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 March 31, 1999.

- 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 April 30, 1999, 7,023,940 shares of the registrant's common 
stock, par value $0.01 per share, were outstanding.
<PAGE>



PART I -  FINANCIAL INFORMATION

Item 1 -- Financial Statements

                         MALLON RESOURCES CORPORATION

                         CONSOLIDATED BALANCE SHEETS
                               (In thousands)


<TABLE>
<CAPTION>
                                                                 March 31,      December 31,
                                                                 1999           1998      
                                                                (Unaudited)

ASSETS
<S>                                                             <C>             <C>
Current assets:
    Cash and cash equivalents                                   $  1,436        $  1,733
    Accounts receivable:
        Oil and gas sales                                            955           1,076
        Joint interest participants, net of allowance of
           $43 and $43, respectively                                 532             650
        Related parties                                               87              89
        Other                                                          9              --
    Inventories                                                      379             375
    Other                                                            152              32
            Total current assets                                   3,550           3,955

Property and equipment:
    Oil and gas properties, full cost method                      96,101          93,624
    Natural gas processing plant                                   8,569           8,275
    Other property and equipment                                   1,013             989
                                                                 105,683         102,888
    Less accumulated depreciation, depletion and amortization    (50,045)        (48,748)
                                                                  55,638          54,140

Notes receivable-related parties                                      83              89

Other, net                                                           263             268

Total Assets                                                   $  59,534        $ 58,452
                                                               =========        ======== 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Trade accounts payable                                     $   2,746        $  4,424
    Undistributed revenue                                            655             945
    Accrued taxes and expenses                                       221             149
    Deferred revenue                                                 682             909
    Current portion of long-term debt                              1,315           1,310
            Total current liabilities                              5,619           7,737

Long-term bank debt                                               31,233          27,183
Accrued expenses                                                      40              39
            Total non-current liabilities                         31,273          27,222

Total liabilities                                                 36,892          34,959

Commitments and contingencies

Series B Mandatorily Redeemable Convertible Preferred Stock,
    $0.01 par value, 500,000 shares authorized, 135,200 shares
    issued and outstanding, respectively, liquidation preference 
    and mandatory redemption of $1,352,000                         1,332           1,329

Shareholders' equity: 
    Common Stock, $0.01 par value, 25,000,000 shares
        authorized; 7,023,940 and 7,021,065 shares issued
        and outstanding, respectively                                 70              70
    Additional paid-in capital                                    74,123          74,103
    Accumulated deficit                                          (52,883)        (52,009)
            Total shareholders' equity                            21,310          22,164

Total Liabilities and Shareholders' Equity                     $  59,534        $ 58,452
                                                               =========        ========
</TABLE>

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

<PAGE>


                        MALLON RESOURCES CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                      For the Three Months
                                                                      Ended March 31,    
                                                                      1999          1998
                                                                      (Unaudited)
<S>                                                                   <C>           <C>
Revenues:
    Oil and gas sales                                                 $  3,020      $  3,069
    Interest and other                                                      18            56
                                                                         3,038         3,125

Costs and expenses:
    Oil and gas production                                               1,345        1,163
    Depreciation, depletion and amortization                             1,306        1,153
    General and administrative                                             700          656
    Interest and other                                                     558          109
                                                                         3,909        3,081

Net (loss) income                                                         (871)          44

Dividends on preferred stock and accretion                                 (30)         (30)

Net (loss) income attributable to common shareholders                 $   (901)     $    14
                                                                      ========      =======

Basic:
    Net (loss) income per share attributable to common shareholders   $  (0.13)     $    --

    Weighted average common shares outstanding                           7,022        6,996

Diluted:
    Net (loss) income per share attributable to common shareholders   $  (0.13)     $    --

    Weighted average common shares outstanding                           7,022        7,088
</TABLE>


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

<PAGE>


                         MALLON RESOURCES CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (In thousands)

<TABLE>
<CAPTION>
                                                                      For the Three Months
                                                                      Ended March 31,    
                                                                      1999          1998
                                                                      (Unaudited)
<S>                                                                   <C>           <C>
Cash flows from operating activities:
    Net (loss) income                                                 $  (871)      $    44
    Adjustments to reconcile net (loss) income to net cash (used in)
    provided by operating activities:
        Depreciation, depletion and amortization                        1,306         1,153
        Amortization of discount on installment obligation                 --             6
        Stock compensation expense                                         41           115
        Changes in operating assets and liabilities:
            Decrease (increase) in:
                  Accounts receivable                                     232           363
                  Inventory and other assets                             (127)         (211)
            (Decrease) increase in:
                  Trade accounts payable and undistributed revenue     (1,968)        1,096
                   Accrued taxes and expenses                              68             6
                  Deferred revenue                                       (227)           --
                  Drilling advances                                        --           (94)
Net cash (used in) provided by operating activities                    (1,546)        2,478

Cash flows from investing activities:
    Additions to property and equipment                                (2,785)       (7,907)
    Other                                                                   6            --
Net cash used in investing activities                                  (2,779)       (7,907)

Cash flows from financing activities:
    Proceeds from long-term debt                                        4,380            --
    Payments of long-term debt                                           (325)           --
    Lease obligation payments                                              --           (50)
    Payment of preferred dividends                                        (27)          (27)
Net cash provided by (used in) financing activities                     4,028           (77)

Net decrease in cash and cash equivalents                                (297)       (5,506)

Cash and cash equivalents, beginning of period                          1,733         6,741

Cash and cash equivalents, end of period                              $ 1,436       $ 1,235
                                                                      =======       =======

Supplemental cash flow information: 
    Cash paid for interest                                            $   480       $   110
                                                                      =======       =======
</TABLE>

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

<PAGE>



                         MALLON RESOURCES CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
                                ___________


Note 1.  GENERAL

    Mallon Resources Corporation ("the Company") engages in oil 
and gas exploration and production through its wholly-owned 
subsidiary, Mallon Oil Company ("Mallon Oil"), whose oil and gas 
operations are conducted primarily in the State of New Mexico.  
The Company operates its business and reports its operations as 
one business segment.  The Company also has an interest in Laguna 
Gold Company ("Laguna").  All significant intercompany balances 
and transactions have been eliminated from the consolidated 
financial statements.

    At March 31, 1999, the Company owned approximately 45% of 
Laguna.  As discussed in the Company's annual report on Form 10-K 
for the year ended December 31, 1998 (the "1998 Form 10-K"), the 
Company's share of Laguna's net losses exceed the carrying value 
of its investment in and advances to Laguna.  Accordingly, the 
Company no longer reflects its share of Laguna's net losses and 
may only reflect its share of Laguna's future earnings to the 
extent that they exceed the Company's share of Laguna's current 
and future net losses not recognized.

    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 1998 Form 
10-K.

    Certain prior year amounts in the consolidated financial 
statements have been reclassified to conform to the presentation 
used in 1999.

Note 2. LONG-TERM BANK DEBT

    The Company has a revolving line of credit (the "Facility") 
with Bank One, Texas, N.A. (the "Bank').  The Facility consists 
of two separate lines of credit: a primary revolving line of 
credit (the "Revolver") and a term loan commitment of $6.5 
million (the "Equipment Loan").  The borrowing base under the 
Revolver is currently $30,000,000 and is under review.  At 
March 31, 1999, the amount outstanding under the Revolver was 
$26,440,000, leaving the amount available under the Revolver at 
$3,560,000.  At March 31, 1999, the Company was not in compliance 
with the minimum net equity and debt service ratio covenants of 
the Facility.  The Bank has agreed to waive any non-compliance 
with the debt service ratio that may occur during calendar year 
1999, and to amend the minimum net equity covenant in such a way 
that management believes that, based on its current projections, 
the Company will meet it for all reporting periods in 1999.

<PAGE>


    In connection with the Bank's waiver of the Company's non-
compliance with certain covenants mentioned above, the following 
provisions of the Revolver are in the process of being amended:

-   Beginning May 1, 1999, the borrowing base will be subject to 
redetermination quarterly, at February 1, May 1, August 1 and 
November 1 of each year, or at such other times as the Bank may 
determine. 

-   Effective March 31, 1999, the Company will pay a fee of 
0.625% per annum, up from 0.375%, on the daily average of the 
unused amount of the borrowing base.  If the borrowing base is 
increased, the Company will pay a fee of 0.50% per annum, up from 
0.25%, of the amount of such increase over the previously 
established borrowing base. 

-   Effective March 31, 1999, the interest rate on amounts drawn 
under the Revolver is, at the Company's election, either the 
Bank's base rate plus 0.25% or LIBOR plus a margin ranging from 
1.375% to 2.125%, up from 1.125% to 1.875%, depending on the 
total Revolver balance outstanding. 

-   In consideration of the waivers and amendments mentioned 
above, the Company will pay the Bank a fee of $25,000. 

    During first quarter 1999, the Company repaid $325,000 of the 
Equipment Loan. 

Note 3. EARNINGS (LOSS) PER SHARE

    Under the provisions of Statement of Financial Accounting 
Standards ("SFAS") No. 128, basic earnings per share is computed 
by dividing income available to common shareholders by the 
weighted average number of common shares outstanding for the 
period. Diluted earnings per share reflects the potential 
dilution that could occur if the Company's outstanding stock 
options and warrants were exercised (calculated using the 
treasury stock method) or if the Company's Series B Convertible 
Preferred Stock were converted to common stock.

    The following table reconciles the net (loss) income and 
common shares outstanding used in the calculations of basic and 
diluted net (loss) income per share for the three months ended 
March 31, 1999 and 1998, respectively.


<TABLE>
<CAPTION>
                                              Three Months Ended March 31,
                                              1999                  1998
                                              Net    Common         Net       Common
(In thousands, except per share amounts)      Loss   Shares  EPS    Income    Shares     EPS
<S>                                          <C>     <C>     <C>    <C>       <C>       <C>
Net (loss) income                            $(871)                 $ 44        

Dividends on preferred stock and accretion     (30)                  (30)            

Basic (loss) income per share                 (901)  7,022   (.13)    14       6,996    $ --

Warrants                                        --      --     --     16    

Stock options                                   --      --      --    76    

Diluted (loss) income per share              $(901)  7,022   (.13)  $ 14       7,088    $ --
</TABLE>


All options, warrants, and Series B Convertible Preferred Stock 
were excluded from the calculation for the first quarter of 1999 
because they were antidilutive as a result of the Company's net 
loss for that period.

Options to purchase 479,000 shares of common stock and Series B 
Convertible Preferred Stock convertible into 131,000 shares of 
common stock were excluded from the calculation for the first 
quarter of 1998 because they were antidilutive.

<PAGE>


Note 4. HEDGING ACTIVITIES:

In June 1998, the Financial Accounting Standards Board issued 
SFAS No. 133, "Accounting for Derivative Instruments and Hedging 
Activities."  SFAS No. 133 establishes accounting and reporting 
standards requiring that every derivative instrument (including 
certain derivative instruments embedded in other contracts) be 
recorded in the balance sheet as either an asset or liability 
measured at its fair value.  SFAS No. 133 requires that changes 
in the derivative's fair value be recognized currently in 
earnings unless specific hedge accounting criteria are met.  
Special accounting for qualifying hedges allows a derivative's 
gains and losses to offset related results on the hedged item in 
the income statement, and requires that a company must formally 
document, designate, and assess the effectiveness of transactions 
that receive hedge accounting.  SFAS No. 133 is effective for 
fiscal years beginning after June 15, 1999, but early adoption is 
permitted.  SFAS No. 133 cannot be applied retroactively.

The Company has not yet quantified the impact of adopting SFAS 
No. 133 on its financial statements and has not determined the 
timing or method of adoption of SFAS No. 133.  However, SFAS No. 
133 could increase volatility in earnings and other comprehensive 
income. 

Note 5. OIL AND GAS PROPERTIES:

    Under the full cost accounting rules of the Securities and 
Exchange Commission, the Company reviews the carrying value of 
its oil and gas properties each quarter on a country-by-country 
basis.  Under full cost accounting rules, net capitalized costs 
of oil and gas properties, less related deferred income taxes, 
may not exceed the present value of estimated future net revenues 
from proved reserves, discounted at 10 percent, plus the lower of 
cost or fair market value of unproved properties, as adjusted for 
related tax effects.  Application of these rules generally 
requires pricing future production at the unescalated oil and gas 
prices in effect at the end of each fiscal quarter.  However, if 
prices increase subsequent to quarter end, but before a quarter-
end report is filed, the higher prices may be used.  Using prices 
in effect at March 31, 1999 of $14.74 per barrel of oil and $1.23 
per Mcf of gas, the Company's oil and gas properties exceeded the 
"ceiling" by approximately $8,239,000.  However, subsequent to 
quarter-end, prices recovered to $17.60 per barrel of oil and 
$1.71 per Mcf of gas.  Using the subsequent prices, the Company's 
oil and gas properties were under the ceiling by approximately 
$13,576,000; accordingly, no ceiling limitation write-down was 
required.

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 March 31, 1999 
and December 31, 1998, and results of operations and cash flows 
for the three months ended March 31, 1999 and 1998.  The 
Company's Consolidated Financial Statements and notes thereto 
should be referred to in conjunction with the following 
discussion.

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, 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 
adverse 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.

<PAGE>
Liquidity and Capital Resources

The Company's operations are capital intensive.  Historically, 
the Company's principal sources of capital have been cash flow 
from operations, a revolving line of credit and proceeds from 
sales of common and preferred stock.  The Company's principal 
uses of capital have been for the exploration, acquisition, 
development and exploitation of oil and gas properties.

The Company's first quarter 1999 oil and gas capital expenditures 
were $2.8 million and its net cash used by operations was $1.5 
million.  In addition, the Company repaid $325,000 in principal 
payments on the Equipment Loan during the quarter.  These 
expenditures were funded primarily through borrowings under the 
Company's revolving line of credit (described below).  The 
Company closed first quarter 1999 with a working capital deficit 
of $2.1 million and long-term debt of $31.2 million.

The Company is currently in the process of securing additional 
capital to enable it to continue its active drilling and 
development program through 1999.  The Company is considering bank 
borrowings or the issuance of debt securities, or the sale of 
preferred stock or other equity securities.  There is no 
assurance that the Company will be able to obtain the financing 
it seeks upon satisfactory terms.

In first quarter 1999, three successful wells were drilled, of 
which two exploratory wells were completed and one exploratory 
well is awaiting completion.  In addition, the Company 
recompleted two wells.  The Company currently has a $23.8 million 
capital budget for 1999, and plans to drill or recomplete more 
than 50 wells during the year.  However, the Company's ability to 
execute its plans is dependent on its ability to obtain 
additional financing.

The borrowing base under the Revolver is subject to 
redetermination every quarter, or at such other times as the Bank 
may determine.  The Revolver, which is secured by substantially 
all of the Company's oil and gas properties, expires April 1, 
2001.  The Revolver's current borrowing base of $30.0 million is 
under review.  At March 31, 1999, borrowings under the Revolver 
were $26.4 million, leaving available additional borrowings of 
$3.6 million.  As of May 11, 1999, the outstanding balance under 
the Revolver was $27.0 million, leaving available additional 
borrowings of $3.0 million.  The Facility requires that the 
Company maintain certain financial and other covenants, including 
a minimum current ratio, a minimum net equity, and a debt service 
ratio.  At March 31, 1999, the Company was not in compliance with 
the minimum net equity and the debt service ratio covenants.  The 
Bank has agreed to waive any non-compliance with the debt service 
ratio that may occur during calendar year 1999, and to amend the 
minimum net equity covenant in such a way that management 
believes that, based on its current projections, the Company will 
meet it for all reporting periods in 1999.

<TABLE>
<CAPTION>
                                                               Results of Operations
                                                               Three Months Ended March 31,
(In thousands, except per unit data)                           1999           1998
<S>                                                            <C>            <C>
Operating Results from Oil and Gas Operations: 
    Oil and gas sales                                          $3,020         $3,069
    Production tax and marketing expense                          445            479
    Lease operating expense                                       900            684
    Depletion                                                   1,211          1,100
    Depreciation                                                   67             30

Net Production: 
    Oil (MBbl)                                                     47             68
    Natural gas (MMcf)                                          1,686          1,086
    MMcfe                                                       1,968          1,494

Average Sales Price Realized (1):
    Oil (per Bbl)                                              $11.53         $14.26
    Natural gas (per Mcf)                                        1.47           1.93
    Per Mcfe                                                     1.53           2.05

Average Cost Data (per Mcfe): 
    Production tax and marketing expense                       $  .22         $  .32
    Lease operating expense                                       .46            .46
    Depletion                                                     .62            .74
    Depreciation                                                  .03            .02
_________________
(1)   Includes effects of hedging.
</TABLE>

<PAGE>


Three Months Ended March 31, 1999 Compared to March 31, 1998

Revenues.  Total revenues for first quarter 1999 decreased 3% to 
$3,038,000 from $3,125,000 for first quarter 1998.  Oil and gas 
sales for first quarter 1999 decreased 2% to $3,020,000 from 
$3,069,000 for first quarter 1998 primarily due to lower oil and 
gas prices realized.  Oil production for first quarter 1999 
decreased 31% to 47,000 barrels from 68,000 barrels for first 
quarter 1998 and gas production for first quarter 1999 increased 
55% to 1,686,000 Mcf from 1,086,000 Mcf for first quarter 1998, 
due to the Company's successful drilling and recompletion program 
in 1998 and 1999.  Lower oil and gas prices in first quarter 1999 
offset the gain in gas production.  Average oil prices per barrel 
for first quarter 1999 decreased 19% to $11.53 from $14.26 for 
first quarter 1998.  Average gas prices per Mcf for first quarter 
1999 decreased 24% to $1.47 from $1.93 for first quarter 1998.

Oil and Gas Production Expenses.  Oil and gas production 
expenses, including production tax and marketing expenses, 
increased 16% to $1,345,000 from $1,163,000 in 1998.  The 
increase was primarily due to new wells drilled in 1998 and 1999.  
Total oil and gas production expenses per Mmcfe decreased $.10, 
or 13%, to $.68 for the 1999 quarter from $.78 for the 1998 
quarter.  Production tax and marketing expense per Mmcfe 
decreased 31% to $.22 from $.32 due to lower oil and gas prices 
in the 1998 quarter.  Lease operating expense per Mmcfe remained 
the same at $.46 per Mmcfe in the 1999 quarter.

Depreciation, Depletion and Amortization.  First quarter 1999 
depreciation, depletion and amortization increased 13% to 
$1,306,000 from $1,153,000 in first quarter 1998 due to higher 
oil and gas production.  Depletion per Mmcfe decreased 16% to 
$.62 from $.74, primarily due to the write-down of oil and gas 
properties of $16.4 million in fourth quarter 1998, pursuant to 
the rules of the Securities and Exchange Commission.

General and Administrative Expenses.  Net general and 
administrative expenses for first quarter 1999 increased 7% to 
$700,000 from $656,000 in first quarter 1998 due to the hiring of 
additional personnel because of expanded operations.

Interest and Other Expenses.  Interest and other expenses for 
first quarter 1999 increased 412% to $558,000 from $109,000 for 
first quarter 1998.  The increase was primarily due to a higher 
outstanding debt balance in the 1999 quarter.

Income Taxes.  The Company incurred net operating losses ("NOLs") 
for U.S. Federal income tax purposes in 1999 and 1998, 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 expense or benefit in the 
consolidated statements of operations for the first quarters of 
1999 and 1998.

Net (Loss) Income.  The Company had a net loss of $871,000 for 
first quarter 1999 compared to net income of $44,000 for first 
quarter 1998 as a result of the factors discussed above.  The 
Company paid the 8% dividend of $27,000 on its $1,352,000 face 
amount Series B Mandatorily Redeemable Convertible Preferred 
Stock in each of the quarters ended March 31, 1999 and 1998, and 
realized accretion of $3,000 in each period.  Net loss 
attributable to common shareholders for the quarter ended 
March 31, 1999 was $901,000 compared to net income attributable 
to common shareholders of $14,000 for the quarter ended March 31, 
1998.

<PAGE>


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 gains of $196,000 and $79,000 in first quarter 
1999 and 1998, respectively.  These amounts are included in oil 
and gas sales in the Company's consolidated statements of 
operations.

Year 2000

The following Year 2000 statements constitute a Year 2000 
Readiness Disclosure within the meaning of the Year 2000 
Information and Readiness Disclosure Act of 1998.

Year 2000 issues result from the inability of certain electronic 
hardware and software to accurately calculate, store or use a 
date subsequent to December 31, 1999.  These dates can be 
erroneously interpreted in a number of ways; e.g., the year 2000 
could be interpreted as the year 1900.  This inability could 
result in a system failure or miscalculations that could in turn 
cause operational disruptions.  These issues could affect not 
only information technology ("IT") systems, such as computer 
systems used for accounting, land and engineering, but also 
systems that contain embedded chips.

The Company has completed an assessment of its IT systems to 
determine whether these systems are Year 2000 compliant.  The 
Company has determined that these systems are either compliant or 
with relatively minor modifications or upgrades (many of which 
would have been made in any event as part of the Company's 
continuing effort to enhance its IT systems) will be compliant.  
All necessary modifications and upgrades and the testing thereof 
are expected to be completed by the end of the second quarter of 
1999.

The Company is assessing its non-information systems to ascertain 
whether these systems contain embedded computer chips that will 
not properly function subsequent to December 31, 1999.  These 
systems include office equipment, the automatic wellhead 
equipment used to operate wells, the Company-owned gas gathering 
pipelines, and the Company's gas processing plant in the San Juan 
Basin.  All of these systems have been determined to be Year 2000 
compliant based on information provided by third party vendors.

To date, the Company has relied upon its internal staff to assess 
its Year 2000 readiness.  The costs associated with assessing the 
Company's Year 2000 internal compliance and related systems 
modification, upgrading and testing are not currently expected to 
exceed $50,000.  Costs incurred through March 31, 1999 have been 
minimal.

The Company is in the process of communicating with certain of 
its significant suppliers, service companies, gas gatherers and 
pipelines, electricity providers and financial institutions to 
determine the vulnerability of the Company to third parties' 
failure to address their Year 2000 issues.  While the Company has 
not yet received definitive responses indicating all such 
entities are Year 2000 compliant, it has not received information 
suggesting the Company is vulnerable to potential Year 2000 
failure by these parties.  These communications are expected to 
continue into the second quarter of 1999.  At this time, the 
Company has not developed any contingency plans to address third 
party non-compliance with Year 2000 matters.  However, should its 
communications with any third parties indicate significant 
vulnerability, development of contingency plans will be 
considered.

<PAGE>


The Company does not anticipate any significant disruptions of 
its operations due to Year 2000 issues.  Among the potential 
"worst case" problems the Company could face would be the loss of 
electricity used to power well pumps and compressors that would 
result in wells being shut-in, or the inability of a third party 
gas gathering company or pipeline to accept gas from the 
Company's wells or gathering lines which would also result in the 
Company's wells being shut-in.  A disruption in production would 
result in the loss of income.

Miscellaneous

The Company's oil and gas operations are significantly affected 
by certain provisions of the Internal Revenue Code of 1986, as 
amended, applicable to the oil and gas industry.  Current law 
permits the Company's intangible drilling and development costs 
to be deducted currently, or capitalized and amortized over a 
five year period.  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 preceding information contains forward-looking statements, 
the realization of which cannot be assured.  Actual results may 
differ significantly from those forecast.  When evaluating the 
Company, its operations, or its expectations, the reader should 
bear in mind that the Company and its operations are subject to 
numerous risks and uncertainties.  Among these are risks related 
to the oil and gas business generally (including operating risks 
and hazards and the regulations imposed thereon), risks and 
uncertainties related to the volatility of the prices of oil and 
gas, uncertainties related to the estimation of reserves of oil 
and gas and the value of such reserves, uncertainties relating to 
geologic models and evaluations, the effects of competition and 
extensive environmental regulation, and other factors, many of 
which are necessarily beyond the Company's control.  These and 
other risk factors that affect the Company's business are 
discussed in the Company's 1998 Form 10-K.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from those 
reported on the Company's 1998 Form 10-K.

<PAGE>



PART II - OTHER INFORMATION

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

(a)    Exhibits:

       None.

(b)    Reports on Form 8-K:

During first quarter 1999, the Company filed three Periodic 
Reports on Form 8-K dated:  March 4, 1999, March 9, 1999 and 
March 15, 1999.  Each Report related to an "Item 5. Other Events" 
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:  May 14, 1999         By: /s/ Roy K. Ross            
                                Roy K. Ross
                                Executive Vice President


Date:  May 14, 1999         By: /s/ Alfonso R. Lopez   
                                Alfonso R. Lopez
                                Vice President, Finance/Treasurer