FORM 10-K
                    SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C.  20549
(Mark One)

[x]    Annual  report  pursuant to Section 13 or 15(d)  of  the  Securities
       Exchange Act of 1934

For the fiscal year ended December 31, 2003

                                    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 000-24181

                       Southwest Partners III, L.P.
                (Exact name of registrant as specified in
                    its limited partnership agreement)

Delaware                                                         75-2699554
(State or other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                       Identification No.)

407 N. Big Spring, Suite 300, Midland, Texas                 79701
(Address of principal executive office)                   (Zip Code)

Registrant's telephone number, including area code   (915) 686-9927

       Securities registered pursuant to Section 12(b) of the Act:

                                   None

       Securities registered pursuant to Section 12(g) of the Act:

                      limited partnership interests

Indicate by check mark whether registrant (1) has filed 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 by check mark if disclosure of delinquent filers pursuant to  Item
405  of  Regulation S-K (229.405 of this chapter) is not contained  herein,
and  will  not  be  contained,  to the best of registrant's  knowledge,  in
definitive  proxy or information statements incorporated  by  reference  in
Part III of this Form 10-K or any amendment to this Form 10-K.     [x]

Indicate  by check mark whether the registrant is an accelerated filer  (as
defined in Exchange Act Rule 12b-2).     Yes     No  X

The  registrant's  outstanding  securities  consist  of  Units  of  limited
partnership  interests for which there exists no established public  market
from which to base a calculation of aggregate market value.

The  total  number of pages contained in this report is 31.   The  exhibits
begin on page 29.




<PAGE>
                            Table of Contents

Item                                                                   Page

                                  Part I

 1.  Business                                                            3

 2.  Properties                                                          4

 3.  Legal Proceedings                                                   5

 4.  Submission of Matters to a Vote of Security Holders                 5

                                 Part II

 5.  Market for Registrant's Common Equity, Related
     Stockholder Matters and Issuer Purchases of Equity Securities       6

 6.  Selected Financial Data                                             7

 7.  Management's Discussion and Analysis of
     Financial Condition and Results of Operations                       8

7A.  Quantitative and Qualitative Disclosures About Market Risk          9

 8.  Financial Statements and Supplementary Data                        10

 9.  Changes in and Disagreements with Accountants
     on Accounting and Financial Disclosure                             21

9A.  Controls and Procedures                                            21

                                 Part III

10.  Directors and Executive Officers of the Registrant                 22

11.  Executive Compensation                                             24

12.  Security Ownership of Certain Beneficial Owners and
     Management and Related Stockholder Matters                         24

13.  Certain Relationships and Related Transactions                     25

14.  Principal Accountant Fees and Services                             25

                                 Part IV

15.  Exhibits, Financial Statement Schedules, and Reports
     on Form 8-K                                                        26

     Signatures                                                         27




<PAGE>
                                  Part I

Item 1.   Business

General
Southwest   Partners  III,  L.P.,  a  Delaware  limited  partnership   (the
"Partnership") was organized March 11, 1997 to invest in oil field  service
companies  and assets.  The Partnership's business strategy was to  acquire
interests  in  oil  field  service companies and  assets  with  a  view  to
providing capital appreciation in the value of the Partnership's  units  of
limited partnership interest (the "Units").  The Partnership concluded  its
acquisition of oil field service company assets in December 1997.

Private Placement
From  March 15, 1997 to June 30, 1997, the Partnership originally conducted
a  "blind  pool"  offering  of the Units in accordance  with  Regulation  D
promulgated under the Securities Act (the "Private Placement").  On July 1,
1997,  the  Partnership  amended  the  offering,  which  was  concluded  on
September  30, 1997, to invest the entire proceeds in the common  stock  of
Basic  Energy  Services,  Inc.  ("Basic"), an  oil  field  service  company
affiliated with the General Partner.  A total of 170.92511 Units were  sold
to   525  Investors  for  an  aggregate  net  price  of  $17,092,510.   The
Partnership  invested  a  total  of  $17,054,500  (including  the   capital
contribution  of  the General Partner) in 2,005 shares  of  Basic's  common
stock.

      On  May 21, 2001, Basic issued a Notice to Stockholders of Preemptive
Rights.   The Partnership purchased an additional 19,000 shares  of  common
stock at $380,000.

On  February 13, 2002, Basic sold 600,000 shares of common stock to a group
of   related  investors.   Based  on  this  transaction,  the  Partnerships
ownership percentage was diluted from 6.32% to 5.39%.

Basic's  Board of Directors according to the Supplemental Warrant Agreement
awarded  all  holders  of EBITDA Contingent Warrants  50%  of  the  maximum
warrants that could have been earned, if the financial goals of Basic  were
achieved.   The  Partnership exercised their warrants on May  5,  2003  and
purchased  50,632 shares of stock for $.01 per share.  The  Partnership  at
December  31,  2003  owned a total of 6.39%, or 270,132 shares  of  Basic's
outstanding common stock.

The General Partner
The  general partner of the Partnership is Southwest Royalties,  Inc.  (the
"General Partner").  The General Partner was formed in 1983 to acquire  and
develop oil and gas properties. The General Partner initially financed  the
acquisition  of  oil and gas reserves and its exploration  and  development
efforts  through  public  and  private limited partnership  offerings.  The
General  Partner  has raised approximately $115 million in  31  public  and
private  limited partnership offerings. The General Partner  is  a  general
partner of these limited partnerships, owns interests in these partnerships
and  receives management fees and operating cost reimbursements  from  such
partnerships. Since its inception, The General Partner, on behalf of itself
and  the investment partnerships, has acquired over $320 million of oil and
gas  properties,  primarily in the Permian Basin  of  West  Texas  and  New
Mexico.

The  principal executive offices of the Partnership are located at  407  N.
Big  Spring, Suite 300, Midland, Texas, 79701.  The General Partner of  the
Partnership,  and  its  staff  of  81 individuals,  together  with  certain
independent  consultants  used  on an "as needed"  basis,  perform  various
services on behalf of the Partnership.  The Partnership has no employees.

The Partnership
The   sole  business  of  the  Partnership  is  holding  Basic  stock.  The
Partnership has no employees and has no operations, except through Basic.

Basic Energy Services, Inc.
Basic  provides a broad range of services used for the drilling, completion
and  operation  of  oil  and gas wells, including well  servicing,  liquids
handling  and  fresh and brine water supply and disposal  services.   Basic
provides  services in its areas of operation in Texas, New Mexico, Oklahoma
and  Louisiana.   These  services are used by  oil  and  gas  companies  to
complete  newly  drilled  oil  and gas wells,  maintain  and  optimize  the
performance  of  existing wells, recomplete wells to  additional  producing
zones and plug and abandon wells at the end of their useful lives.  Basic's
well  servicing and fluid service equipment fleets includes well  servicing
rigs and fluid service trucks.



<PAGE>
Basic  uses  its  well  servicing rigs to provide completion,  maintenance,
workover  and plugging and abandonment services.  Basic's related  trucking
services are used to move large equipment to and from the job sites of  its
customers.   Basic  also  provides an integrated mix  of  liquids  handling
services,  including vacuum truck services, frac tank  rentals,  test  tank
rentals and Enviro-Vat system rentals. Basic's fresh and brine water supply
and  disposal services include the production and sale of fresh  and  brine
water which is used in drilling, completion and workover processes, as well
as  operation  of injection wells that dispose of produced salt  water  and
incidental  non-hazardous oil field wastes.  Basic  also  provides  certain
other well services, including pit lining services and hot oil services.

Environmental
Hazards  in the operation of oil field service companies, such as  employee
injuries  on  the  job site and accidental petroleum or waste  spills,  are
sometimes  encountered.  Such hazards may cause substantial liabilities  to
third  parties or governmental entities, the payment of which could  reduce
ultimately   the  funds  available  for  distribution.   Although   it   is
anticipated that customary insurance will be obtained, the Partnership  may
be  subject  to liability for pollution and other damages due  to  hazards,
which  cannot  be  insured against or will not be insured  against  due  to
prohibitive  premium costs or for other reasons.  Environmental  regulatory
matters  also  could  increase the cost of doing business  or  require  the
modification  of  operations in certain areas.  Environmental  expenditures
are  expensed  or  capitalized depending on their future economic  benefit.
Expenditures that relate to an existing condition caused by past operations
and  that  have no future economic benefits are expensed.  Liabilities  for
expenditures  of  a  noncapital  nature  are  recorded  when  environmental
assessment  and/or remediation is probable, and the costs can be reasonably
estimated.

Industry Regulations and Guidelines
Certain  industry  regulations and guidelines apply  to  the  registration,
qualification  and operation of limited partnerships.  The  Partnership  is
subject  to  these  guidelines, which regulate  and  restrict  transactions
between  the General Partner and the Partnership.  The Partnership complies
with  these  guidelines and the General Partner does  not  anticipate  that
continued  compliance would have a material adverse effect  on  Partnership
operations.

Partnership Employees
The  Partnership has no employees; however the General Partner has a  staff
of  geologists,  engineers, accountants, landmen  and  clerical  staff  who
engage  in  Partnership  activities and operations and  perform  additional
services  for  the  Partnership as needed.   In  addition  to  the  General
Partner's  staff, the Partnership engages independent consultants  such  as
petroleum  engineers  and geologists as needed.  As of  December  31,  2003
there  were  81  individuals directly employed by the  General  Partner  in
various capacities.

Item 2.   Properties

The  Partnership  does  not  currently own  or  lease  any  property.   The
Partnership  operates from the offices of its General Partner  in  Midland,
Texas.

Basic's  corporate  office is located in Midland, Texas, which  complements
the  core of its operations in the Permian Basin of West Texas and  eastern
New Mexico ("the Permian Basin").  Within the Permian Basin, Basic owns and
leases  field  offices.   Additionally, Basic has field  offices  in  South
Texas, East Texas and Oklahoma.

Basic's well servicing equipment fleet includes well servicing rigs,  fluid
service  trucks, Enviro-Vat systems and frac and test tanks.  Additionally,
the  Company  operates injection wells and fresh or brine  water  stations.
Basic  uses  its  well  servicing rigs to provide completion,  maintenance,
workover  and plugging and abandonment services.  Basic's related  trucking
services are used to move large equipment to and from the job sites of  its
customers  as  well  as  provide  an integrated  mix  of  liquids  handling
services,  including vacuum truck services, frac tank  rentals,  test  tank
rentals  and  Enviro-Vat system rentals.  Basic's  fresh  and  brine  water
supply  and disposal services include the production and sale of fresh  and
brine  water which is used in drilling, completion and workover  processes,
as well as operation of injection wells that dispose of produced salt water
and incidental non-hazardous oil field wastes.

Basic  believes  it  has satisfactory title to all  of  its  properties  in
accordance  with  standards generally accepted within  the  well  servicing
industry.







<PAGE>
Item 3.   Legal Proceedings

The Partnership is not currently involved in any legal proceeding nor is it
party to any pending or threatened claims that could reasonably be expected
to  have a material adverse effect on its financial condition or results of
operations.

Item 4.   Submission of Matters to a Vote of Security Holders

No  matter  was submitted to a vote of security holders during  the  fourth
quarter of 2003 through the solicitation of proxies or otherwise.

<PAGE>
                                 Part II

Item 5.   Market  for  the Registrant's Common Equity, Related  Stockholder
          Matters and Issuer Purchases of Equity Securities

Market Information
There is no trading market for the Units, and it is unlikely that a trading
market will exist at any time in the future.  The Partnership does not have
any  units  (i)  that  are subject to outstanding options  or  warrants  to
purchase, or securities convertible into, common equity of the Partnership,
(ii)  that could be sold pursuant to Rule 144 under the Securities  Act  or
that  we  have  agreed to register under the Securities  Act  for  sale  by
security  holders, or (iii) that are being, or have been publicly  proposed
to  be,  publicly offered by the Partnership, the offering of  which  could
have  a  material  effect  on the market price of the  limited  partnership
units.   Any  transfer  of  the  Units is severely  restricted  by  certain
conditions  outlined in the Partnership Agreement and requires the  consent
of the General Partner.

There have been no cash distributions to the Limited Partners to date.   In
general,  the  Partnership expects to reinvest all cash flow received  from
operations  and does not expect to make distributions until liquidation  of
the  Partnership.   The  following  is  a  summary  of  certain  allocation
provisions of the Partnership Agreement and is qualified in its entirety by
reference  to the Partnership Agreement, which was filed as an  Exhibit  to
the  partnership's  Form 10, filed April 1998.  Any distributions  of  cash
flow,  income, gain, profit, or loss will be allocated 85% to  the  Limited
Partners  and  15% to the General Partner in accordance with their  capital
accounts  until  the  Limited Partners have recovered,  through  cumulative
distributions  100% of their capital contributions plus  a  10%  cumulative
(but not compounded) return.  Thereafter, distributions will be made 75% to
the Limited Partners and 25% to the General Partner.

The   revenues  generated  and  capital  appreciation,  if  any,  from  the
Partnership's  investment  in Basic is highly  dependent  upon  the  future
prices  and  demand for oil and gas in that the level of use of  oil  field
services and equipment is directly related to the amount of activity in the
oil fields.  In addition, investments in oil field service companies, while
presenting  significant potential for capital appreciation, may  take  from
four  to  seven years from the date of initial investment to reach  such  a
state  of  maturity  that  disposition can  be  considered.   Thus,  it  is
anticipated  that capital gains or losses typically will take two  to  five
years or longer to realize.  In view of these factors, it is unlikely  that
any  significant  distributions of the proceeds  from  the  disposition  of
investments will be made until such time.  The Partnership's investment  in
Basic will generate little, if any, current income.

The  General  Partner has the right, but not the obligation  in  accordance
with  the  obligations set forth in the partnership agreement, to  purchase
limited  partnership units should an investor desire to sell.  The investor
must  give  written notice of intentions to dispose of their units  to  the
General   Partner  along  with  the  nature  and  terms  of  the   proposed
disposition.  The notice shall be deemed to constitute an offer to sell the
units  to  the General Partner.  The General Partner has 15 days  from  the
date of the offer to indicate in writing to the investor its decision as to
whether it will purchase all or any of the offered units.

                   Issuer Purchases of Equity Securities
                                                   Maximum
                                       Total     Number (or
                                      Number
                                     of Units    Approximat
                                                      e
                                     Purchased    Value) of
                                        as          Units
                                      Part of     that May
                                     Publicly      Yet Be
               Total                 Announced    Purchased
              Number
             of Units     Average    Plans or     Under the
                           Price                    Plans
Period(1)    Purchased   Paid Per    Programs        or
                           Unit                   Programs
October 1-
   31,
   2003          -      $     -          -           N/A
November 1-
   30,
   2003          -            -          -           N/A
December 1-
   31,
   2003          -            -          -           N/A
  TOTALS         -      $     -

(1)  In January 2003, the General Partner purchased a total of 0.25 limited
partner  units from limited partners at an average base price  of  $100,000
per unit.  As of December 31, 2002, no limited partner units were purchased
by  the  General  Partner.  As of December 31,  2001  the  General  Partner
purchased  0.15  limited  partner units for $13,950.   These  discretionary
repurchases were made based upon the partnership agreement criteria.
Number of Limited Partner Interest Holders
As of December 31, 2003, there were 524 holders of limited partner units in
the Partnership.

Distributions
Pursuant  to Section 4.1 of the Partnership's Certificate and Agreement  of
Limited  Partnership, "Net Cash From Operations and Net Cash From Sales  or
Refinancings"  shall be distributed, at such times as the  General  Partner
may  determine  in  its  sole discretion.  "Net Cash  From  Operations"  is
defined  as "the gross cash proceeds from Partnership operations  less  the
portion  thereof  used  to  pay or establish reasonable  reserves  for  all
Partnership  expenses, fees, commissions, debt payments,  new  investments,
capital  improvements,  replacements, repairs and contingencies,  and  such
other  purposes  deemed  appropriate, all  as  determined  by  the  General
Partner."   "Net Cash From Sales or Refinancings" is defined  as  "the  net
cash  proceeds  from all sales and other dispositions (other  than  in  the
ordinary  course of business) and all refinancings of Partnership Property,
less  any portion thereof used to establish reserves, all as determined  by
the General Partner.  There have been no cash distributions to date.

Item 6.   Selected Financial Data

The  following  selected financial data for the years  ended  December  31,
2003,  2002,  2001,  2000 and 1999 should be read in conjunction  with  the
financial statements included in Item 8:

                                       Years ended December 31,
                                --------------------------------------

                              2003     2002      2001      2000     1999
                              ----     ----      ----      ----     ----

Revenues                 $  103      220       4,021     11,403   11,164

Equity     loss      in
unconsolidated
 subsidiary                 -        -         -         -        (2,005,0
                                                                  00)

Net loss                    (10,755) (5,611)   (1,643)   (63,169) (2,120,4
                                                                  33)

Partners' share of  net
loss:

General partner             (1,613)  (842)     (246)     (9,475)  (318,065
                                                                  )

Limited partners            (9,142)  (4,769)   (1,397)   (53,694) (1,802,3
                                                                  68)

Limited partners' net
 loss per unit              (53)     (28)      (8)       (314)    (10,545)

Total assets             $  404,931  404,828   408,120   404,112  392,709




<PAGE>
Item 7.   Management's  Discussion and Analysis of Financial Condition  and
          Results of Operations

Southwest Partners III, L.P.

General
Southwest   Partners  III,  L.P.  was  organized  as  a  Delaware   limited
partnership on March 11, 1997.  The Partnership was formed for the  purpose
of  investing  in Basic Energy Services, Inc., an oilfield service  company
which  provides  services and products to oil and  gas  operators  for  the
workover,  maintenance and plugging of existing oil and gas  wells  in  the
southwestern United States.

The Partnership intends to wind up its operations and distribute its assets
or the proceeds therefrom on or before December 31, 2008, at which time the
Partnership's  existence  will  terminate,  unless  sooner  terminated   or
extended in accordance with the terms of the Partnership agreement.  As  of
December  31, 2003, the Partnership owned a 6.39% interest in Basic,  which
is accounted for using the cost method of accounting.

Results of Operations
For the year ended December 31, 2003

Revenues
Revenues  consisted of interest income.  The surplus cash remaining  before
and  after  the  May  21,  2001 additional investment  in  Basic  generated
interest income of $103.

Expenses
Direct  expenses  totaled  $10,858 for the year, relating  to  general  and
administrative.   General and administrative expenses  primarily  represent
independent accounting fees incurred to perform quarterly reviews  and  the
annual audit of the Partnership.

Results of Operations
For the year ended December 31, 2002

Revenues
Revenues  consisted of interest income.  The surplus cash remaining  before
and  after  the  May  21,  2001 additional investment  in  Basic  generated
interest income of $220.

Expenses
Direct  expenses  totaled  $5,831 for the year,  relating  to  general  and
administrative.   General and administrative expenses  primarily  represent
independent accounting fees incurred to audit the Partnership.

Revenue and Distribution Comparison

Partnership  losses for the years ended December 31, 2003,  2002  and  2001
were  $10,755,  $5,611 and $1,643, respectively.  Since  inception  of  the
Partnership, no cash distributions have been made to the partners.

Liquidity and Capital Resources

Cash  flows  provided by (used in) operating activities were  approximately
$103 in 2003 compared to $(3,292) in 2002 and approximately $4,008 in 2001.
Cash  flows  provided by operating activities for 2003  represent  interest
income.

Cash  flows used in investing activities were approximately $500  in  2003.
There  were  no cash flows used in investing activities during 2002.   Cash
flows used in investing activities were approximately $380,000 in 2001.

There were no cash flows used in financing activities during 2003, 2002 and
2001.

The  Partnership  as of December 31, 2003 has negative working  capital  of
$334,510, which includes a payable to the General Partner of $358,936.  The
Partnership does not generate operating income and has no current means  of
settling the liability to the General Partner, but believes the fair  value
of  its  assets  are  sufficient  to  meet  their  current  obligations  if
necessary.  The General Partner, should it become necessary, has agreed  to
either  extend the payment terms until the Partnership can comfortably  pay
the  balance or make other mutually acceptable arrangements to  settle  the
payable by transfer, sale or assignment of Partnership assets.
<PAGE>
Liquidity - Investment in Subsidiary

Southwest Partners III consist entirely of an investment in Basic's  common
stock.   The  investment had been accounted for using  the  equity  method.
Based on the December 21, 2000 transaction discussed below, the Partnership
accounted for the investment using the cost method.  Southwest Partners III
no  longer  holds a 20% or more interest in Basic and exerts no significant
influence over Basic's operations.

On December 21, 2000, Basic entered into a refinancing and restructuring of
its  debt and equity.  Upon the signing of the documents, the Partnership's
percentage  of ownership was diluted from 44.94% to 10.57%.  A  new  equity
investor,  in  exchange  for  1,441,730 shares  of  Basic's  common  stock,
purchased  and  retired  $24.5 million of Basic's debt  from  its  previous
lender.  The equity investor received a 76% ownership.  Additionally, $10.5
million of the debt held by the previous lender was refinanced with  a  new
lender.   The  remaining debt held by the previous lender of  approximately
$21.7 million was cancelled.

Basic's new equity investor mentioned in the above paragraphs purchased  an
additional  576,709  shares,  during  the  first  part  of  2001,   thereby
increasing their ownership from 76% to 81.6%.  As a result of the purchase,
the Partnership's ownership decreased at that time from 10.57% to 8.11%.

On  May  21,  2001,  Basic  issued a Notice to Stockholders  of  Preemptive
Rights.   The Partnership purchased an additional 19,000 shares  of  common
stock at $380,000.

On  February 13, 2002, Basic sold 600,000 shares of common stock to a group
of   related  investors.   Based  on  this  transaction,  the  Partnerships
ownership percentage was diluted from 6.32% to 5.39%.

Basic's  Board of Directors according to the Supplemental Warrant Agreement
awarded  all  holders  of EBITDA Contingent Warrants  50%  of  the  maximum
warrants that could have been earned, if the financial goals of Basic  were
achieved.   The  Partnership exercised their warrants on May  5,  2003  and
purchased  50,632 shares of stock for $.01 per share.  The  Partnership  at
December  31,  2003  owned a total of 6.39%, or 270,132 shares  of  Basic's
outstanding common stock.

Liquidity - General Partner

As  of  December 31, 2003, the Managing General Partner is in violation  of
several covenants pertaining to their Amended and Restated Revolving Credit
Agreement  due  June  1, 2006 and their Senior Second Lien  Secured  Credit
Agreement  due  October  15,  2008.  Due to the  covenant  violations,  the
Managing  General  Partner is in default under their Amended  and  Restated
Revolving  Credit  Agreement  and the Senior  Second  Lien  Secured  Credit
Agreement,  and all amounts due under these agreements have been classified
as  a current liability on the Managing General Partner's balance sheet  at
December 31, 2003.  The significant working capital deficit and debt  being
in default at December 31, 2003, raise substantial doubt about the Managing
General Partner's ability to continue as a going concern.

Subsequent  to  December 31, 2003, the Board of Directors of  the  Managing
General  Partner announced its decision to explore a merger,  sale  of  the
stock  or  other transaction involving the Managing General  Partner.   The
Board  has  formed a Special Committee of independent directors to  oversee
the   sales  process.   The  Special  Committee  has  retained  independent
financial  and  legal advisors to work closely with the management  of  the
Managing General Partner to implement the sales process.  There can  be  no
assurance  that a sale of the Managing General Partner will be  consummated
or what terms, if consummated, the sale will be on.

Critical Accounting Policies

The  Partnership used the cost method of accounting for its  investment  in
Basic  since December 21, 2000.  Prior to December 21, 2000 the Partnership
used  the  equity method of accounting for the investment.  Under the  cost
method  of  accounting  the  Partnership  recognizes  as  income  dividends
received  that are distributed from net accumulated earnings of an investee
subsequent  to the date of acquisition of the investment.  The  Partnership
would  recognize  a loss when there is a loss in value in  the  investment,
which  is  other than a temporary decline.  In its assessment of value  the
Partnership considers future cash flows either in the form of dividends  or
other distributions from the investee or from selling it's investment to an
unrelated party.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The  Partnership  is  not a party to any derivative or embedded  derivative
instruments.
<PAGE>
Item 8.   Financial Statements and Supplementary Data

                      Index to Financial Statements

                                                                       Page

Independent Auditors' Report                                            11

Balance Sheets                                                          12

Statements of Operations                                                13

Statement of Changes in Partners' Equity                                14

Statements of Cash Flows                                                15

Notes to Financial Statements                                           16

<PAGE>









                       INDEPENDENT AUDITORS' REPORT

The Partners
Southwest Partners III, L.P.
(A Delaware Limited Partnership):


We  have audited the accompanying balance sheets of Southwest Partners III,
L.P.  (the "Partnership") as of December 31, 2003 and 2002, and the related
statements  of operations, changes in partners' equity and cash  flows  for
each  of the years in the three year period ended December 31, 2003.  These
financial   statements   are  the  responsibility  of   the   Partnership's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We  conducted  our  audits in accordance with auditing standards  generally
accepted in the United States of America.  Those standards require that  we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit  includes
examining, on a test basis, evidence supporting the amounts and disclosures
in  the  financial  statements.   An  audit  also  includes  assessing  the
accounting principles used and significant estimates made by management, as
well  as  evaluating  the  overall financial  statement  presentation.   We
believe that our audits provide a reasonable basis for our opinion.

In  our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Southwest Partners III,
L.P. as of December 31, 2003 and 2002 and the results of its operations and
its  cash  flows  for  each  of the years in the three  year  period  ended
December  31,  2003  in  conformity  with accounting  principles  generally
accepted in the United States of America.






                                                  KPMG LLP



Midland, Texas
March 19, 2004, except as to Note 8, which is as of May 3, 2004





<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)
                              Balance Sheets
                        December 31, 2003 and 2002


                                   2003      2002
                                   ----      ----
Assets

Current asset:
Cash and cash equivalents     $  24,425    24,828
                                 --------  --------
                                 --        --
  Total current assets           24,425    24,828
                                 --------  --------
                                 --        --
Investment                       380,506   380,000
                                 --------  --------
                                 --        --
  Total assets                $  404,931   404,828
                                 ======    ======


Liabilities  and   Partners'
Equity

Current liabilities:
Payable to General Partner    $  358,935   348,077
                                 --------  --------
                                 --        --
  Total current liabilities      358,935   348,077
                                 --------  --------
                                 --        --
Partners' equity:
 General Partner                 (909,926  (908,313
                                 )         )
 Limited partners                955,922   965,064
                                 --------  --------
                                 --        --
  Total partners' equity         45,996    56,751
                                 --------  --------
                                 --        --
                              $  404,931   404,828
                                 ======    ======

















                  The accompanying notes are an integral
                   part of these financial statements.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)
                         Statements of Operations
                Years Ended December 31, 2003, 2002 and 2001

                              2003      2002      2001
                              ----      ----      ----

Revenues

Interest income           $ 103       220       4,021
                            --------  --------  --------
                            --        --        --
                            103       220       4,021
                            --------  --------  --------
                            --        --        --
Expenses

General              and    10,858    5,831     5,664
administrative
                            --------  --------  --------
                            --        --        --
                            10,858    5,831     5,664
                            --------  --------  --------
                            --        --        --
Net loss                  $ (10,755)  (5,611)   (1,643)
                            ======    ======    ======
 Net loss allocated to:

 General Partner          $ (1,613)   (842)     (246)
                            ======    ======    ======
 Limited partners         $ (9,142)   (4,769)   (1,397)
                            ======    ======    ======
   Per  limited  partner  $ (53)      (28)      (8)
unit
                            ======    ======    ======























                  The accompanying notes are an integral
                   part of these financial statements.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)
                 Statement of Changes in Partners' Equity
               Years Ended December 31, 2003, 2002 and 2001

                                 General   Limited
                                 Partner   Partners   Total
                                 --------  --------   -----

Balance - December 31, 2000   $  (907,225  971,230   64,005
                                 )

Net loss                         (246)     (1,397)   (1,643)
                                 --------  --------  --------
                                 --        ----      --
Balance - December 31, 2001      (907,471  969,833   62,362
                                 )

Net loss                         (842)     (4,769)   (5,611)
                                 --------  --------  --------
                                 --        ----      --
Balance - December 31, 2002      (908,313  965,064   56,751
                                 )

Net loss                         (1,613)   (9,142)   (10,755)
                                 --------  --------  --------
                                 --        ----      --
Balance - December 31, 2003   $  (909,926  955,922   45,996
                                 )
                                 ======    =======   ======





























                  The accompanying notes are an integral
                   part of these financial statements.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)
                         Statements of Cash Flows
               Years Ended December 31, 2003, 2002 and 2001

                                              2003     2002     2001
                                              ----     ----     ----

Cash flows from operating activities:

 Paid to suppliers                        $ -         (3,512)  (13)
 Interest received                          103       220      4,021
                                            -------   -------  -------
                                            ---       -----    ---
    Net   cash  provided  by  (used   in)
operating
   activities                               103       (3,292)  4,008
                                            -------   -------  -------
                                            ---       -----    ---

Cash flows from investing activities:

 Purchase of Basic Investment               (506)     -        (380,00
                                                               0)
                                            -------   -------  -------
                                            ---       -----    ---
Net decrease in cash and cash equivalents   (403)     (3,292)  (375,99
                                                               2)

Beginning of period                         24,828    28,120   404,112
                                            -------   -------  -------
                                            ---       -----    ---
End of period                             $ 24,425    24,828   28,120
                                            ======    =======  ======

Reconciliation of net loss to net cash
   (used   in)   provided  by   operating
activities:

Net loss                                  $ (10,755   (5,611)  (1,643)
                                            )

Adjustments to reconcile net loss to  net
cash
   (used   in)   provided  by   operating
activities:

 Increase in accounts payable               10,858    2,319    5,651
                                            -------   -------  -------
                                            ----      -----    ---

Net cash provided by (used in)
 operating activities                     $ 103       (3,292)  4,008
                                            ======    =======  ======









                  The accompanying notes are an integral
                   part of these financial statements.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

1.   Organization
     Southwest  Partners III, L.P. (the "Partnership") was organized  under
     the laws of the state of Delaware on March 11, 1997 for the purpose of
     investing  in or acquiring oil field service companies'  assets.   The
     Partnership  intends  to  wind up its operations  and  distribute  its
     assets  or the proceeds therefrom on or before December 31,  2008,  at
     which  time the Partnership's existence will terminate, unless  sooner
     terminated or extended in accordance with the terms of the Partnership
     Agreement.   Southwest Royalties, Inc., a Delaware corporation  formed
     in  1983, is the General Partner of the Partnership.  Revenues,  costs
     and expenses are allocated as follows:

                              Limited   General
                              Partners  Partner
                              -------   --------
Interest  income on  capital    (1)       (1)
contributions
All other revenues              85%       15%
Organization  and   offering    100%       -
costs
Syndication costs               100%       -
Amortization of organization    100%       -
costs
Gain  or  loss  on  property    85%       15%
disposition
Operating and administrative    85%       15%
costs
All other costs                 85%       15%

     After  payout, allocations will be seventy-five (75%) to  the  limited
     partners and twenty-five (25%) to the General Partner.  Payout is when
     the  limited partners have received an amount equal to one hundred ten
     percent (110%) of their limited partner capital contributions.

     (1)   Interest   earned  on  promissory  notes  related   to   Capital
     Contributions is allocated to the specific holders of those notes.

     Method of Allocation of Administrative Costs

     For  the  purpose  of  allocating Administrative  Costs,  the  General
     Partner will allocate each employee's time among three divisions:  (1)
     operating  partnerships; (2) corporate activities; and  (3)  currently
     offered  or  proposed partnerships.  The General Partner determines  a
     percentage  of total Administrative Costs per division  based  on  the
     total  allocated  time  per  division and personnel  costs  (salaries)
     attributable to such time. Within the operating partnership  division,
     Administrative Costs are further allocated on the basis of  the  total
     capital of each partnership invested in its operations.

2.   Summary of Significant Accounting Policies

     Investment
     Investment in Basic Energy Services, Inc. in which the Partnership had
     a  6.39%  interest at December 31, 2003, is accounted for by the  cost
     method.  Southwest Partners III no longer holds a 20% or more interest
     in  Basic and exerts no significant influence over Basic's operations.
     Under  the  cost  method of accounting the Partnership  recognizes  as
     income  dividends received that are distributed from  net  accumulated
     earnings of an investee subsequent to the date of acquisition  of  the
     investment.  The Partnership would recognize a loss when  there  is  a
     loss  in  value  in  the investment, which is other than  a  temporary
     decline.  In its assessment of value the Partnership considers  future
     cash flows either in the form of dividends or other distributions from
     the  investee  or from selling it's investment to an unrelated  party.
     Prior  to  December 2000, the Partnership accounted for the investment
     on the equity method.

     Estimates and Uncertainties
     The  preparation of financial statements in conformity with  generally
     accepted  accounting principles requires management to make  estimates
     and  assumptions  that  affect  the reported  amounts  of  assets  and
     liabilities and disclosure of contingent assets and liabilities at the
     date  of the financial statements and the reported amounts of revenues
     and expenses during the reporting period.  Actual results could differ
     from those estimates.
<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

2.   Summary of Significant Accounting Policies - continued

     Syndication Costs
      Syndication  costs  are accounted for as a reduction  of  partnership
equity.

     Income Taxes
     No  provision  for  income  taxes  is  reflected  in  these  financial
     statements, since the tax effects of the Partnership's income or  loss
     are passed through to the individual partners.

     In   accordance  with  the  requirements  of  Statement  of  Financial
     Accounting  Standards  No. 109, "Accounting  for  Income  Taxes,"  the
     Partnership's  tax basis in its assets is $17,054,500 and  $17,054,500
     more,  as  of  December  31,  2003 and  2002  as  that  shown  on  the
     accompanying  Balance  Sheet  in accordance  with  generally  accepted
     accounting principles.

     Cash and Cash Equivalents
     For purposes of the statement of cash flows, the Partnership considers
     all  highly liquid debt instruments purchased with a maturity of three
     months or less to be cash equivalents.  The Partnership maintains  its
     cash at one financial institution.

     Number of Limited Partner Units
     There were 170.93 limited partner units outstanding as of December 31,
     2003, held by 524 partners.

     Concentrations of Credit Risk
     All  partnership  revenues are received by  the  General  Partner  and
     subsequently remitted to the partnership and all expenses are paid  by
     the General Partner and subsequently reimbursed by the partnership.

     Fair Value of Financial Instruments
     The  carrying amount of cash approximates fair value due to the  short
     maturity of these instruments.

     Net loss per limited partnership unit
     The  net loss per limited partnership unit is calculated by using  the
     number of outstanding limited partnership units.

3.   Liquidity - Partnership
     The  Partnership as of December 31, 2003 has negative working  capital
     of  $334,510,  which  includes a payable to  the  General  Partner  of
     $358,936.  The Partnership does not generate operating income and  has
     no current means of settling the liability to the General Partner, but
     believes  the  fair value of its assets are sufficient to  meet  their
     current  obligations  if necessary.  The General  Partner,  should  it
     become necessary, has agreed to either extend the payment terms  until
     the Partnership can comfortably pay the balance or make other mutually
     acceptable  arrangements to settle the payable by  transfer,  sale  or
     assignment of Partnership assets.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

4.   Liquidity - General Partner
     As  of December 31, 2003, the Managing General Partner is in violation
     of   several  covenants  pertaining  to  their  Amended  and  Restated
     Revolving  Credit Agreement due June 1, 2006 and their  Senior  Second
     Lien  Secured  Credit  Agreement due October 15,  2008.   Due  to  the
     covenant violations, the Managing General Partner is in default  under
     their  Amended and Restated Revolving Credit Agreement and the  Senior
     Second Lien Secured Credit Agreement, and all amounts due under  these
     agreements have been classified as a current liability on the Managing
     General Partner's balance sheet at December 31, 2003.  The significant
     working  capital  deficit and debt being in default  at  December  31,
     2003,  raise  substantial doubt about the Managing  General  Partner's
     ability to continue as a going concern.

     Subsequent  to  December  31, 2003, the  Board  of  Directors  of  the
     Managing  General Partner announced its decision to explore a  merger,
     sale  of the stock or other transaction involving the Managing General
     Partner.   The  Board  has formed a Special Committee  of  independent
     directors  to  oversee the sales process.  The Special  Committee  has
     retained independent financial and legal advisors to work closely with
     the  management of the Managing General Partner to implement the sales
     process.   There  can  be no assurance that a  sale  of  the  Managing
     General Partner will be consummated or what terms, if consummated, the
     sale will be on.

5.   Investment
     Common stock ownership in Basic Energy Services, Inc. was as follows:

December  31, 1997 to  March  45.89%
31, 1999
March  31,  to December  21,  44.94%
2000
December   21,    2000    to  10.57%
December 31, 2000
January  1, 2001 to May  20,  8.11%
2001
May 21, 2001 to February 13,  6.32%
2002
February 14, 2002 to May  4,  5.39%
2003
May  5, 2003 to December 31,  6.39%
2003

     Southwest  Partners III consist entirely of an investment  in  Basic's
     common  stock.  The investment had been accounted for using the equity
     method.   Based on the December 21, 2000 transaction discussed  below,
     the  Partnership changed its accounting for the investment to the cost
     method.  Southwest Partners III no longer holds a 20% or more interest
     in Basic and exerts no significant influence over Basic's operations.

     On   December   21,  2000,  Basic  entered  into  a  refinancing   and
     restructuring  of  its  debt and equity.   Upon  the  signing  of  the
     documents, the Partnership's percentage of ownership was diluted  from
     44.94%  to  10.57%.  A new equity investor, in exchange for  1,441,730
     shares of Basic's common stock, purchased and retired $24.5 million of
     Basic's debt from its previous lender.  The equity investor received a
     76%  ownership. Additionally, $10.5 million of the debt  held  by  the
     previous lender was refinanced with a new lender.  The remaining  debt
     held  by  the  previous  lender  of approximately  $21.7  million  was
     cancelled.

     Basic's   new  equity  investor  mentioned  in  the  above  paragraphs
     purchased an additional 576,709 shares, during the first part of 2001,
     thereby increasing their ownership from 76% to 81.6%.  As a result  of
     the  purchase, the Partnership's ownership decreased at that time from
     10.57% to 8.11%.

     On  May  21, 2001, Basic issued a Notice to Stockholders of Preemptive
     Rights.   The  Partnership purchased an additional  19,000  shares  of
     common stock at $380,000.


<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

5.   Investment - continued
     On  February 13, 2002, Basic sold 600,000 shares of common stock to  a
     group   of   related  investors.   Based  on  this  transaction,   the
     Partnerships ownership percentage was diluted from 6.32% to 5.39%.

     Basic's  Board  of  Directors according to  the  Supplemental  Warrant
     Agreement awarded all holders of EBITDA Contingent Warrants 50% of the
     maximum  warrants that could have been earned, if the financial  goals
     of  Basic were achieved.  The Partnership exercised their warrants  on
     May  5,  2003 and purchased 50,632 shares of stock for $.01 per share.
     The  Partnership  at  December 31, 2003 owned a  total  of  6.39%,  or
     270,132 shares of Basic's outstanding common stock.

6.   Commitments and Contingent Liabilities
     As  a  marketing  incentive, brokers who sold in excess  of  one  Unit
     received  three  percent (3%) of the Partnership liquidation  proceeds
     which  are  distributed to the General Partner in  proportion  to  the
     dollar  amount  of  Units sold by each such broker; provided,  however
     that no broker shall receive such interest unless the Partnership  has
     returned to the Limited Partners 100% of their Limited Partner Capital
     Contribution plus a 10% cumulative (but not compounded) return at  the
     time  of  liquidation.  As of December 31, 1998, there  were  13  such
     brokers  who  sold in excess of one Unit qualifying  for  the  special
     distribution.

     The  Partnership  is  subject  to various  federal,  state  and  local
     environmental  laws  and  regulations, which establish  standards  and
     requirements  for  protection  of the  environment.   The  Partnership
     cannot  predict the future impact of such standards and  requirements,
     which  are  subject to change and can have retroactive  effectiveness.
     The  Partnership  continues to monitor the status of  these  laws  and
     regulations.

     As  of December 31, 2003, the Partnership has not been fined, cited or
     notified  of any environmental violations and management is not  aware
     of  any  unasserted  violations, which would have a  material  adverse
     effect upon capital expenditures, earnings or the competitive position
     in the oil field service industry.

7.   Related Party Transactions
     Accounts payable to the General Partner at December 31, 2003 and  2002
     totaled $358,935 and $348,077 and primarily represents management fees
     billed in previous years.

<PAGE>
                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)

                      Notes to Financial Statements

8.   Subsequent Event
     Subsequent  to  December  31,  2003,  the  Managing  General   Partner
     announced that its Board of Directors had decided to explore a  merger
     or  sale  of  the  stock of the Company.  The Board formed  a  Special
     Committee  of independent directors to oversee the sale process.   The
     Special Committee retained independent financial and legal advisors to
     work closely with management to implement the sale process.

     On  May  3,  2004, the Managing General Partner entered  into  a  cash
     merger  agreement to sell all of its stock to Clayton Williams Energy,
     Inc.  The cash merger price is being negotiated, but is expected to be
     approximately  $45 per share.  The transaction, which  is  subject  to
     approval  by the Managing General Partner's shareholders, is  expected
     to close no later than May 21, 2004.

9.   Selected Quarterly Financial Results - (unaudited)
                                      Quarter
                       --------------------------------------
                                      --------

                        First     Second    Third     Fourth
2003:                   ------   -------    ------    ------
 Total revenues     $  27        27        25        24
 Total expenses        1,267     8,007     2,823     (1,239)
 Net income (loss)     (1,240)   (7,980)   (2,798)   1,263
 Net income (loss)
per
   limited partner     (6)       (40)      (14)      7
unit

2002:
 Total revenues     $  61        63        60        36
 Total expenses        1,223     1,419     1,929     1,260
 Net loss              (1,162)   (1,356)   (1,869)   (1,224)
 Net loss per
   limited partner     (6)       (7)       (9)       (6)
unit



<PAGE>

Item 9.   Changes  in and Disagreements With Accountants on Accounting  and
          Financial Disclosure

None

Item 9A.                                             Controls and
Procedures

Disclosure Controls and Procedures
As  of  the year ended December 31, 2003, H.H. Wommack, III, President  and
Chief  Executive  Officer  of the Managing General  Partner,  and  Bill  E.
Coggin,  Executive  Vice  President and  Chief  Financial  Officer  of  the
Managing  General Partner, evaluated the effectiveness of the Partnership's
disclosure  controls  and  procedures.  Based  on  their  evaluation,  they
believe that:

     The disclosure controls and procedures of the Partnership were
     effective in ensuring that information required to be disclosed by the
     Partnership in the reports it files or submits under the Exchange Act
     was recorded, processed, summarized and reported within the time
     periods specified in the SEC's rules and forms; and

     The  disclosure  controls  and  procedures  of  the  Partnership  were
     effective  in  ensuring  that  material  information  required  to  be
     disclosed by the Partnership in the report it filed or submitted under
     the  Exchange  Act was accumulated and communicated  to  the  Managing
     General  Partner's  management,  including  its  President  and  Chief
     Executive Officer and Chief Financial Officer, as appropriate to allow
     timely decisions regarding required disclosure.

Internal Control Over Financial Reporting
There  has  not been any change in the Partnership's internal control  over
financial reporting that occurred during the year ended December  31,  2003
that has materially affected, or is reasonably likely to materially affect,
it internal control over financial reporting.

<PAGE>
                                 Part III

Item 10.  Directors and Executive Officers of the Registrant

Management of the Partnership is provided by Southwest Royalties, Inc.,  as
General  Partner. The names, ages, offices, positions and length of service
of  the  directors and executive officers of Southwest Royalties, Inc.  are
set forth below.  Each director and executive officer serves for a term  of
one year.

         Name               Age               Position
H. H. Wommack, III          48      Chairman   of   the    Board,
                                    President, Director
                                    and Chief Executive Officer
James N. Chapman(1)         41      Director
William P. Nicoletti(2)     58      Director
Joseph J. Radecki,  Jr.     45      Director
(2)
Richard D. Rinehart(1)      68      Director
John M. White(2)            48      Director
Herbert  C. Williamson,     55      Director
III(1)
Bill E. Coggin              49      Executive Vice President  and
                                    Chief Financial Officer
J. Steven Person            45      Vice President, Marketing

(1)  Member of the Compensation Committee

(2)  Member of the Audit Committee

H.  H.  Wommack, III has served as Chairman of the Board, President,  Chief
Executive Officer and a director since Southwest's founding in 1983.  Since
1997  Mr.  Wommack  has  served as President, Chief Executive  Officer  and
Chairman of SRH, Southwest's former parent and current holder of 10% of its
voting  share capital.  SRH holds an equity investment in Southwest and  in
Basic  Energy Services.  Since 1997 Mr. Wommack has served as  chairman  of
the  board  of directors of Midland Red Oak Realty, Inc.  Midland  Red  Oak
Realty  owns  and  manages  commercial real  estate  properties,  including
shopping centers and office buildings, in secondary real estate markets  in
the Southwestern United States.  From 1997 until December 2000, Mr. Wommack
served as chairman of the board of directors of Basic Energy Services, Inc.
and  since  December  2000  has continued to  serve  on  Basic's  board  of
directors.  Basic provides certain well services for oil and gas companies.
Prior to Southwest's formation, Mr. Wommack was a self-employed independent
oil  and  gas  producer engaged in the purchase and  sale  of  royalty  and
working  interests in oil and gas leases and the drilling  of  wells.   Mr.
Wommack graduated from the University of North Carolina at Chapel Hill  and
received his law degree from the University of Texas.

James  N.  Chapman  has served as a director since  April  19,  2002.   Mr.
Chapman is associated with Regiment Capital Advisors, LLC, which he  joined
in January 2003.  Prior to Regiment, Mr. Chapman acted as a capital markets
and  strategic  planning consultant with private and public  companies,  as
well as hedge funds, across a range of industries. Prior to establishing an
independent  consulting practice, Mr. Chapman worked for The  Renco  Group,
Inc. from December 1996 to December 2001.  Prior to Renco, Mr. Chapman  was
a  founding  principal of Fieldstone Private Capital Group in August  1990.
Prior  to joining Fieldstone, Mr. Chapman worked for Bankers Trust  Company
from  July 1985 to August 1990, most recently in the BT Securities  capital
markets area.  Mr. Chapman serves as a member of the board of directors  of
Anchor  Glass  Container Corporation, Davel Communications, Inc.,  Coinmach
Corporation, as well as a number of private companies.

William  P. Nicoletti has served as a director since April 19,  2002.   Mr.
Nicoletti  is Managing Director of Nicoletti & Company Inc., an  investment
banking  and financial advisory firm he founded in 1991.  He was previously
a  senior officer and head of the Energy Investment Banking Groups of E. F.
Hutton  &  Company Inc. and Paine Webber, Incorporated.   From  March  1998
until June 1990 he was a managing director and co-head of Energy Investment
Banking  at  McDonald Investments Inc.  Mr. Nicoletti  is  a  director  and
Chairman  of  the Audit Committee of Star Gas Partners, L.P., the  nation's
largest  retail  distributor  of  home  heating  oil  and  a  major  retail
distributor  of  propane  gas.  He is also a director  of  MarkWest  Energy
Partners,  L.P.,  a  business engaged in the gathering  and  processing  of
natural  gas and the fractionation and storage of natural gas liquids,  and
Russell-Stanley Holdings, Inc., a manufacturer and marketer  of  steel  and
plastic  industrial containers.  Mr. Nicoletti is a graduate of Seton  Hall
University  and  received an MBA degree from Columbia  University  Graduate
School of Business.

<PAGE>
Joseph J. Radecki, Jr. has served as a director since April 19, 2002.   Mr.
Radecki is currently a Managing Director in the Leveraged Finance Group  of
CIBC  World  Markets  where he is principally responsible  for  the  firm's
financial restructuring and distressed situation advisory practice.   Prior
to  joining  CIBC World Markets in 1998, Mr. Radecki was an Executive  Vice
President and Director of the Financial Restructuring Group of Jefferies  &
Company,  Inc.  beginning in 1990.  From 1983 until 1990, Mr.  Radecki  was
First  Vice President in the International Capital Markets Group at  Drexel
Burnham Lambert, Inc., where he specialized in financial restructurings and
recapitalizations.   Over the past fourteen years,  Mr.  Radecki  has  been
integrally involved in over 120 transactions totaling nearly $50 billion in
recapitalized  securities.  Mr. Radecki currently serves as a  Director  of
RBX  Corporation,  a  manufacturer of rubber and  plastic  foam  and  other
polymer  products.   He  previously served  as  a  Director  of  Wherehouse
Entertainment, Inc., a music and video specialty retailer, as  Chairman  of
the  Board  of  American  Rice,  Inc., an  international  rice  miller  and
marketer,  as  a  member  of  the  Board of Directors  of  Service  America
Corporation,   a   national   food   service   management   firm,   Bucyrus
International, Inc., a mining equipment manufacturer, and ECO-Net,  a  non-
profit  engineering related network firm.  Mr. Radecki graduated magna  cum
laude in 1980 from Georgetown University with a B.A. in Government.

Richard  D.  Rinehart has served as a director since April 19,  2002.   Mr.
Rinehart is a founding principal of PetroCap, Inc. and president of Kestrel
Resources,  Inc.   PetroCap, Inc. provides investment and merchant  banking
services  to  a  variety  of clients active in the oil  and  gas  industry.
Kestrel Resources, Inc. is a privately owned oil and gas operating company.
He  served  as Director of Coopers & Lybrand's Energy Systems and  Services
Division prior to the founding of Kestrel Resources, Inc. in 1992. Prior to
joining  Coopers & Lybrand, he was chief executive officer/founder of  Dawn
Information  Resources,  Inc., formed in 1986 and  acquired  by  Coopers  &
Lybrand  in  early  1991.  Mr. Rinehart served as CEO  of  Terrapet  Energy
Corporation during the period 1982 through 1986. Prior to the formation  of
Terrapet in 1982, he was employed as President of the Terrapet Division  of
E.I.  DuPont de Nemours and Company. Before its acquisition by  DuPont,  he
served  as  CEO and President of Terrapet Corp., a privately owned  E  &  P
company. Before the formation of Terrapet Corp. in 1972, he was manager  of
supplementary recovery methods and senior evaluation engineer  with  H.  J.
Gruy and Associates, Inc., Dallas, Texas.

John White has served as a director since April 19, 2002.  Mr. White became
an  equity  analyst for Harris Nesbitt Gerard following the acquisition  by
BMO  Financial  Group in 2003.  He had joined BMO Nesbitt  Burns  in  1998,
responsible  for  high  yield research on oil, gas  and  energy  companies.
Previously,  Mr.  White worked at John S. Herold, Inc., an independent  oil
and  gas  research and consulting firm, where he was responsible for  fixed
income  research  on the oil and gas industry.  His prior  experience  also
included four years managing a portfolio of oil and gas loans for The  Bank
of Nova Scotia.  Before entering financial services, Mr. White was with BP,
where he worked in exploration and production for seven years.  At BP,  his
experience  was  primarily  in the basins of the  Mid-Continent  and  Rocky
Mountain regions.  Mr. White is a graduate of The University of Oklahoma.

Herbert  C. Williamson, III has served as a director since April 19,  2002.
At  present, Mr. Williamson is self-employed as a consultant.   From  March
2001  to  March  2002  Mr. Williamson served as an investment  banker  with
Petrie  Parkman & Co.  From April 1999 to March 2001 Mr. Williamson  served
as chief financial officer and from August 1999 to March 2001 as a director
of  Merlon  Petroleum  Company, a private oil and gas company  involved  in
exploration  and production in Egypt.  Mr. Williamson served  as  executive
vice  president,  chief  financial  officer  and  director  of  Seven  Seas
Petroleum,  Inc., a publicly traded oil and gas exploration  company,  from
March  1998  to  April 1999.  From 1995 through April 1998,  he  served  as
director  in  the  Investment Banking Department  of  Credit  Suisse  First
Boston.   Mr.  Williamson  served  as  vice  chairman  and  executive  vice
president  of Parker and Parsley Petroleum Company, a publicly  traded  oil
and  gas  exploration company (now Pioneer Natural Resources Company)  from
1985 through 1995.

Bill  E.  Coggin  has served as Vice President and Chief Financial  Officer
since joining the Managing General Partner in 1985.  Previously, Mr. Coggin
was  Controller  for Rod Ric Corporation, an oil and gas drilling  company,
and  for  C.F.  Lawrence  &  Associates, a large independent  oil  and  gas
operator.  Mr. Coggin received a B.S. in Education and a B.A. in Accounting
from Angelo State University.

J.  Steven Person has served as Vice President, Marketing since joining the
Managing  General  Partner in 1989.  Mr. Person  began  in  the  investment
industry  with Dean Witter in 1983.  Prior to joining the Managing  General
Partner, Mr. Person was a senior wholesaler with Capital Realty, Inc. While
at  Capital  Realty, he was involved in the syndication of  mortgage  based
securities  through  the major brokerage houses.   Mr.  Person  received  a
B.B.A.  degree  from Baylor University and an M.B.A. from  Houston  Baptist
University.


<PAGE>
Key Employees

Jon  P.  Tate,  age  46, has served as Vice President, Land  and  Assistant
Secretary  of the Managing General Partner since 1989. From 1981  to  1989,
Mr.  Tate  was employed by C.F. Lawrence & Associates, Inc., an independent
oil  and  gas company, as land manager. Mr. Tate is a member of the Permian
Basin Landman's Association.

R.  Douglas  Keathley, age 48, has served as Vice President, Operations  of
the  Managing  General Partner since 1992. Before joining us, Mr.  Keathley
worked  as a senior drilling engineer for ARCO Oil and Gas Company  and  in
similar capacities for Reading & Bates Petroleum Co. and Tenneco Oil Co.

Code of Ethics

Neither the Partnership nor the Managing General Partner has adopted a code
of  ethics  for  employees, or any principal executive officers,  principal
financial officers, principal accounting officers or the Board of Directors
of the Managing General Partner.  The Board of the Managing General Partner
believes  that  the Partnership's existing internal control procedures  and
current business practices are adequate to promote ethical conduct  and  to
deter  wrongdoing  on the part of these executives.  The  Managing  General
Partner  of  the  Partnership intends to implement during 2004  a  code  of
ethics  that will apply to these executives.  In accordance with applicable
SEC rules, the code of ethics will be made publicly available.

Audit Committee

The  current members of the Audit Committee of the Managing General Partner
are  William  P. Nicoletti, John M. White and Joseph J. Radecki,  Jr.   The
Board of Directors of the Managing General Partner has determined that  Mr.
Nicoletti, the Chairman of the Audit Committee, meets the definition of  an
"audit  committee financial expert" under Item 401(h)(2) of Regulation  S-K
and  has  also  determined that all of the members of the Audit  Committee,
including  Mr.  Nicoletti, meet the independence  requirements  of  Section
10A(m)(3) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

Item 11.  Executive Compensation

The  Partnership  does not have any directors or executive  officers.   The
executive  officers  of  the  General  Partner  do  not  receive  any  cash
compensation,  bonuses, deferred compensation or compensation  pursuant  to
any type of plan, from the Partnership.

Item  12.   Security Ownership of Certain Beneficial Owners and  Management
and Related Stockholder Matters

There  are  no  limited partners who own of record, or  are  known  by  the
General  Partner  to  beneficially own,  more  than  five  percent  of  the
Partnership's limited partnership interests.

The  General  Partner owns a 15 percent interest in the  Partnership  as  a
general  partner.  Through repurchase, the General Partner also  owns  0.40
limited  partner  units,  a 0.20% limited partner  interest.   The  General
Partner's total percentage interest ownership in the Partnership is 15.20%.

No  officer or director of the General Partner directly owns units  in  the
Partnership.   The  officers  and directors  of  the  General  Partner  are
considered beneficial owners of the limited partner units acquired  by  the
General  Partner by virtue of their status as such.  A list  of  beneficial
owners  of  limited  partner units, known to the  General  Partner,  is  as
follows:




<PAGE>

                                                 Amount and
                                                 Nature of      Percen
                                                                  t
                        Name and Address of      Beneficial       of
  Title of Class         Beneficial Owner        Ownership      Class
-------------------    ---------------------     ----------     ------
  --------------          --------------           ------       -----
Limited Partnership    Southwest  Royalties,     Directly       0.20%
Interest               Inc.                      Owns
                       Managing      General     0.40 Units
                       Partner
                       407   N.  Big  Spring
                       Street
                       Midland, TX 79701

Limited Partnership    H. H. Wommack, III        Indirectly     0.20%
Interest                                         Owns
                       Chairman    of    the     0.40 Units
                       Board,
                       President, and CEO
                       of          Southwest
                       Royalties, Inc.,
                       the  Managing General
                       Partner
                       407   N.  Big  Spring
                       Street
                       Midland, TX 79701


There  are  no arrangements known to the General Partner, which  may  at  a
subsequent date result in a change of control of the Partnership.

Item 13.  Certain Relationships and Related Transactions

The  General Partner contributed $1,692,698, which entitled it  to  receive
100%  of  the Partnership's general partner interest.  The general  partner
interest  entitles the General Partner to 15% interest in the  Partnership.
See "Item 5."

In  2003, the General Partner received no administrative fees.  The General
Partner  ceased to charge the Partnership for administrative fees effective
July 31, 2000.

The  Partnership originally invested primarily all of the proceeds  of  the
Private Placement in 2,005 shares 45.9% of Basic common stock.  On May  21,
2001,  Basic  issued  a Notice to Stockholders of Preemptive  Rights.   The
Partnership  purchased  an  additional 19,000 shares  of  common  stock  at
$380,000.   The Partnership at December 31, 2003 owns a total of 6.39%,  or
270,132 shares of Basic's outstanding common stock.

In  the  opinion  of  management, the terms of the above  transactions  are
similar to ones with unaffiliated third parties.

Item 14.  Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered
by KPMG, LLP for the audit of the Partnership's annual financial statements
for the years ended December 31, 2003 and 2002 and fees billed for other
services rendered by KPMG during those periods.

 For the Year Ended December    2003
             31,                         2002

Audit Fees                     $8,630    $
                                         4,763
Audit Related Fees                  -         -
Tax Fees                            -
                                         -
All Other Fees                      -
                                         -

    TOTAL                      $8,630    $
                                         4,763

The  Audit Committee of the Managing General Partner reviewed and approved,
in advance, all audit and non-audit services provided by KPMG, LLP.


<PAGE>
                                 Part IV


Item 15.  Exhibits, Financial Statements Schedules and Reports on Form 8-K

          (a)(1)  Financial Statements:

                  Southwest Partners III, L.P. Financial Statements

                  Included in Part II Item 8 of this report -
                  Independent Auditors Report
                  Balance Sheets
                  Statements of Operations
                  Statement of Changes in Partners' Equity
                  Statements of Cash Flows
                  Notes to Financial Statements

                     (2)  Schedules required by Article 12 of Regulation S-
                  X  are either omitted because they are not applicable  or
                  because  the  required  information  is  shown   in   the
                  financial statements or the notes thereto.

            (3)   Exhibits:


4  (a)
                          Certificate  of Limited Partnership of  Southwest
                          Partners   III,  L.P.,  dated  March  11,   1997.
                          (Incorporated  by  reference  from  Partnership's
                          Form 10-K for the fiscal year ended December  31,
                          1998).


(b)   Agreement of Limited                  Partnership                  of
                          Southwest  Partners III, L.P.,  dated  March  11,
                          1997.    (Incorporated    by    reference    from
                          Partnership's Form 10-K for the fiscal year ended
                          December 31, 1998).

           31.1                                        Rule  13a-14(a)/15d-
14(a) Certification
           31.2                                        Rule  13a-14(a)/15d-
14(a) Certification
          32.1                                       Certification of Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350, as
              adopted Pursuant to Section 906 of the Sarbanes-Oxley Act  of
2002
          32.2                                       Certification of Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as
              adopted Pursuant to Section 906 of the Sarbanes-Oxley Act  of
2002


          (b)     Reports on Form 8-K

                  There  were  no  reports filed on  Form  8-K  during  the
              quarter ended December 31, 2003.

<PAGE>
                                Signatures


Pursuant  to  the  requirements of Section 13 or 15(d)  of  the  Securities
Exchange  Act  of 1934, the Partnership has duly caused this report  to  be
signed on its behalf by the undersigned, thereunto duly authorized.


                          Southwest Partners III, L.P.
                          a Delaware limited partnership



By:
                                 Southwest Royalties, Inc.,

General Partner


                          By:    /s/ H. H. Wommack, III
                                 ------------------------------------------
-----

H. H. Wommack, III, President


                          Date:  May 12, 2004


In  accordance with the Exchange Act, this report has been signed below  by
the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.


/s/ H. H. Wommack, III                 /s/ Bill E. Coggin
----------------------------           ------------------------
-------------------                    -----------------------
H. H. Wommack, III, Chairman           Bill      E.      Coggin,
of the Board,                          Executive Vice President
President,   Director    and           and    Chief    Financial
Chief Executive Officer                Officer

Date: May 12, 2004                     Date: May 12, 2004


/s/ William P. Nicoletti               /s/ James N. Chapman
----------------------------           ------------------------
-------------------                    -----------------------
William     P.    Nicoletti,           James     N.     Chapman,
Director                               Director

Date: May 10, 2004                     Date: May 12, 2004


/s/ Richard D. Rinehart                /s/  Joseph  J.  Radecki,
                                       Jr.
----------------------------           ------------------------
-------------------                    -----------------------
Richard     D.     Rinehart,           Joseph  J. Radecki,  Jr.,
Director                               Director

Date: May 12, 2004                     Date: May 12, 2004


/s/  Herbert  C. Williamson,
III
----------------------------           ------------------------
-------------------                    -----------------------
Herbert C. Williamson,  III,           John M. White, Director
Director

Date: May 11, 2004                     Date:





<PAGE>
                   SECTION 302 CERTIFICATION                Exhibit 31.1


I, H.H. Wommack, III, certify that:

1.                                                    I  have reviewed this
annual report on Form 10-K of Southwest Partners III, L.P.

2.Based  on my knowledge, this report does not contain any untrue statement
  of  a  material fact or omit to state a material fact necessary  to  make
  the  statements  made,  in light of the circumstances  under  which  such
  statements  were made, not misleading with respect to the period  covered
  by this report;

3.Based  on  my  knowledge, the financial statements, and  other  financial
  information  included  in  this report, fairly present  in  all  material
  respects  the financial condition, results of operations and  cash  flows
  of the registrant as of, and for, the periods presented in this report;

4.The  registrant's other certifying officer(s) and I are  responsible  for
  establishing  and  maintaining disclosure  controls  and  procedures  (as
  defined  in  Exchange  Act  Rules 13a-15(e) and  15-15(e))  and  internal
  control  over financial reporting (as defined in Exchange Act Rules  13a-
  15(f) and 15d-15(f) for the registrant and have:

  a)Designed  such  disclosure  controls and  procedures,  or  caused  such
     disclosure   controls  and  procedures  to  be  designed   under   our
     supervision,  to  ensure  that material information  relating  to  the
     registrant, including its consolidated subsidiaries, is made known  to
     us  by others within those entities, particularly during the period in
     which this report is being prepared;

  b)Designed  such  internal control over financial  reporting,  or  caused
     such  internal  control over financial reporting to be designed  under
     our   supervision,  to  provide  reasonable  assurance  regarding  the
     reliability  of financial reporting and the preparation  of  financial
     statements for external purposes in accordance with generally accepted
     accounting principles;

  c)Evaluated  the  effectiveness of the registrant's  disclosure  controls
     and  procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end
     of the period covered by this report based on such evaluation; and

  d)Disclosed  in  this  report  any change in  the  registrant's  internal
     control over financial reporting that occurred during the registrant's
     most recent fiscal quarter (the registrant's fourth fiscal quarter  in
     the  case  of  an annual report) that has materially affected,  or  is
     reasonably  likely  to  materially affect, the  registrant's  internal
     control over financial reporting; and

5.The  registrant's other certifying officer(s) and I have disclosed, based
  on  our  most  recent  evaluation  of  internal  control  over  financial
  reporting,  to  the  registrant's auditors and  the  audit  committee  of
  registrant's  board  of directors (or persons performing  the  equivalent
  functions):

  a)All  significant deficiencies and material weaknesses in the design  or
     operation   of  internal  controls  over  financial  reporting   which
     reasonably  likely  to  adversely affect the registrant's  ability  to
     record, process, summarize and report financial information; and

  b)Any  fraud, whether or not material, that involves management or  other
     employees  who  have  a significant role in the registrant's  internal
     controls over financial reporting.


Date:  May 12, 2004                /s/ H.H. Wommack, III
                                   H. H. Wommack, III
                                    Chairman, President and Chief Executive
Officer
                                   of Southwest Royalties, Inc., the
                                   Managing General Partner of
                                   Southwest Partners III, L.P.



<PAGE>
                   SECTION 302 CERTIFICATION                Exhibit 31.2


I, Bill E. Coggin, certify that:

1.                                                    I  have reviewed this
annual report on Form 10-K of Southwest Partners III, L.P.

2.Based  on my knowledge, this report does not contain any untrue statement
  of  a  material fact or omit to state a material fact necessary  to  make
  the  statements  made,  in light of the circumstances  under  which  such
  statements  were made, not misleading with respect to the period  covered
  by this report;

3.Based  on  my  knowledge, the financial statements, and  other  financial
  information  included  in  this report, fairly present  in  all  material
  respects  the financial condition, results of operations and  cash  flows
  of the registrant as of, and for, the periods presented in this report;

4.The  registrant's other certifying officer(s) and I are  responsible  for
  establishing  and  maintaining disclosure  controls  and  procedures  (as
  defined  in  Exchange  Act  Rules 13a-15(e) and  15-15(e))  and  internal
  control  over financial reporting (as defined in Exchange Act Rules  13a-
  15(f) and 15d-15(f) for the registrant and have:

  a)Designed  such  disclosure  controls and  procedures,  or  caused  such
     disclosure   controls  and  procedures  to  be  designed   under   our
     supervision,  to  ensure  that material information  relating  to  the
     registrant, including its consolidated subsidiaries, is made known  to
     us  by others within those entities, particularly during the period in
     which this report is being prepared;

  b)Designed  such  internal control over financial  reporting,  or  caused
     such  internal  control over financial reporting to be designed  under
     our   supervision,  to  provide  reasonable  assurance  regarding  the
     reliability  of financial reporting and the preparation  of  financial
     statements for external purposes in accordance with generally accepted
     accounting principles;

  c)Evaluated  the  effectiveness of the registrant's  disclosure  controls
     and  procedures and presented in this report our conclusions about the
     effectiveness of the disclosure controls and procedures, as of the end
     of the period covered by this report based on such evaluation; and

  d)Disclosed  in  this  report  any change in  the  registrant's  internal
     control over financial reporting that occurred during the registrant's
     most recent fiscal quarter (the registrant's fourth fiscal quarter  in
     the  case  of  an annual report) that has materially affected,  or  is
     reasonably  likely  to  materially affect, the  registrant's  internal
     control over financial reporting; and

5.The  registrant's other certifying officer(s) and I have disclosed, based
  on  our  most  recent  evaluation  of  internal  control  over  financial
  reporting,  to  the  registrant's auditors and  the  audit  committee  of
  registrant's  board  of directors (or persons performing  the  equivalent
  functions):

  a)All  significant deficiencies and material weaknesses in the design  or
     operation   of  internal  controls  over  financial  reporting   which
     reasonably  likely  to  adversely affect the registrant's  ability  to
     record, process, summarize and report financial information; and

  b)Any  fraud, whether or not material, that involves management or  other
     employees  who  have  a significant role in the registrant's  internal
     controls over financial reporting.


Date:  May 12, 2004                /s/ Bill E. Coggin
                                   Bill E. Coggin
                                   Executive Vice President
                                   and Chief Financial Officer of
                                   Southwest Royalties, Inc., the
                                   Managing General Partner of
                                   Southwest Partners III, L.P.


<PAGE>

                   CERTIFICATION PURSUANT TO                Exhibit 32.1
                    19 U.S.C. SECTION 1350,
                    AS ADOPTED PURSUANT TO
         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


      In  connection with the Annual Report of Southwest Partners III, L.P.
(the  "Company") on Form 10-K for the period ending December  31,  2003  as
filed  with the Securities and Exchange Commission on the date hereof  (the
"Report"),  I, H.H. Wommack, III, Chief Executive Officer of  the  Managing
General  Partner of the Company, certify, pursuant to 18 U.S.C.   1350,  as
adopted pursuant to  906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The  Report fully complies with the requirements of section  13(a)  or
     15(d) of the Securities Exchange Act of 1934; and

(2)  The  information  contained  in the Report  fairly  presents,  in  all
     material respects, the financial condition and results of operation of
     the Company.


Date:  May 12, 2004




/s/ H.H. Wommack, III
H. H. Wommack, III
Chairman, President, Director and Chief Executive Officer
  of Southwest Royalties, Inc., the
  Managing General Partner of
  Southwest Partners III, L.P.

<PAGE>
                   CERTIFICATION PURSUANT TO                Exhibit 32.2
                    19 U.S.C. SECTION 1350,
                    AS ADOPTED PURSUANT TO
         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



  In connection with the Annual Report of Southwest Partners III, L.P. (the
"Company")  on Form 10-K for the period ending December 31, 2003  as  filed
with  the  Securities  and  Exchange Commission on  the  date  hereof  (the
"Report"),  I,  Bill  E. Coggin, Chief Financial Officer  of  the  Managing
General  Partner of the Company, certify, pursuant to 18 U.S.C.   1350,  as
adopted pursuant to  906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The  Report fully complies with the requirements of section  13(a)  or
     15(d) of the Securities Exchange Act of 1934; and

(2)  The  information  contained  in the Report  fairly  presents,  in  all
     material respects, the financial condition and results of operation of
     the Company.


Date: May 12, 2004




/s/ Bill E. Coggin
Bill E. Coggin
Executive Vice President
  and Chief Financial Officer of
  Southwest Royalties, Inc., the
  Managing General Partner of
  Southwest Partners III, L.P.


<PAGE>