<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, 1995

                                          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 1, 1996
                (Title of Class)                         3,321,786<PAGE>








<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, 1995 and 
                  March 31, 1995 . . . . . . . . . . . . . . . . . . . .   3

                Statements of Operations, Three Months
                  Ended December 31, 1995 and 1994 . . . . . . . . . . .   5

                Statements of Operations, Nine Months
                  Ended December 31, 1995 and 1994 . . . . . . . . . . .   7

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

                Statements of Cash Flows, Nine Months
                  Ended December 31, 1995 and 1994 . . . . . . . . . . .  10

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

       Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations  . . . . . . . . .  14


     Part II.  Other Information

       Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . .  17

       Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . .  18














                                         -2-




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

     Item 1.  FINANCIAL STATEMENTS


                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                   December 31, 1995 (Unaudited) and March 31, 1995
                        (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                 December 31,
                                                     1995            March 31,  
       ASSETS                                     (Unaudited)          1995     
       ------                                    -------------      -----------
     <S>                                         <C>                <C>
     Current assets:
       Cash and cash equivalents                   $     74         $   1,590 
       Trade receivables,
         net of allowance for doubtful
           accounts of $1,225 at both 
           December 31, and March 31, 1995            3,575             2,568 
       Inventories                                       46                45 
       Deposits                                         422               513 
       Other                                            113               265 
                                                    --------          --------
         Total current assets                         4,230             4,981 
                                                    --------          --------

     Property and equipment, at cost:
       Drilling equipment                            39,656            38,308 
       Oil and gas properties, based on
         successful efforts accounting                8,711             5,790 
       Other property and equipment                   3,211             3,206 
                                                    --------          --------
                                                     51,578            47,304 

     Less accumulated depreciation,
       depletion and amortization                   (43,406)          (42,505)
                                                    --------          --------

         Net property and equipment                   8,172             4,799 
                                                    --------          --------

     Other assets                                       347               260 
                                                    --------          --------
         Total assets                              $ 12,749          $ 10,040 
                                                    ========          ========
</TABLE>
     See accompanying notes to financial statements.


                                         -3-





<PAGE> 4
                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                   December 31, 1995 (Unaudited) and March 31, 1995
                        (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                December 31, 
                                                    1995            March 31, 
     LIABILITIES AND STOCKHOLDERS' EQUITY        (Unaudited)          1995    
     ------------------------------------       ------------       -----------
     <S>                                        <C>                <C>
     Current liabilities:
       Current portion of capital lease
         obligations                              $      --          $     92 
       Trade payables                                 3,436             1,839 
       Accrued workers' compensation                  1,274             1,220 
       Leasehold purchase obligation                     --               386 
       Loans from bank                                  500                -- 
       Other                                            618               728  
                                                    --------          --------
          Total current liabilities                   5,828             4,265 
                                                    --------          --------

     Contingencies

     Stockholders' equity:
       Common stock, $0.10 par value
         Authorized, 50,000,000 shares;
         issued, 4,590,525 and 4,393,525
         shares at December 31 and 
         March 31, 1995, respectively                   459               439 
       Additional paid-in capital                    60,650            60,540 
       Accumulated deficit                          (54,038)          (55,054)
       Treasury stock-common, 1,268,739
         shares at December 31, and 
         March 31, 1995, at cost                       (150)             (150)
                                                    --------          --------
          Total stockholders' equity                  6,921             5,775 
                                                    --------          --------
          Total liabilities and
            stockholders' equity                  $  12,749         $  10,040 
                                                    ========          ========
</TABLE>
     See accompanying notes to financial statements.









                                         -4-





<PAGE> 5
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended December 31, 1995 and 1994 (Unaudited)
                        (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                      Three months ended
                                                         December 31,
                                                 -----------------------------
                                                    1995              1994    
                                                 -----------       -----------
       <S>                                      <C>               <C>
       Revenues:
          Contract drilling                     $     5,066       $     5,703 
          Oil and gas                                   305               252 
                                                 -----------       -----------
              Total revenues                          5,371             5,955 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                           4,411             4,720 
          Oil and gas production                        168               110 
          Dry holes and abandonments                    131                -- 
          Depreciation, depletion and 
            amortization                                373               252 
          General and administrative                    403               391 
                                                 -----------       -----------
              Total operating costs
                and expenses                          5,486             5,473 
                                                 -----------       -----------
              Operating income (loss)                  (115)              482 
                                                 -----------       -----------

       Other income (expense):
          Interest                                      (33)              (40)
          Other, net                                     23               174 
                                                 -----------       -----------
          Total other income (expense)                  (10)              134 
                                                 -----------       -----------
       Net income (loss) before income
          tax provision                                (125)              616 
       Provision for income taxes                        --               (13)
                                                 -----------       -----------

       Net income (loss)                        $      (125)      $       603 
                                                 ===========       ===========
</TABLE>
     See accompanying notes to financial statements.








                                         -5-
<PAGE> 6

                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended December 31, 1995 and 1994 (Unaudited)
                        (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                      Three months ended 
                                                         December 31, 
                                                 -----------------------------
                                                    1995              1994
                                                 -----------       -----------
     <S>                                        <C>               <C>
     Net income (loss) per share 
       of common stock                          $      (.03)      $       .15 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding                  4,095,906         4,051,108 
                                                 ===========       ===========
</TABLE>
     See accompanying notes to financial statements.


































                                         -6-
<PAGE> 7

                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Nine months ended December 31, 1995 and 1994 (Unaudited)
                        (In thousands, except per share data)
<TABLE>
<CAPTION>
                                                       Nine months ended
                                                          December 31,
                                                 -----------------------------
                                                    1995              1994    
                                                 -----------       -----------
       <S>                                      <C>               <C>
       Revenues:
          Contract drilling                     $    16,194       $    12,723 
          Oil and gas                                 1,096               610 
                                                 -----------       -----------
              Total revenues                         17,290            13,333 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                          13,372            10,624 
          Oil and gas production                        374               232 
          Dry holes and abandonments                    422               301 
          Depreciation, depletion and 
            amortization                                898               577 
          General and administrative                  1,174             1,086 
                                                 -----------       -----------
              Total operating costs
                and expenses                         16,240            12,820 
                                                 -----------       -----------
              Operating income                        1,050               513 
                                                 -----------       -----------

       Other income (expense):
          Interest                                      (99)             (106)
          Gain on sales of assets                        24               100 
          Other, net                                     71               218 
                                                 -----------       -----------
          Total other income (expense)                   (4)              212 
                                                 -----------       -----------
       Net income before income
          tax provision                               1,046               725 
       Provision for income taxes                       (30)              (13)
                                                 -----------       -----------

       Net income                               $     1,016       $       712 
                                                 ===========       ===========
</TABLE>
     See accompanying notes to financial statements.








                                         -7-
<PAGE> 8

                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Nine months ended December 31, 1995 and 1994 (Unaudited)
                        (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                       Nine months ended 
                                                          December 31, 
                                                 -----------------------------
                                                    1995              1994
                                                 -----------       -----------
     <S>                                        <C>               <C>
     Net income per share 
       of common stock                          $       .25       $       .18 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding                  4,083,980         4,036,957 
                                                 ===========       ===========
</TABLE>
     See accompanying notes to financial statements.



























                                         
                                         -8-






<PAGE> 9
                              TMBR/SHARP DRILLING, INC.

                          STATEMENTS OF STOCKHOLDERS EQUITY

                 Nine Months Ended December 31,1995 (Unaudited) and

                              Year Ended March 31, 1995

                                   (In thousands)

<TABLE>
<CAPTION>

                                                                                   Treasury Stock
                                                                                   -------------- 
                                       Common Stock     Additional                  Common Stock        Total
                                      --------------     Paid-In     Accumulated   --------------    Stockholders'
                                      Shares  Amount     Capital       Deficit     Shares  Amount       Equity
                                      ------  ------     -------     -----------   ------  ------    ------------
                 <S>                  <C>     <C>       <C>          <C>           <C>     <C>       <C>
                 Balance, 
                   March 31, 1995     4,394   $ 439     $ 60,540      $(55,054)     1,269  $(150)      $ 5,775

                 Exercise of
                   stock options        197      20          110            --         --     --           130 

                 Net income              --      --           --         1,016         --     --         1,016 
                                      -----    -----     --------      --------    -------  -----       -------

                 Balance, 
                   December 31,  
                     1995             4,591   $ 459     $ 60,650      $(54,038)     1,269  $(150)      $ 6,921
                                      =====    =====     ========      ========    =======  =====       =======
</TABLE>
          See accompanying notes to financial statements.


















                                         -9-





<PAGE> 10
                               TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF CASH FLOWS
            For the nine months ended December 31,1995 and 1994 (Unaudited)
                                    (In thousands)
<TABLE>
<CAPTION>
                                                                      Nine months ended December 31,
                                                                      ------------------------------
                                                                        1995                 1994
                                                                      ---------            --------- 
    <S>                                                               <C>                  <C>
    Cash flows from operating activities:
      Net income                                                      $  1,016             $    712 
      Adjustments to reconcile net income
      to net cash provided (required) by
          operating activities:             
           Depreciation, depletion and amortization                        898                  577 
           Dry holes and abandonments                                      422                  301 
           Gain on sales of assets                                         (24)                (100)
           Changes in assets and liabilities:
            Trade receivables                                           (1,007)              (2,284)
            Deposits                                                        91                  193 
            Inventories and other assets                                    64                 (130)
            Trade payables                                               1,597                  752 
            Accrued interest and other liabilities                         (56)                 (88)
                                                                       --------             --------
             Total adjustments                                           1,985                 (779)
                                                                       --------             --------
             Net cash provided (required) by operating activities        3,001                  (67)

    Cash flows from investing activities:
      Additions to property and equipment                               (4,695)              (1,985)
      Proceeds from sales of property and equipment                         26                  106 
                                                                       --------             --------
             Net cash required by investing activities                  (4,669)              (1,879)

    Cash flows from financing activities:
      Repayments of capital lease                                          (92)                 (69)
      Issuance of common stock                                             130                   96 
      Loans from bank                                                      500                  600 
      Leasehold borrowings                                                  --                  578 
      Repayments of leasehold borrowings                                  (386)                  -- 
                                                                       --------             --------
             Net cash provided by financing activities                     152                1,205 
                                                                       --------             --------
             Net decrease in cash and cash equivalents                  (1,516)                (741)

    
    Cash and cash equivalents at beginning of period                     1,590                1,039 
                                                                       --------             --------
     
    Cash and cash equivalents at end of period                         $    74              $   298 
                                                                       ========             ========
</TABLE>
    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,  1995 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,  1995 and March  31, 1995, the  results of operations  for the
     three and nine months ended  December 31, 1995 and 1994, and the cash flows
     for the nine month period ended December 31, 1995 and 1994.

          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, 1995.


     (2) Summary of Significant Accounting Policies

     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.

          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
     also  has an ownership interest, the Company's proportionate share of costs
     related to  these properties  is capitalized  as stated  above, net  of its
     working  interest share  of  profits from  the related  drilling contracts.
     Capitalized costs of  undeveloped properties, which are not  depleted until


                                         -11-

<PAGE> 12

     proved reserves  can be  associated with  the properties, are  periodically
     reviewed for possible impairment. 

          Depletion  of capitalized oil and gas property costs is 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.  Other property and equipment is depreciated using the straight-line
     method of depreciation with estimated useful lives of three to seven years.

          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

          Net income (loss) per share  of common stock is based on  the weighted
     average number of common shares outstanding during each period.  All common
     stock equivalents are considered  anti-dilutive for purposes of calculating
     the  net loss per  share and dilutive  for purposes of  calculating the net
     income per share.
      

     (3)  Debt

          Line of Credit

          The  Company and its lender  entered into an  agreement which provides
     for a $1,000,000 revolving line of  credit ("LOC") secured by the Company's
     accounts  receivable.   At  December 31,  1995,  the Company  had  borrowed
     $500,000 against the LOC.  The LOC  bears interest at 1% above the  Norwest
     Bank Minnesota,  Base Rate and matures on July 15, 1996.  In January, 1996,
     the Company and its bank lender entered into a loan agreement providing for
     the renewal,  extension and increase in  principal amount of the  LOC.  See
     Note 7.

          Leasehold Purchase Obligation

          On  December 9,  1994,  the Company  entered  into an  agreement  with
     Paladin  Exploration Co., Inc. ("Paladin")  to acquire certain  oil and gas
     leases.  The  Company agreed to  reimburse Paladin  an aggregate amount  of
     approximately  $629,000 (including imputed interest  at a rate  of 9.5% per
     annum)  for leasehold  acquisition,  legal and  seismic  costs incurred  by
     Paladin associated with the acquisition of such leases.  During the quarter
     ended  December 31, 1995, the Company satisfied this obligation to Paladin.
     See Item 2, Management's Discussion and Analysis of Financial Condition and
     Results of Operations - Liquidity and Capital Resources.


     (4)  Stockholders' Equity
      
          1984 Stock Option Plan



                                         -12-

<PAGE> 13

          In August of 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 108,000 shares of common stock are currently outstanding under the
     Plan, with  60,500 of the options  being exercisable at  December 31, 1995.
     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 or directors 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 meeting  of stockholders held  on August  30, 1994.   The
     Company has not granted any options under the 1994 Plan.


     (5)  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.

     (6)  Contingencies

          On March 19, 1992, the Company was notified by the Texas Department of
     Insurance  that  the  Company's   former  workers'  compensation  insurance
     carriers,  Sir  Lloyd's  Insurance  Company  and  its  affiliate,  Standard
     Financial Indemnity Corporation ("SFIC"), had been placed in liquidation by
     order of the 201st District Court of Travis County, Texas on March 12, 1992
     in Cause No. 92-12765, The State of Texas vs. Sir Lloyd's Insurance Company
     and Sir  Insurance Agency, Inc.,  and in Cause  No. 91-12766, The  State of
     Texas  vs. Standard  Financial  Indemnity Corporation.   Approximately  two
     months  before  being ordered  into  liquidation, SFIC  requested  that the
     Company pay policy premiums in  the amount of $646,476.   On July 22,  1993
     the  special  deputy receiver  of  SFIC  billed the  Company  approximately
     $1,061,000 for retrospective premiums, but adjusted  the amount to $854,153
     on January 12,  1994.  Although the Company disputes  the amount claimed by
     SFIC and its receiver, the Company is presently unable to determine whether


                                         -13-

<PAGE> 14

     and to what extent such amount is, in fact, an accurate estimate of amounts
     owed to SFIC,  if any, largely as  a result of the difficulty  of verifying
     the  insurance   carrier's  estimated   claims  and  adjustments   and  the
     unavailability  of SFIC personnel.   However,  an accrual  was made  in the
     Company's financial statements for the amount in question.

          In  a  related  development, on  November  3,  1995,  the Company  was
     notified that a lawsuit had been filed in Travis County, Texas styled Texas
     Property  and  Casualty  Insurance  Guaranty   Association  vs.  TMBR/Sharp
     Drilling,  Inc.  (Cause No.  95-12318).   The  Texas Property  and Casualty
     Insurance Guaranty Association ("Guaranty Association") seeks a recovery of
     past  workers' compensation  claims  advanced by  the Guaranty  Association
     related to the Company's workers compensation insurance program with  SFIC.
     The Guaranty Association is seeking to recover a total of $803,057.11.

          The Company disagrees with the claims made by the Guaranty Association
     and intends to vigorously  defend this lawsuit.  The  Company believes that
     if  the Guaranty Association's claim  is ultimately determined  to be valid
     and  enforceable, then the Receiver's  claim against the  Company is either
     without merit or that its  claim would be offset against the claims  of the
     Guaranty  Association.  For these reasons,  the Company has not accrued the
     Guaranty Association's claim in its financial statements.

     (7)  Subsequent Events

          On  January 16, 1996,  the Company entered into  a loan agreement with
     Norwest  Bank Texas, Midland, N.A. (Norwest) that provides 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  bear interest at  the Norwest Bank  Minnesota, National Association
     base rate  and the interest is  payable monthly.  The  loans mature January
     15,  1998 at  which time  the  then outstanding  principal and  all of  the
     accrued and unpaid interest is  due and payable.  At February 1,  1996, the
     Company had borrowed $500,000 under the facility.


     Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

     Liquidity and Capital Resources

          Pursuant to its agreement with  an exploration and production company,
     the  Company  agreed  to  fund approximately  $629,000  (including  imputed
     interest at a rate of 9.5%  per annum) for leasehold acquisition, legal and
     seismic costs incurred in acquiring certain oil and gas leases.  During the
     quarter ended  December 31,  1995, the remaining  obligation (approximately
     $37,000) relating to this agreement was satisfied.  See Note (3).

          The Company  intends to  meet  its capital  resource requirements  for
     fiscal  1996 through available cash balances on hand and cash flow provided
     through  operations.  If needed,  the Company will  also consider borrowing
     funds from its bank lender.  See Note (7).

          The  Company believes it owns a  sufficient number of drilling rigs to


                                         -14-

<PAGE> 15



     remain competitive within  its areas of operation.   However, the cash flow
     generated  from operations  will continue  to be  directly affected  by the
     level  of  drilling activity  in the  Company's  areas of  operations.   By
     focusing  on drilling contracts which  can provide operating  cash flow and
     maintaining  its  cost  containment   program,  the  Company  believes  its
     operating  cash flow will improve.   Cash provided  by operating activities
     was $3,001,000 for the  nine months ended December 31,  1995, compared with
     an outflow of $67,000 for the nine months ended December 31, 1994.

     Results of Operations

          Total revenues  were approximately $5,371,000 and  $17,290,000 for the
     three  and  nine  months  ended  December  31,  1995,  respectively,  which
     represents a 10% decrease and a 30% increase over the same periods in 1994,
     respectively.   Operating expenses as a  percent of revenues were  102% and
     94%  for the three  and nine months ended  December 31, 1995, respectively,
     versus 92% and 96%  for the same periods of the prior  year.  The operating
     results were negatively affected by a decrease in rig utilization rates.

          Rig utilization rates  were 42% and 45% for the  three and nine months
     ended December 31, 1995, respectively,  as compared to 52% and 42%  for the
     same periods in 1994.  Rig utilization in the Company's operating market is
     difficult to project, primarily  due to the intense competition  within the
     industry  and  the inability  to accurately  determine  the number  of rigs
     available for work.

          Oil  and gas revenues  increased by approximately 21%  and 80% for the
     three  and nine months ended  December 31, 1995,  respectively, compared to
     the same  periods in 1994.   Accordingly, oil  and gas production  expenses
     also  increased.  Depreciation and depletion expense has also increased due
     to  the increase in the number of producing  wells in which the Company has
     acquired ownership interests.

          On  September 5,  1995, the  Company  entered into  a 10  year License
     Agreement with  the Government of  the Republic of  Palau and the  State of
     Kayangel which  grants the Company the right to explore for oil and natural
     gas offshore.   The license  covers approximately 1.1  million gross  acres
     within the waters of Palau.   The Company is considering the feasibility of
     conducting exploration activities jointly with other parties, entering into
     farmout  arrangements  with third  parties or  entering into  other "earned
     interest"  arrangements   with  industry  partners.     Under  the  license
     agreement, the Company is  required to commence drilling of  an exploratory
     well no later than 9-5-97, and an  additional well within six months of the
     initial  well.   The  Company estimates  that  it will  cost  approximately
     $6,000,000 to drill the two wells.

          Net working capital  was a  negative $1,598,000 for  the period  ended
     December 31,  1995 as compared to  $716,000 for the period  ended March 31,
     1995.  This decrease in working  capital is a result of a decrease  in cash
     and  an increase in accounts  payable.  The  Company expended approximately
     $4.7  million in cash  during the nine  months ended December  31, 1995 for
     asset  acquisitions, including  a 110  National drilling  rig with  a depth
     capacity of 22,000 feet.  Additionally, the Company continues to invest  in
     oil and gas exploration projects.
                                         
                                         -15-
<PAGE> 16     
     Financial Condition

          Recently, the  Company has  entered into "turnkey"  drilling contracts
     which create substantially more  economic risk to the Company  than footage
     or daywork contracts.   Under a turnkey contract, the  Company contracts to
     drill a well to a specified depth and bears the risk of loss to that depth.
     Typically,  turnkey contracts are  more profitable than  footage or daywork
     contracts but  the Company could experience substantial  losses if drilling
     problems occur under its turnkey contracts.

          For  the  nine  months  ended  December  31,  1995,  the  Company  has
     experienced improved operating results which can be attributable to several
     factors.  The Company's oil and gas exploration program has been successful
     and drilling rig utilization rates have stabilized as have drilling prices.
     The Company has  substantially improved its  safety record which has  had a
     positive  impact  on worker's  compensation costs.    All of  these factors
     coupled with a successful cost containment program have positively impacted
     the Company's operating margins.  However,  the Company is still subject to
     considerable  uncertainty due  to the  instability of  oil and  gas prices,
     decreased demand for contract drilling services and the intense competition
     prevalent in the contract drilling industry.






























                                         -16-







<PAGE> 17
     PART TWO - OTHER INFORMATION

     Item 1.  Legal Proceedings

          On March 19, 1992, the Company was notified by the Texas Department of
     Insurance  that   the  Company's  former  workers'  compensation  insurance
     carriers,  Sir  Lloyd's  Insurance  Company  and  its  affiliate,  Standard
     Financial Indemnity Corporation ("SFIC"), had been placed in liquidation by
     order of the 201st District Court of Travis County, Texas on March 12, 1992
     in Cause No. 92-12765, The State of Texas vs. Sir Lloyd's Insurance Company
     and Sir  Insurance Agency, Inc.,  and in Cause  No. 91-12766, The  State of
     Texas  vs. Standard  Financial  Indemnity Corporation.   Approximately  two
     months  before  being ordered  into  liquidation, SFIC  requested  that the
     Company pay policy premiums  in the amount of  $646,476.  On July 22,  1993
     the  special  deputy receiver  of  SFIC  billed  the Company  approximately
     $1,061,000 for retrospective  premiums, but adjusted the amount to $854,153
     on January 12,  1994.  Although the Company disputes  the amount claimed by
     SFIC and its receiver, the Company is presently unable to determine whether
     and to what extent such amount is, in fact, an accurate estimate of amounts
     owed to SFIC, if  any, largely as a  result of the difficulty  of verifying
     the  insurance   carrier's  estimated   claims  and  adjustments   and  the
     unavailability of  SFIC personnel.   However, an  accrual was  made in  the
     Company's financial statements for the amount in question.

          In  a  related  development, on  November  3,  1995,  the Company  was
     notified that a lawsuit had been filed in Travis County, Texas styled Texas
     Property  and   Casualty  Insurance  Guaranty  Association  vs.  TMBR/Sharp
     Drilling,  Inc.  (Cause No.  95-12318).   The  Texas Property  and Casualty
     Insurance Guaranty Association ("Guaranty Association") seeks a recovery of
     past  workers' compensation  claims  advanced by  the Guaranty  Association
     related to the Company's workers compensation  insurance program with SFIC.
     The Guaranty Association is seeking to recover a total of $803,057.11.

          The Company disagrees with the claims made by the Guaranty Association
     and intends to vigorously defend  this lawsuit.  The Company  believes that
     if  the Guaranty Association's claim  is ultimately determined  to be valid
     and  enforceable, then the Receiver's  claim against the  Company is either
     without merit or that  its claim would be offset against  the claims of the
     Guaranty Association.   For these reasons, the  Company has not accrued the
     Guaranty Association's claim in its financial statements.













                                         -17-





<PAGE> 18
     Item 6.  Exhibits and reports on Form 8-K.

          (a)  Exhibits:

               10.1 -  Loan Agreement  dated January 16,  1996, between  Norwest
                       Bank Texas, Midland, N.A. and the Registrant.

               27 - Financial Data Schedule

          (b)  Reports on Form 8-K:

               No  reports on  Form  8-K were  filed  during the  quarter  ended
               December 31, 1995.







































                                         -18-






<PAGE> 19
                                      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.            


<TABLE>
     <S>                              <C>
     February 12, 1996                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) 
</TABLE>




























                                         -19-





<PAGE> 20
                                    Exhibit Index



<TABLE>
<CAPTION>     
     Exhibit
     Number              Description
     -------             -----------
     <S>            <C>
     10.1           Loan Agreement dated January 16, 1996,
                    between Norwest Bank Texas, Midland, N.A.
                    and the Registrant.

       27           Financial Data Schedule 
</TABLE>





































                                         -20-