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 [Fee Required]

For the fiscal year ended December 31, 2000

                                    OR

[ ]    Transition  report pursuant to Section 13 or 15(d) of the Securities
       Exchange Act of 1934 [No Fee Required]

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]

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 42.   There  is  no
exhibit index.

<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 and Related
     Stockholder Matters                                                 6

 6.  Selected Financial Data                                             7

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

 8.  Financial Statements and Supplementary Data                        12

 9.  Changes in and Disagreements with Accountants
     on Accounting and Financial Disclosure                             22

                                 Part III

10.  Directors and Executive Officers of the Registrant                 23

11.  Executive Compensation                                             24

12.  Security Ownership of Certain Beneficial Owners and
     Management                                                         24

13.  Certain Relationships and Related Transactions                     24

                                 Part IV

14.  Exhibits, Financial Statement Schedules, and Reports
     on Form 8-K                                                        25

     Signatures                                                         26

<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 the  Basic  common
stock.

      Basic  in  March  2000 filed a restated certificate of  incorporation
increasing its authorized common shares to 25,000,000 and completed a  400-
for-1 stock split.  All shares had been restated as if the stock split  had
occurred  at the beginning of 1998.  The 400-for-1 stock split was reversed
during  2000.   Basic on December 21, 2000 completed a 100-for-1  dividend.
The  Partnership  at  December 31, 2000 owns 10.57% or  200,500  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,  Southwest Royalties, Inc. (the " General  Partner")  and  its
staff of 92 individuals, together with certain independent consultants used
on  an  "as  needed"  basis,  perform various services  on  behalf  of  the
Partnership,  including  the selection of oil and gas  properties  and  the
marketing  of  production from such properties.   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  93  well
servicing rigs and 133 fluid service trucks.

Formed  in  1992 by the General Partner, Basic has grown primarily  through
selective  acquisitions.  It has completed 14 purchases  of  well  services
companies  as well as purchases of additional equipment.  Basic's  revenues
have  grown from $932,000 in 1992 to approximately $56.5 million  in  2000.
Basic's  strategy emphasizes diversification and expansion through internal
growth  and  the  acquisition of well servicing  companies  to  provide  an
integrated group of oil field services.
<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,  2000
there  were  92  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
eight  field offices and leases one field office over a short-term  period.
Additionally, Basic leases a field office in South Texas and owns two field
offices in East Texas.  Basic leases two field offices in Oklahoma.

Basic's well servicing equipment fleet includes 93 well servicing rigs, 133
fluid  service trucks, 90 Enviro-Vat systems and 314 frac and  test  tanks.
Additionally,  the Company operates nine injection wells and  32  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 2000 through the solicitation of proxies or otherwise.

<PAGE>
                                 Part II

Item 5.   Market   for   the   Registrant's  Common  Equity   and   Related
          Stockholder Matters

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,  to  purchase
limited partnership units should an investor desire to sell.  The value  of
the  unit  is  determined  by adding the sum of  (1)  current  assets  less
liabilities  and  (2)  the  present  value  of  the  future  net   revenues
attributable to proved reserves and by discounting the future net  revenues
at  a rate not in excess of the prime rate charged by NationsBank, N.A.  of
Midland, Texas plus one percent (1%), which value shall be further  reduced
by  a risk factor discount of no more than one-third (1/3) to be determined
by the General Partner in its sole and absolute discretion.  As of December
31, 2000 the General Partner purchased no limited partner units.

Number of Limited Partner Interest Holders
As of December 31, 2000, 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.  During 2000, no distributions were made.

<PAGE>

Item 6.   Selected Financial Data

The following selected financial data for the years ended December 31 2000,
1999, 1998 and March 11, 1997 (date of inception) through December 31, 1997
should  be  read in conjunction with the financial statements  included  in
Item 8:

                                                              March 11, 1997
                                                                 through
                                Years ended December 31,     December 31, 1997
                          --------------------------------------------------
---

                               2000       1999       1998         1997
                               ----       ----       ----         ----

Revenues                  $   11,403     11,164     11,514      147,356

Equity loss in unconsolidated
 subsidiary                        -(2,005,000)(5,046,321)    (542,414)

Impairment of equity investment
  of  unconsolidated subsidiary                 -           -   (9,460,765)
-

Net loss                    (63,169)(2,120,433)(14,702,959)   (420,813)

Partners' share of net loss:

 General partner             (9,475)  (318,065)(2,195,181)     (68,107)

 Limited partners           (53,694)(1,802,368)(12,507,778)   (352,706)

Limited partners' net
 loss per unit                 (314)   (10,545)   (73,177)      (2,054)

Total assets              $  404,112    392,709  2,386,545   17,081,587


<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, 2000, the Partnership owned a 10.57% interest in Basic,  which
is  accounted for using the equity method of accounting.  The equity method
adjusts  the  carrying  value  of  the  Partnership's  investment  by   its
proportionate  share of Basic's undistributed earnings or losses  for  each
respective period.

Results of Operations
For the year ended December 31, 2000

Revenues
Revenues  consisted of interest income.  The surplus cash  remaining  after
the periodic investments in Basic generated interest income of $11,403.

Expenses
Direct  expenses  totaled  $74,572 for the year, relating  to  general  and
administrative.   General and administrative expenses represent  management
fees  paid  to  the  General  Partner for costs  incurred  to  operate  the
Partnership.  Effective July 31, 2000, the General Partner ceased to charge
the Partnership management fees.

Results of Operations
For the year ended December 31, 1999

Revenues
Revenues  consisted of interest income.  The surplus cash  remaining  after
the periodic investments in Basic generated interest income of $11,164.

Expenses
Direct  expenses  totaled $126,597 for the year, relating  to  general  and
administrative.   General and administrative expenses represent  management
fees  paid  to  the  General  Partner for costs  incurred  to  operate  the
partnership.

The  Partnerships  investment  in Basic upon  recording  their  portion  of
Basic's losses for the six months ended June 30, 1999 was reduced to  zero.
Therefore,  according  to  Generally Accepted  Accounting  Principles,  the
equity  method  was  suspended.   The  Partnership  did  not  record  their
ownership  percentage of Basic's losses beyond June  30,  1999.   If  Basic
subsequently  begins  to  report net income, the  Partnership  will  resume
applying  the equity method only after its share of net income  equals  the
share  of net losses not recognized during the period the equity method  is
suspended.
<PAGE>


Revenue and Distribution Comparison

Partnership loss for the years ended December 31, 2000, 1999 and  1998  was
$63,169,  $2,120,433 and $14,702,959, respectively.  Excluding the  effects
of  amortization, net loss would have been $63,169 in 2000,  $2,120,433  in
1999  and $14,634,544 in 1998.  Since inception of the Partnership, no cash
contributions have been made to the partners.

Liquidity and Capital Resources

Cash  flows provided by operating activities were approximately $11,403  in
2000  compared to $11,164 in 1999 and approximately $11,480 in  1998.   The
source of the 2000 cash flow from operating activities was interest.

There were no cash flows used in investing activities during 2000 and  1999
as compared to $63,514 in 1998.

There were no cash flows used in financing activities during 2000 and  1999
as compared to $67,507 in 1998.

As  of  December  31,  2000, the Partnership had approximately  $64,000  in
working capital.  The General Partner knows of no other commitments.

Liquidity - Equity 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
will  be  accounting 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.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The  Partnership  is  not a party to any derivative or embedded  derivative
instruments.



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

Basic Energy Services, Inc.

General
Basic derives its revenues from well servicing, liquids handling, fresh and
brine water supply and disposal and other related services.  Well servicing
rigs  are billed at hourly rates that are generally determined by the  type
of  equipment required, market conditions in the region in which  the  well
servicing  rig  operates, ancillary equipment and the  necessary  personnel
provided on the rig.  Basic charges its customers for liquids handling  and
fresh  and  brine water supply and disposal services on an  hourly  or  per
barrel  basis  depending  on  the services offered.   Demand  for  services
depends  substantially  upon  the level of activity  in  the  oil  and  gas
industry,  which  in  turn  depends,  in  part,  on  oil  and  gas  prices,
expectations about future prices, the cost of exploring for, producing  and
delivering  oil and gas, the discovery rate of new oil and gas reserves  in
on-shore areas, the level of drilling and workover activity and the ability
of oil and gas companies to raise capital.

Results of Operations
For the year ended December 31, 2000

Revenues
Basic's  revenues increased to $56.5 million, or 52%, for  the  year  ended
December 31, 2000 as compared to $37.3 million for the same period in 1999.
The  increase  was primarily attributable to the increase in  oil  and  gas
prices, resulting in a rise in oilfield service activity.

Expenses
Operating  expenses  increased $11.8 million, or 34%, for  the  year  ended
December  31, 2000 as compared to the same period for 1999.  The components
of  operating expenses consisted of increases in cost of revenues of  $10.3
million  and  general  and administrative increases of  $1.5  million.  The
increase  in operating and general and administrative expenses is a  direct
reflection of the increase in oilfield service activity.  Interest  expense
for  the  year ended December 31, 2000 increased to $6.9 million from  $6.1
million for the same period in 1999.  The increase for the year 2000 is due
to  quarterly  escalating interest rates in effect per the credit  facility
with the previous lender.

Results of Operations
For the year ended December 31, 1999

Revenues
Basic's  revenues decreased to $37.3 million, or 18%, for  the  year  ended
December 31, 1999 as compared to $45.3 million for the same period in 1998.
The  decrease was primarily attributable to a severe decline in oil prices,
resulting in reduced oilfield service activity.

Expenses
Operating  expenses  decreased $5.1 million, or 14%,  for  the  year  ended
December  31, 1999 as compared to the same period for 1998.  The components
of  operating expenses consisted of decreases in cost of revenues  of  $4.8
million  and general and administrative decreases of $300,000. The decrease
reflects  Basic's cost cutting measures taken after the  hiring  of  a  new
chief executive officer in early 1999.  Interest expense for the year ended
December 31, 1999 decreased to $6.1 million from $7.2 million for the  same
period in 1998.  The decrease was due to a decrease in long-term debt as  a
result of the March 1999 refinancing and a decrease in amortization of debt
issuance costs.



<PAGE>
Liquidity and Capital Resources
The  primary source of cash is from operations, the receipt of income  from
well services provided.

Net  Cash  Provided  by  Operating  Activities.   Cash  flows  provided  by
operating  activities for the period consisted primarily of  net  operating
income net of expenses of $7.3 million.

Net  Cash  Used  in  Investing Activities.  Cash flows  used  in  investing
activities totaled $3.8 million for the period, and consisted primarily  of
the  purchase  of property and equipment partially offset by proceeds  from
the sale of property and equipment.

Net  Cash  Used  in  Financing Activities.  Cash flows  used  in  financing
activities  totaled $1.5 million for the period and consisted primarily  of
payments on long-term debt and unsuccessful offering and acquisition  costs
greatly offset by borrowings under long-term debt.

Liquidity - Equity Investment by Investors

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
will  be  accounting 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.

<PAGE>
Item 8.   Financial Statements and Supplementary Data

                      Index to Financial Statements

                                                                       Page

Independent Auditors Report                                             13

Balance Sheets                                                          14

Statements of Operations                                                15

Statements of Changes in Partners' Equity                               16

Statements of Cash Flows                                                17

Notes to Financial Statements                                           18

<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, 2000 and 1999, 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, 2000.  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, 2000 and 1999 and the results of its operations and
its  cash  flows  for  each  of the years in the  three-year  period  ended
December  31,  2000  in  conformity  with accounting  principles  generally
accepted in the United States of America.






                                                  KPMG LLP



Midland, Texas
April 16, 2001





<PAGE>



                       Southwest Partners III, L.P.
                     (a Delaware limited partnership)
                              Balance Sheets
                        December 31, 2000 and 1999


                                              2000              1999
                                              ----              ----
  Assets

Current asset:
 Cash and cash equivalents              $    404,112           392,709
                                                                 ==========
==========


  Liabilities and Partners' Equity

Current liabilities:
 Payable to General Partner             $    340,107           265,535
                                                                 ----------
----------

Partners' equity:
 General Partner                           (907,225)         (897,750)
 Limited partners                            971,230         1,024,924
                                                                 ----------
----------
                                         Total partners' equity         64,
005                                          127,174
                                                                 ----------
----------
                                                            $       404,112
392,709
                                                                 ==========
==========





































                  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, 2000, 1999 and 1998

                                         2000         1999          1998
                                         ----         ----          ----

  Revenues

Interest income                  $      11,403        11,164       11,514
                                                   ----------    ----------
----------
                                                       11,403        11,164
11,514
                                                   ----------    ----------
----------
  Expenses

General and administrative              74,572       126,597      138,972
Amortization                                 -             -       68,415
Equity  loss  in unconsolidated subsidiary          -             2,005,000
5,046,321
Impairment of equity investment of
 unconsolidated subsidiary                   -             -    9,460,765
                                                   ----------    ----------
----------
                                                       74,572     2,131,597
14,714,473
                                                   ----------    ----------
----------
Net loss                         $    (63,169)    (2,120,433)  (14,702,959)
                                                   ==========    ==========
==========
Net loss allocated to:

 General Partner                 $     (9,475)     (318,065)  (2,195,181)
                                                   ==========    ==========
==========
 Limited partners                $    (53,694)    (1,802,368) (12,507,778)
                                                   ==========    ==========
==========
  Per limited partner unit       $       (314)      (10,545)     (73,177)
                                                   ==========    ==========
==========



























                  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, 2000, 1999 and 1998




                                  General     Limited    Notes
                                  Partner     Partners Receivable  Total
                                  --------    -------- ----------  -----

Balance - December 31, 1997     $1,615,496 15,410,070(106,330) 16,919,236

 Capital contributions                   -              31,330     31,330

 Refund of down payment-note
   receivable uncollectible                  (75,000)   75,000          -

 Net loss                       (2,195,181)(12,507,778)      -(14,702,959)
                                             -------------------   --------
----------
Balance - December 31, 1998      (579,685)  2,827,292        -  2,247,607
  Net  loss                        (318,065)(1,802,368)        -(2,120,433)
---------                       ----------   ------------------
Balance - December 31, 1999      (897,750)  1,024,924        -    127,174

 Net loss                          (9,475)   (53,694)        -   (63,169)
                                             -------------------   --------
----------
Balance - December 31, 2000     $(907,225)    971,230        -     64,005
                                             ===================   ========
==========






























                  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, 2000, 1999 and 1998



                                         2000         1999        1998
                                         ----         ----        ----

Cash flows from operating activities:

 Cash paid to General Partner
  for administrative fees           $                      -        (34)
 Interest received                       11,403       11,164      11,514
                                                                 ----------
----------                          -----------
  Net cash provided by operating
                                     activities         11,403       11,164
11,480
                                                                 ----------
----------                          -----------

Cash flows from investing activities:

  Organization costs                          -            -    (63,514)
                                                                 ----------
----------                          -----------
   Net cash used in investing activities                     -            -
(63,514)
                                                                 ----------
----------                          -----------

Cash flows from financing activities:

  Capital contributed by limited partners                    -            -
(6,250)
 Repayment of notes receivable from limited
  partners                                    -            -      37,580
 Syndication costs                            -            -    (98,837)
                                                                 ----------
----------                          -----------
   Net cash used in financing activities                     -            -
(67,507)
                                                                 ----------
----------                          -----------

Net increase (decrease) in cash and cash
 equivalents                             11,403       11,164   (119,541)

 Beginning of period                    392,709      381,545     501,086
                                                                 ----------
----------                          -----------
 End of period                      $   404,112      392,709     381,545
                                                                 ==========
==========                          ===========

Reconciliation of net loss to net cash
 provided by operating activities:

Net loss                            $  (63,169)  (2,120,433)(14,702,959)

Adjustments to reconcile net loss to net
 cash provided by operating activities:

  Amortization                                -            -      68,415
  Undistributed loss of affiliate             -    2,005,000   5,046,321
  Impairment of equity investment             -            -   9,460,765
  Increase in accounts payable           74,572      126,597     138,938
                                                                 ----------
-----------                         ----------
Net  cash  provided by operating activities     $       11,403       11,164
11,480
                                                                 ==========
===========                         ==========

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

     Equity investment in subsidiary
     Investment in Basic Energy Services, Inc. in which the Partnership had
     a  10.57%  and  44.94%  interest at December 31,  2000  and  1999,  is
     accounted for by the equity method and the carrying amount is adjusted
     for  the  Partnership's  proportionate share of Basic's  undistributed
     earnings  or  losses.  The  Partnerships  investment  in  Basic   upon
     recording  their  portion of Basic's losses for the six  months  ended
     June  30, 1999 was reduced to zero.  Therefore, according to Generally
     Accepted Accounting Principles, the equity method was suspended.   The
     Partnership  has  not recorded their ownership percentage  of  Basic's
     losses   beyond  June  30,  1999.  Effective  January  1,  2001,   the
     Partnership  will be recording the investment on the cost method  (See
     Note 3).

     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.

     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.

     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 $17,075,550 and  $17,091,339
     more,  as  of  December  31,  2000 and  1999  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  170.925 limited partner units outstanding as of  December
     31, 2000, held by 524 partners.

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

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

                      Notes to Financial Statements

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

     December 31, 1997 to March 31, 1999                    45.89%
     March 31, to December 21, 2000                         44.94%
     December 21, 2000 to December 31, 2000                 10.57%

     The  Partnerships investment in Basic upon recording their portion  of
     Basic's  losses for the six months ended June 30, 1999 was reduced  to
     zero.    Therefore,   according  to  Generally   Accepted   Accounting
     Principles, the equity method was suspended.  The Partnership has  not
     recorded their ownership percentage of Basic's losses beyond June  30,
     1999.

     Southwest  Partners III consists 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 will be accounting 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.

     Basic on March 31, 1999 finalized a restructuring of its debt with the
     lender.   The  restructuring of Basic's debt with its lender  provided
     for  a  senior  subordinated  credit facility  and  three  classes  of
     preferred stock.  Based on the December 21, 2000 transaction discussed
     above, this credit facility was retired and cancelled.

     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  in  March  2000 filed a restated certificate  of  incorporation
     increasing its authorized common shares to 25,000,000 and completed  a
     400-for-1  stock split.  All shares had been restated as if the  stock
     split  had  occurred  at the beginning of 1998.  The  400-for-1  stock
     split  was reversed during 2000.  Basic on December 21, 2000 completed
     a 100-for-1 dividend. The Partnership at December 31, 2000 owns 10.57%
     or 200,500 shares of Basic's outstanding common stock.



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

                      Notes to Financial Statements

3.   Investment - continued
     Following  is  a  summary  of the financial position  and  results  of
     operations  of  Basic Energy Services, Inc. as of and  for  the  years
     ended December 31, 2000, 1999 and 1998 (in thousands):
                                           2000       1999       1998
                                                               Restated

     Current assets                   $  13,283      8,971       9,882
     Property and equipment, net         32,780     31,186      35,634
      Other  assets,  net                                6,955        6,704
7,811
                                         ------     ------      ------
     Total assets                     $  53,018     46,861      53,327
                                         ======     ======      ======
     Current liabilities              $  11,322      7,296       3,599
     Long-term debt                      15,390     50,371      54,664
     Deferred income taxes                5,052      2,224           -
                                         ------     ------      ------
                                      $  31,764     59,891      58,263
                                         ======     ======      ======
     Stockholders' equity             $  21,254   (13,030)     (4,936)
                                         ======     ======      ======
       Sales                                     $      56,466       37,331
45,319
                                         ======     ======      ======
      Net  income  (loss)                        $      13,849     (12,971)
(28,296)
                                         ======     ======      ======

4.   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, 2000, 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.

5.   Related Party Transactions
     Southwest   Royalties,  Inc.,  the  General  Partner,  was   paid   an
     administrative fee of $70,000, $120,000 and $120,000 during 2000, 1999
     and 1998 for indirect general and administrative overhead expenses.

     In addition, a director and officer of the Managing General Partner is
     a  partner  in a law firm, with such firm providing legal services  to
     the  Partnership.  There were no legal fees in 2000 and  approximately
     $2,500  and  $3,400  in legal services provided for  the  years  ended
     December 31, 1999 and 1998.

     Accounts payable to the General Partner at December 31, 2000 and  1999
     totaled  $340,107  and  $265,535 and primarily  represents  management
     fees.

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

                      Notes to Financial Statements

6.  Selected Quarterly Financial Results - (unaudited)

                                                 Quarter
                              ----------------------------------------------
                                 First       Second    Third       Fourth
                                 ------     -------    ------      ------
  2000:
     Total revenues           $    2,805      2,825     2,876       2,897
     Total expenses               31,326     31,046    10,904       1,296
     Net income (loss)          (28,521)   (28,221)   (8,028)       1,601
     Net income (loss) per
      limited partner unit         (142)      (140)      (40)           8

  1999:
     Total revenues           $    2,789      2,764     2,795       2,816
     Total expenses            1,075,694    994,864    30,408      30,631
     Net loss                 (1,072,905) (992,100)  (27,613)    (27,815)
     Net loss per
      limited partner unit       (5,335)    (4,934)     (137)       (139)


  Included in total expenses for the first and second quarters of 1999  was
  an  equity  loss in unconsolidated subsidiary of $1,044,236 and $960,764,
  respectively.   For further information concerning the equity  loss,  see
  Management's Discussion and Analysis of Financial Condition  and  Results
  of  Operations for Southwest Partners III for the year ended December 31,
  1999.


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

          None













<PAGE>
                                 Part III

Item 10.  Directors and Executive Officers of the Registrant

Management of the Partnership is provided by Southwest Royalties, Inc.,  as
Managing  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                      45
                                        Chairman of the Board, President,
                                        Chief Executive Officer, Treasurer
                                        and Director

H. Allen Corey              44          Secretary and Director

Bill E. Coggin                          46
                                        Vice  President and Chief Financial
                                        Officer

J. Steven Person            42          Vice President, Marketing

Paul L. Morris              59          Director

H.  H.  Wommack, III, is Chairman of the Board, President, Chief  Executive
Officer,  Treasurer, principal stockholder and a director of  the  Managing
General  Partner,  and  has  served as its President  since  the  Company's
organization  in August, 1983.  Prior to the formation of the Company,  Mr.
Wommack  was  a  self-employed  independent oil  producer  engaged  in  the
purchase  and sale of royalty and working interests in oil and gas  leases,
and  the drilling of exploratory and developmental oil and gas wells.   Mr.
Wommack  holds  a J.D. degree from the University of Texas  from  which  he
graduated  in  1980, and a B.A. from the University of  North  Carolina  in
1977.

H.  Allen  Corey, a founder of the Managing General Partner, has served  as
the   Managing  General  Partner's  secretary  and  a  director  since  its
inception.   Mr. Corey is President of Trolley Barn Brewery, Inc.,  a  brew
pub restaurant chain based in the Southeast.  Prior to his involvement with
Trolley Barn, Mr. Corey was a partner at the law firm of Miller & Martin in
Chattanooga,  Tennessee.  He is currently of counsel to  the  law  firm  of
Baker,  Donelson,  Bearman  & Caldwell, with the  offices  in  Chattanooga,
Tennessee.  Mr. Corey received a J.D. degree from the Vanderbilt University
Law  School and B.A. degree from the University of North Carolina at Chapel
Hill.

Bill  E. Coggin, Vice President and Chief Financial Officer, has been  with
the Managing General Partner since 1985.  Mr. Coggin was Controller for Rod
Ric  Corporation of Midland, Texas, an oil and gas drilling company, during
the latter part of 1984.  He was Controller for C.F. Lawrence & Associates,
Inc., an independent oil and gas operator also of Midland, Texas during the
early  part of 1984.  Mr. Coggin taught public school for four years  prior
to his business experience.  Mr. Coggin received a B.S. in Education and  a
B.B.A. in Accounting from Angelo State University.

J.  Steven  Person, Vice President, Marketing, assumed his responsibilities
with  the Managing General Partner as National Marketing Director in  1989.
Prior  to joining the Managing General Partner, Mr. Person served  as  Vice
President  of  Marketing  for CRI, Inc., and was  associated  with  Capital
Financial  Group and Dean Witter (1983).  He received a B.B.A. from  Baylor
University in 1982 and an M.D.A. from Houston Baptist University in 1987.

Paul  L.  Morris has served as a Director of Southwest Royalties  Holdings,
Inc.  since August 1998 and Southwest Royalties, Inc. since September 1998.
Mr. Morris is President and CEO of Wagner & Brown, Ltd., one of the largest
independently owned oil and gas companies in the United States.   Prior  to
his  position with Wagner & Brown, Mr. Morris served as President of Banner
Energy  and  in various managerial positions with the Columbia Gas  System,
Inc.

<PAGE>

Key Employees

Jon  P. Tate, Vice President, Land and Assistant Secretary, age 43, assumed
his  responsibilities with the Managing General Partner in 1989.  Prior  to
joining  the  Managing  General Partner, Mr.  Tate  was  employed  by  C.F.
Lawrence  & Associates, Inc., an independent oil and gas company,  as  Land
Manager from 1981 through 1989.  Mr. Tate is a member of the Permian  Basin
Landman's  Association and American Association of Petroleum Landmen.   Mr.
Tate received his B.B.S. degree from Hardin-Simmons University.

R.    Douglas   Keathley,   Vice   President,   Operations,   assumed   his
responsibilities with the Managing General Partner as a Production Engineer
in  October,  1992.   Prior to joining the Managing  General  Partner,  Mr.
Keathley  was  employed for four (4) years by ARCO Oil  &  Gas  Company  as
senior  drilling  engineer working in all phases of well production  (1988-
1992),  eight  (8)  years by Reading & Bates Petroleum  Company  as  senior
petroleum  engineer responsible for drilling (1980-1988) and two (2)  years
by  Tenneco Oil Company as drilling engineer responsible for all phases  of
drilling   (1978-1980).   Mr.  Keathley  received  his  B.S.  in  Petroleum
Engineering in 1977 from the University of Oklahoma.

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.  The General Partner billed $70,000
during  2000 and $120,000 during 1999 and 1998, as an annual administrative
fee.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

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.

No   officer  or  director  of  the  General  Partner  owns  Units  in  the
Partnership.  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  2000,  the  General Partner received $70,000 as an administrative  fee.
This amount is part of the general and administrative expenses incurred  by
the  Partnership.  The General Partner ceased to charge the Partnership for
administrative fees effective July 31, 2000.

The  Partnership  originally invested all of the proceeds  of  the  Private
Placement in 2,005 shares 45.9% of Basic common stock.  The General Partner
at December 31, 2000 directly owns 6.65% of Basic's common stock.  Basic in
March  2000  filed a restated certificate of incorporation  increasing  its
authorized  common  shares to 25,000,000 and completed  a  400-for-1  stock
split.  All shares had been restated as if the stock split had occurred  at
the beginning of 1998.  The 400-for-1 stock split was reversed during 2000.
Basic on December 21, 2000 completed a 100-for-1 dividend.  The Partnership
at  December  31,  2000  now  owns 10.57%  or  200,500  shares  of  Basic's
outstanding common stock.

H.  Allen Corey, who is an officer and director of the General Partner,  is
of  counsel  with  Baker, Donelson, Bearman & Caldwell, a law  firm,  which
provides  legal  services to the General Partner and the Partnership.   The
Partnership paid no legal fees for 2000.

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

<PAGE>
                                 Part IV


Item 14.  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

                    Index   to   Financial  Statements  of   Unconsolidated
Subsidiary

                  Independent Auditors' Report              28
                                        Balance                      Sheets
29
                  Statements of Operations                  30
                  Statements of Stockholders' Equity        31
                  Statements of Cash Flows                  32
                  Notes to Financial Statements             33

                     (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).


          (b)     Reports on Form 8-K

                  There  were  no  reports filed on  Form  8-K  during  the
              quarter ended December 31, 2000.

<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.,

Managing General Partner


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

H. H. Wommack, III, President


                          Date:  May 8, 2001


Pursuant  to the requirements of the Securities Exchange Act of 1934,  this
report  has  been signed below by the following persons on  behalf  of  the
Partnership and in the capacities and on the dates indicated.


By:    /s/ H. H. Wommack, III
       -----------------------------------
       H. H. Wommack, III, Chairman of the
       Board, President, Chief Executive
       Officer, Treasurer and Director


Date:  May 8, 2001


By:    /s/ H. Allen Corey
       -----------------------------
       H. Allen Corey, Secretary and
       Director


Date:  May 8, 2001

<PAGE>























                        BASIC ENERGY SERVICES, INC.

                           Financial Statements

                        December 31, 2000 and 1999

                (With Independent Auditors' Report Thereon)


<PAGE>










                       INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Basic Energy Services, Inc.:

We  have  audited the accompanying balance sheets of Basic Energy Services,
Inc. (formerly Sierra Well Service, Inc.) as of December 31, 2000 and 1999,
and  the  related statements of operations, stockholders' equity  and  cash
flows  for  each of the years in the three-year period ended  December  31,
2000.  These  financial statements are the responsibility of the  Company's
management.

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 Basic Energy Services,
Inc.  as  of  December 31, 2000 and 1999, and the results of its operations
and  its  cash  flows for each of the years in the three-year period  ended
December  31,  2000,  in  conformity  with  auditing  principles  generally
accepted in the United States of America.


                                         KPMG LLP




February 10, 2001
Midland, Texas

<PAGE>

                        BASIC ENERGY SERVICES, INC.
                              BALANCE SHEETS
                     As of December 31, 2000 and 1999

                     (in thousands, except share data)

                   ASSETS                     2000   1999
 Current assets
   Cash and cash equivalents                 $       $
                                             3,118   1,062
   Trade accounts receivable, net of
 allowance                                   9,675   7,477
    of $531 and $271, respectively
   Accounts receivable-related party         14      73
   Inventories                               104     144
   Other current assets                         372     215
           Total current assets              13,283   8,971
 Property and equipment, net                 32,780  31,186
 Other assets
   Deferred loan costs, net of amortization
    of $8 and $2,198, respectively           1,151   494
   Goodwill, net of amortization of $17,399
    and $17,024, respectively                4,873   4,633
   Other                                        931   1,577
           Total other assets                 6,955   6,704
 Total assets                                $53,01  $46,86
                                             8       1

    LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities
   Current portion of long-term debt         $       $
                                             4,226   1,164
   Accounts payable                          3,594   4,281
   Accounts payable-related party            -       49
   Accrued expenses                          2,390   1,698
   Deferred income                           728     -
   Income tax payable                        200     -
   Deferred income tax                          184     104
           Total current liabilities         11,322  7,296
 Long-term debt                              15,390  50,371

 Deferred income tax                         5,052   2,224
 Commitments & contingencies                 -       -

 Stockholders' equity
   Series A Redeemable 10% Preferred Stock,
    $10,000 par, 1,000 shares authorized,
    530.45 shares issued at December 31,     -       5,305
 1999
   Series B Convertible Preferred Stock,
    $1 par, 1,000 shares authorized, 1,000
    issued at December 31, 1999              -       1
   Series C Convertible Preferred Stock,
    $1,000 par, 1 share authorized, one
    issued at December 31, 1999              -       1
   Common stock - $.01 par; 5,000,000
    shares authorized; 1,897,013 and
 446,177
    shares issued and outstanding at         19      4
    December 31, 2000 and 1999,
 respectively
   Additional paid-in capital                51,217  24,845
   Accumulated deficit                       (29,98  (43,18
                                             2)      6)
           Total stockholders' equity        21,254  (13,03
 (deficit)                                           0)
 Total liabilities and stockholders' equity  $53,01  $46,86
                                             8       1

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

<PAGE>


                        BASIC ENERGY SERVICES, INC.

                         STATEMENTS OF OPERATIONS
           For the years ended December 31, 2000, 1999 and 1998
              (in thousands, except per share and share data)

                                       2000
                                                1999     1998
 Revenues
   Well Servicing                      $37,784  $24,453  $26,687
   Fluid Services                      18,682   12,878   18,632
                                       56,466   37,331   45,319
 Expenses
   Well Servicing                      27,475   20,164   21,640
   Fluid Services                      12,639   9,613    13,009
   General and administration,
 including
    management fees and computer
 services                              6,683    5,229    5,471
    from related parties of $138,
 $234,
    and $241, respectively
   Depreciation and amortization       6,795    6,747    8,624
   Impairment of long lived assets         -    -        22,671
 (Note 4)
   Unsuccessful offering and            2,073        -      990
 acquisition costs
                                       55,665   41,753   72,405
 Operating income (loss)                  801   (4,422)  (27,086)
 Other income (expense)
   Interest income                        93    100      263
   Interest expense                    (6,930)  (6,065)  (7,166)
   Gain (loss) on sale of assets          91    (301)    (93)
   Other, net                              76       45       16
                                       (6,670)  (6,221)  (6,980)
 Loss before income taxes and          (5,869)  (10,643  (34,066)
 extraordinary item                             )
  Provision for income tax (expense)    2,037   (2,328)   5,770
 benefit
 Loss before extraordinary item        $(3,83   $(12,971 $(28,296
                                       2)       )        )
  Extraordinary gain from early
 extinguishments                       17,681        -        -
   of debt, net of tax of $4,434
 Net income (loss)                     $13,849  $(12,971 $(28,296
                                                )        )
  Preferred stock dividend                645      430        -
 Net income (loss) to common           $13,204  $(13,401 $(28,296
 stockholders' interest                         )        )


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

<PAGE>

                           BASIC ENERGY SERVICES, INC.

                       STATEMENTS OF STOCKHOLDERS' EQUITY
1812:

1814:   Series B    Series C
                                         Additi
              onal
  Paid-  Accumul
Stock          Preferred   Preferred    Common Stock      In      ated
  Stock
1820:   Shares   Shares  Amount Capita  Deficit
 Amount   Shares Amount Shares  Amount                    l
1822:
                                          (in thousands, except share data)

 Balance -
  -      -      -      -     -   437,071  $ 4    $24,845 $(1,489)
  -      -      -      -     -     -   (28,296)

 Balance -
  -      -      -      -     -   437,071    4    24,845  (29,785)
  -      -      -      -     -    9,106     -        -        -
 granted
500   $ 5,0   1,000  $ 1      1   $          -     -        -        -
 issued                      00                          1

305      -      -      -     -        -     -        -    (305)
1838:Preferred stock
  -      -      -      -     -        -     -        -    (125)
  -       -      -      -      -     -              -            (12,971)
 Balance -

  -     -       -      -     -    $ 1    $   -   $    -
 granted                                                       9,106
 (1)   $(1)       -     -         -
 retired               (595) 0)      (1,000)  (1)             4,001
  -      -      -      -     -    14       -
      -       -       -    -   1,441,730    -    24,486       -
645    -        -      -     -       -             (645)
 -           (2,115)
 stock                                                         _
   Preferred stock                                                             -
     dividend - stock                                          _
  -      -      -      -     -        -     -        -   13,849
 Balance -
 $ 0 0    $ 0   $ 0     1,897,013       $19    $51,217 $(29,982)

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

<PAGE>

                        BASIC ENERGY SERVICES, INC.

STATEMENTS OF CASH FLOWS
           For the years ended December 31, 2000, 1999 and 1998
                              (In thousands)
                                                2000    1999    1998
     Cash flows from operating activities
   Net Income (loss)                          $13,849  $(12,9  $
                                                       71)     (28,29
                                                               6)
   Depreciation                                5,676   5,494
                                                               6,322
   Amortization                                1,119   1,253
                                                               2,302
   Impairment of long lived assets                 -       -
                                                               22,671
   Bad debt expense                              113     125
                                                               442
   Noncash interest expense                    6,657   2,494
                                                               1,435
   Gain on retirement of debt                 (22,115      -
   Write-off of unsuccessful offering and     )            -   -
 acquisition costs                             2,073
                                                               990
   (Gain) loss on sale of assets                (91)     301
                                                               93
   Deferred income tax expense (benefit)       2,397   2,328
                                                               (5,770
                                                               )
   Changes in operating assets and
 liabilities, net of
      acquisitions -                          (2,314)  (1,051
      Accounts receivable                              )       1,011
      Inventories                                 40      14
                                                               92
      Other current assets                     (157)      46
                                                               (152)
      Accounts payable                        (1,061)  2,518
                                                               (1,333
                                                               )
      Deferred Income                            728       -
                                                               -
      Accrued expenses                           442     314
                                                               (468)
      Deposits                                  (38)       -
                                                               -
 Net cash provided by (used in) operating      7,318     865
 activities                                                    (661)
     Cash flows from investing activities
   Purchase of property and equipment         (4,255)  (2,287
                                                       )       (2,435
                                                               )
   Proceeds from sale of property and            435   1,210
 equipment                                                     309
   Collections of notes receivable               118       3
                                                               -
   Proceeds from sale of other long-term           -     205
 assets                                                        85
   Payments for other long-term assets             -   (101)
                                                               (92)
   Payments for businesses, net of cash         (80)       -
 acquired                                                      (1,800
                                                               )
           Net cash used in investing         (3,782)  (970)
 activities                                                    (3,933
                                                               )
     Cash flows from financing activities
   Borrowings under long-term debt            15,988       -
                                                               2,100
   Payments of long-term debt                 (12,816  (497)
                                              )                (595)
   Costs related to issuance of common stock  (1,540)      -
                                                               -
   Dividends paid                                  -   (125)       -
   Deferred loan costs and unsuccessful       (3,112)  (1,057
 offering and acquisition costs                        )       (602)
           Net cash provided by (used in)     (1,480)  (1,679
 financing activities                                  )       903
 Net increase (decrease) in cash and cash      2,056   (1,784
 equivalents                                           )       (3,691
                                                               )
   Cash and cash equivalents - beginning of    1,062   2,846
 year                                                          6,537
 Cash and cash equivalents - end of year      $3,118   $1,062  $
                                                               2,846
 Supplemental disclosures of cash flow
 information -                                $  273   $5,106  $
   Interest paid                                               5,732
 Supplemental schedule of noncash investing
 and financing
   activities -
   Capital leases issued for equipment         2,170     353
                                                               252
   Notes receivable-non cash                     138      83
                                                               -
   Preferred stock dividend                      645     305
                                                               -
   Transfer of debt for preferred stock            -   5,002
                                                               -
   Accrued interest capitalized into long-         -   1,614
 term debt                                                     -
   Common stock issued to retire debt         24,500       -
                                                               -
   Note issued to retire all preferred stock   2,500       -
                                                               -
   Costs related to issuance of common stock     575       -
                                                               __-

The accompanying notes are an integral part of these financial statements.
<PAGE>
                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

  Organization & Business - Basic Energy Services, Inc. (the "Company"),  a
Delaware  corporation,  was  formed in 1992 as a  subsidiary  of  Southwest
Royalties,  Inc. ("SWR"). In June 1997, Southwest Royalties  Holding,  Inc.
("SRH")  was formed to serve as a holding company for SWR, the Company  and
other  subsidiaries of SWR. At that time, SWR's investment in  the  Company
was  transferred by dividend to SRH and the Company became a subsidiary  of
SRH.  Due to sales of the Company's common stock to Southwest Partners  II,
L.P.  and Southwest Partners III, L.P. (limited partnerships for which  SWR
serves  as  general partner) in 1996 and 1997, SRH's ownership interest  in
the  Company was reduced to a point where the Company's financial  position
and  results of operations were no longer consolidated with SRH,  effective
July 1, 1997.

  The  Company  provides  a  range of well site services  to  oil  and  gas
drilling  and  producing  companies through the  Company's  fleet  of  well
servicing  rigs  and  fluid handling assets. The Company's  operations  are
concentrated  in the major United States oil and gas producing  regions  of
Texas, New Mexico, Oklahoma and Louisiana.

  Common  Stock  Split and Change of Name -  On May 23, 2000,  the  Company
filed  a  restated certificate of incorporation changing its name to  Basic
Energy Services, Inc. from Sierra Well Service, Inc.  On December 21, 2000,
the  Company  filed a restated certificate of incorporation,  changing  its
authorized common shares to 5,000,000 and issuing a 100-for-1 stock  split.
All  share  and per share amounts have been restated as if the stock  split
had occurred at the beginning of the earliest period presented.

  Estimates   and  Uncertainties  -  The  preparation  of  these  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 disclosures  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 these estimates.

  Cash  and  Cash  Equivalents - The Company considers  all  highly  liquid
instruments purchased with a maturity of three months or less  to  be  cash
equivalents.  The  Company maintains its excess cash in  various  financial
institutions, where deposits may exceed federally insured amounts at times.

  Inventories  - Inventories mainly consist of pipe, are held  for  use  in
the  operations  of  the Company and are stated at the  lower  of  cost  or
market,  with  cost  being  determined on the  first-in,  first-out  (FIFO)
method.

  Property  and  Equipment - Property and equipment  are  stated  at  cost.
Expenditures for repairs and maintenance are charged to expense as incurred
and  additions and improvements that significantly extend the lives of  the
assets  are  capitalized.  Upon  sale or other  retirement  of  depreciable
property,  the  cost  and accumulated depreciation  are  removed  from  the
related  accounts  and  any gain or loss is reflected  in  operations.  All
assets are depreciated on the straight-line method and the estimated useful
lives of the assets are as follows:

Buildings and improvements                              20-30
                                                        years
Well servicing rigs and equipment                        5-15
                                                        years
Fluid service equipment                                  5-10
                                                        years
Brine/fresh water stations                           15 years
Enviro-Vat units and fluid service                   10 years
Disposal facilities                                  10 years
Vehicles                                            3-5 years
<PAGE>
                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

  The  Company  reviews  property and equipment  and  certain  identifiable
intangibles  for  impairment whenever events or  changes  in  circumstances
indicate  that  the carrying amount of an asset may not be recoverable.  An
impairment loss is indicated if the sum of the expected undiscounted future
cash  flows  is  less  than  the  carrying amount,  including  any  related
goodwill,  of  such assets. Expected future cash flows and carrying  values
are aggregated at their lowest identifiable level, which is on a rig-by-rig
basis for the Company's well service rigs and by local service area for the
Company's  truck  fleets  and water stations.  The  Company  recognizes  an
impairment loss for the difference between the asset's, or group of assets,
carrying value and estimated fair value, if the carrying value exceeds  the
expected undiscounted future cash flows.

  Deferred   Debt  Costs  -  The  Company  capitalizes  certain  costs   in
connection with obtaining its borrowings, such as lender's fees and related
attorney's fees. These costs are being amortized to interest expense on the
straight-line  method  over  the terms of the related  debt.   Amortization
calculated using the straight line method is not materially different  from
the amount calculated using the effective interest method.

  Goodwill - The Company classifies as goodwill the cost in excess of  fair
value  of  the  net  tangible  assets acquired  in  purchase  transactions.
Goodwill  is  being amortized on a straight-line basis over  the  estimated
period  benefited by it of fifteen years. Management continually  evaluates
whether  events or circumstances have occurred that indicate the  remaining
useful  life of goodwill may warrant revision or the remaining  balance  of
goodwill may not be recoverable.

  Income  Taxes  -  Deferred  income  taxes  are  recognized  for  the  tax
consequences of temporary differences between financial statement  carrying
amounts  and  the  tax  basis  of  existing  assets  and  liabilities.  The
measurement of current and deferred tax assets and liabilities is based  on
enacted  tax  law. The effect on deferred tax assets and liabilities  of  a
change  in  tax  rate is recognized in income in the period  of  change.  A
valuation allowance for deferred tax assets is recognized when it is  "more
likely  than  not"  that the benefit of deferred tax  assets  will  not  be
realized.

  Concentrations of Credit Risk - Financial instruments, which  potentially
subject  the Company to concentration risk, consist primarily of  temporary
cash investments and trade receivables. The Company restricts investment of
temporary  cash  investments  to financial institutions  with  high  credit
standing.  The Company's customer base consists primarily of multi-national
and independent oil and natural gas producers. The Company performs ongoing
credit  evaluations  of  its  customers  but  generally  does  not  require
collateral  on  its  trade  receivables.  Credit  risk  is  considered   by
management  to  be limited due to the large number of customers  comprising
the  Company's customer base. The Company maintains reserves for  potential
credit losses, and such losses have been within management's expectations.

  Recent   Accounting  Pronouncements  -  In  June  1998,   the   Financial
Accounting   Standards  Board  ("FASB")  issued  Statement   of   Financial
Accounting  Standards  No. 133 "Accounting for Derivative  Instruments  and
Hedging Activities" ("SFAS 133") which establishes standards for derivative
instruments,  including certain derivative instruments  embedded  in  other
contracts, and for hedging activities. It requires that an entity recognize
all  derivatives  as  either  assets or liabilities  in  the  statement  of
financial  position  and  measure  those  instruments  at  fair  value.  It
establishes  conditions under which a derivative may  be  designated  as  a
hedge, and establishes standards for reporting changes in the fair value of
a  derivative.   SFAS  133,  as amended by SFAS  137,  is  required  to  be
implemented  for  all fiscal quarters of all fiscal years  beginning  after
June  15,  2000.  Early  adoption is permitted.   Based  on  the  Company's
assessment of the implications of this new statement, the Company  believes
they  have  no freestanding or embedded derivative instruments  that  would
need to be accounted for under SFAS 133.

<PAGE>
                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS
2. Acquisitions

  In  2000 and 1999 Basic acquired for cash either substantially all of the
assets  or  all  of the outstanding capital stock of each of the  following
businesses,  which  were  accounted  for  using  the  purchase  method   of
accounting:

                                 Closing Date  Total     Purchase
                                               Price
                                                 (in thousands)

  Harrison Well Service, Inc.      August 2000       $ 1,250

  Accurate Petroleum Services,      April 1998       $ 1,800
  Inc.

  The  operations of each of the aforementioned acquisitions  are  included
in  the  Company's  statement of operations as of each  respective  closing
date.

  In  2000  and 1998, the Company expensed previously deferred  costs  from
foregone  acquisitions  and  costs associated  with  equity  offerings  not
consummated, totaling approximately $2,073,000 and $990,000, respectively.


3. Property and Equipment

  Property  and equipment consists of the following as of December  31  (in
thousands):

                                                 2000    1999
  Land                                          $ 284   $ 236
  Buildings and improvements                    1,716   1,673
  Well service units and equipment              26,702  22,507
  Water hauling equipment                       7,104   7,052
  Brine/fresh water stations                    8,679   8,620
  Enviro-Vat units and frac/test tanks          3,215   3,211
  Disposal facilities                           5,659   5,348
  Vehicles                                      4,984   4,389
  Other                                           976     672
                                                59,319  53,708
  Less accumulated depreciation                 26,539  22,522
  Property and equipment, net                   $32,78  $31,186
                                                0

  The  Company  is  obligated  under various  capital  leases  for  certain
vehicles  and  equipment that expire at various dates during the  next  ten
years.  The  gross amount of property and equipment and related accumulated
amortization recorded under capital leases and included above  consists  of
the following as of December 31 (in thousands):

                                                  2000
                                                          1999
  Vehicles                                        $2,274  $924
  Water hauling equipment                            626  375
  Other                                               44   44
                                                   2,944  1,343
   Less accumulated amortization                   1,065  594
                                                  $1,879  $749

  Amortization  of  assets  held  under  capital  leases  of  approximately
$587,000, $155,000 and $273,000 for the years ended December 31, 2000, 1999
and 1998, respectively, is included with depreciation expense.

<PAGE>
                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS
4. Impairment

  At  December  31, 1998, the Company recorded an impairment  loss  on  its
well  servicing  and  fluid  services business  segments  of  approximately
$1,392,000  and  $21,280,000,  respectively,  for  a  total  impairment  of
approximately $22,672,000. The amount of goodwill impaired relating to  the
well  servicing  and  fluid services segments, and included  in  the  total
impairment, was approximately $1,235,000 and $13,686,000, respectively.  In
determining  if  an  impairment  loss was indicated,  management  projected
future  undiscounted cash flows through the estimated life of  each  asset,
for  each of the Company's well service rigs and by local service area  for
the  Company's  trucks  and water stations, based on  generally  increasing
utilization  rates  based  on management's expectations,  hours,  estimated
future  rates and expenses. Where an impairment was indicated, the carrying
value  of  the related goodwill was first reduced. If additional impairment
was  indicated the related equipment was reduced to estimated  fair  market
value, based upon a recent appraisal.

5. Long-Term Debt

  Long-term  debt  consists  of  the  following  as  of  December  31   (in
thousands):

                                                 2000
                                                         1999

  Credit Facility
    Senior Notes                                 $       $24,40
                                                 -       8
    Subordinated Notes                               -   26,535
  New Credit Facility
    Revolving Line of Credit                     1,040       -
    Term Loan                                    15,000      -
  Cash Flow Participation Note (net of discount  1,960       -
  of $540)
  Capital leases and equipment notes             1,616     592
                                                 19,616  51,535
  Less current portion                             4,22  1,164
                                                 6
                                                 $15,39  $50,37
                                                 0       1

Credit Facility

  On  March  31,  1999,  the Company entered into three  security  purchase
agreements  (collectively,  the  "Credit Facility")  that  provided  up  to
$54,410,000, the proceeds of which were used to retire certain  outstanding
indebtedness.  The Company accounted for this restructuring under  FAS  15,
"Accounting  by  Debtors  and  Creditors for Troubled  Debt  Restructuring"
because  the maturity of the debt was extended from March 31, 1999 to  June
2004  and  the interest rate was maintained at a level below the rate  that
the  Company  could have obtained from an alternate lender.   In  fact,  it
would  have  been unlikely that the Company could have obtained alternative
financing from any source. In addition, the lender accepted preferred stock
in  exchange for $5 million of the debt. The Company issued preferred stock
with an estimated fair value of $5 million to the lender on March 31, 1999,
as partial settlement of the outstanding balance of the Credit Facility. In
accordance with FAS 15, no gain or loss was recognized on the restructuring
because there was not a complete settlement of the outstanding debt and the
total  of  the  future  payments under the terms of the  restructured  debt
exceeded the carrying value.

2000 Refinancing

  On  December  21, 2000, the Company entered into a new term  loan  and  a
revolving  line  of credit (collectively, the "New Credit  Facility")  that
provided  up to $16,040,000 to the Company for the year ended December  31,
2000. The proceeds were used to retire amounts outstanding under the Credit
Facility   and   for   costs  associated  with  the  recapitalization   and
refinancing. In 2000, the Company incurred approximately $508,800 in  costs
related  to the refinancing.  The Company used $10,500,000 of the  proceeds
of the term loan to retire the December 21, 2000 outstanding balance of the
Subordinated  Notes  plus  accrued interest of  approximately  $30,220,000.
This  transaction  resulted  in  an  extraordinary  gain  of  approximately
$19,720,000  before taxes.  See discussion of the terms of the  New  Credit
Facility below.

<PAGE>
                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

  On December 21, 2000, the Company also entered into a securities purchase
agreement with an investor whereby the investor purchased the December  21,
2000  outstanding  balance  of the Senior Notes plus  accrued  interest  of
approximately  $26,895,000, for $24,500,000.  The investor  then  exchanged
this debt for 1,441,730 shares of the Company's common stock, resulting  in
an  extraordinary gain of approximately $2,395,000 before taxes.  In  2000,
the  Company  incurred  approximately $2,115,000 in costs  related  to  the
issuance of this common stock.  The Company and this investor entered  into
a  Commitment Agreement dated December 21, 2000, whereby the investor could
purchase  an additional 576,709 shares of the Company's common stock  at  a
purchase price of $16.993 per share, for a total additional purchase  price
of  up to $9,800,000, for the purpose of providing funds to the Company  to
complete  acquisitions  of  businesses and  assets.  The  Company  and  the
investor  exercised this Commitment Agreement in January of 2001 (See  Note
13).

  In  addition,  the  Credit Facility lender exchanged  all  the  preferred
stock,  plus  accrued and unpaid dividends, for a Cash  Flow  Participation
Note.   See  discussion of the terms of this Cash Flow  Participation  Note
below.

New Credit Facility

Term Note

  The  Term  Note  has  a  principal balance of  $15,000,000  with  monthly
interest payable at a rate per annum equal to the lesser of 1.25% above the
Chase  Bank  prime  rate or 3.75% above the LIBOR rate.  The  principal  is
payable monthly, in installments of $227,273, beginning February 2001.  All
outstanding principal and accrued and unpaid interest is due and payable in
full  on  December  31,  2004. In the event the Company  has  Surplus  Cash
(earnings  before  income taxes, depreciation and  amortization  less  non-
financed  capital  expenditures less fixed  charges)  in  any  fiscal  year
beginning  December 31, 2001, then in April of the next  succeeding  fiscal
year,  the Company must make a mandatory prepayment of the Term Note by  an
amount equal to 50% of the calculated Surplus Cash.

Revolving Line of Credit

  The  Revolving Line of Credit provides $10,000,000 with monthly  interest
payable  at a rate per annum equal to the lesser of 0.50% above  the  Chase
Bank  prime  rate or 3.0% above the LIBOR rate.  All outstanding  principal
and  accrued and unpaid interest is due and payable in full on December 31,
2004.   The borrowing base is equal to 85% of eligible accounts receivable.
The Term Note and Revolving Line of Credit have restrictive covenants which
restrict dividends, investments, capital expenditures, capital leases,  and
the  sale  of assets.  Additionally, the covenants require the  Company  to
maintain  a fixed charge coverage ratio (as defined) of at least 1.2:1  for
each  quarter beginning March 31, 2001, a ratio of indebtedness  to  equity
(as  defined)  of not more than 1.25: 1, at all times, and maintain  during
each  fiscal  quarter a tangible net worth (as defined)  greater  than  the
minimum tangible net worth determined for such fiscal quarter.

Cash Flow Participation Note

  On  December 21, 2000, the Credit Facility lender exchanged all Series  A
Cumulative Preferred Stock, Series B Convertible Preferred Stock, Series  C
Convertible Preferred Stock, plus all accrued and unpaid dividends, whether
in  cash  or securities, for the Cash Flow Participation Note (the "Note").
Beginning  with the calendar year ending December 31, 2001, the Company  is
required to make an annual payment equal to 45% of Consolidated Annual Free
Cash   Flow   (earnings  before  interest  expense,  income  tax   expense,
depreciation  and amortization expense less the then-prevailing  Adjustment
Amount).   The  Adjustment Amount is $9,000,000 and can be  lowered  by  an
amount  that  equals  the then - current balance of the  suspended  payment
obligation  for  such  calendar  year divided  by  the  payout  percentage.
Payments  are subject to a Lifetime Cap of $5,000,000 and a Yearly  Cap  of
$1,000,000.


<PAGE>

                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

  Any  amount  not  paid when due shall bear interest  at  14%  per  annum.
After  March 31, 2001, the Company has the option to purchase the  Note  at
the Call Exercise Price then in effect as follows:

     Period                                         Amount

  April 1, 2001 to March 31, 2002                 $2,500,000
  April 1, 2002 to March 31, 2003                 $2,500,000
  April 1, 2003 to March 31, 2004                 $3,000,000
  April 1, 2004 to March 31, 2005                 $3,500,000
  April 1, 2005 to September 30, 2005             $4,000,000
  Thereafter                                      $5,000,000

  As  a  result  of the conditions above, it was determined that  the  fair
market  value of the Note is $2,500,000 as of December 31, 2000.   As  this
note  is  non-interest bearing, the current value was  further  reduced  by
$540,000  of  imputed interest until maturity, using an effective  interest
rate of 12.75%.


  As  of  December  31, 2000, the aggregate maturities of  debt,  including
capital leases, for each of the five years subsequent to December 31, 2000,
are as follows (in thousands):

  Year Ending
  December 31,
  2001                                               $4,226
  2002                                                4,357
  2003                                                3,987
  2004                                                7,046
  2005
                                                     -
                                                     $19,616

6.                                                    Income Taxes

  Income  tax provision (benefit) and amounts separately allocated were  as
follows (in thousands):

                                                 December 31,
                                             2000    1999    1998
  Loss before income taxes and             $(2,037  $2,328 $(5,770)
  extraordinary item                       )
  Extraordinary gain from early             4,434      -        -
  extinguishments of debt
                                           $  2,39  $2,328 $ (5,77
                                           7               0)

  The  provision  (benefit) for income taxes attributable  to  loss  before
income  taxes  and  extraordinary item consists  of  the  following  as  of
December 31 (in thousands):

                                               2000    1999    1998
  Current                                    $   -    $   -   $   -
  Deferred                                   (1,983)  5,392   (2,924)
  Benefit of net operating loss               (54)    (2,555  (3,355)
  carryforward                                        )
  Change in valuation allowance                  -    (509)     509
                                             $(2,03   $2,328  $(5,77
                                             7)               0)

<PAGE>

                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

  A  reconciliation between the amount determined by applying  the  federal
statutory rate to loss before income taxes and extraordinary item with  the
provision  (benefit) for income taxes is as follows as of December  31  (in
thousands):

                                             2000                1998
                                                       1999
  Statutory federal income tax               $         $ (3,619) $ (11,582)
                                             (1,995)
  Amortization of non-deductible goodwill    95        227       5,195
  and property
  Meals and entertainment                    61        75        95
  Change in valuation allowance              -         (509)     509
  Reduction in net operating loss            -         6,101     -
  carryforwards
  Adjustment for changes in estimates        (363)     -         -
  State tax                                  146       -         -
  Other                                            19       53          13
                                             $ (2,037  $ 2,328   $  (5,770)
                                             )

  As  a  result of issuing preferred stock and convertible preferred  stock
to  its primary lender on March 31, 1999, the Company's net operating  loss
carryforwards  accumulated prior to that date were effectively  reduced  to
zero  under  Section 382 of the Internal Revenue Code. Deferred tax  assets
related to operating loss carryforwards existing at December 31, 1999 arose
from  losses  occurring  subsequent  to  March  31,  1999.   The  valuation
allowance  at December 31, 1998 was reduced because the net operating  loss
carryforwards to which it related were lost as described above.

  The  tax  effects of temporary differences that give rise to  significant
portions  of the deferred tax assets and liabilities are as follows  as  of
December 31 (in thousands):

                                              2000
                                                       1999     1998
  Deferred tax assets:
    Operating loss carryforwards              $  54    $2,555   $
                                                                5,082
    Alternative minimum tax credit              109                 -
  carryforwards                                        -
    Receivables                                 185               148
                                                       -
    Other intangibles                           376                 -
                                                       -
    Other                                         -                 1
                                                       202
    Valuation allowance                           -
                                                       -        (509)
    Total deferred tax assets                   724
                                                       2,757    4,722
  Deferred tax liabilities:
    Property and equipment                    (5,652)           (4,505
                                                       (4,794)  )
    Real estate investments                       -              (23)
                                                       -
    Goodwill                                  (137)             (157)
                                                       (145)
    Receivables                                   -                 -
                                                       (104)
    Other                                     (171)
                                                       (42)     (37)
    Total deferred tax liabilities            (5,960)
                                                       (5,085)  (4,722
                                                                )
            Net deferred tax liability        $(5,23   $        $
                                              6)       (2,328)  -

  A  valuation allowance is provided when it is more likely than  not  that
some portion of the deferred tax assets will not be realized. The valuation
allowance relates primarily to the uncertainty of the realizability of  the
Company's  carryforwards. The amount of the valuation  allowance  could  be
reduced  if  estimates  of  future taxable income during  the  carryforward
period are increased.

  As   of   December   31,  2000,  the  Company  had  net  operating   loss
carryforwards  for  U.S.  federal  income  tax  purposes  of  approximately
$160,000,  which are available to offset future regular taxable income,  if
any. The net operating loss carryforwards expire in various periods through
2019.  As  described above, this amount relates only to  tax  losses  since
March  31,  1999.   The Company has alternative minimum  tax  carryforwards
totaling  $109,000  to offset regular income tax, which have  no  scheduled
expiration date.

<PAGE>

                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

7. Commitments and Contingencies

 Environmental

  The  Company is subject to various federal, state and local environmental
laws  and  regulations  which  establish  standards  and  requirements  for
protection of the environment. The Company cannot predict the future impact
of such standards and requirements which are subject to change and can have
retroactive effectiveness. The Company continues to monitor the  status  of
these   laws  and  regulations.  Management  does  not  believe  that   the
disposition of any of these items will result in a material adverse  impact
to  the  financial position, liquidity, capital resources or future results
of operations of the Company.

  Currently,  the  Company has not been fined, cited  or  notified  of  any
environmental  violations which would have a material adverse  effect  upon
the  financial  position, liquidity or capital resources  of  the  Company.
However, management does recognize that by the very nature of its business,
material costs could be incurred in the near term to bring the Company into
total   compliance.  The  amount  of  such  future  expenditures   is   not
determinable  due  to  several factors including the unknown  magnitude  of
possible  contamination, the unknown timing and extent  of  the  corrective
actions which may be required, the determination of the Company's liability
in  proportion  to other responsible parties and the extent to  which  such
expenditures are recoverable from insurance or indemnification.

 Litigation

  From  time  to time, the Company is a party to litigation or other  legal
proceedings that the Company considers to be a part of the ordinary  course
of business. The Company is not currently involved in any legal proceedings
that could reasonably be expected to have a material adverse effect on  the
Company's financial condition or results of operations.

 Leases

  The  Company  leases  certain  equipment under  non-cancelable  operating
leases which expire at various dates through December 2001. The term of the
operating  leases generally run from 36 to 60 months with  varying  payment
dates throughout each month.

  The  future minimum lease payments under non-cancelable operating  leases
total  $575,289  for  the  year ending December  31,  2001.   Rent  expense
approximated  $865,000,  $942,000 and $979,000 for  2000,  1999  and  1998,
respectively.   The Company rents various equipment for short-term  periods
in order to assist day-to-day operations.

8. Stock Compensation

  The Company granted an officer 9,106 common shares with nominal value  in
March  of 1999 and an additional 9,106 shares with a nominal value in March
of 2000. The value of these shares was determined to be nominal because the
Company's  financial condition and prospects at the time of  issuance.  The
Company  was experiencing significant negative cash flow, all of  its  debt
was scheduled for repayment on March 31, 1999 and the Company had no source
of  funds for the repayment, and there was no expectation that the  Company
would have the ability to meet interest requirements.

<PAGE>

                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

9. EBITA Contingent Warrants

  On  December  21, 2000, the Company issued EBITDA Contingent Warrants  to
purchase  up  to an aggregate of 146,341 or 229,941, or 16,260  or  57,485,
shares, at $0.01 per share,  of the Company's common stock as a dividend to
stockholders  of  record on December 18, 2000 or as part of  an  authorized
issuance to certain members of management of the Company, respectively.  If
the  Company  achieves average adjusted EBITDA for the fiscal  years  ended
December  31,  2001  and 2002 of at least $14 million  but  less  than  $15
million,  the  stockholders  and certain members  of  management  shall  be
entitled to purchase a total of 146,341 and 16,260 shares, respectively; if
the  Company achieves average adjusted EBITDA of $15 million or  more,  the
stockholders  and  certain  members of  management  shall  be  entitled  to
purchase  a total of 229,941 and 57,485 shares, respectively. The  warrants
shall  become  exercisable no later than March 31,  2003  based  on  actual
EBITDA results for 2001 and 2002 and will expire on May 1, 2003.

  When  the  Company determines that it is probable that the EBITDA  levels
mentioned   above  can  be  achieved,  the  Company  will   recognize   the
compensation expense related to the warrants issued to certain  members  of
management and will record the value of the warrants issued to stockholders
as a preferred stock dividend.

10. Related Party Transactions

  The  Company provided services and products for workover, maintenance and
plugging of existing oil and gas wells to a related party for approximately
$685,000, $1,010,000 and $906,000 in 2000, 1999 and 1998, respectively. The
Company had receivables from this related party, of $14,000 and $73,000  as
of December 31, 2000 and 1999, respectively.

  The  Company  paid  a  related  party  management  fees  for  accounting,
bookkeeping,  tax preparation, banking and computer services  in  2000  and
1999. All services, except for computer and tax preparation services,  were
terminated  by  the  Company as of December 31,  1999.  Tax  services  were
terminated in the first quarter of 2001.

  The Company leased three well service rigs from a related party under  an
operating  lease  entered into in October 1999. The lease required  monthly
payments  of  approximately  $11,000 through  October  2004.  Rent  expense
related  to this lease approximated $132,000 in 2000 and $24,000  in  1999.
These rigs were purchased by the Company in January 2001.

  The  Company leased two well service rigs from a related party under  two
separate operating leases entered into in February and September 2000.  The
leases  required  monthly payments of $21,190 and $11,085 through  February
2001  and August 2003, respectively.  Rent expense related to these  leases
approximated $245,000 in 2000.  These rigs were purchased by the Company in
December  2000.  The Company also incurred $325,000 in consulting  fees  to
this related party during 2000 related to the Company's debt refinancing.

  A  director of the Company is a partner in a law firm that provides legal
services  to  the  Company.  During 2000, 1999 and 1998, the  Company  paid
approximately  $161,000, $64,000 and $112,000, respectively,  in  fees  for
legal  services  performed  to this law firm.  This  director  resigned  as
director of the Company on July 1, 2000.

<PAGE>

                        BASIC ENERGY SERVICES, INC.

                       NOTES TO FINANCIAL STATEMENTS

11. Profit Sharing Plan

  The  Company has a contributory retirement plan that covers substantially
all employees. Employees may contribute up to 15% of their base salary with
the  maximum  amount  determined by law. Employee contributions  are  fully
vested  at  all  times and discretionary employer contributions  are  fully
vested  upon  the first to occur of retirement and five years  of  service.
Employer  contributions to the 401(k) plan approximated $67,000  for  2000,
$56,000 for 1999 and $18,000  for 1998.

12. Major Customers

  No  customers  accounted for over 10% sales in 2000, 1999 and  1998.  The
Company  performs ongoing evaluations of its customers' financial condition
and generally requires no collateral to secure outstanding receivables.

13. Subsequent Events

  On  January  2, 2001, the Company purchased three rigs that it previously
leased  from  a related party for $540,000 plus the applicable  sales  tax.
This was funded by the revolving line of credit.

  On  January  9,  2001,  the  Company's investor purchased  an  additional
576,709  shares of the Company's common stock for approximately  $9,800,000
or $16.993 per share.  After the purchase of this stock, this investor owns
81.6%  of the outstanding stock of the Company. The proceeds of this  stock
sale  plus  cash on hand were used to acquire the assets of  D&W  Services,
Inc.

  On  January  11, 2001, the Company purchased all of the operating  assets
and  the  accounts  receivable  of D&W Services,  Inc.  (D&W).   The  total
purchase  price  was approximately $12,148,000 plus the assumption  of  the
plugging  cost  of a disposal well.  D&W operated approximately  24  vacuum
tractor  and  trailers,  72  frac tanks, five  disposal  wells,  and  three
acid/pressure trucks in the east Texas/north Louisiana market  area,  along
with various other equipment to support these operations.

  On  February  22,  2001,  the  Company purchased  the  operating  assets,
consisting of six well servicing rigs and support equipment, from Real Well
Service,  Inc. for approximately $2.2 million.  The acquisition was  funded
by the revolving line of credit.

<PAGE>