SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C.  20549

                                   Form 10-Q

(Mark One)
[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934 for the quarterly period
     ended June 30, 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    (IRS Employer Identification No.)
of 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 July 31, 1999, 7,031,940 shares of 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)


                                  ASSETS


<TABLE>
<CAPTION>
                                                                  June 30,      December 31,
                                                                    1999            1998
                                                                 (Unaudited)
<S>                                                               <C>            <C>
Current assets:
    Cash and cash equivalents                                      $  1,150      $  1,733
    Accounts receivable:
        Oil and gas sales                                             1,107         1,076
        Joint interest participants, net of allowance of $43 and
            $43, respectively                                           511           650
        Related parties                                                  81            89
    Inventories                                                         386           375
    Other                                                               104            32
          Total current assets                                        3,339         3,955

Property and equipment:
    Oil and gas properties, full cost method                         97,153        93,624
    Natural gas processing plant                                      8,574         8,275
    Other property and equipment                                      1,042           989
                                                                    106,769       102,888
    Less accumulated depreciation, depletion and amortization       (51,085)      (48,748)
                                                                     55,684        54,140

Notes receivable-related parties                                         83            89

Other, net                                                              336           268

Total Assets                                                       $ 59,442      $ 58,452
                                                                   ========      ========
</TABLE>


(Continued on following page)

The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
                         MALLON RESOURCES CORPORATION

                   CONSOLIDATED BALANCE SHEETS - Continued
                    (In thousands, except share amounts)



                    LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                  June 30,      December 31,
                                                                    1999            1998
                                                                 (Unaudited)
<S>                                                               <C>            <C>
Current liabilities:
    Trade accounts payable                                        $  2,751       $  4,424
    Undistributed revenue                                              561            945
    Accrued taxes and expenses                                         312            149
    Deferred revenue                                                   455            909
    Current portion of long-term debt                                1,315          1,310
          Total current liabilities                                  5,394          7,737

Long-term debt                                                      31,804         27,183
Accrued expenses                                                        27             39
          Total non-current liabilities                             31,831         27,222

Total liabilities                                                   37,225         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                           1,335          1,329

Shareholders' equity:
    Common Stock, $0.01 par value, 25,000,000
        shares authorized; 7,031,940 and 7,021,065
        shares issued and outstanding, respectively                     70             70
    Additional paid in capital                                      74,170         74,103
    Accumulated deficit                                            (53,358)       (52,009)
          Total shareholders' equity                                20,882         22,164

Total Liabilities and Shareholders' Equity                        $ 59,442       $ 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)
                                 (Unaudited)



<TABLE>
<CAPTION>
                                                   For the Three Months    For the Six Months
                                                      Ended June 30,         Ended June 30,
                                                     1999        1998        1999      1998
<S>                                                <C>         <C>         <C>       <C>
Revenues:
    Oil and gas sales                              $ 2,913     $ 2,913     $ 5,933   $ 5,982
    Interest and other                                  27          14          45        70
                                                     2,940       2,927       5,978     6,052

Costs and expenses:
    Oil and gas production                           1,175       1,196       2,520     2,359
    Depreciation, depletion and amortization         1,051       1,181       2,357     2,334
    General and administrative                         582         533       1,282     1,189
    Interest and other                                 604         174       1,162       283
                                                     3,412       3,084       7,321     6,165
Net loss                                              (472)       (157)     (1,343)     (113)

Dividends on preferred stock and accretion             (30)        (30)        (60)      (60)

Net loss attributable to common shareholders       $  (502)    $  (187)    $(1,403)  $  (173)
                                                   =======     =======     =======   =======

Basic:
    Net loss attributable to common shareholders   $ (0.07)    $  (.03)    $ (0.20)  $ (0.02)
                                                   =======     =======     =======   =======


    Weighted average shares outstanding              7,025       7,010       7,024     7,004
                                                   =======     =======     =======   =======

</TABLE>




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

                         MALLON RESOURCES CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                          For the Six Months
                                                                            Ended June 30,
                                                                            1999       1998
<S>                                                                       <C>        <C>
Cash flows from operating activities:
    Net loss                                                              $(1,343)   $  (113)
    Adjustments to reconcile net loss to net cash provided by operating activities:
        Depreciation, depletion and amortization                            2,357      2,334
        Stock compensation expense                                             55        142
        Amortization of discount on installment obligation                     --         11
        Changes in operating assets and liabilities:
            (Increase) decrease in:
                Accounts receivable                                           117        881
                Inventory and other assets                                   (170)      (189)
            Increase (decrease) in:
                Trade accounts payable and undistributed revenue           (2,071)       771
                Accrued taxes and expenses                                    160         28
                Deferred revenue                                             (455)        --
                Drilling advances                                              --       (119)
Net cash (used in) provided by operating activities                        (1,350)     3,746

Cash flows from investing activities:
    Additions to property and equipment                                    (3,866)   (16,908)
    Increase in notes receivable-related parties                                6         (1)
Net cash used in investing activities                                      (3,860)   (16,909)

Cash flows from financing activities:
    Proceeds from long-term debt                                            5,280      6,849
    Payments of long-term debt                                               (654)        --
    Lease obligation payments                                                  --        (97)
    Proceeds from sale of common stock                                         55         --
    Payment of preferred dividends                                            (54)       (54)
Net cash provided by financing activities                                   4,627      6,698

Net decrease in cash and cash equivalents                                    (583)    (6,465)

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

Cash and cash equivalents, end of period                                  $ 1,150    $   276
                                                                          =======    =======

Supplemental cash flow information:
    Cash paid for interest                                                $ 1,086    $    265
                                                                          =======    ========

    Non-cash transactions:
        Acquisition of equipment under lease obligations                  $    --    $    199
                                                                          =======    ========
</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 also has an interest in Laguna Gold Company
("Laguna").  All significant intercompany balances and
transactions have been eliminated from the consolidated financial
statements.

    At June 30, 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 exceeded 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").  Effective May 1, 1999, the
borrowing base under the Revolver was reduced from $30,000,000 to
the current $28,000,000.  At May 1, 1999, a borrowing base
<PAGE>
deficiency existed under the Facility.  The Bank temporarily
waived the borrowing base deficiency until the borrowing base is
next redetermined.  At August 13, 1999, the borrowing base is
under review.  At June 30, 1999, the amount outstanding under the
Revolver was $27,340,000, leaving the amount available under the
Revolver at $660,000.

    At June 30, 1999, the Company was not in compliance with the
debt service ratio covenant of the Facility.  Effective March 31,
1999, the Bank waived any non-compliance with the debt service
ratio that may occur during calendar year 1999, and amended the
minimum net equity covenant in such a way that management
believes that, based on its current projections, the Company will
be in compliance with the covenant for all reporting periods in
1999.  At June 30, 1999, the Company was not in compliance with
the current ratio covenant of the Facility.  The Bank has waived
any non-compliance with the current ratio covenant for the second
quarter of 1999.  The Company is currently holding discussions
with a different lender regarding a new credit facility (see Note 5).

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

-    The minimum net equity covenant was redefined.

-    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 fees of $55,000.

    During the first six months of 1999, the Company repaid
$650,000 of the Equipment Loan, leaving an outstanding balance of
$5,633,000 at June 30, 1999.

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
<PAGE>
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 consolidated statements of operations for the three and
six months ended June 30, 1999 and 1998 reflect only basic
earnings per share because the Company was in a loss position for
all periods presented and all common stock equivalents were anti-
dilutive.

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.  The implementation of SFAS No.
133 has been deferred and is now effective for fiscal years
beginning after June 15, 2000, 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. SUBSEQUENT EVENT

    In July 1999, the Company executed a letter of intent with a
potential new lender.  The proposed credit agreement provides for
a loan amount sufficient to repay the Company's current senior
secured indebtedness and Equipment Loan and, together with cash flow
from operations, to fund the Company's drilling program through 2000.
Although the terms of the new credit agreement have not been finalized,
the Company's management believes that the financing will be obtained
upon satisfactory terms and expects to close the transaction before
the end of third quarter 1999.
<PAGE>
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 June 30, 1999
and December 31, 1998, results of operations for the three and
six months ended June 30, 1999 and 1998 and cash flows for the
six months ended June 30, 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.

                       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 oil and gas capital expenditures for the first half
of 1999 were $3.9 million and its net cash used by operations was
$1.4 million.  In addition, the Company repaid $650,000 in
principal on the Equipment Loan during the six months.  These
expenditures were funded primarily through borrowings under the
Company's revolving line of credit (described below).  The
Company closed the second quarter 1999 with a working capital
deficit of $2.1 million and long-term debt of $31.8 million.

In the first half of 1999, three successful wells were drilled
and completed.  In addition, the Company recompleted three wells.
The Company currently has an $8 million capital budget for the
remainder of 1999, and plans to drill or recomplete approximately
24 wells during the remainder of 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.  Effective May 1, 1999, the borrowing base under the
<PAGE>
Revolver was reduced from $30,000,000 to the current $28,000,000.
At May 1, 1999, a borrowing base deficiency existed under the
Facility.  The Bank temporarily waived the borrowing base
deficiency until the borrowing base is next redetermined.  At
August 13, 1999, the borrowing base is under review.  At June 30,
1999, the amount outstanding under the Revolver was $27,340,000,
leaving the amount available under the Revolver at $660,000.

At June 30, 1999, the Company was not in compliance with the debt
service ratio covenant of the Facility.  Effective March 31,
1999, the Bank waived any non-compliance with the debt service
ratio that may occur during calendar year 1999, and amended the
minimum net equity covenant in such a way that management
believes that, based on its current projections, the Company will
be in compliance with the covenant for all reporting periods in
1999.  At June 30, 1999, the Company was not in compliance with
the current ratio covenant of the Facility.  The Bank has waived
any non-compliance with the current ratio covenant for second
quarter 1999.  At August 13, 1999, borrowings under the Revolver
were fully drawn.

In July 1999, the Company executed a letter of intent with a
potential new lender.  The proposed credit agreement provides for
a loan amount sufficient to repay the Company's current senior
secured indebtedness and Equipment Loan and, together with cash flow
from operations, to fund the Company's drilling program through 2000.
Although the terms of the new credit agreement have not been finalized,
the Company's management believes that the financing will be obtained
upon satisfactory terms and expects to close the transaction before
the end of third quarter 1999.

                            Results of Operations


<TABLE>
<CAPTION>
                                                   For the Three Months    For the Six Months
                                                      Ended June 30,         Ended June 30,
(In thousands, except per unit data)                 1999        1998        1999      1998
<S>                                                <C>         <C>         <C>       <C>
Results of Operations from Oil and Gas Producing Activities:
    Oil and gas sales                              $ 2,913     $ 2,913     $ 5,933   $ 5,982
    Production tax and marketing expense               411         427         856       906
    Lease operating expense                            764         769       1,664     1,453
    Depletion                                          941       1,124       2,152     2,224
    Depreciation                                        68          34         135        64

Net Production:
    Oil (MBbl)                                          44          61          91       129
    Natural gas (MMcf)                               1,303       1,160       2,989     2,246
    Mmcfe                                            1,567       1,526       3,535     3,020

Average Sales Price Realized (1):
    Oil (per Bbl)                                   $15.89      $13.21      $13.64    $13.77
    Natural gas (per Mcf)                             1.70        1.82        1.57      1.87
    Per Mcfe                                          1.86        1.91        1.68      1.98

Average Cost Data (per Mcfe):
    Production tax and marketing expense             $0.26       $0.28       $0.24     $0.30
    Lease operating expense                           0.49        0.50        0.47      0.48
    Depletion                                         0.60        0.74        0.61      0.74
    Depreciation                                      0.04        0.02        0.04      0.02
_________________
1) Includes effects of hedging.
</TABLE>
<PAGE>

Three and Six Months Ended June 30, 1999 Compared to June 30, 1998

Revenues.  Total revenues increased slightly to $2,940,000 for
the three months ended June 30, 1999 from $2,927,000 for the
three months ended June 30, 1998 and decreased slightly to
$5,978,000 for the six months ended June 30, 1999 from $6,052,000
for the six months ended June 30, 1998.  Oil and gas sales stayed
at $2,913,000 for the 1999 quarter compared to the 1998 quarter.
Higher oil prices and higher gas production were offset by lower
gas prices and lower oil production.  In May 1999, the Company's
gas wells in the San Juan Basin were shut-in for 15 days because
of pipeline maintenance by a major natural gas pipeline company.
Oil and gas sales decreased 1% to $5,933,000 for the six months
ended June 30, 1999 from $5,982,000 for the six months ended
June 30, 1998, due to lower gas prices and oil production in the
1999 period.  Average oil prices realized per barrel increased
20% to $15.89 in second quarter 1999 from $13.21 for second
quarter 1998; however, average gas prices realized per Mcf
decreased 7% to $1.70 in the 1999 quarter from $1.82 in the 1998
quarter.  Average oil prices realized per barrel decreased 1% to
$13.64 for the six months ended June 30, 1999, from $13.77 for
the comparable 1998 period, and average gas prices realized per
Mcf decreased 16% to $1.57 in the 1999 period from $1.87 for the
six months ended June 30, 1998.  Oil production decreased 28% to
44,000 barrels in the 1999 quarter from 61,000 barrels in the
1998 quarter and gas production increased 12% to 1,303,000 Mcf in
the 1999 quarter from 1,160,000 in the 1998 quarter.   Oil
production decreased 29%, to 91,000 barrels for the six months
ended June 30, 1999 from 129,000 barrels for the six months ended
June 30, 1998, and gas production increased 33% to 2,989,000 Mcf
for the six months ended June 30, 1999 from 2,246,000 Mcf for the
same period a year ago.  The gas production increases are due to
the Company's successful drilling program in 1998 and 1999.

Oil and Gas Production Expenses.  Oil and gas production
expenses, including production tax and marketing expenses,
decreased 2% to $1,175,000 for the three months ended June 30,
1999 from $1,196,000 for the 1998 quarter, and increased 7% to
$2,520,000 for the six months ended June 30, 1999 from $2,359,000
for the comparable 1998 period, due to new wells coming on line
as a result of the 1998 and 1999 drilling programs.  Per Mcfe,
oil and gas production expense, including production tax and
marketing expense, decreased $0.03, or 4%, to $0.75 for the 1999
quarter from $0.78 for the 1998 quarter.  Production tax and
marketing expense per Mcfe decreased $0.02, or 7%, for the 1999
quarter from the 1998 quarter because of lower gas prices.  LOE
per Mcfe decreased slightly to $0.49 in the 1999 quarter from
$0.50 for the 1998 quarter.  Oil and gas production expenses per
Mcfe decreased $0.07, or 9%, to $0.71 for the six months ended
June 30, 1999 from $0.78 for the six months ended June 30, 1998.
Production tax and marketing expense decreased $0.06 per Mcfe, or
20%, during the six months ended June 30, 1999 as a result of
lower oil and gas prices.  LOE per Mcfe for the six months ended
June 30, 1999 decreased slightly to $0.47 from $0.48 for the 1998
period.
<PAGE>
Depreciation, Depletion and Amortization.  Depreciation,
depletion and amortization for the three months ended June 30,
1999 decreased 11% to $1,051,000 from $1,181,000 in the 1998
quarter, and increased 1% to $2,357,000 for the six months ended
June 30, 1999 from $2,334,000 for the six months ended June 30,
1998.  Depletion per Mcfe decreased 19% to $0.60 for the fiscal
1999 quarter from $0.74 for the fiscal 1998 quarter and decreased
18% to $0.61 for the six months ended June 30, 1999 from $0.74
for the six months ended June 30, 1998, 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 the quarter ended June 30, 1999
increased 9% to $582,000 from $533,000 in the 1998 quarter, and
increased 8% to $1,282,000 for the six months ended June 30, 1999
from $1,189,000 for the same period in 1998 due to the hiring of
additional personnel because of expanded operations.

Interest and Other Expenses.  Interest and other expenses for the
quarter ended June 30, 1999 increased 247% to $604,000 from
$174,000 for the 1998 quarter and increased 311% to $1,162,000
for the six months ended June 30, 1999 from $283,000 for the six
months ended June 30, 1998.  The increase was primarily due to a
higher outstanding debt balance in the 1999 periods.

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 benefit in the
consolidated statements of operations for the three and six
months ended June 30, 1999 and 1998.

Net Loss.  Net loss for the three months ended June 30, 1999
increased 201% to $472,000 from $157,000 for the three months
ended June 30, 1998, and increased 1,088% to $1,343,000 for the
six months ended June 30, 1999 from $113,000 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") and realized accretion of $3,000 in each of the
three month periods ended June 30, 1999 and 1998.  The Company
paid dividends of $54,000 and realized accretion of $6,000 during
each of the six month periods ended June 30, 1999 and 1998.  Net
loss attributable to common shareholders for the three months
ended June 30, 1999 increased 168% to $502,000 from $187,000 for
the three months ended June 30, 1998, and increased 711% to
$1,403,000 for the six months ended June 30, 1999 from $173,000
for the six months ended June 30, 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 $183,000 and $32,000 in second
quarter 1999 and 1998, respectively, and recognized hedging gains
of $379,000 and $112,000 in the first six months of 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 third 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 June 30, 1999 have been
minimal.
<PAGE>
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 third 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.

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
<PAGE>
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 in the Company's 1998 Form 10-K.


PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits:

     None.

(b)  Reports on Form 8-K:

     During second quarter 1999, the Company filed Periodic
Reports of Form 8-K dated May 14, 1999, June 10, 1999 and
July 19, 1999.  Each Report related to an "Item 5. Other
Events" matter.

<PAGE>
                                    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:  August 13, 1999              By:  /s/ Roy K. Ross
                                         Roy K. Ross
                                         Executive Vice President


Date:  August 13, 1999              By:  /s/ Alfonso R. Lopez
                                         Alfonso R. Lopez
                                         Vice President, Finance/
                                         Corporate Treasurer