<PAGE> 1





                          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 December 31, 1998

                                          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 0-12757

                              TMBR/SHARP DRILLING, INC.               
                (Exact name of registrant as specified in its charter)

                     TEXAS                                    75-1835108     
         (State or other jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                   Identification No.)

              4607 WEST INDUSTRIAL BLVD.
                    MIDLAND, TEXAS                                79703   
         (Address of principal executive offices)               (Zip Code)

               Registrant's telephone number (area code) (915) 699-5050

          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      

          Indicate  the number  of shares  outstanding of  each of  the issuer's
     classes of common stock, as of the latest practicable date.

          Common Stock, $.10 Par Value         Outstanding at February 10, 1999
                (Title of Class)                         4,710,886








<PAGE> 2
                              TMBR/SHARP DRILLING, INC.
                                   FORM 10-Q REPORT

                                        INDEX



                                                                        Page No.

     Part I.  Financial Information (Unaudited)

       Item 1.  Financial Statements

                Balance Sheets, December 31, 1998 and 
                  March 31, 1998 . . . . . . . . . . . . . . . . . . . .   3

                Statements of Operations, Three Months
                  Ended December 31, 1998 and 1997 . . . . . . . . . . .   5

                Statements of Operations, Nine Months
                  Ended December 31, 1998 and 1997 . . . . . . . . . . .   7

                Statements of Stockholders'
                  Equity   . . . . . . . . . . . . . . . . . . . . . . .   9

                Statements of Cash Flows, Nine Months
                  Ended December 31, 1998 and 1997 . . . . . . . . . . .  10

                Notes to Financial Statements  . . . . . . . . . . . . .  11

       Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations  . . . . . . . . .  16


     Part II.  Other Information

       Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . .  18

       Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . .  19














                                         -2-





<PAGE> 3
     PART ONE - FINANCIAL INFORMATION (UNAUDITED)

     Item 1.  FINANCIAL STATEMENTS


                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                   December 31, 1998 (Unaudited) and March 31, 1998
                        (In thousands, except per share data)



                                                  December 31,
                                                     1998            March 31,  
       ASSETS                                     (Unaudited)          1998     
       ------                                    -------------      -----------

     Current assets:
       Cash and cash equivalents                   $  1,056         $   1,623 
       Marketable securities                             87                87 
       Trade receivables,
         net of allowance for doubtful
           accounts of $1,135 at both 
           December 31, and March 31, 1998            4,937             8,149 
       Inventories                                      119                82 
       Deposits                                         104                73 
       Other                                            595               664 
                                                    --------          --------
         Total current assets                         6,898            10,678 
                                                    --------          --------

     Property and equipment, at cost:
       Drilling equipment                            48,919            48,691 
       Oil and gas properties, based on
         successful efforts accounting               18,027            15,452 
       Other property and equipment                   3,733             3,786 
                                                    --------          --------
                                                     70,679            67,929 

     Less accumulated depreciation,
       depletion and amortization                   (56,015)          (54,132)
                                                    --------          --------

         Net property and equipment                  14,664            13,797 
                                                    --------          --------

     Other assets                                       174               173 
                                                    --------          --------
         Total assets                              $ 21,736          $ 24,648 
                                                    ========          ========

     See accompanying notes to financial statements.

                                         -3-





<PAGE> 4
                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                   December 31, 1998 (Unaudited) and March 31, 1998
                        (In thousands, except per share data)


                                                 December 31, 
                                                    1998            March 31, 
     LIABILITIES AND STOCKHOLDERS' EQUITY        (Unaudited)          1998    
     ------------------------------------       ------------       -----------

     Current liabilities:
       Trade payables                             $   1,662          $  2,622 
       Accrued workers' compensation                     53               411   
       Other                                            629             1,655  
                                                    --------          --------
          Total current liabilities                   2,344             4,688 
                                                    --------          --------


     Contingencies

     Stockholders' equity:
       Common stock, $0.10 par value
         Authorized, 50,000,000 shares;
         issued 5,979,625 shares at 
         December 31, and March 31, 1998                598               598 
       Additional paid-in capital                    69,429            69,429 
       Accumulated deficit                          (50,485)          (49,917)
       Treasury stock-common, 1,268,739
         shares at December 31, and 
         March 31, 1998, at cost                       (150)             (150)
                                                    --------          --------
          Total stockholders' equity                 19,392            19,960 
                                                    --------          --------
          Total liabilities and
            stockholders' equity                  $  21,736         $  24,648 
                                                    ========          ========

     See accompanying notes to financial statements.













                                         -4-





<PAGE> 5
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended December 31, 1998 and 1997 (Unaudited)
                        (In thousands, except per share data)




                                                      Three months ended
                                                         December 31,  
                                                 -----------------------------
                                                    1998              1997    
                                                 -----------       -----------
       Revenues:
          Contract drilling                     $     1,821       $     8,914 
          Oil and gas                                   393               566 
                                                 -----------       -----------
              Total revenues                          2,214             9,480 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                           1,700             5,907 
          Oil and gas production                        227               274 
          Dry holes and abandonments                    186               282 
          Depreciation, depletion and 
            amortization                                531             1,033 
          General and administrative                    457               482 
                                                 -----------       -----------
              Total operating costs
                and expenses                          3,101             7,978 
                                                 -----------       -----------
              Operating (loss) income                  (887)            1,502 
                                                 -----------       -----------

       Other income:
          Interest                                       36                43 
          Gain on sales of assets                        11                95 
          Other, net                                     15                39 
                                                 -----------       -----------
          Total other income                             62               177 
                                                 -----------       -----------
       Net (loss) income before income
          tax benefit (provision)                      (825)            1,679 
       Benefit (provision) for
          income taxes                                    5               (30)
                                                 -----------       -----------

       Net (loss) income                         $     (820)      $     1,649 
                                                 ===========       ===========

     See accompanying notes to financial statements.





                                         
                                         -5-

<PAGE> 6
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended December 31, 1998 and 1997 (Unaudited)
                        (In thousands, except per share data)




                                                      Three months ended 
                                                         December 31,   
                                                 -----------------------------
                                                    1998              1997
                                                 -----------       -----------

     Net (loss) income per common share: 

       Basic                                  $       (.17)       $       .35 
       Diluted                                        (.17)               .32 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding:

       Basic                                      4,710,886         4,704,065 
       Diluted                                    4,710,886         5,229,999 
                                                 ===========       ===========

     See accompanying notes to financial statements.



























                                         
                                         -6-


<PAGE> 7
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Nine months ended December 31, 1998 and 1997 (Unaudited)
                        (In thousands, except per share data)




                                                       Nine months ended
                                                          December 31,  
                                                 -----------------------------
                                                    1998              1997    
                                                 -----------       -----------
       Revenues:
          Contract drilling                      $   11,384       $    27,368 
          Oil and gas                                 1,397             1,519 
                                                 -----------       -----------
              Total revenues                         12,781            28,887 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                           8,802            17,930 
          Oil and gas production                        546               689 
          Dry holes and abandonments                    773               415 
          Depreciation, depletion and 
            amortization                              1,936             2,744 
          General and administrative                  1,468             1,428 
                                                 -----------       -----------
              Total operating costs
                and expenses                         13,525            23,206 
                                                 -----------       -----------
              Operating (loss) income                  (744)            5,681 
                                                 -----------       -----------

       Other income:
          Interest                                      130               110 
          Gain on sales of assets                        31               179 
          Other, net                                     15               987 
                                                 -----------       -----------
          Total other income                            176             1,276 
                                                 -----------       -----------
       Net (loss) income before income
          tax provision                                (568)            6,957 
       Provision for income taxes                        --              (140)
                                                 -----------       -----------

       Net (loss) income                          $    (568)      $     6,817 
                                                 ===========       ===========

     See accompanying notes to financial statements.






                                         -7-


<PAGE> 8
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Nine months ended December 31, 1998 and 1997 (Unaudited)
                        (In thousands, except per share data)




                                                       Nine months ended 
                                                          December 31,   
                                                 -----------------------------
                                                    1998              1997
                                                 -----------       -----------

     Net (loss) income per common share: 

       Basic                                      $    (.12)      $      1.49 
       Diluted                                         (.12)             1.35 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding:

       Basic                                      4,710,886         4,584,125 
       Diluted                                    4,710,886         5,042,417 
                                                 ===========       ===========

     See accompanying notes to financial statements.




























                                         
                                         -8-

<PAGE> 9



                              TMBR/SHARP DRILLING, INC.

                          STATEMENTS OF STOCKHOLDERS EQUITY

                 Nine Months Ended December 31, 1998 (Unaudited) and

                         Year Ended March 31, 1998 (Audited)

                                   (In thousands)



<TABLE>
<CAPTION>                                                                                          
                                                                                                  
                                       Common Stock     Additional                 Treasury Stock       Total
                                      --------------     Paid-In     Accumulated   --------------    Stockholders'
                                      Shares  Amount     Capital       Deficit     Shares  Amount       Equity
                                      ------  ------     -------     -----------   ------  ------    ------------
                 <S>                  <C>     <C>       <C>          <C>           <C>     <C>       <C>
                 Balance, 
                   March 31, 1998     5,980   $ 598     $ 69,429      $(49,917)     1,270  $(150)      $19,960

                 Net loss                --      --           --          (568)        --     --          (568)
                                      -----    -----     --------      --------    -------  -----       -------

                 Balance, 
                   December 31,  
                     1998             5,980   $ 598     $ 69,429      $(50,485)     1,270  $(150)      $19,392
                                      =====    =====     ========      ========    =======  =====       =======
</TABLE>
          See accompanying notes to financial statements.





















                                         -9-
                               
                               
<PAGE> 10
                               TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF CASH FLOWS
           For the nine months ended December 31, 1998 and 1997 (Unaudited)
                                    (In thousands)


                                                  Nine months ended December 31,
                                                  ------------------------------
                                                    1998                 1997
                                                  ---------            ---------
    Cash flows from operating activities:
      Net (loss) income                             $ (568)            $  6,817 
      Adjustments to reconcile net (loss) income
      to net cash provided by
          operating activities:
           Depreciation, depletion and
            amortization                             1,936                2,744 
           Dry holes and abandonments                  773                  415 
           Gain on sales of assets                     (31)                (179)
           Changes in assets and liabilities:
            Trade receivables                        3,212               (3,515)
            Deposits                                   (31)                 (31)
            Inventories and other assets                31                  350 
            Trade payables                            (960)               1,701 
            Accrued interest and other liabilities  (1,384)              (1,116)
                                                   --------             --------
             Total adjustments                       3,546                  369 
                                                   --------             --------
             Net cash provided by
              operating activities                   2,978                7,186 

    Cash flows from investing activities:
      Additions to property and equipment           (3,687)              (7,826)
      Proceeds from sales of property and
        equipment                                      142                  262 
                                                   --------             --------
             Net cash required by
              investing activities                  (3,545)              (7,564)

    Cash flows from financing activities:
      Issuance of common stock                          --                1,027 
                                                   --------             --------
             Net cash provided by
              financing activities                      --                1,027 
                                                   --------             --------
             Net (decrease) increase in
              cash and cash equivalents               (567)                 649 

    Cash and cash equivalents at beginning
      of period                                      1,623                1,048 
                                                   --------             --------
    Cash and cash equivalents at end of 
      period                                       $ 1,056              $ 1,697 
                                                   ========             ========

    See accompanying notes to financial statements.

                                         
                                         -10-
<PAGE> 11


                              TMBR/SHARP DRILLING, INC.
                            NOTES TO FINANCIAL STATEMENTS



          The amounts presented in the  balance sheet as of March 31,  1998 were
     derived from the  Company's audited  financial statements  included in  its
     Form  10-K Report  filed  for the  year  then  ended.   The  notes to  such
     statements are incorporated herein by reference.
      

     (1) Management's Representation

          In  the opinion  of management,  the accompanying  unaudited financial
     statements contain all adjustments (all of which are  of a normal recurring
     nature)  necessary to present fairly the Company's financial position as of
     December 31,  1998 and March  31, 1998, the  results of operations  for the
     three and nine months ended  December 31, 1998 and 1997, and the cash flows
     for the nine month periods ended December 31, 1998 and 1997.

          While the Company believes that the disclosures presented are adequate
     to  make the  information  not  misleading,  it  is  suggested  that  these
     condensed financial  statements be read  in conjunction with  the financial
     statements and the related notes in the Company's Annual Report on Form 10-
     K for the fiscal year ended March 31, 1998.


     (2) Summary of Significant Accounting Policies

     Marketable Securities

          Under  SFAS No. 115,  "Accounting  for Certain Investments in Debt and
     Equity  Securities",   marketable securities,  such as  those owned  by the
     Company,  are  classified as  available-for-sale securities  and are  to be
     reported  at market value, with unrealized gains  and losses, net of income
     taxes,  excluded  from earnings  and reported  as  a separate  component of
     stockholders' equity.  The market value of these securities at December 31,
     1998  was not materially different from the historical cost, and therefore,
     no unrealized gains or losses have been recorded.

     Inventories

          Inventories  consist  primarily of  casing  and tubing.    The Company
     values its inventories at  the lower of  cost or estimated net  recoverable
     value using the specific identification method.

     Property and Equipment

          Drilling  equipment is  depreciated  on  a units-of-production  method
     based  on the  monthly utilization  of the  equipment.   Drilling equipment
     which  is  not utilized  during  a  month is  depreciated  using a  minimum
     utilization rate  of approximately  twenty-five percent.   Estimated useful
     lives range  from four  to eight  years.  Other  property and  equipment is
     depreciated using  the straight-line method of  depreciation with estimated


                                         -11-
<PAGE> 12


     useful lives of three to seven years.

          Oil  and gas properties are accounted for using the successful efforts
     method.   Accordingly, the costs  incurred to acquire  property (proved and
     unproved),  all  development costs  and  successful  exploratory costs  are
     capitalized,  whereas  the  costs  of unsuccessful  exploratory  wells  are
     expensed.  Geological and  geophysical costs, including seismic  costs, are
     charged to  expense when  incurred.   In cases  where the  Company provides
     contract drilling services  related to oil and  gas properties in which  it
     has  an  ownership interest,  the  Company's proportionate  share  of costs
     related to  these properties  is capitalized as  stated above,  net of  the
     Company's working  interest  share of  profits  from the  related  drilling
     contracts.   Capitalized costs  of  undeveloped properties,  which are  not
     depleted until proved reserves  can be associated with the  properties, are
     periodically reviewed for possible impairment. 

          Depletion, depreciation  and amortization  of capitalized oil  and gas
     property costs was  provided using the units-of-production method  based on
     estimated proved or proved  developed oil and gas reserves,  as applicable,
     of the respective property units.

          Major  renewals and  betterments  are capitalized  in the  appropriate
     property accounts while the cost  of repairs and maintenance is  charged to
     operating expense in  the period  incurred.  For  assets sold or  otherwise
     retired, the cost and related accumulated  depreciation amounts are removed
     from the accounts and any resulting gain or loss is recognized.

     Net Income (Loss) Per Common Share

          On  April  1,  1997,  the  Company  adopted   Statement  of  Financial
     Accounting  Standards No.  128  ("SFAS  128")  "Earnings Per  Share"  which
     superseded Accounting  Principles Board Opinion No. 15 ("APB 15") "Earnings
     Per  Share". SFAS 128 simplifies earnings per share ("EPS") calculations by
     replacing  previously  reported  primary  EPS  with   basic  EPS  which  is
     calculated by  dividing reported earnings available  to common shareholders
     by  the weighted average shares  outstanding.  No  dilution for potentially
     dilutive  securities is included in  basic EPS.   Previously reported fully
     diluted EPS is called  diluted EPS which includes all  potentially dilutive
     securities.
      

     (3)  Debt

          Line of Credit

          On January 16, 1996,  the Company entered into  a loan agreement  with
     Norwest  Bank  Texas,  N.A.  ("Norwest") that  provided  for  a  $3,000,000
     revolving line of credit secured by the Company's drilling rigs and related
     equipment, accounts receivable and inventory.  Borrowings under the line of
     credit bore  interest at the  Norwest Bank Minnesota,  National Association
     base  rate and the interest was payable monthly.  The loan agreement had an
     extended maturity  date of April 15,  1998, at which time,  the outstanding
     principal and all of the accrued and unpaid interest were due and payable.



                                         -12-
<PAGE> 13


          In August, 1996, the Company entered into a second loan agreement with
     Norwest.  The  second loan  agreement provided for  a $2,000,000  revolving
     line of credit secured by substantially  all of the Company's producing oil
     and  gas properties.  Borrowings under the  line of credit bore interest at
     the  Norwest base rate and  the interest was payable  monthly.  The line of
     credit had an extended maturity date of April 15, 1998,  at which time, the
     principal  amount outstanding  was due  and payable,  plus any  accrued and
     unpaid interest.   The borrowings under  both loan agreements were  paid in
     full in February, 1997.

          On May  26, 1998,   the  Company renewed and  extended the  prior loan
     agreements  with Norwest.  The amended and restated loan agreement provides
     for a revolving  line of credit equal  to the lesser of  $5,000,000 or one-
     third of the  "borrowing base amount".  The borrowing  base is redetermined
     by Norwest  within 45  days after  the end  of each fiscal  quarter of  the
     Company.    At  December 31,  1998,  the  borrowing  base was  $19,253,695.
     Borrowings under the line  of credit are secured by  the Company's drilling
     rigs  and related equipment, accounts receivable and inventory.  Borrowings
     bear interest at Norwest's base rate and interest is payable  monthly.  The
     Company did not have any borrowings  outstanding at December 31, 1998.  All
     amounts outstanding under the loan agreement mature on May 26, 2000.


     (4)  Stockholders' Equity
      
          1984 Stock Option Plan

          In  August 1984, the Company  adopted the 1984  Stock Option Plan (the
     "Plan") which initially  authorized 375,000 shares of  the Company's common
     stock to be issued as either  incentive stock options or nonqualified stock
     options.   This Plan was amended in  August 1986 to increase the authorized
     shares to 475,000  shares of the Company's common stock.   In January 1988,
     the Plan was amended to  reduce the option price on certain  options issued
     prior to March 31,  1986, to reflect the then current  fair market value of
     the Company's common stock.  The  Plan provides that options may be granted
     to key employees or  directors for various terms  at a price not less  than
     the fair market value of  the shares on the date of the grant.   Options to
     purchase 100,000 shares of common stock are currently outstanding under the
     Plan.   All of these  options are  earned and exercisable  at December  31,
     1998.  No additional shares are available for grant as the  Plan expired by
     its own terms in August 1994.   The options that were granted prior to  the
     expiration of the  Plan, and which are  outstanding, remain subject to  the
     terms of the Plan.

          1994 Stock Option Plan

          In July  1994, the  Company adopted  its 1994  Stock Option  Plan (the
     "1994 Plan")  which  authorized the  grant  of options  to purchase  up  to
     750,000 shares of the Company's common stock.  These options  may be issued
     as  either incentive or nonqualified stock options.  The 1994 Plan provides
     that  options may  be  granted to  key  employees (including  officers  and
     directors who are also key employees) for various terms at a price not less
     than the fair market  value of the shares on  the date of grant.   The 1994
     Plan was ratified and approved by the stockholders at  the Company's annual


                                         -13-
<PAGE> 14


     meeting of  stockholders held  on  August 30,  1994.   In  September  1998,
     options outstanding under the  plan were amended to reduce the option price
     to $4.125 per share.

          On  September  3,  1996,   the  Company  granted  465,000  shares   of
     nonqualified stock  options to  key employees  under  the 1994  Plan.   The
     following  sets forth  certain  information  concerning these  nonqualified
     options.

                                          Number          Option Price
                                            of         -------------------
                                          Shares       Per Share     Total
                                          ------       -------------------

          Outstanding March 31, 1998     337,500       $ 7.75     $ 2,615,625

          Forfeited                       (5,000)      $ 7.75     $   (38,750)
          Reduction in option price          --        $(3.625)   $(1,205,312)
                                         -------         -----      ---------

          Outstanding December 31,
            1998                         332,500        $4.125     $1,371,563
                                         =======         =====      =========

          All of the nonqualified stock options granted on September 3, 1996 are
     earned and exercisable as of May 1, 1997.

          On  September 1, 1998, the Company granted 240,000 shares of incentive
     stock options at a  price of $4.125 to  key employees under the  1994 Plan.
     On  March 9,  1999, 140,000  shares will  be earned  and exercisable.   The
     remaining 
     100,000 shares will become earned and exercisable over a three year period.

          1998 Stock Option Plan

          In  September  1998,  the  Company  adopted,  subject  to  shareholder
     approval, its 1998 Stock Option Plan (the "1998 Plan") which authorizes the
     grant of options  to purchase up to 750,000 shares  of the Company's common
     stock.   These options may  be issued as  either incentive or  nonqualified
     stock  options.  The 1998 Plan provides that  options may be granted to key
     employees or directors from various terms at a price not less than the fair
     market value of  the shares  on the  date of  grant.   The Company  granted
     options to purchase 50,000 shares of common stock to  two outside directors
     under the 1998 Plan.  These nonqualified options were granted at $4.125 per
     share and  are exercisable on  the date  on which the  shareholders of  the
     Company approve and adopt the 1998 Plan.

          In connection with a private placement completed in February 1997, the
     Company issued and currently  has outstanding a warrant to  purchase 36,250
     common shares  with an exercise  price of $13.20  per share.   This warrant
     became exercisable on February 17, 1998  and expires on February 17,  2002.


                                         


                                         -14-
<PAGE> 15

     (6)  Employee Benefits

          Effective  May  1,  1995,   the  Company  established  the  TMBR/Sharp
     Drilling,  Inc. Employee Retirement Plan  which is a  401(K) profit sharing
     plan.   Company contributions are discretionary and have been currently set
     at  25% for  each dollar  contributed by  each eligible  employee, limited,
     however, to a maximum of 5% of the employee's compensation.

     (7)  Contingencies

          The Company is a defendant in various lawsuits generally incidental to
     its business.  The Company does not believe that the ultimate resolution of
     such litigation will have  a significant effect on the  Company's financial
     position or results of operations.

     (8)  Recently Issued Accounting Standards

          In  June  1997,  the FASB  issued  SFAS  No.  131, "Disclosures  about
     Segments of  an Enterprise  and  Related Information",   which  establishes
     standards  for the way public  enterprises are to  report information about
     operating  segments  in  annual   financial  statements  and  requires  the
     reporting  of  selected information  about  operating  segments in  interim
     financial  reports issued to shareholders.   SFAS No.  131 also establishes
     standards for  related disclosures about products  and services, geographic
     areas,  and  major  customers.   SFAS  No.  131  is effective  for  periods
     beginning after December 15, 1997, at which time the Company will adopt the
     provision.   This statement is not anticipated to have a material impact on
     the Company's financial disclosures.

















                                         


                                         -15-









<PAGE> 16
     Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

          In  addition  to  historical  information,  this  discussion  contains
     certain  forward-looking statements  that  involve risks  and uncertainties
     about the business, long-term  strategy, financial condition and  future of
     the Company.   Factors that may  affect future results are  included in the
     discussion  below and in Part I,  Items 1 and 2 of  the Company's Form 10-K
     for the year ended  March 31, 1998.  Although the Company believes that the
     expectations  reflected in such  forward-looking statements are reasonable,
     it  can give no  assurance that such  expectations will prove  to have been
     correct,  and actual  results could differ  materially from  those forward-
     looking statements.

     Results of Operations

          Total  revenues were $2,214,000 and $12,781,000 for the three and nine
     months ended December 31, 1998 which represents a 77% and 56% decrease from
     the same periods in 1997.  Operating expenses as a percent of revenues were
     140% and 106% for the three and  nine months ended December 31, 1998 versus
     84% and 80% for the same periods of the prior year.   The operating results
     were negatively affected by a decrease in demand for the Company's contract
     drilling  services which resulted in  a decrease in  rig utilization rates.
     The Company has  also experienced a decrease in the  average price received
     for its  contract drilling services.   Rig utilization rates were   17% and
     31%  for the three and nine months ended  December 31, 1998 compared to 81%
     and 79% in the same periods in 1997.

          Oil and  gas revenues decreased  by approximately  31% and 8%  for the
     three and nine  months ended December  31, 1998,  respectively.  In  fiscal
     1998, the  Company sold a group  of fourteen wells in  Ector County, Texas.
     These wells had high lifting  costs on an equivalent barrel of  oil ("EBO")
     basis.  As a result of this  sale, oil and gas production expenses for  the
     three and  nine months ended  December 31, 1998  decreased by 17%  and 21%,
     respectively,  when compared to the same periods in the prior year.  

          In  fiscal  1998,   the  Company  recognized  a   non-cash  charge  of
     approximately $3.1  million due to a writedown of the carrying value of its
     oil and  gas properties.   As  a result  of  this writedown,  depreciation,
     depletion and amortization expense  decreased by approximately 49% and  29%
     respectively when compared to the three and  nine months ended December 31,
     1997.

          In September  1997, the  Company recognized approximately  $659,000 as
     miscellaneous income relating to the settlement of a lawsuit.  In addition,
     the Company  recorded approximately  $236,000 of miscellaneous  income from
     the sale of junk drill bits in the same quarter.

          Net  working capital was $4.6 million at December 31, 1998 compared to
     $6.0 million at March 31, 1998.  





                                         -16-



<PAGE> 17


     Liquidity and Capital Resources

          In  January 1996,  the  Company entered  into  a loan  agreement  with
     Norwest  providing for a revolving credit  facility (the "Credit Facility")
     originally maturing on January 15, 1998.  The aggregate principal amount of
     the  Company's borrowings outstanding at  any one time  under the revolving
     facility was  limited to  the lesser  of $3.0 million  or one-third  of the
     borrowing  base amount  then  in effect.   The  borrowing  base amount  was
     redetermined  by Norwest monthly.   The Credit Facility  was established to
     finance  the Company's purchases of drill  pipe and oil and gas exploration
     activities.  Interest  only was  payable monthly and  the entire  principal
     amount was due and payable on January 15, 1998, which was extended to April
     15, 1998.  The Credit Facility bore interest at Norwest's base rate and was
     secured by substantially all of the Company's accounts receivable, drilling
     rigs and related equipment.  

          In  August 1996, the Company entered into a second loan agreement with
     Norwest.  This  second loan agreement provided for a $2.0 million revolving
     line of credit  (the "Line of Credit") secured by  substantially all of the
     Company's  producing  oil and  gas  properties.   The  Line  of  Credit was
     established to finance the Company's oil and gas exploration activities and
     for general  corporate  purposes.   The  Line of  Credit  bore interest  at
     Norwest's base rate, with interest  only to be paid monthly.   The original
     maturity date  of February 15,  1998, was extended to  April 15, 1998.   At
     that time the  principal amount then outstanding was due  and payable, plus
     any accrued and unpaid interest. 

          On  May 26, 1998, the  Company renewed, extended  and consolidated the
     prior  loan facilities  with  Norwest.    The  amended  and  restated  loan
     agreement provides  for a revolving line  of credit equal to  the lesser of
     $5.0 million or  one-third of the "borrowing  base amount".  The  borrowing
     base is redetermined by Norwest within 45 days after the end of each fiscal
     quarter of the Company.  At December 31, 1998, the borrowing base was $19.3
     million.  Borrowings under the line  of credit are secured by the Company's
     drilling  rigs and  related equipment,  accounts receivable  and inventory.
     Borrowings bear interest  at Norwest's  base rate and  interest is  payable
     monthly.  The Company did  not have any borrowings outstanding at  December
     31, 1998.   All amounts outstanding  under the loan facility  mature on May
     26, 2000.  

          The Company  anticipates that  funds for its  capital expenditures  in
     fiscal 1999 will be available from a  combination of sources, including (i)
     borrowings under the line of credit, (ii) funds raised through issuances of
     equity  or debt  securities in  public or  private transactions,  and (iii)
     internally generated funds.

     Trends and Prices

          Although  the Company  achieved record  growth, profitability  and rig
     utilization in  fiscal 1998,  the contract drilling  industry is  currently
     experiencing decreased  demand and  declining prices for  contract drilling

                                         -17-




<PAGE> 18
     services due to the  declines in oil and gas  prices.  The Company  has and
     will continue to be affected by  oil and gas industry conditions but cannot
     predict  either  the  future level  of  demand  for  its contract  drilling
     services or future conditions in the contract drilling industry.

          In  recent years,  oil and  gas prices  have been  extremely volatile.
     Prices  are affected  by market  supply and  demand factors  as well  as by
     actions of state and local agencies,  the U.S. and foreign governments  and
     international cartels.  The Company has no way of accurately predicting the
     supply of and demand  for oil and gas, domestic or  international political
     events or the effects  of any such  factors on the  prices received by  the
     Company for its oil and gas.


     Year 2000 Issues

          The Company  has reviewed the effect of  the year 2000 issues relating
     to its  information  systems.   At  September  30, 1998,  the  Company  had
     completed  updating and  testing  its  information  systems for  year  2000
     compliance and   has determined that the year 2000  issues directly related
     to its information systems will not have a material impact on its business,
     operations  nor its financial position.  The cost of planning, implementing
     and testing the Company's information systems was minimal and immaterial to
     its operations as a whole. 

           The Company believes that its greatest risk for year 2000 issues that
     may adversely effect the Company's operations is in the area of third party
     computer  systems that are not year 2000  compliant and which, as a result,
     may cause  interruptions in the  Company's normal business  operations. The
     Company  does not currently have  any information concerning  the year 2000
     compliance status of its  vendors, customers and local, state,  federal and
     other U.S.  government entities.   In the event  that any of  the Company's
     significant vendors,  customers and  local, state, federal  and other  U.S.
     government entities  do  not  successfully and  timely  achieve  year  2000
     compliance, the Company's business,  operations or financial position could
     be adversely affected. With respect to the uncertainty of the impact on the
     Company of third party vendors, suppliers and customers not being year 2000
     compliant,  the Company intends to  send inquiries to  third parties having
     significant relationships with  the Company.  Depending  upon the responses
     to the inquiries and the outcome of the Company's assessment  of such third
     parties'  state of  readiness for  the  year 2000,  the  Company will  then
     address remediation  alternatives.    The Board  of Directors has  formed a
     committee to assist the Company in its year 2000 efforts.  


     PART TWO - OTHER INFORMATION

     Item 1.  Legal Proceedings

          The Company is a defendant in various lawsuits generally incidental to
     its business.  The Company does not believe that the ultimate resolution of
     such litigation will have  a significant effect on the  Company's financial
     position or results of operations.


                                         -18-



<PAGE> 19

     Item 6.  Exhibits and reports on Form 8-K.

          (a)  Exhibits:
               27 - Financial Data Schedule

          (b)  Reports on Form 8-K:

               No  reports on  Form  8-K were  filed  during the  quarter  ended
               December 31, 1998.










































                                         -19-






<PAGE> 20

                                      SIGNATURES




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



                                           TMBR/SHARP DRILLING, INC.            




     February 12, 1999                By:  /s/  Patricia R. Elledge             
     -----------------                     -------------------------
          Date                                  Patricia R. Elledge             
                                                Controller/Treasurer            

                                           (Ms. Elledge is the Chief Financial  
                                           Officer and has been duly authorized 
                                           to sign on behalf of the Registrant) 





























                                         -20-




<PAGE> 21
                                    Exhibit Index





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

       27           Financial Data Schedule 










































                                         -21-