<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 September 30, 1997

                                          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 November 3, 1997
                (Title of Class)                         4,703,886








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

                                        INDEX



                                                                        Page No.

     Part I.  Financial Information (Unaudited)

       Item 1.  Financial Statements

                Balance Sheets, September 30, 1997 and 
                  March 31, 1997 . . . . . . . . . . . . . . . . . . . .   3

                Statements of Operations, Three Months
                  Ended September 30, 1997 and 1996 . .  . . . . . . . .   5

                Statements of Operations, Six Months
                  Ended September 30, 1997 and 1996  . . . . . . . . . .   7

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

                Statements of Cash Flows, Six Months
                  Ended September 30, 1997 and 1996 . .  . . . . . . . .  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 4.  Submission of Matters to a Vote of
                  Security Holders . . . . . . . . . . . . . . . . . . .  20

       Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . .  20











                                         -2-





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

     Item 1.  FINANCIAL STATEMENTS


                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                  September 30, 1997 (Unaudited) and March 31, 1997
                        (In thousands, except per share data)



                                                 September 30,
                                                     1997            March 31,  
       ASSETS                                     (Unaudited)          1997     
       ------                                    -------------      -----------

     Current assets:
       Cash and cash equivalents                   $  3,082         $   1,048 
       Marketable securities                             87                87 
       Trade receivables,
         net of allowance for doubtful
           accounts of $1,135 at both 
           September 30, and March 31, 1997           9,013             6,218 
       Inventories                                      110                74 
       Deposits                                         105                73 
       Other                                            601               560 
                                                    --------          --------
         Total current assets                        12,998             8,060 
                                                    --------          --------

     Property and equipment, at cost:
       Drilling equipment                            45,550            42,690 
       Oil and gas properties, based on
         successful efforts accounting               14,454            13,102 
       Other property and equipment                   3,776             3,584 
                                                    --------          --------
                                                     63,780            59,376 

     Less accumulated depreciation,
       depletion and amortization                   (49,562)          (47,851)
                                                    --------          --------

         Net property and equipment                  14,218            11,525 
                                                    --------          --------

     Other assets                                       174               176 
                                                    --------          --------
         Total assets                              $ 27,390          $ 19,761 
                                                    ========          ========

     See accompanying notes to financial statements.

                                         -3-





<PAGE> 4
                              TMBR/SHARP DRILLING, INC.
                                    BALANCE SHEETS
                  September 30, 1997 (Unaudited) and March 31, 1997
                        (In thousands, except per share data)


                                                September 30, 
                                                    1997            March 31, 
     LIABILITIES AND STOCKHOLDERS' EQUITY        (Unaudited)          1997    
     ------------------------------------       ------------       -----------

     Current liabilities:
       Trade payables                             $   5,053          $  2,739 
       Accrued workers' compensation                    737             1,245   
       Other                                          1,330             1,405  
                                                    --------          --------
          Total current liabilities                   7,120             5,389 
                                                    --------          --------


     Contingencies

     Stockholders' equity:
       Common stock, $0.10 par value
         Authorized, 50,000,000 shares;
         issued, 5,939,125 and 5,696,825
         shares at September 30, and 
         March 31, 1997, respectively                   594               570 
       Additional paid-in capital                    69,119            68,413 
       Accumulated deficit                          (49,293)          (54,461)
       Treasury stock-common, 1,268,739
         shares at September 30, and 
         March 31, 1997, at cost                       (150)             (150)
                                                    --------          --------
          Total stockholders' equity                 20,270            14,372 
                                                    --------          --------
          Total liabilities and
            stockholders' equity                  $  27,390         $  19,761 
                                                    ========          ========

     See accompanying notes to financial statements.












                                         -4-





<PAGE> 5
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended September 30, 1997 and 1996 (Unaudited)
                        (In thousands, except per share data)




                                                      Three months ended
                                                         September 30,  
                                                 -----------------------------
                                                    1997              1996    
                                                 -----------       -----------
       Revenues:
          Contract drilling                     $     9,253       $     3,838 
          Oil and gas                                   424               458 
                                                 -----------       -----------
              Total revenues                          9,677             4,296 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                           6,070             2,815 
          Oil and gas production                        216               246 
          Dry holes and abandonments                    124               120 
          Depreciation, depletion and 
            amortization                                882               316 
          General and administrative                    512               376 
                                                 -----------       -----------
              Total operating costs
                and expenses                          7,804             3,873 
                                                 -----------       -----------
              Operating income                        1,873               423 
                                                 -----------       -----------

       Other income (expense):
          Interest                                       --               (72)
          Other, net                                    970                 8 
                                                 -----------       -----------
          Total other income (expense)                  970               (64)
                                                 -----------       -----------
       Net income before income
          tax provision                               2,843               359 
       Provision for income taxes                       (60)               -- 
                                                 -----------       -----------

       Net income                               $     2,783       $       359 
                                                 ===========       ===========

     See accompanying notes to financial statements.








                                            -5-

<PAGE> 6
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
              Three months ended September 30, 1997 and 1996 (Unaudited)
                        (In thousands, except per share data)




                                                      Three months ended 
                                                         September 30,   
                                                 -----------------------------
                                                    1997              1996
                                                 -----------       -----------

     Net income per share 
       of common stock                          $       .54       $       .09 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding                  5,113,145         4,175,943 
                                                 ===========       ===========

     See accompanying notes to financial statements.


































                                         -6-

<PAGE> 7
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Six months ended September 30, 1997 and 1996 (Unaudited)
                        (In thousands, except per share data)




                                                       Six months ended
                                                         September 30,  
                                                 -----------------------------
                                                    1997              1996    
                                                 -----------       -----------
       Revenues:
          Contract drilling                     $    18,454       $     6,768 
          Oil and gas                                   953               945 
                                                 -----------       -----------
              Total revenues                         19,407             7,713 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                          12,023             5,259 
          Oil and gas production                        415               453 
          Dry holes and abandonments                    134               337 
          Depreciation, depletion and 
            amortization                              1,711               608 
          General and administrative                    945               761 
                                                 -----------       -----------
              Total operating costs
                and expenses                         15,228             7,418 
                                                 -----------       -----------
              Operating income                        4,179               295 
                                                 -----------       -----------

       Other income (expense):
          Interest                                       --              (141)
          Gain on sales of assets                        84                65 
          Other, net                                  1,015                22 
                                                 -----------       -----------
          Total other income (expense)                1,099               (54)
                                                 -----------       -----------
       Net income before income
          tax provision                               5,278               241 
       Provision for income taxes                      (110)               -- 
                                                 -----------       -----------

       Net income                               $     5,168       $       241 
                                                 ===========       ===========

     See accompanying notes to financial statements.







                                         -7-

<PAGE> 8
                              TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF OPERATIONS
               Six months ended September 30, 1997 and 1996 (Unaudited)
                        (In thousands, except per share data)




                                                       Six months ended 
                                                         September 30,   
                                                 -----------------------------
                                                    1997              1996
                                                 -----------       -----------

     Net income per share 
       of common stock                          $      1.02       $       .06 
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding                  5,050,339         4,160,494 
                                                 ===========       ===========

     See accompanying notes to financial statements.
































        

                                         -8-

<PAGE> 9



                              TMBR/SHARP DRILLING, INC.

                          STATEMENTS OF STOCKHOLDERS EQUITY

                 Six Months Ended September 30, 1997 (Unaudited) and

                              Year Ended March 31, 1997

                                   (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, 1997     5,697   $ 570     $ 68,413      $(54,461)     1,270  $(150)      $14,372

     Exercise of
       stock options        242      24          706            --         --     --           730 

     Net income              --      --           --         5,168         --     --         5,168 
                          -----    -----     --------      --------    -------  -----       -------

     Balance, 
       September 30,  
         1997             5,939   $ 594     $ 69,119      $(49,293)     1,270  $(150)      $20,270
                          =====    =====     ========      ========    =======  =====       =======
</TABLE>
     See accompanying notes to financial statements.


















                                         -9-


<PAGE> 10
                               TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF CASH FLOWS
           For the six months ended September 30, 1997 and 1996 (Unaudited)
                                    (In thousands)


                                                  Six months ended September 30,
                                                  ------------------------------
                                                    1997                 1996
                                                  ---------            ---------
    Cash flows from operating activities:
      Net income                                  $  5,168             $    241 
      Adjustments to reconcile net income
      to net cash provided (required) by
          operating activities:
           Depreciation, depletion and
            amortization                             1,711                  608 
           Dry holes and abandonments                  134                  337 
           Gain on sales of assets                     (84)                 (65)
           Changes in assets and liabilities:
            Trade receivables                       (2,795)                (341)
            Deposits                                   (32)                 350 
            Inventories and other assets               (39)                  (4)
            Trade payables                           2,314               (1,554)
            Accrued interest and other liabilities    (583)                 318 
                                                   --------             --------
             Total adjustments                         626                 (351)
                                                   --------             --------
             Net cash provided (required) by
              operating activities                   5,794                 (110)

    Cash flows from investing activities:
      Additions to property and equipment           (4,661)              (3,413)
      Proceeds from sales of property and
        equipment                                      171                   71 
                                                   --------             --------
             Net cash required by
              investing activities                  (4,490)              (3,342)

    Cash flows from financing activities:
      Issuance of common stock                         730                   43 
      Loans from bank                                   --                3,200 
                                                   --------             --------
             Net cash provided by
              financing activities                     730                3,243 
                                                   --------             --------
             Net increase (decrease) in
              cash and cash equivalents              2,034                 (209)

    Cash and cash equivalents at beginning
      of period                                      1,048                  339 
                                                   --------             --------
    Cash and cash equivalents at end of 
      period                                       $ 3,082              $   130 
                                                   ========             ========

    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,  1997 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
     September 30,  1997 and March 31,  1997, the results of  operations for the
     three and six months ended  September 30, 1997 and 1996, and the cash flows
     for the six month period ended September 30, 1997 and 1996.

          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, 1997.


     (2) Summary of Significant Accounting Policies

     Marketable Securities

          During  1997,  the  Company   adopted  the  accounting  procedures  as
     established by the  SFAS No.  115, "Accounting for  Certain Investments  in
     Debt  and Equity Securities."   Under SFAS No.  115, 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 September  30, 1997  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


                                         -11-


<PAGE> 12
     lives  range from  four to eight  years.   Other property  and equipment is
     depreciated using  the straight-line method of  depreciation with estimated
     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 Per Common Share

          Net income 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  dilutive for  purposes of  calculating the  net
     income per share.
      

     (3)  Stockholders' Equity
      
          1984 Stock Option Plan

          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 100,000 shares of common stock are currently outstanding under the
     Plan.   All of these  options are earned  and exercisable at  September 30,
     1997.  No  additional shares are available for grant as the Plan expired by


                                         -12-


<PAGE> 13
     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.

          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, 1997     465,000        $7.75      $3,603,750

          Exercised                       87,000        $7.75      $  674,250
                                         -------         ----       ---------

          Outstanding September 30,
            1997                         378,000        $7.75      $2,929,500
                                         =======         ====       =========

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




















                                         -13-


<PAGE> 14

     (4)  Effects of Future Adoption of Accounting Standards

          In  February 1997,  the  Financial Accounting  Standards Board  issued
     Statement of  Financial Accounting Standards No. 128 ("SFAS 128") "Earnings
     Per Share"  superseding 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 what will be
     called  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 will  be
     included  in basic  EPS.   Previously reported  fully  diluted EPS  will be
     called diluted EPS which will include potentially dilutive securities.  The
     requirements under SFAS  128 will  not be incorporated  into the  Company's
     financial  statements  until  the  fiscal   year  ending  March  31,  1998.
     Presented below are the pro forma effects of  SFAS 128 on the Company's EPS
     disclosures  for the  three and  six months ending  September 30,  1997 and
     1996:

                                      Three Months            Six Months
                                   ended September 30,    ended September 30,   
                                   -------------------    -------------------
                                     1997       1996        1997       1996  
                                   --------   --------    --------   --------
        Primary EPS as reported     $ 0.54     $ 0.09      $ 1.02     $ 0.06

        Effect of SFAS 128            0.07       0.01        0.12       0.01
                                      ----       ----        ----       ----
        Pro-forma basic EPS         $ 0.61     $ 0.10      $ 1.14     $ 0.07
                                      ====       ====        ====       ====

        Fully diluted EPS as
          reported                  $ 0.54     $ 0.09      $ 1.02      $ 0.06

        Effect of SFAS 128            0.00       0.00        0.00        0.00
                                      ----       ----        ----        ----
        Pro-forma diluted EPS       $ 0.54     $ 0.09      $ 1.02      $ 0.06
                                      ====       ====        ====        ====   
               
     (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

          In March  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


                                         -14-


<PAGE> 15
     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.

          In November,  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") was seeking 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  was
     seeking to recover a total of $803,057.11.

          On  September 9, 1997, the Company entered into a settlement agreement
     with the Guaranty  Association.  The Company agreed to  pay to the Guaranty
     Association  the  sum of  $375,000 in  full  satisfaction of  any liability
     relating to the Company's workers compensation insurance program with  SFIC
     and Sir Lloyd's Insurance Company  and the lawsuit brought by  the Guaranty
     Association.   The  Company  originally accrued  $854,153  relating to  the
     Guaranty  Association's  claim  for reimbursement.    As  a  result of  the
     settlement,  the Company  has eliminated  the accrual  of $854,153  and the
     difference  between the accrued amount and the settlement amount ($479,153)
     has  been recognized  as miscellaneous  income in  the  Company's financial
     statements.  

          In  addition, the Company has entered into a settlement agreement with
     the insurance  agent that represented  the Company at the  time the workers
     compensation insurance policies  were purchased from Sir  Lloyd's and SFIC.
     The agent has  paid the Company the  sum of $180,000 in  full settlement of
     all  claims  and liabilities  relating to  SFIC  and Sir  Lloyd's Insurance
     Company.   This amount has been  recognized as miscellaneous income  in the
     Company's financial statements.

          The Company provides for its  workers' compensation claims based  upon
     the most recent information available from its insurance carrier concerning
     claims  and estimated  costs.   However, in  future years  the Company  may
     receive retroactive adjustments, both favorable and unfavorable, related to
     estimates  of claim costs for previous years,  which may be material to the
     Company's results of operations.  No provision for  retroactive adjustments
     to claim costs is recorded until the Company receives notification from its
     insurance carrier because this  amount, if any, cannot  be estimated.   For
     claims incurred November 1993  to September 1997, the Company  is generally
     responsible  for the  first $10,000  ($100,000 prior  to November  1993) in
     claim costs for each  workers' compensation injury.  Currently  the Company
     is covered by a fully insured workers compensation policy.

          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.


                                         -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, 1997.  Actual results  could differ materially
     from those forward-looking statements.

     Results of Operations

          Total revenues were $9,677,000  and $19,407,000 for the three  and six
     months ended  September 30, 1997 which represents  a 125% and 152% increase
     over the same periods in 1996.  Operating expenses as a percent of revenues
     were 81%  and 78% for  the three and  six months  ended September 30,  1997
     versus 90% and  96% for the same periods of the  prior year.  The operating
     results were positively affected  by an increase in rig  utilization rates.
     The Company has experienced an increase in demand for its contract drilling
     services  which has  positively impacted  the rig  utilization rates.   Rig
     utilization  rates were  83% and  82% for  the three  and six  months ended
     September 30, 1997 compared to 44% and 39% in the same periods in 1996.

          Oil  and  gas revenues  decreased by  approximately  7% for  the three
     months ended  September 30, 1997 and increased  by approximately 1% for the
     six months  ended September  30, 1997.    Oil and  gas production  expenses
     decreased  by approximately 12% and  8% in the  same periods, respectively.
     General  and administrative expense increased due to an increase in payroll
     related taxes in connection with the exercise of stock options.

          During  the first quarter of  this fiscal year,  the Company completed
     the assembly  of an  additional  drilling rig  from  its inventory  of  rig
     components.   This  U-15 Unit  rig  is capable  of drilling  to a  depth of
     approximately 8,500  feet.  The  addition of  this drilling rig  brings the
     Company's  available  fleet  to  16  rigs.    Depreciation,  depletion  and
     amortization expense has  increased due to  the addition of  the U-15  Unit
     drilling rig, drill pipe and miscellaneous drilling equipment along with an
     increase  in the  number of  producing wells  in which  the Company  has an
     ownership interest.

          Net working capital was $5.8 million at September 30, 1997 compared to
     $2.7 million at  March 31, 1997.   The increase in  working capital can  be
     attributed  to  an  increase in  cash  and  cash  equivalents and  accounts
     receivable due to increased drilling activity.

     Liquidity and Capital Resources

          In  January 1996, the Company  entered into a  loan agreement with its
     bank  lender  providing  for  a  revolving  credit  facility  (the  "Credit
     Facility") maturing on January 15, 1998.  The aggregate principal amount of
     the  Company's borrowings outstanding at  any one time  under the revolving
     facility are  limited to the  lesser of  $3.0 million or  one-third of  the


                                         -16-



<PAGE> 17

     borrowing  base  amount  then in  effect.   The  borrowing  base  amount is
     redetermined by the bank monthly.   The Credit Facility was  established to
     finance  the Company's purchases of drill pipe  and oil and gas exploration
     activities.   Interest  only is  payable monthly  and the  entire principal
     amount  is due and payable on January 15,  1998.  The Credit Facility bears
     interest at the bank's base rate and is secured by substantially all of the
     Company's accounts  receivable, drilling  rigs and  related equipment.   At
     September  30, 1997,  there were  no amounts  outstanding under  the Credit
     Facility.

          In August 1996, the Company entered into a second  loan agreement with
     its bank  lender.  This second  loan agreement provides 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 bears interest at
     the bank's  base rate and  interest only is payable  monthly.  The  Line of
     Credit matures  on February 15,  1998, at which  time the principal  amount
     then outstanding is  due and payable, plus any accrued and unpaid interest.
     At  September 30,  1997,  no amounts  were outstanding  under  the Line  of
     Credit.

          The Company intends  to meet  its fiscal 1998  cash flow  requirements
     through cash  flow  provided from  operations  and, if  needed,  additional
     borrowings  under the Credit Facility and Line  of Credit.  As described in
     "Item 1  - Legal  Proceedings", the  Company was a  defendant in  a lawsuit
     filed  against  it  by  Texas  Property  and  Casualty  Insurance  Guaranty
     Association which had  resulted in the  Company's accrual of  approximately
     $854,000 for  a contingent liability.   On September  9, 1997, the  Company
     entered into a  settlement agreement  with the Guaranty  Association.   The
     Company agreed  to pay to the  Guaranty Association the sum  of $375,000 in
     full satisfaction  of  any  liability  relating to  the  Company's  workers
     compensation programs with SFIC  and Sir Lloyd's Insurance Company  and the
     lawsuit  brought  by  the  Guaranty  Association.    As  a  result  of  the
     settlement, the Company recognized approximately $479,000  as miscellaneous
     income during the quarter ended September 30, 1997.

          In  addition, the Company has entered into a settlement agreement with
     the insurance agent  that represented the  Company at the time  the workers
     compensation insurance policies were  purchased from Sir Lloyd's  and SFIC.
     The agent has paid the  Company the sum of  $180,000 in full settlement  of
     all  claims  and liabilities  relating to  SFIC  and Sir  Lloyd's Insurance
     Company.  This  amount has been recognized  as miscellaneous income in  the
     quarter ended September 30, 1997.

     Trends and Prices

          Although the domestic onshore  contract drilling business is currently
     experiencing  increased  demand for  drilling  services,  primarily due  to
     stronger  oil and  gas prices  and technological  advances, the  market for
     onshore contract drilling services has generally been depressed since 1982,
     when oil and gas prices began to weaken.  The Company cannot predict either

                                         -17-




<PAGE> 18
     the  future level of  demand for its  contract drilling services  or future
     conditions in the contract drilling industry.

          The contract drilling industry is experiencing a shortage of qualified
     drilling rig personnel.  The continued growth and  expansion of the Company
     will  depend upon, among other factors, the successful retention of skilled
     and qualified drilling rig personnel.  If the Company is  unable to attract
     and  retain  additional qualified  personnel,  its  ability to  market  and
     operate more  drilling rigs and expand  its operations will continue  to be
     restricted.

          In  recent years,  oil and  gas prices  have been  extremely volatile.
     Prices for oil and gas are affected by market supply and demand  factors as
     well  as  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  and demand for oil  and gas, domestic or
     worldwide political events or the effects of any such factors on the prices
     received by the Company for its oil and gas.


     PART TWO - OTHER INFORMATION

     Item 1.  Legal Proceedings

          In March 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.

          In November, 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")  was seeking 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 was
     seeking to recover a total of $803,057.11.

          On  September 9, 1997, the Company entered into a settlement agreement
     with  the Guaranty Association.  The Company  agreed to pay to the Guaranty
     Association  the  sum of  $375,000 in  full  satisfaction of  any liability
     relating  to the Company's workers compensation insurance program with SFIC
     and Sir Lloyd's Insurance Company and  the lawsuit brought by the  Guaranty

                                         -18-





<PAGE> 19
     Association.    The Company  originally  accrued $854,153  relating  to the
     Guaranty  Association's  claim  for reimbursement.    As  a  result of  the
     settlement,  the Company  has eliminated  the accrual  of $854,153  and the
     difference between the accrued amount and  the settlement amount ($479,153)
     has  been recognized  as  miscellaneous income  in the  Company's financial
     statements.  

          In  addition, the Company has entered into a settlement agreement with
     the insurance  agent that represented the  Company at the time  the workers
     compensation insurance  policies were purchased from Sir  Lloyd's and SFIC.
     The agent  has paid the Company  the sum of $180,000 in  full settlement of
     all  claims  and liabilities  relating to  SFIC  and Sir  Lloyd's Insurance
     Company.   This amount has been  recognized as miscellaneous  income in the
     Company's financial statements.

          The  Company provides for its  workers' compensation claims based upon
     the most recent information available from its insurance carrier concerning
     claims and  estimated costs.   However,  in  future years  the Company  may
     receive retroactive adjustments, both favorable and unfavorable, related to
     estimates of claim  costs for previous years, which may  be material to the
     Company's results of operations.   No provision for retroactive adjustments
     to claim costs is recorded until the Company receives notification from its
     insurance carrier because this  amount, if any,  cannot be estimated.   For
     claims incurred November 1993  to September 1997, the Company  is generally
     responsible  for the  first $10,000  ($100,000 prior  to November  1993) in
     claim costs for each  workers' compensation injury.  Currently  the Company
     is covered by a fully insured workers compensation policy.

          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.





















                                         -19-





<PAGE> 20
     Item 4.  Submission of matters to a vote of security holders.

          The  Company's annual meeting of  stockholders was held  on August 29,
     1997.   At  the meeting,  the following  persons were  elected to  serve as
     Directors of the Company until the 1998 annual  meeting of stockholders and
     until  their respective  successors are  duly qualified  and elected:   (1)
     Thomas C. Brown, (2) Donald  L. Evans, (3) David N. Fitzgerald  and (4) Joe
     G. Roper.

          Set forth below is a tabulation of votes with respect  to each nominee
     for Director:

<TABLE>                                      
<CAPTION>
                                      Votes       Votes      
                                      Cast        Cast       Votes                         Broker
            Name                      For         Against    Withheld     Abstentions      Non-Votes
            ----                      -----       -------    --------     -----------      ---------
            <S>                     <C>           <C>          <C>           <C>             <C>
            Thomas C. Brown         3,626,835      4,690        --            --              --
            Donald L. Evans         3,627,496      4,029        --            --              --
            David N. Fitzgerald     3,627,396      4,129        --            --              --
            Joe G. Roper            3,627,396      4,129        --            --              --
</TABLE>
          No other matters were voted upon at the annual meeting.


     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
               September 30, 1997.



















                                         -20-


<PAGE> 21



                                      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.            



          
     November 4, 1997                 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) 





























                                         -21-


<PAGE> 22


                                    Exhibit Index





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

       27           Financial Data Schedule 










































                                         -22-