----        -----        ------- 
       Net income                              $ 2,820     $ 1,297       $  4,117            $ 2,454      $ 1,259       $ 3,713
                                                 ======      =====          =====              ======      ======        =======
</TABLE>

                                                           -16-

<PAGE>



Second Quarter of 1997 Compared to Second Quarter of 1996

Oil Revenue

Oil revenue  decreased  $1,429,000 during the second quarter of 1997 as compared
with the second  quarter of 1996.  The  decrease  in revenue is  comprised  of a
decrease in oil production  from 213,000  barrels in 1996 to 165,000  barrels in
1997,  combined  with a decrease in the average oil price from $20.56 per barrel
in 1996 to $17.88  per  barrel in 1997.  Approximately  10% of the  decrease  in
production  is due to the  temporary  shut-in  of two wells in  Louisiana  while
workover  procedures  are  performed,  and  the  remainder  of the  decrease  in
production is due to normal  production  declines.  Because the Company's hedged
oil prices were higher than average posted prices in the second quarter of 1997,
the effect of hedging  transactions,  as  described  above,  was to increase the
Company's  average  oil price  from  $17.85  per  barrel to $17.88  per  barrel,
resulting in a $5,000 increase in revenue.

Gas Revenue

Gas revenue  decreased  $283,000  during the second  quarter of 1997 as compared
with the second  quarter of 1996. The decrease is comprised of a decrease in gas
production from 2,023,000 mcf in 1996 to 1,798,000 mcf in 1997, partially offset
by an  increase  in price  from  $1.80 per mcf in 1996 to $1.87 per mcf in 1997.
Approximately  72% of the decrease in production is due to the temporary shut-in
of two wells in  Louisiana  while  workover  procedures  are  performed  and the
remainder of the decrease in  production is due to normal  production  declines.
The effect of the Company's  hedging  activity during the second quarter of 1997
was to decrease the Company's  average gas price from $1.91 per mcf to $1.87 per
mcf, resulting in a $72,000 decrease in revenue.

Pipeline and Other

Pipeline and other revenue consists of revenue derived from salt water disposal,
incentive and tax credit  payments from certain coal bed methane wells and other
miscellaneous  items.  Pipeline and other revenue increased  $266,000 during the
second quarter of 1997 as compared with the second quarter of 1996. The increase
is due to the receipt of insurance  proceeds  during the second quarter of 1997,
which  reimbursed  a portion of  expense  incurred  in a prior  period to settle
certain litigation.

Interest Income

Interest income increased  $51,000 during the second quarter of 1997 as compared
with the second  quarter of 1996 due to a higher  average  cash  balance  during
1997.

Production Operating Expense

Production  operating  expense  decreased  $124,000 during the second quarter of
1997 as  compared  with the  second  quarter of 1996,  primarily  as a result of
decreased  production taxes and operating  expenses due to the decreased oil and
gas production as discussed previously.

General and Administrative Expense

General  and   administrative   expense   includes  costs  incurred  for  direct
administrative  services  such as legal,  audit and  reserve  reports as well as
allocated  internal overhead incurred by Hallwood  Petroleum,  Inc. ("HPI"),  an
affiliate of HCRC,  which manages and operates certain oil and gas properties on
behalf of the Company.  These costs increased  $87,000 during the second quarter
of 1997 as compared with the second quarter of 1996, due to a timing  difference
in the payment of consulting expenses.


                                                       -17-

<PAGE>



Interest Expense

Interest expense decreased $38,000 during the second quarter of 1997 as compared
with the second quarter of 1996 due to lower outstanding debt during 1997.

Depreciation, Depletion and Amortization

Depreciation,  depletion and amortization  expense decreased $416,000 during the
second  quarter of 1997 as compared  with the second  quarter of 1996,  due to a
lower  depletion  rate  caused  by the  decrease  in  production  as  previously
discussed.

Other

Other  expense  during  the  second  quarter of 1996 is  comprised  of  numerous
miscellaneous items, none of which is individually significant.

Provision for Income Taxes

Income  taxes for the second  quarter  of 1997 are less than  would be  expected
using the federal  statutory  rate due to the change in the valuation  allowance
resulting from the utilization of net operating loss carryforwards.

First Six Months 1997 compared to the First Six Months 1996

The  comparisons  for the first six  months of 1997 and the first six  months of
1996 are consistent  with those discussed in the second quarter 1997 compared to
the second quarter 1996 except for the following:

Oil Revenue

Oil revenue decreased $1,588,000 during the first six months of 1997 as compared
with the first six months of 1996.  The  decrease is  comprised of a decrease in
production from 441,000  barrels in 1996 to 356,000  barrels in 1997,  partially
offset by an increase in the average oil price from $19.17 per barrel in 1996 to
$19.28 per barrel in 1997. Approximately 8% of the production decrease is due to
the temporary  shut-in of two wells in Louisiana  while workover  procedures are
performed,  and the  remainder  of the decrease in  production  is due to normal
production declines.

The effect of HCRC's  hedging  transactions  was to decrease  HCRC's average oil
price  from  $19.86 per barrel to $19.28  per  barrel,  representing  a $206,000
decrease in revenues.

Gas Revenue

Gas revenue  increased  $360,000 during the first six months of 1997 as compared
with the first six months of 1996.  The  increase is comprised of an increase in
the average price from $1.87 per mcf in 1996 to $2.15 per mcf in 1997, partially
offset by a decrease  production  from 4,151,000 mcf in 1996 to 3,777,000 mcf in
1997.  Approximately  64% of the  production  decrease  is due to the  temporary
shut-in of two wells in Louisiana  while  workover  procedures are performed and
the  remainder  of the  decrease  in  production  is due  to  normal  production
declines.

The effect of HCRC's  hedging  transactions  was to decrease  HCRC's average gas
price from $2.36 per mcf to $2.15 per mcf,  representing a $793,000 reduction in
revenue from hedging transactions.


                                                       -18-

<PAGE>



PART II -     OTHER INFORMATION


ITEM 1  -     LEGAL PROCEEDINGS

              Reference  is made to Item 8 - Note 14 of Form  10-K  for the year
              ended December 31, 1996, and Item 1 - Note 6 of this Form 10-Q.


ITEM 2  -     CHANGES IN SECURITIES

              None.


ITEM 3  -     DEFAULTS UPON SENIOR SECURITIES

              None.


ITEM 4  -     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              On May 5, 1997, HCRC held its Annual Meeting of Shareholders at
              which Anthony J. Gumbiner, William L. Guzzetti, Brian M. Troup,
              John R. Isaac, Jr., Jerry A. Lubliner, Bill M. Van Meter and 
              Hamilton P. Schrauff were elected directors.  Following is the 
              number of votes cast for and votes withheld for each of the
              directors:


Name                                      Votes For          Votes Withheld

Anthony J. Gumbiner                         788,786                35,984
William L. Guzzetti                         788,865                36,085
Brian M. Troup                              761,016                63,754
John R. Isaac, Jr.                          788,796                35,974
Jerry A. Lubliner                           788,812                35,958
Bill M. Van Meter                           788,830                35,940
Hamilton P. Schrauff                        788,851                35,919

              There were no abstentions or broker non-votes.

              The 1997 Stock Option Plan was also approved,  and votes were cast
as follows:


For                                 599,030
Against                              51,925
Abstain                             213,816

              148,134 broker non-votes and 7,317 actual abstentions are included
in the abstain number above.


                                                       -19-

<PAGE>



              On July 31, 1997,  HCRC held a Special  Meeting of Stockholders at
              which the  stockholders  approved  an  increase  in the  number of
              authorized  shares of common stock from  2,000,000 to  10,000,000.
              The voting on this  matter,  as well as the number of  abstentions
              and broker non-votes, is set forth below.


For                                 883,266
Against                              38,007
Abstain                              15,368
Broker non-votes                        -0-


ITEM 5  -     OTHER INFORMATION

              None.


ITEM 6  -     EXHIBITS AND REPORTS ON FORM 8-K

              Exhibits

              3.2       Certificate of Amendment of Restated Certificate of 
                        Incorporation, effective August 1, 1997

              10.13     Second Amended and Restated Credit Agreement dated as 
                        of May 31, 1997

              10.14     1997 Stock Option Plan

                                                       -20-

<PAGE>



SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly  caused  this  report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized.


                                   HALLWOOD CONSOLIDATED RESOURCES CORPORATION



Date: August 14, 1997             By:      /s/Robert S. Pfeiffer
      ---------------                 ------------------------------------
                                           Robert S. Pfeiffer, Vice President
                                                (Chief Financial Officer)



                                                       -21-

<PAGE>




                                                 INDEX TO EXHIBITS


                                                                       


   3.2    Certificate of Amendment of Restated Certificate of Incorporation,
          effective August 1, 1997

10.13     Second Amended and Restated Credit Agreement dated as of May 31, 1997

10.14     1997 Stock Option Plan

                                                       -22-

<PAGE>