SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C.  20549

                                     Form 10-Q

(Mark One)
[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934 for the quarterly period 
     ended September 30, 1997.

- or -

[  ] Transition report pursuant to Section 13 or 15(d) of the 
     Securities Exchange Act of 1934 for the transition period 
     from _____________ to _________________.

Commission File No. 0-17267

MALLON RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)

     COLORADO                               84-1095959
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

999 18th Street, Suite 1700
Denver, Colorado  80202
(Address of principal executive offices)

(303) 293-2333
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months (or 
such shorter period of time registrant was required to file such 
reports), and (2) has been subject to such filing requirements for 
the past 90 days.

          YES [X]                        NO [  ]

As of October 31, 1997, 4,695,264 shares of registrant's common 
stock, par value $0.01 per share, were outstanding.

PART I - FINANCIAL INFORMATION

Item 1 -- Financial Statements


                              MALLON RESOURCES CORPORATION
 
                              CONSOLIDATED BALANCE SHEETS
                                     (In thousands)
<TABLE>
<CAPTION>
                                                            September 30,     December 31,
                                                                1997              1996   
                                                                              (Unaudited)

                                        ASSETS
<C>                                                           <S>              <S>
Current assets:
    Cash and cash equivalents                                  $    424         $  2,771
    Short-term investments                                          698            2,786
    Accounts receivable: 
       Oil and gas sales                                          1,006            1,879
       Joint interest participants, net of allowance of $8
            and $8, respectively                                  1,595              827
       Related parties                                               57               20
       Other                                                         11               45
    Inventories                                                     332              251
    Other                                                            80              104
          Total current assets                                    4,203            8,683

Property and equipment: 
    Oil and gas properties, full cost method                     57,766           46,175
    Mining properties and equipment                              11,348           10,114
    Other equipment                                                 708              559
                                                                 69,822           56,848
    Less accumulated depreciation, depletion and amortization   (26,308)         (24,406)
                                                                 43,514           32,442

Notes receivable-related parties                                     18               17

Other, net                                                          347              258

Total Assets                                                   $ 48,082         $ 41,400


                        LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities: 
    Trade accounts payable                                     $  4,512         $  1,614
    Undistributed revenue                                           701            1,502
    Drilling advances                                               151              100
    Accrued taxes and expenses                                      158               77
    Current portion of capital lease obligation                      19               25
    Current portion of installment obligation, less unamortized
       discount of $6 and $-0-, respectively                        394               --
          Total current liabilities                               5,935            3,318

Long-term bank debt                                               8,369            3,269
Installment obligation, less unamortized discount of $27 and
    $-0-, respectively                                              372               --
Notes payable                                                       230              230
Capital lease obligation, net of current portion                     --               12
Drilling advances                                                   308              368
Accrued expenses                                                     50               41
          Total non-current liabilities                           9,329            3,920
Total liabilities                                                15,264            7,238

Commitments and contingencies

Minority interest                                                 7,921           8,358

Series B Mandatorily Redeemable Convertible Preferred Stock, 
    $0.01 par value, 500,000 shares authorized, 135,200 and 
    400,000 shares issued and outstanding, respectively, 
    liquidation preference and mandatory redemption of 
    $1,352,000 and $4,000,000, respectively                       1,314           3,900

Shareholders' equity: 
    Common Stock, $0.01 par value, 25,000,000 
       shares authorized; 4,695,264 and 4,384,562
       shares issued and outstanding, respectively                   47              44
    Additional paid in capital                                   59,121          56,707
    Accumulated deficit                                         (35,585)        (34,847)
          Total shareholders' equity                             23,583          21,904

Total Liabilities and Shareholders' Equity                     $ 48,082        $ 41,400
(/TABLE>

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


                              MALLON RESOURCES CORPORATION
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except per share amounts)
                                      (Unaudited)


</TABLE>
<TABLE>
<CAPTION>
                                                For the Three Months    For the Nine Months
                                                 Ended September 30,    Ended September 30,
                                                   1997       1996        1997       1996  
<C>                                               <S>        <S>        <S>        <S>
Revenues:
    Oil and gas sales                             $1,995     $1,263     $ 5,806    $ 4,098
    Gain on sale of subsidiary stock                  --        329          --        329
    Interest and other                                35         76         122        105
                                                   2,030      1,668       5,928      4,532

Costs and expenses: 
    Oil and gas production                           838        537       2,158      1,511
    Mining project expenses                          191        289         871        648
    Depreciation, depletion and amortization         749        501       1,873      1,671
    Impairment of oil and gas properties               4         --          59         --
    General and administrative                       435        365       1,730      1,252
    Interest and other                               173        248         381        702
                                                   2,390      1,940       7,072      5,784

Minority interest in loss of consolidated 
    subsidiary                                       112         39         427         92

Loss before extraordinary item                      (248)      (233)       (717)    (1,160)

Extraordinary loss on early retirement of debt        --         --          --       (160)

Net loss                                            (248)      (233)       (717)    (1,320)

Dividends on preferred stock and accretion           (30)       (94)       (155)      (281)

Preferred stock conversion inducement                 --         --        (403)        --

Net loss attributable to common shareholders      $ (278)    $ (327)    $(1,275)   $(1,601)


Per share: 
    Net loss attributable to common shareholders 
       before extraordinary item                  $(0.06)    $(0.16)    $ (0.28)   $ (0.71)
    Extraordinary loss                                --         --          --      (0.08)

    Net loss attributable to common shareholders  $(0.06)    $(0.16)    $ (0.28)   $ (0.79)


Weighted average shares outstanding                4,695      2,084       4,576      2,032
</TABLE>

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

                             MALLON RESOURCES CORPORATION
 
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (In thousands)
                                       (Unaudited)

<TABLE>
<CAPTION>
                                                                       For the Nine Months
                                                                        Ended September 30,
                                                                         1997        1996  
<C>                                                                    <S>         <S>
Cash flows from operating activities: 
    Net loss                                                           $   (717)   $ (1,320)
    Adjustments to reconcile net loss to net cash provided 
     by operating activities:
        Depreciation, depletion and amortization                          1,873       1,671
        Impairment of oil and gas properties                                 59          --
        Gain on sale of subsidiary stock                                     --        (329)
        Amortization of discount on notes payable                            33          --
        Minority interest in loss of consolidated subsidiary               (427)        (92)
        Stock compensation expense                                          111         293
        Non-cash portion of extraordinary loss                               --         160
        Write-off of notes receivable - related parties                      --          32
        Changes in operating assets and liabilities: 
            (Increase) decrease in: 
                Accounts receivable                                         102         123
                Inventory and other assets                                 (171)        (21)
            Increase (decrease) in: 
                Trade accounts payable and undistributed revenue          2,097        (236)
                Accrued taxes and expenses                                   89         125
                Drilling advances                                            (9)         19
Net cash provided by operating activities                                 3,040         425

Cash flows from investing activities: 
    Decrease in short-term investments                                    2,088          --
    Increase in funds held in escrow                                         --      (2,814)
    Additions to property and equipment                                 (12,246)     (2,752)
    Proceeds from sale of subsidiary stock                                   --         372
    Proceeds from sale of property and equipment                             --          11
    Purchase of subsidiary stock                                            (55)         --
    Increase (decrease) in notes receivable-related parties                  (1)         --
Net cash used in investing activities                                   (10,214)     (5,183)

Cash flows from financing activities: 
    Proceeds from long-term debt                                          5,100      10,570
    Payment of long-term debt                                               (18)    (10,017)
    Debt issue costs paid                                                    --         (83)
    Net proceeds from sale of subsidiary special warrants                    --       4,325
    Payment of preferred dividends                                         (134)       (240)
    Redemption of preferred stock                                          (121)         --
Net cash provided by financing activities                                 4,827       4,555

Net decrease in cash and cash equivalents                                (2,347)       (203)

Cash and cash equivalents, beginning of period                            2,771       1,269

Cash and cash equivalents, end of period                               $    424    $  1,066


Supplemental cash flow information: 

    Cash paid for interest                                             $    341    $    637

    Non-cash transactions: 
        Issuance of common stock in exchange for consultants' 
            accounts payable                                           $    --     $    791

        Installment obligation (less unamortized discount) in
            exchange for property and equipment                        $    733    $     --

        Acquisition of Red Rock Ventures, Inc. for subsidiary
            common stock and notes payable                             $    --     $  2,300
</TABLE>

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


                                  MALLON RESOURCES CORPORATION

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                          (Unaudited)


Note 1.  GENERAL

    The Company engages in oil and gas exploration and production 
through its wholly-owned subsidiary, Mallon Oil Company ("Mallon 
Oil").  The Company also has interests in gold and silver 
exploration through its majority-owned subsidiary, Laguna Gold 
Company ("Laguna").  At September 30, 1997, the Company owned 
approximately 56% of Laguna.  The significant majority of the 
Company's assets and revenues are utilized in its oil and gas 
operations, which are conducted primarily in the State of New 
Mexico.  Mining operations, conducted through Laguna in Costa Rica, 
are in the pre-production stage.  All significant intercompany 
balances and transactions have been eliminated from the 
consolidated financial statements.

    These unaudited consolidated financial statements have been 
prepared in accordance with generally accepted accounting 
principles for interim financial information and with the 
instructions to Form 10-Q and Article 10 of Regulation S-X.  
Accordingly, they do not include all of the information and 
footnotes required by generally accepted accounting principles for 
complete financial statements.  In the opinion of management, such 
interim statements reflect all adjustments (consisting of normal 
recurring adjustments) necessary to present fairly the financial 
position and the results of operations and cash flows for the 
interim periods presented.  The results of operations for these 
interim periods are not necessarily indicative of the results to be 
expected for the full year.  These interim statements should be 
read in conjunction with the consolidated financial statements and 
notes thereto included in the Company's Annual Report on Form 10-K 
for the year ended December 31, 1996.

    A reclassification from operating service revenue to general 
and administrative expense was made to the statements of operations 
for the three and nine months ended September 30, 1996 to conform 
to the September 30, 1997 presentation.  In addition, certain 
reclassifications were made to the September 30, 1996 statement of 
cash flows to conform to the September 30, 1997 presentation.

Note 2. LONG-TERM BANK DEBT

    Effective September 1997, the borrowing base under the 
Company's revolving credit facility was increased to $10,830,000.  
Beginning November 30, 1997, the borrowing base will decrease by 
$170,000 per month.  The Company is not required to make debt 
service payments unless the outstanding balance under the facility 
exceeds the borrowing base, as adjusted.  At September 30, 1997, 
the amount outstanding under the facility was $8,369,000, leaving 
the amount available under the facility at $2,461,000.

Note 3.  OIL AND GAS PROPERTIES

    In January 1997, the Company acquired certain oil and gas 
properties for consideration of $1,300,000 in cash and conveyance 
of its interest in certain other oil and gas properties.  Cash 
consideration of $500,000 was paid at closing in January 1997 and 
installment obligations of $400,000 will be paid on each of 
January 1, 1998 and January 1, 1999.  The installment obligations 
include an imputed interest rate of 6%.  There was no gain or loss 
relative to the conveyance of the interest in the oil and gas 
properties.

Note 4.  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

    Mandatory redemption of the Company's Series B Preferred Stock 
(the "Series B Stock") was to begin in April 1997, when 20% of the 
outstanding shares, or 80,000 shares, were to be redeemed for 
$800,000.  The Company extended an offer to all holders of the 
Series B Stock to convert their shares into shares of the Company's 
common stock at a conversion price of $9.00, rather than the $11.31 
conversion price otherwise then in effect.  In April 1997, holders 
of 252,675 shares of Series B Stock elected to convert their shares 
into 280,747 shares of the Company's common stock.  The excess of 
the fair value of the common stock issued at the $9.00 conversion 
price over the fair value of the common stock that would have been 
issued at the $11.31 conversion price, totaling $403,000, has been 
reflected on the statements of operations for the nine months ended 
September 30, 1997 as an increase to the net loss attributable to 
common shareholders for preferred stock conversion inducement.  In 
addition, the Company redeemed 12,125 shares of Series B Stock at 
$10.00 per share.  After these transactions, 135,200 shares of 
Series B Stock remain outstanding and the Company has no further 
obligation to redeem any shares until April 2000.  The Series B 
Stock is convertible to common stock automatically if the common 
stock trades at a price in excess of 140% of the then applicable 
conversion price for each day in a period of 10 consecutive trading 
days.  The conversion price, as adjusted to reflect the offering of 
common stock discussed in Note 8, is currently $11.18 per share.

Note 5.  EARNINGS PER SHARE

    In February 1997, the Financial Accounting Standards Board 
issued Statement of Financial Accounting Standards (SFAS) No. 128, 
"Earnings per Share," which establishes new standards for computing 
and presenting earnings per share.  The new Statement is intended 
to simplify the standard for computing earnings per share and will 
require the presentation of basic and diluted earnings per share on 
the face of the income statement, including all prior periods 
presented.  The Statement is effective for financial statements 
issued for periods ending after December 15, 1997, and earlier 
adoption is not permitted.  Had the calculation of earnings per 
share been prepared in accordance with the provisions of SFAS No. 
128 for the three and nine months ended September 30, 1997 and 
1996, earnings per share would have been the same as what was 
reported on the consolidated statements of operations.

Note 6.  SHAREHOLDER RIGHTS PLAN

    In April 1997, the Company's Board of Directors declared a 
dividend on its shares of common stock (the "Common Shares") of 
preferred share purchase rights (the "Rights") as part of a 
Shareholder Rights Plan (the "Plan").  The Plan is designed to 
insure that all shareholders of the Company receive fair value for 
their Common Shares in the event of a proposed takeover of the 
Company and to guard against the use of partial tender offers or 
other coercive tactics to gain control of the Company without 
offering fair value to the Company's shareholders.  At the present 
time, the Company knows of no proposed or threatened takeover, 
tender offer or other effort to gain control of the Company.  Under 
the terms of the Plan, the Rights will be distributed as a dividend 
at the rate of one Right for each Common Share held.  Shareholders 
will not actually receive certificates for the Rights at this time, 
but the Rights will become part of each Common Share.  All Rights 
expire on April 22, 2001.

    Each Right will entitle the holder to buy shares of Common 
Stock at an exercise price of $40.00.  The Rights will be 
exercisable and will trade separately from the Common Shares only 
if a person or group acquires beneficial ownership of 20% or more 
of the Company's Common Shares or commences a tender or exchange 
offer that would result in such a person or group owning 20% or 
more of the Common Shares.  Only when one or more of these events 
occur will shareholders receive certificates for the Rights.

    If any person actually acquires 20% or more of Common Shares -- 
other than through a tender or exchange offer for all Common Shares 
that provides a fair price and other terms for such shares -- or if 
a 20%-or-more shareholder engages in certain "self-dealing" 
transactions or engages in a merger or other business combination 
in which the Company survives and its Common Shares remain 
outstanding, the other shareholders will be able to exercise the 
Rights and buy Common Shares of the Company having twice the value 
of the exercise price of the Rights.  In other words, payment of 
the $40.00 per Right exercise price will entitle the holder to 
acquire $80.00 worth of Common shares.  Additionally, if the 
Company is involved in certain other mergers where its shares are 
exchanged, or certain major sales of assets occur, shareholders 
will be able to purchase the other party's common shares in an 
amount equal to twice the value of the exercise price of the 
Rights.

    The Company will be entitled to redeem the Rights at $.01 per 
Right at any time until the tenth day following public announcement 
that a person has acquired a 20% ownership position in Common 
Shares of the Company.  The Company in its discretion may extend 
the period during which it can redeem the Rights.

Note 7.  LAGUNA

    In June 1997, pending an improvement in the financial markets, 
Laguna started a program to conserve capital by curtailing its 
mining operations in Costa Rica and reducing its work force.  Under 
Costa Rican Labor Law, Laguna is obligated to make certain payments 
to Costa Rican employees who are dismissed.  The Company has 
estimated this amount at $134,000, and has included it on the 
Company's statements of operations in mining project expenses for 
the nine months ended September 30, 1997.  Laguna made payments of 
approximately $103,000 during the third quarter of 1997 related to 
this liability.  No payments were made in October 1997.

The Company has engaged a Canadian investment banking firm to 
explore strategic alternatives relating to the Company's interest 
in Laguna, which may include a sale of the Company's Laguna stock, 
a reorganization or merger of Laguna with a third party, or other 
transaction.  No assurance can be given that any such transaction 
will be arranged, or as to the terms of any arrangement that may be 
made.  In connection with any potential disposition of the 
Company's interest in Laguna, the Company may incur a loss on the 
recovery of its investment.   Pending the receipt of an offer to 
purchase Laguna, or the negotiation of the terms of a merger or 
other transaction, no estimate of whether such a loss will be 
incurred, or the amount of such loss, if any, can be made.

The value of the Company's interest in Laguna will be affected by 
the business results of Laguna and by changes in the markets for 
gold and junior gold mining companies.  There are many 
uncertainties in any mineral exploration and development program, 
such as the location of economic ore bodies, the receipt of 
necessary government permits and the construction of mining and 
processing facilities, as well as widely fluctuating prices of 
minerals.  Because Laguna's properties are not in the United 
States, additional uncertainties include currency risks, risks of 
changes in foreign laws and the risk of expropriation.  Substantial 
expenditures will be required to pursue Laguna's exploration and 
development activities, and substantial time may elapse from the 
initial phases of development until Laguna's activities are fully 
operational.  The Company does not have any obligation or intention 
to finance Laguna's future operations.

Note 8.  COMMON STOCK OFFERING

    The Company has filed a registration statement with the 
Securities and Exchange Commission for a public offering of 
2,300,000 shares of its common stock.  The registration statement 
has not yet become effective.  If completed, the net proceeds from 
the offering would be used to fund exploitation and development 
activities and to repay indebtedness under the Company's line of 
credit.

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

The following discussion is intended to assist in understanding the 
Company's consolidated financial position at September 30, 1997 and 
December 31, 1996, results of operations for the three and nine 
months ended September 30, 1997 and 1996 and cash flows for the 
nine months ended September 30, 1997 and 1996.  The Company's 
Consolidated Financial Statements and notes thereto should be 
referred to in conjunction with the following discussion.  Except 
as noted, the financial information discussed below is consolidated 
information, which includes the accounts of Laguna.

Overview

The Company's revenues, profitability and future rate of growth 
will be substantially dependent upon its drilling success in the 
San Juan and Delaware Basins of New Mexico, and prevailing prices 
for oil and gas, which are in turn dependent upon numerous factors 
that are beyond the Company's control, such as economic, political 
and regulatory developments and competition from other sources of 
energy.  The energy markets have historically been volatile, and 
there can be no assurance that oil and gas prices will not be 
subject to wide fluctuations in the future.  A substantial or 
extended decline in oil or gas prices could have a material effect 
on the Company's financial position, results of operations and 
access to capital, as well as the quantities of oil and gas 
reserves that the Company may economically produce.

Liquidity and Capital Resources

The Company has filed a registration statement with the Securities 
and Exchange Commission for a public offering of 2.3 million shares 
of its common stock.  The registration statement has not yet become 
effective.  If completed, the net proceeds from the offering would 
be used to pay down the Company's revolving line of credit (the 
"Facility") with Bank One, Texas, N.A. (the "Bank") and to finance 
the Company's oil and gas exploitation activities in the San Juan 
and Delaware Basins of New Mexico.  Although no acquisitions are 
pending, a portion of the net proceeds may be used to make 
strategic acquisitions of oil and gas interests in such basins.

The borrowing base under the Facility is subject to redetermination 
every six months, or at such other times as the Bank may determine.  
The Company is obligated to maintain certain financial and other 
covenants, including a minimum current ratio, minimum net equity, a 
debt coverage ratio and a total bank debt ceiling.  The Facility is 
collateralized by substantially all of the Company's oil and gas 
properties and expires March 31, 1999.  At November 7, 1997, the 
redetermined borrowing base under the facility was $10,830,000, and 
the principal amount outstanding was $9,384,000, leaving the amount 
remaining available under the Facility at $1,446,000.  The Company 
is currently in compliance with the covenants of the Facility.

Mandatory redemption of the Company's Series B Mandatorily 
Redeemable Convertible Preferred Stock (the "Series B Stock") was 
to begin in April 1997, when 20% of the outstanding shares, or 
80,000 shares, were to be redeemed for $800,000.  The Company 
extended an offer to all holders of the Series B Stock to convert 
their shares into shares of the Company's common stock at a 
conversion price of $9.00, rather than the $11.31 conversion price 
otherwise then in effect.  In April 1997, holders of 252,675 shares 
of Series B Stock elected to convert their shares into 280,747 
shares of the Company's common stock.  In addition, the Company 
redeemed 12,125 shares of Series B Stock at $10.00 per share.  
After these transactions, 135,200 shares of Series B Stock remain 
outstanding and the Company has no further obligation to redeem any 
shares until April 2000, when it will be required to redeem all 
Series B Stock outstanding in excess of 80,000 shares.  The Series 
B Stock is convertible to common stock automatically if the common 
stock trades at a price in excess of 140% of the then applicable 
conversion price for each day in a period of 10 consecutive trading 
days.  The conversion price, as adjusted to reflect the stock 
offering discussed above, is currently $11.18 per share.

Capital expenditures related to the Company's drilling and 
development programs totaled $10,280,000 during the first nine 
months of 1997.  The Company expects to spend approximately 
$14,000,000 for drilling and development in all of 1997.  The 
Company's current budget for drilling and development capital 
expenditures in 1998 is approximately $24,700,000.  During the 
first nine months of 1997, the Company completed 18 of the 20 
development wells it drilled.  The Company recompleted 13 wells 
during the first nine months of 1997, all of which are on 
production.  In addition, the Company completed a gas sweetening 
plant in the East Blanco Field, which will allow acceleration of 
the Company's Ojo Alamo recompletion program.  The Company expects 
to drill a total of 31 wells and recomplete 26 wells in 1997.  The 
Company currently plans to drill 53 wells and recomplete six wells 
in 1998.

The Company believes that, with the net proceeds of the common 
stock offering, borrowings available under the Facility, and the 
operating cash flows that are expected to be generated by the 
application of such funds to the Company's drilling program, the 
Company will have sufficient capital to fund the continued 
development of its current properties and to meet the Company's 
liquidity requirements through 1998.


Results of Operations
<TABLE>
<CAPTION>
                                                For the Three Months    For the Nine Months
                                                 Ended September 30,     Ended September 30,
                                                  1997        1996        1997       1996  
                                                   (In thousands, except per unit data)
<C>                                             <S>         <S>         <S>        <S>
Results of Operations, Consolidated:
    Revenues                                    $ 2,030     $ 1,668     $ 5,928    $ 4,532
    Costs and expenses                            2,390       1,940       7,072      5,784
    Net loss                                       (248)       (233)       (717)    (1,320)
    Net loss attributable to common shareholders   (278)       (327)     (1,275)    (1,601)
    Net loss per share attributable to common 
      shares                                      (0.06)      (0.16)      (0.28)     (0.79)
    EBITDA (1)                                      677         516       1,595      1,209
    Capital expenditures-cash basis (3)           5,022       1,033      12,246      2,752

Results of Operations from Oil and Gas Producing Activities: 
    Oil and gas sales                             1,995       1,263       5,806      4,098
    Production tax and marketing expense            281         176         739        499
    Lease operating expense                         557         361       1,419      1,012
    Depletion                                       668         461       1,698      1,546
    Impairment of oil and gas properties              4          --          59         --

Net Production: 
    Oil (MBbl)                                       50          44         131        135
    Natural gas (MMcf)                              575         234       1,553        934
    MBOE                                            146          83         390        291

Average Sales Price Realized: 
    Oil (per Bbl)                               $ 19.08     $ 17.70     $ 20.15    $ 17.21
    Natural gas (per Mcf)                          1.81        2.07        2.04       1.90
    Per BOE                                       13.66       15.22       14.89      14.08

Average cost data (per BOE):
    Production tax and marketing expense           1.92        2.12        1.89       1.71
    Lease operating expense                        3.82        4.35        3.64       3.48
    Depletion                                      4.58        5.55        4.35       5.31

Results of Operations, Excluding Laguna (2): 
    Revenues                                    $ 2,012     $ 1,598     $ 5,850    $ 4,445
    Costs and expenses                            2,142       1,632       6,093      5,065
    Net loss                                       (130)        (34)       (243)      (780)
    Net loss attributable to common shareholders   (160)       (128)       (801)    (1,061)
    Net loss per share attributable to common 
      shares                                      (0.03)      (0.06)      (0.18)     (0.52)
    EBITDA (1)                                      738         691       1,961      1,690
    Capital expenditures-cash basis (3)           4,677         546      10,937      1,455
</TABLE>

_________________
1)  EBITDA is earnings before income taxes, interest expense, 
depreciation, depletion and amortization, impairment, and 
extraordinary loss.  EBITDA is a financial measure commonly used in 
the Company's industry and should not be considered in isolation or 
as a substitute for net income, cash flow provided by operating 
activities or other income or cash flow data prepared in accordance 
with generally accepted accounting principles or as a measure of a 
company's profitability or liquidity.
2)  Reflects oil and gas operations.
3)  Includes expenditures for drilling, acquisitions, and furniture 
and equipment.


Three and Nine Months Ended September 30, 1997 Compared to 
September 30, 1996

Revenues.  Total revenues increased 22% to $2,030,000 for the three 
months ended September 30, 1997 from $1,668,000 for the three 
months ended September 30, 1996 and increased 31% to $5,928,000 for 
the nine months ended September 30, 1997 from $4,532,000 for the 
nine months ended September 30, 1996.  Oil and gas sales increased 
58% to $1,995,000 for the 1997 quarter from $1,263,000 for the 1996 
quarter due primarily to higher oil and gas production in the 1997 
quarter.  Oil and gas sales increased 42% to $5,806,000 for the 
nine months ended September 30, 1997 from $4,098,000 for the nine 
months ended September 30, 1996, due to higher oil and gas prices 
realized and higher gas production in the 1997 period.  Average oil 
prices realized per barrel increased 8% to $19.08 in the fiscal 
1997 quarter, from $17.70 for the fiscal 1996 quarter; however, 
average gas prices realized per Mcf decreased 13% to $1.81 in the 
1997 quarter from $2.07 in the 1996 quarter.  Average oil prices 
realized per barrel increased 17% to $20.15 for the nine months 
ended September 30, 1997, from $17.21 for the comparable 1996 
period, and average gas prices realized per Mcf increased 7% to 
$2.04 in the 1997 period from $1.90 for the nine months ended 
September 30, 1996.  Oil production increased 14% to 50,000 barrels 
in the 1997 quarter from 44,000 barrels in the 1996 quarter and gas 
production increased 146% to 575,000 Mcf in the 1997 quarter from 
234,000 Mcf in the 1996 quarter.   Oil production decreased 3% to 
131,000 barrels for the nine months ended September 30, 1997 from 
135,000 barrels for the nine months ended September 30, 1996; 
however, gas production increased 66% to 1,553,000 Mcf for the nine 
months ended September 30, 1997 from 934,000 Mcf for the same 
period a year ago.  Oil production was constrained by a delay in 
planned drilling during the first five months of fiscal 1997 while 
additional land acquisitions were made.  However, the normal 
production declines for the nine-month period ended September 30, 
1997 were mostly offset by new production.  The gas production 
increases are due to the Company's successful drilling and 
recompletion program in 1997.  During the three and nine months 
ended September 30, 1996, the Company sold 400,000 of its shares of 
Laguna common stock and realized a gain of $329,000.  Excluding 
Laguna, total revenues for the three months ended September 30, 
1997 increased 26% to $2,012,000 from $1,598,000 for the 1996 
quarter, primarily due to higher gas production.  Excluding Laguna, 
total revenues for the nine months ended September 30, 1997 
increased 32% to $5,850,000 from $4,445,000 for the same period a 
year ago, primarily due to higher oil and gas prices and higher gas 
production in the 1997 period.  There were no sales of gold and 
silver in 1997 or 1996, and no sales are expected in the immediate 
future.

Oil and Gas Production Expenses.  Oil and gas production expenses, 
including production tax and marketing expenses, increased 56% to 
$838,000 for the three months ended September 30, 1997 from 
$537,000 for the 1996 quarter, and increased 43% to $2,158,000 for 
the nine months ended September 30, 1997 from $1,511,000 for the 
comparable 1996 period, due to new wells coming on line as a result 
of the 1997 drilling program.  Per BOE, oil and gas production 
expense, including production tax and marketing expense, decreased 
$0.73, or 11%, to $5.74 for the 1997 quarter from $6.47 for the 
1996 quarter.  However, oil and gas production expenses per BOE 
increased $0.34, or 7%, to $5.53 for the nine months ended 
September 30, 1997 from $5.19 for the nine months ended 
September 30, 1996.  Production tax and marketing expense increased 
$0.18 per BOE, or 11%, during the nine months ended September 30, 
1997 as a result of higher oil and gas prices.  LOE increased $0.16 
per BOE, or 5%, during the nine months ended September 30, 1997 
primarily as a result of non-recurring repair and maintenance costs 
totaling approximately $416,000, or $1.07 per BOE, during the nine 
months ended September 30, 1997, compared to non-recurring repair 
and maintenance costs of $194,000, or $0.50 per BOE, for the 
comparable period in 1996.  Of the non-recurring repair and 
maintenance costs incurred during the nine months ended 
September 30, 1997, approximately $151,000, or $0.39 per BOE, 
related to remediation expenses.  The remediation was essentially 
completed in the third quarter of 1997.  No remediation expenses 
were incurred in the 1996 period.

Mining Project Expenses.  Mining project expenses for the three 
months ended September 30, 1997 decreased 34% to $191,000 from 
$289,000 for the three months ended September 30, 1996, and 
increased 34% to $871,000 for the nine months ended September 30, 
1997 from $648,000 for the comparable 1996 period.  In June 1997, 
pending an improvement in the financial markets, Laguna started a 
program to conserve capital by curtailing its mining operations in 
Costa Rica and reducing its work force.  Under Costa Rican Labor 
Law, Laguna is obligated to make certain payments to Costa Rican 
employees who are dismissed.  The Company has estimated this amount 
at $134,000, and has included it in mining project expenses for the 
nine months ended September 30, 1997.  Additionally, mining project 
expenses were higher during the nine months ended September 30, 
1997 compared to the same period in 1996 due to Laguna's drilling 
program in new exploration areas and business development expenses 
related to reviewing other mineral concessions.  

Depreciation, Depletion and Amortization.  Depreciation, depletion 
and amortization for the three months ended September 30, 1997 
increased 50% to $749,000 from $501,000 in the 1996 quarter, and 
increased 12% to $1,873,000 for the nine months ended September 30, 
1997 from $1,671,000 for the nine months ended September 30, 1996.  
Depletion per BOE decreased 17% to $4.58 for the fiscal 1997 
quarter from $5.55 for the fiscal 1996 quarter and decreased 18% to 
$4.35 for the nine months ended September 30, 1997 from $5.31 for 
the nine months ended September 30, 1996, primarily due to an 
increase in proved reserves.

Impairment of Oil and Gas Properties.  Impairment of oil and gas 
properties was $4,000 and $59,000 during the fiscal 1997 periods 
compared to $-0- for the fiscal 1996 periods.  In 1996, the Company 
acquired a 2.25% working interest in an exploration venture to 
drill one or more wells offshore Belize.  The joint venture drilled 
a dry hole during the first quarter of 1997.  Accordingly, the 
Company reduced the carrying amount of its capitalized costs.  
During the three and nine months ended September 30, 1996, the 
Company's oil and gas activities were conducted entirely in the 
United States.

General and Administrative Expenses.  Total general and 
administrative expenses for the three months ended September 30, 
1997 increased 19% to $435,000 from $365,000 in the 1996 quarter, 
and increased 38% to $1,730,000 for the nine months ended 
September 30, 1997 from $1,252,000 for the same period in 1996, due 
to the hiring of additional personnel because of expanded 
operations and less sharing of expenses with Laguna now that Laguna 
is operating independently.  During the third quarter of 1997, the 
Company capitalized $253,000 of general and administrative expenses 
directly related to its drilling program.  No such costs were 
capitalized during the first six months of 1997 or in fiscal 1996.  
Laguna's general and administrative expenses are included in mining 
project expenses on the consolidated statements of operations.

Interest and Other Expenses.  Interest and other expenses for the 
three months ended September 30, 1997 decreased 30% to $173,000 
from $248,000 for the three months ended September 30, 1996 and 
decreased 46% to $381,000 for the nine months ended September 30, 
1997 from $702,000 for the nine months ended September 30, 1996.  
The decrease was primarily due to lower outstanding borrowings 
under the Company's credit facility in the 1997 periods.

Minority Interest.  Minority interest in loss of consolidated 
subsidiary represents the minority interest share in the Laguna 
loss and increased to $112,000 and $427,000 in the three and nine 
months ended September 30, 1997 from $39,000 and $92,000 for the 
same periods in 1996 primarily due to increases in the minority 
interest in Laguna beginning in June 1996, but not fully reflected 
until 1997.

Income Taxes.  The Company incurred net operating losses ("NOLs") 
for U.S. Federal income tax purposes in 1997 and 1996, which can be 
carried forward to offset future taxable income.  Statement of 
Financial Accounting Standards No. 109 requires that a valuation 
allowance be provided if it is more likely than not that some 
portion or all of a deferred tax asset will not be realized.  The 
Company's ability to realize the benefit of its deferred tax asset 
will depend on the generation of future taxable income through 
profitable operations and the expansion of the Company's oil and 
gas producing activities.  The market and capital risks associated 
with achieving the above requirement are considerable, resulting in 
the Company's decision to provide a valuation allowance equal to 
the net deferred tax asset.  Accordingly, the Company did not 
recognize any tax benefit in the consolidated statements of 
operations for the three and nine months ended September 30, 1997 
and 1996.

Extraordinary Loss.  The Company incurred an extraordinary loss of 
$160,000 during the nine months ended September 30, 1996, as a 
result of the refinancing of its credit facility with a new lender.

Net Loss.  Net loss for the three months ended September 30, 1997 
increased 6% to $248,000 from $233,000 for the three months ended 
September 30, 1996, and decreased 46% to $717,000 for the nine 
months ended September 30, 1997 from $1,320,000 for the same period 
a year ago, as a result of the factors discussed above.  The 
Company paid the 8% dividend of $27,000 on its Series B Mandatorily 
Redeemable Convertible Preferred Stock ("Series B Preferred Stock") 
in the three months ended September 30, 1997, and realized 
accretion of $3,000, compared to dividends of $80,000 and accretion 
of $14,000 in the three months ended September 30, 1996.  The 
Company paid dividends of $134,000 and realized accretion of 
$21,000 during the nine months ended September 30, 1997 compared to 
dividends of $240,000 and accretion of $41,000 during the nine 
months ended September 30, 1996.  Beginning in April 1997, 
preferred dividend payments were reduced as a result of the 
conversion into common stock and redemption of Series B Preferred 
Stock, as discussed in Note 4 of the Consolidated Financial 
Statements.  The excess of the fair value of the common stock 
issued at the $9.00 conversion price over the fair value of the 
common stock that would have been issued at the $11.31 conversion 
price, totaling $403,000, has been reflected on the statements of 
operations for the nine months ended September 30, 1997 as an 
increase to the net loss attributable to common shareholders. Net 
loss attributable to common shareholders for the three months ended 
September 30, 1997 decreased 15% to $278,000 from $327,000 for the 
three months ended September 30, 1996, and decreased 20% to 
$1,275,000 for the nine months ended September 30, 1997 from 
$1,601,000 for the nine months ended September 30, 1996.  Excluding 
Laguna, net loss attributable to common shareholders for the three 
months ended September 30, 1997 increased 25% to $160,000 from 
$128,000 in 1996 quarter, and decreased 25% to $801,000 for the 
nine months ended September 30, 1997 from $1,061,000 during the 
comparable 1996 period, due primarily to the factors discussed 
above.

Hedging Activities

The Company uses hedging instruments to manage commodity price 
risks.  The Company has used energy swaps and other financial 
arrangements to hedge against the effects of fluctuations in the 
sales prices for oil and natural gas.  Gains and losses on such 
transactions are matched to product sales and charged or credited 
to oil and gas sales when that product is sold.  Management 
believes that the use of various hedging arrangements can be a 
prudent means of protecting the Company's financial interests from 
the volatility of oil and gas prices.

The Company recognized hedging losses of $118,000 and $217,000 
during the three and nine months ended September 30, 1997, 
respectively, compared to losses of $176,000 and $401,000 during 
the three and nine months ended September 30, 1996, respectively.  
These losses are included in oil and gas sales in the Company's 
consolidated statements of operations.

At September 30, 1997, the Company had outstanding swap agreements 
covering 9,000 barrels of oil per month for the period from October 
1997 to December 1997 at fixed prices ranging from $19.99 to 
$20.39; 90,000 Mmbtu of gas per month for the period from October 
1997 to December 1997 at fixed prices ranging from $1.50 to $1.79; 
and 90,000 Mmbtu of gas per month at fixed prices ranging from 
$1.77 to $2.44 for the period from October 1997 to August 1998.  
The Company will receive the difference between the fixed price per 
unit of production and a price based on an agreed upon third party 
index if the index price is lower.  If the index price is higher, 
the Company will pay the difference.  The Company's current swaps 
are settled monthly.

Laguna

The Company has engaged a Canadian investment banking firm to 
explore strategic alternatives relating to the Company's interest 
in Laguna, which may include a sale of the Company's Laguna stock, 
a reorganization or merger of Laguna with a third party, or other 
transaction.  No assurance can be given that any such transaction 
will be arranged, or as to the terms of any arrangement that may be 
made.  In connection with any potential disposition of the 
Company's interest in Laguna, the Company may incur a loss on the 
recovery of its investment.   Pending the receipt of an offer to 
purchase Laguna, or the negotiation of the terms of a merger or 
other transaction, no estimate of whether such a loss will be 
incurred, or the amount of such loss, if any, can be made.

The value of the Company's interest in Laguna will be affected by 
the business results of Laguna and by changes in the markets for 
gold and junior gold mining companies.  There are many 
uncertainties in any mineral exploration and development program, 
such as the location of economic ore bodies, the receipt of 
necessary government permits and the construction of mining and 
processing facilities, as well as widely fluctuating prices of 
minerals.  Because Laguna's properties are not in the United 
States, additional uncertainties include currency risks, risks of 
changes in foreign laws and the risk of expropriation.  Substantial 
expenditures will be required to pursue Laguna's exploration and 
development activities, and substantial time may elapse from the 
initial phases of development until Laguna's activities are fully 
operational.  The Company does not have any obligation or intention 
to finance Laguna's future operations.

Miscellaneous

In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards (SFAS) No. 128, 
"Earnings per Share," which establishes new standards for computing 
and presenting earnings per share.  The new Statement is intended 
to simplify the standard for computing earnings per share and will 
require the presentation of basic and diluted earnings per share on 
the face of the income statement, including all prior periods 
presented.  The Statement is effective for financial statements 
issued for periods ending after December 15, 1997, and earlier 
adoption is not permitted.  Had the calculation of earnings per 
share been prepared in accordance with the provisions of SFAS No. 
128 for the three and nine months ended September 30, 1997 and 
1996, earnings per share would have been the same as what was 
reported on the consolidated statements of operations.

The Company's oil and gas operations are significantly affected by 
certain provisions of the Internal Revenue Code of 1986, as 
amended, that are applicable to the oil and gas industry.  Current 
law permits the Company to deduct currently, rather than 
capitalize, intangible drilling and development costs incurred or 
borne by it.  The Company, as an independent producer, is also 
entitled to a deduction for percentage depletion with respect to 
the first 1,000 barrels per day of domestic crude oil (and/or 
equivalent units of domestic natural gas) produced (if such 
percentage depletion exceeds cost depletion).  Generally, this 
deduction is 15% of gross income from an oil and gas property, 
without reference to the taxpayer's basis in the property.  The 
percentage depletion deduction may not exceed 100% of the taxable 
income from a given property.  Further, percentage depletion is 
limited in the aggregate to 65% of the Company's taxable income.  
Any depletion disallowed under the 65% limitation, however, may be 
carried over indefinitely.

Inflation has not historically had a material impact on the 
Company's financial statements, and management does not believe 
that the Company will be materially more or less sensitive to the 
effects of inflation than other companies in the oil and gas 
business.

The Company and its operations are subject to numerous risks and 
uncertainties.  Among these are risks related to the oil and gas 
and the mining businesses (including operating risks and hazards 
and the regulations imposed thereon), risks and uncertainties 
related to the volatility of the prices of oil and gas and 
minerals, uncertainties related to the estimation of reserves of 
oil and gas and minerals and the value of such reserves, the 
effects of competition and extensive environmental regulation, the 
uncertainties related to foreign operations, and other factors, 
many of which are necessarily beyond the Company's control.

PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits:

    None.

(b)    Reports on Form 8-K:

During third quarter 1997, the Company filed Periodic Reports on 
Form 8-K dated August 14, 1997, August 28, 1997, September 8, 1997 
and October 15, 1997.  Each of those Reports related to an "Item 5. 
Other Events" matter.  On August 11, 1997, the Company filed a 
Periodic Report on Form 8-K relating to an Item 4 and Item 7 
matter.

                                  SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 
1934, the registrant has duly caused this report to be signed on 
its behalf by the undersigned, thereunto duly authorized.


                                  MALLON RESOURCES CORPORATION
                                  Registrant


Date:  November 14, 1997          By:  /s/ Roy K. Ross             
                                         Roy K. Ross
                                         Executive Vice President


Date:  November 14, 1997          By:  /s/ Alfonso R. Lopez        
                                         Alfonso R. Lopez
                                         Vice President-Finance/
                                         Corporate Treasurer