<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 June 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 August 4, 1997
                (Title of Class)                         4,523,386








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

                                        INDEX



                                                                        Page No.

     Part I.  Financial Information (Unaudited)

       Item 1.  Financial Statements

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

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

                Statements of Stockholders'
                  Equity   . . . . . . . . . . . . . . . . . . . . . . .   7

                Statements of Cash Flows, Three Months
                  Ended June 30, 1997 and 1996 . . . . . . . . . . . . .   8

                Notes to Financial Statements  . . . . . . . . . . . . .   9

       Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations  . . . . . . . . .  13


     Part II.  Other Information

       Item 1.  Legal Proceedings  . . . . . . . . . . . . . . . . . . .  15

       Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . .  17

















                                         -2-





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

     Item 1.  FINANCIAL STATEMENTS


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



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

     Current assets:
       Cash and cash equivalents                   $  2,269         $   1,048 
       Marketable securities                             87                87 
       Trade receivables,
         net of allowance for doubtful
           accounts of $1,135 at both 
           June 30, and March 31, 1997                7,324             6,218 
       Inventories                                       59                74 
       Deposits                                          73                73 
       Other                                            533               560 
                                                    --------          --------
         Total current assets                        10,345             8,060 
                                                    --------          --------

     Property and equipment, at cost:
       Drilling equipment                            43,305            42,690 
       Oil and gas properties, based on
         successful efforts accounting               13,899            13,102 
       Other property and equipment                   3,609             3,584 
                                                    --------          --------
                                                     60,813            59,376 

     Less accumulated depreciation,
       depletion and amortization                   (48,679)          (47,851)
                                                    --------          --------

         Net property and equipment                  12,134            11,525 
                                                    --------          --------

     Other assets                                       174               176 
                                                    --------          --------
         Total assets                              $ 22,653          $ 19,761 
                                                    ========          ========

     See accompanying notes to financial statements.

                                         -3-





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




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

     Current liabilities:
       Trade payables                             $   3,488          $  2,739 
       Accrued workers' compensation                  1,245             1,245   
       Other                                          1,073             1,405  
                                                    --------          --------
          Total current liabilities                   5,806             5,389 
                                                    --------          --------


     Contingencies

     Stockholders' equity:
       Common stock, $0.10 par value
         Authorized, 50,000,000 shares;
         issued, 5,758,125 and 5,696,825
         shares at June 30, and 
         March 31, 1997, respectively                   576               570 
       Additional paid-in capital                    68,497            68,413 
       Accumulated deficit                          (52,076)          (54,461)
       Treasury stock-common, 1,268,739
         shares at June 30, and 
         March 31, 1997, at cost                       (150)             (150)
                                                    --------          --------
          Total stockholders' equity                 16,847            14,372 
                                                    --------          --------
          Total liabilities and
            stockholders' equity                  $  22,653         $  19,761 
                                                    ========          ========

     See accompanying notes to financial statements.










                                         -4-





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




                                                      Three months ended
                                                           June 30,  
                                                 -----------------------------
                                                    1997              1996    
                                                 -----------       -----------
       Revenues:
          Contract drilling                     $     9,201       $     2,930 
          Oil and gas                                   529               487 
                                                 -----------       -----------
              Total revenues                          9,730             3,417 
                                                 -----------       -----------

       Operating costs and expenses:
          Contract drilling                           5,954             2,445 
          Oil and gas production                        199               207 
          Dry holes and abandonments                     10               217 
          Depreciation, depletion and 
            amortization                                828               292 
          General and administrative                    433               384 
                                                 -----------       -----------
              Total operating costs
                and expenses                          7,424             3,545 
                                                 -----------       -----------
              Operating income (loss)                 2,306              (128)
                                                 -----------       -----------

       Other income (expense):
          Interest                                       31               (69)
          Gain on sales of assets                        84                65 
          Other, net                                     14                14 
                                                 -----------       -----------
          Total other income (expense), net             129                10 
                                                 -----------       -----------
       Net income (loss) before income
          tax provision                               2,435              (118)
       Provision for income taxes                       (50)               -- 
                                                 -----------       -----------

       Net income (loss)                        $     2,385       $      (118)
                                                 ===========       ===========

     See accompanying notes to financial statements.







                                         -5-

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




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

     Net income (loss) per share 
       of common stock                          $       .47       $      (.03)
                                                 ===========       ===========

     Weighted average number of 
       common shares outstanding                  5,032,724         4,079,434 
                                                 ===========       ===========

     See accompanying notes to financial statements.

































                                         -6-


<PAGE> 7


                              TMBR/SHARP DRILLING, INC.

                          STATEMENTS OF STOCKHOLDERS EQUITY

                  Three Months Ended June 30, 1997 (Unaudited) and

                              Year Ended March 31, 1997

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

                 Exercise of
                   stock options         61       6           84            --         --     --            90 

                 Net income              --      --           --         2,385         --     --         2,385 
                                      -----    -----     --------      --------    -------  -----       -------

                 Balance, 
                   June 30,  
                     1997             5,758   $ 576     $ 68,497      $(52,076)     1,270  $(150)      $16,847
                                      =====    =====     ========      ========    =======  =====       =======

</TABLE>
          See accompanying notes to financial statements.

















                                         -7-
                               

<PAGE> 8
                               TMBR/SHARP DRILLING, INC.
                               STATEMENTS OF CASH FLOWS
             For the three months ended June 30, 1997 and 1996 (Unaudited)
                                    (In thousands)


                                                   Three months ended June 30,
                                                  ------------------------------
                                                    1997                 1996
                                                  ---------            ---------
    Cash flows from operating activities:
      Net income (loss)                           $  2,385             $   (118)
      Adjustments to reconcile net income
      to net cash provided (required) by
          operating activities:
           Depreciation, depletion and
            amortization                               828                  292 
           Dry holes and abandonments                   10                  217 
           Gain on sales of assets                     (84)                 (65)
           Changes in assets and liabilities:
            Trade receivables                       (1,106)                 186 
            Deposits                                    --                  350 
            Inventories and other assets                29                  (21)
            Trade payables                             749               (1,771)
            Accrued interest and other liabilities    (332)                (300)
                                                   --------             --------
             Total adjustments                          94               (1,112)
                                                   --------             --------
             Net cash provided (required) by
              operating activities                   2,479               (1,230)

    Cash flows from investing activities:
      Additions to property and equipment           (1,519)                (868)
      Proceeds from sales of property and
        equipment                                      171                   71 
                                                   --------             --------
             Net cash required by
              investing activities                  (1,348)                (797)

    Cash flows from financing activities:
      Issuance of common stock                          90                    9 
      Loans from bank                                   --                1,700 
                                                   --------             --------
             Net cash provided by
              financing activities                      90                1,709 
                                                   --------             --------
             Net increase (decrease) in
              cash and cash equivalents              1,221                 (318)

    Cash and cash equivalents at beginning
      of period                                      1,048                  339 
                                                   --------             --------
    Cash and cash equivalents at end of 
      period                                       $ 2,269              $    21 
                                                   ========             ========

    See accompanying notes to financial statements.

                                          -8-
<PAGE> 9


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


                                         -9-
<PAGE> 10


     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  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.

          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)  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 103,000 shares of common stock are currently outstanding under the
     Plan.  All  of these options are  earned and exercisable at June  30, 1997.


                                         -10-
<PAGE> 11


     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.

          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                          9,000        7.75          69,750
                                           -------        ----       ---------
          Outstanding June 30, 1997        456,000       $7.75      $3,534,000
                                           =======        ====       =========

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

          In  connection with a private placement, the Company has outstanding a
     warrant representing 36,250 common shares with an exercise price of $13.20.
     This  warrant becomes  exercisable  on February  17,  1998 and  expires  on
     February 17, 2002.


     (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


                                         -11-
<PAGE> 12


     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 months ending June 30, 1997 and 1996:

                                                1997            1996
                                                ----            ----

             Primary EPS as reported           $ 0.47          $(0.03)

             Effect of SFAS 128                  0.06           (0.01)
                                                 ----            ----
             Pro-forma basic EPS               $ 0.53          $(0.04)
                                                 ====            ====

             Fully diluted EPS as
               reported                        $ 0.47          $(0.03)

             Effect of SFAS 128                  0.00            0.00
                                                 ----            ----
             Pro-forma diluted EPS             $ 0.47          $(0.03)
                                                 ====            ====

     (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
     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 approximate amount of $646,000.  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 the receiver for SFIC, 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.  However, an accrual was made in
     the  Company's  financial statements  for  the amount  in  question.   In a
     related  development, on June 5,  1995, the Company  received a letter from
     the Texas  Property and Casualty Insurance  Guaranty Association ("Guaranty
     Association") requesting payment in the approximate  amount of $729,000 for
     claims  that the  Guaranty Association  has paid  on behalf  of SFIC.   The
     Guaranty Association does  not believe  that the policies  written by  SFIC


                                         -12-
<PAGE> 13


     involved a  transfer of insurance risk  as required by  the Texas Insurance
     Code and is  asserting that it is entitled to  reimbursement for all monies
     paid to  claimants under these policies.   In November, 1995,  the Guaranty
     Association  filed a lawsuit against  the Company in  Travis County, Texas,
     styled  Texas  Property and  Casualty  Insurance  Guaranty Association  vs.
     TMBR/Sharp Drilling, Inc., Cause No. 95-12318.  The Guaranty Association is
     seeking  to  recover past  workers' compensation  claims  in the  amount of
     approximately  $803,000,   which  have   been  advanced  by   the  Guaranty
     Association under the Company's workers compensation insurance program with
     SFIC.  In May, 1996, and pursuant to an order of the Travis County District
     Court, the claims of the receiver for SFIC were assigned to and became part
     of the  Guaranty Association's claims against the Company.  The Company has
     rejected a settlement offer  made by the Guaranty Association for an amount
     less than  the amount  accrued by  the Company and  the Company  intends to
     vigorously defend its position against the Guaranty Association.

          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.   The
     Company is generally responsible  for the first $10,000 ($100,000  prior to
     November 1993) in claim costs for each workers' compensation injury.

          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.


     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  $9,730,000 for  the three months  ended June  30,
     1997 which  represents  a 185%  increase  over  the same  period  in  1996.
     Operating expenses as  percent of revenues  were 76% for  the three  months
     ended June 30, 1997 versus 104% for the same period of the prior year.  The
     operating results were positively affected by an increase in demand for the
     Company's contract drilling services  which resulted in an increase  in rig
     utilization rates.   The Company has  also experienced  an increase in  the
     average price received for its contract drilling services.  Rig utilization


                                         -13-
<PAGE> 14




     rates were 81% for the three months ended June 30, 1997 compared to  34% in
     the same period in 1996.

          Oil and gas revenues increased by  approximately 9% due to an increase
     in the number of equivalent  barrels of oil and gas produced.   Oil and gas
     production expenses decreased by approximately 8%.

          During  the quarter  ended June  30, 1997,  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 $4.5 million at June 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 from the 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
     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
     June 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 June 30, 1997, no amounts were outstanding under the Line of Credit.

          The  Company intends to meet  its fiscal 1998  cash flow requirements,
     including amounts, if any,  that may be required to be  paid by the Company
     as  a result  of the claims  asserted against  the Company  as described in

                                         -14-

<PAGE> 15



     "Item  1 - Legal Proceedings",  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  is a
     defendant in  a lawsuit  filed against  it by  Texas Property  and Casualty
     Insurance Guaranty Association which has resulted in the  Company's accrual
     of  approximately  $854,000 for  a contingent  liability.   If  the Company
     ultimately  incurs any amount in  settlement of the  lawsuit, the Company's
     liquidity could be  adversely affected to the extent of the amount actually
     paid  in settlement  of  the lawsuit  or in  satisfaction  of any  judgment
     against the Company.   However, in either event, the Company  believes that
     its capital resources are more than adequate to fund any such liability and
     that any adverse  effects on the Company's liquidity  would not be material
     and would  not result in any  material constraints on  the Company's future
     operations.

     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
     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

                                         -15-


<PAGE> 16


     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 approximate amount of $646,000.  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 the receiver for SFIC, 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.  However, an accrual was made in
     the  Company's financial  statements  for the  amount  in question.   In  a
     related development, on June  5, 1995, the  Company received a letter  from
     the Texas  Property and Casualty Insurance  Guaranty Association ("Guaranty
     Association") requesting payment in the approximate amount of  $729,000 for
     claims  that the  Guaranty Association  has paid  on behalf  of SFIC.   The
     Guaranty Association does  not believe  that the policies  written by  SFIC
     involved a transfer  of insurance risk  as required by the  Texas Insurance
     Code and is asserting that  it is entitled to reimbursement for  all monies
     paid to claimants  under these policies.   In November, 1995,  the Guaranty
     Association  filed a lawsuit against  the Company in  Travis County, Texas,
     styled  Texas  Property and  Casualty  Insurance  Guaranty Association  vs.
     TMBR/Sharp Drilling, Inc., Cause No. 95-12318.  The Guaranty Association is
     seeking  to  recover past  workers' compensation  claims  in the  amount of
     approximately  $803,000,   which  have   been  advanced  by   the  Guaranty
     Association under the Company's workers compensation insurance program with
     SFIC.  In May, 1996, and pursuant to an order of the Travis County District
     Court, the claims of the receiver for SFIC were assigned to and became part
     of the Guaranty Association's claims against the Company.  The  Company has
     rejected  a settlement offer made by the Guaranty Association for an amount
     less than  the amount accrued  by the  Company and the  Company intends  to
     vigorously defend its position against the Guaranty Association.

          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.  The
     Company is generally responsible  for the first $10,000 ($100,000  prior to
     November 1993) in claim costs for each workers' compensation injury.

          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.






                                         -16-



<PAGE> 17


     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 June
               30, 1997.










































                                         -17-




<PAGE> 18

                                      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.            




     August 6, 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) 





























                                         -18-




<PAGE> 18
                                    Exhibit Index





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

       27           Financial Data Schedule 










































                                         -19-