UNITED STATES
                                                                  
                                                                  
                       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, 1995

          TRANSITION  REPORT PURSUANT TO SECTION  13 or 15(d)  OF THE SECURITIES
          EXCHANGE ACT OF 1934

                          Commission File Number 0-9579
                                                    
                             -----------------------

                           HALLWOOD ENERGY CORPORATION
             (Exact name of registrant as specified in its charter)
                                                    
                            ------------------------


                Texas                          75-1319083
    (State or other jurisdiction of           (I.R.S. Employer
    incorporation or organization)         Identification Number)

   4582 SOUTH ULSTER STREET PARKWAY
              SUITE 1700
           DENVER, COLORADO                         80237
 (Address of principal executive                 (Zip Code)
 offices)

       Registrant's telephone number, including area code:  (303) 850-7373

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 for  such shorter  period that  the registrant was
required  to  file such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  Yes  x    No   

Shares of Common Stock outstanding at November 10, 1995                  436,126






<TABLE>
<CAPTION>
                           HALLWOOD ENERGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                          (In thousands except Shares)


                                         September 30,  December 31,
                                             1995           1994    
                                          (Unaudited)<PAGE>
 <S>                                      <C>          <C>       
 CURRENT ASSETS                             $  119       $    668
   Cash and cash equivalents
   Accounts receivable:                        684            526
     Affiliates                                 16              7
     Trade                                   1,996          1,760
   Current assets of affiliate               ------        -------
             Total                           2,815          2,961
                                             ------        -------

 PROPERTY, PLANT AND EQUIPMENT, at cost
   Oil and gas properties (full 
     cost method):
       Proved mineral interests            112,835        111,951
       Unproved mineral interests -                              
         domestic                               27             46
       Unproved mineral interests -                              
         foreign                                              288
   Other property and equipment              3,759          3,745
                                            -------        -------

             Total                         116,621        116,030
   Less accumulated depreciation,
     depletion, amortization and
     property impairment                  (106,758)      (105,461)
                                            -------        -------

             Net Property, Plant and
               Equipment                     9,863         10,569
                                            -------        -------
 OTHER ASSETS
   Investment in common stock of
     parent (at fair value)                  2,713          1,680
   Investment in bonds of parent                                 
     (at cost adjusted for                                       
     amortization of discount)                              1,352
   Noncurrent assets of affiliate            1,559          1,704
                                            -------        -------

             Total                           4,272          4,736
                                            -------        -------

 TOTAL ASSETS                             $ 16,950       $ 18,266
                                            =======        =======
</TABLE>

<TABLE>
<CAPTION>
                           HALLWOOD ENERGY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                          (In thousands except Shares)
                                   (Continued)

                                         September 30,  December 31,
                                             1995           1994    
                                          (Unaudited)<PAGE>
 <S>                                     <C>          <C>       
 CURRENT LIABILITIES
   Accounts payable and accrued
     liabilities                          $   149       $    154
   Current portion of long-term                                 
     debt                                     300
   Current liabilities of
     affiliate                              2,636          2,879
                                            ------       --------
                                            3,085          3,033
                                            ------        -------

 NONCURRENT LIABILITIES
   Long-term debt                             900
   Long-term obligations of affiliate       5,350          3,917
                                            ------         ------

                                            6,250          3,917
                                            ------         ------
       Total Liabilities                    9,335          6,950
                                            ------         ------

 STOCKHOLDERS' EQUITY
   Series D convertible,
     cumulative, redeemable preferred
     stock, $.01
     par value; 65,000 shares
     authorized; 18,864 shares issued
     as of 1994 with a liquidation
     preference of $1,154                                      1
   Series E convertible preferred 
     stock; $.01 stated value; 450,000
     shares authorized; 356,000 shares
     issued with a liquidation
     preference of $.01 per share               4              4
   Common stock, $.50 par value,
     80,000,000 shares authorized;
     842,121 shares issued                    421            421
   Capital in excess of par value          54,598         58,248
   Accumulated deficit                    (42,295)       (42,290)
   Unrealized loss on investment
     in common stock of parent               (321)          (896)
   Less cost of treasury stock of
     405,995 and 347,995 common shares
     in 1995 and 1994, respectively and
     7,500 Series D preferred
     shares in 1994                        (4,792)        (4,172)
                                           -------        -------
       Total Stockholders' Equity           7,615         11,316
                                           -------        -------

 TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY                                  $ 16,950       $ 18,266
                                           =======        =======
</TABLE>
 <TABLE>
<CAPTION>
                           HALLWOOD ENERGY CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
                      (In thousands except per Share data)


                                           For the Three Months      
                                           Ended September 30,       <PAGE>
                                           1995           1994       
 <S>
 REVENUES:                               <C>            <C>      
   Oil revenue                             $   623        $   587
   Gas revenue                                 842            876
                                             ------         ------

                                             1,465          1,463
                                             ------         ------

 EXPENSES:
   Production operating                        417            383
   General and administrative                  384            186
   Depreciation, depletion and
     amortization                              456            481
   Interest                                    140             86
                                             ------         ------
                                             1,397          1,136
                                             ------         ------

 OTHER INCOME                                  133             78
                                             ------         ------
 NET INCOME                                    201            405

 PREFERRED STOCK DIVIDENDS                                     18
                                             ------         ------

 NET INCOME FOR COMMON STOCKHOLDERS        $   201        $   387
                                             ======         ======
 NET INCOME PER COMMON SHARE               $   .45        $   .46    
                                             ======         ======

 WEIGHTED AVERAGE COMMON SHARES                447            850
                                             ======         ======
</TABLE>
<TABLE>
<CAPTION>
                           HALLWOOD ENERGY CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
                      (In thousands except per Share data)

                                            For the Nine Months      
                                            Ended September 30,      

                                           1995           1994       

 <S>
 REVENUES:                               <C>            <C>      
   Oil revenue                             $ 1,660        $ 1,548
   Gas revenue                               2,332          2,977
                                             ------         ------
                                             3,992          4,525
                                             ------         ------

 EXPENSES:
   Production operating                      1,059          1,244
   General and administrative                  884            567
   Depreciation, depletion and
     amortization                            1,297          1,421
   Impairment of oil and gas
     properties                                464
   Interest                                    344            278
                                             ------         ------<PAGE>
                                             4,048          3,510
                                             ------         ------
 OTHER INCOME (EXPENSE):
   Impairment of investment in
     parent                                                (3,249)
   Miscellaneous income                         51            256
                                             ------         ------

                                                51         (2,993)
                                             ------         ------

 NET LOSS                                       (5)        (1,978)
 PREFERRED STOCK DIVIDENDS                                     54
                                             ------         ------

 NET LOSS FOR COMMON STOCKHOLDERS          $    (5)       $(2,032)
                                             ======         ======
 NET LOSS PER COMMON SHARE                 $  (.01)       $ (2.39)   
                                             ======         ======

 WEIGHTED AVERAGE COMMON SHARES                440            850
                                             ======         ======
</TABLE>

<TABLE>
<CAPTION>
                           HALLWOOD ENERGY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)


                                             For the Nine Months
                                               Ended September 30,  
                                             1995           1994     

 <S>                                      <C>           <C>      
 OPERATING ACTIVITIES:
   Net loss                                $    (5)       $(1,978)
   Adjustments to reconcile net
     loss to net cash used in
     operating activities:
       Depreciation, depletion,
         amortization and property
         impairment                          1,761          1,421
       Impairment of investment in
         parent                                             3,249
       Undistributed earnings of
         affiliate                          (2,208)        (2,848)
       Amortization of bond discount           (24)           (73)
                                             ------         ------
           Cash used in operations
             before working capital
             changes                          (476)          (229)

   Changes in operating assets and
     liabilities provided (used) cash
     net of noncash activity:
       Receivables from affiliates            (158)            56
       Receivables - trade                      (9)            (1)
       Accounts payable and accrued
         liabilities                            (5)          (167) 
                                             ------         ------<PAGE>
           Net cash used in
             operating activities             (648)          (341)
                                             ------         ------
 INVESTING ACTIVITIES:
   Additions to property                       (51)          (117)
   Proceeds from property sales                                 4
   Distributions received from
     affiliate                               2,301          2,201
   Proceeds from sale of investment in
     bonds of parent                         1,376
   Purchase of common stock of                                   
     parent                                   (458)
   Other investing activities                                   8
                                             ------        -------


         Net cash provided by                3,168          2,096
           investing activities              ------        ------

 FINANCING ACTIVITIES:
   Dividends paid                           (2,038)        (2,774)
   Repurchase of Common Stock               (1,189)
   Repurchase of Series D preferred
     shares                                 (1,042)
   Proceeds from long-term debt              1,200               
                                            ------         ------
         Net cash used in
           financing activities             (3,069)        (2,774)
                                            ------         ------

 DECREASE IN CASH AND CASH EQUIVALENTS        (549)        (1,019)
 CASH AND CASH EQUIVALENTS:

 BEGINNING OF PERIOD                           668          1,128
                                            ------         ------

 END OF PERIOD                            $    119        $   109
                                            =======         ======
</TABLE>
                           HALLWOOD ENERGY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 1 - GENERAL

Hallwood  Energy Corporation ("HEC") or  the ("Company") is  a Texas corporation
engaged in  the development, production  and sale of  oil and gas.   HEC  is the
general partner  of Hallwood Energy  Partners, L. P. ("HEP"),  a publicly traded
Delaware limited partnership.   HEP  commenced operations in  August 1985  after
completing an  exchange offer in which  HEP acquired oil and  gas properties and
operations from HEC, 24  oil and gas limited partnerships  of which HEC was  the
general partner and  certain working  interest owners that  had participated  in
wells with HEC and the limited partnerships.  HEC now conducts substantially all
of  its operations  through HEP.   The  activities of HEP  are conducted  by HEP
Operating Partners, L. P. ("HEPO") and EDP Operating, Ltd. ("EDPO").

HEC's  wholly-owned  subsidiaries include  Hallwood  Operating Company  ("HOC"),
former operator for  HEC's properties,  and Hallwood  G. P.,  Inc., the  general
partner  of  EDPO.    Unless  otherwise  indicated,  all  references to  HEC  in
connection with the ownership, exploration, development or production of oil and
gas  properties refer  to HEC and  its proportionate  ownership of  HEP.   As of
September  30,  1995,  HEC's parent  company,  The  Hallwood Group  Incorporated
("Hallwood  Group"),  owns  75.3% of  the  outstanding  shares  of HEC  assuming
conversion of the Series E Preferred Stock into common stock.  The interim
financial data are unaudited; however, in the opinion of management, the interim
data include all  adjustments, consisting only  of normal recurring adjustments,
necessary  for a fair presentation  of the results  for the interimperiods. 
These financial  statements should  be read  in conjunction with  the financial
statements and accompanying footnotes included  in HEC's December 31,1994 Annual
Report on Form 10-K.  

ACCOUNTING POLICIES 

INVESTMENT IN HEP

HEC's general  partner interest in  HEP entitles it to  a share of  net revenues
derived  from  HEP's   properties  ranging  from  2%  to   25%,  and  HEC  holds
approximately 6.5% and  7.3% of HEP's limited partner units  as of September 30,
1995 and December 31, 1994, respectively.  HEC accounts for its ownership of HEP
using  the proportionate consolidation method  of accounting whereby HEC records
its proportionate share of each of HEP's revenues  and expenses, current assets,
current liabilities, noncurrent assets,  long-term obligations and fixed assets.
HEP  owns approximately  40% of its  affiliate, Hallwood  Consolidated Resources
Corporation ("HCRC"), which HEP accounts for under the equity method.

INVESTMENT IN PARENT

Hallwood Group, a  public company traded  on the New  York Stock Exchange,  is a
diversified  holding  company   with  interests  in   oil  and  gas,   specialty
restaurants,  real  estate,  textile products  and  hotels.    During 1991,  HEC
purchased  $2,149,000  aggregate  principal  amount of  Hallwood  Group's  13.5%
Subordinated Debentures  due July  31,  2009 ("Subordinated  Debentures").   The
purchase price was  $1,429,000 including  $99,000 of accrued  interest.   During
1992, HEC received an additional $290,000 face value of bonds as payment in lieu
of interest.   HEC exchanged the original  issue Subordinated Debentures  for 7%
Collateralized Subordinated Debentures (the "New Collateralized  Debentures") on
March 2, 1993.  Interest  on the New Collateralized Debentures accrued  from the
date of  the exchange at  the rate of 7%  per annum, payable  quarterly in cash.
Additionally, during the first

quarter  of  1993,  Hallwood  Group  purchased  for  $380,000  the  Subordinated
Debentures that had been  issued to HEC in 1991  and 1992 as payment in  lieu of
interest.  On March 29, 1995, Hallwood Group  repurchased the New Collateralized
Debentures for $1,376,000 plus accrued interest through the purchase date.

On October 23,  1995, the board of directors of Hallwood  Group authorized it to
purchase up to  an additional 40,000  shares of the  common stock  of HEC.   The
purchases may be made on the open market or in private transactions from time to
time.  The board has  authorized the purchases to enable HEC to  be consolidated
with Hallwood Group for  federal income tax  purposes.  Subsequent to  September
30, through  November 7, 1995, Hallwood Group has purchased an additional 25,186
common shares of HEC.

From 1990  through the  third quarter  of 1995, HEC  acquired 264,709  shares of
Hallwood Group's  Common  Stock (adjusted  for  the one-for-four  reverse  stock
split), or approximately 17% of the outstanding shares of Hallwood Group, on the
open market at an average cost of $11.64 per share.  HEC is holding the stock of
Hallwood Group  as a long-term investment and has classified it as an available-
for-sale security.  


NOTE 2 - DIVIDENDS

HEC paid a dividend of  $1.00 per share of  common stock and Series E  Preferred
Stock on March  3, 1995.  On August  15, 1995, HEC paid a dividend  of $1.50 per
share of common  stock and Series E Preferred  Stock.  On October 31,  1995, HEC
declared a dividend  of $.80 per  share of common  stock and Series  E Preferred
Stock to all  shareholders of record on  November 11, 1995, payable  on or about
November 15, 1995.  The Board of Directors will determine future dividends, if 
any, after consideration of the cash flow and working capital needs of HEC.


NOTE 3 - REPURCHASES OF SERIES D PREFERRED STOCK AND COMMON STOCK

During the first quarter  of 1995, HEC repurchased 1,500 shares  of its Series D
Preferred  Stock for  $90.88 per  share.   During  April 1995,  in two  separate
transactions,  HEC  repurchased  the remaining  9,864  shares  of  its Series  D
Preferred Stock at $91.80 per share.

In July 1995, HEC purchased 58,000 shares of its common stock from an individual
in a privately negotiated transaction for a total cost of $1,189,000.  


NOTE 4 - DEBT

During the second quarter of  1995, the Company entered into a  credit agreement
with a bank  that has committed  to loan the  Company up to  $1,500,000.  As  of
September 30, 1995, the Company has borrowed $1,200,000 against the credit line.
Borrowings against the credit line  bear interest at the bank's prime  rate plus
2%  (10.75% at September 30, 1995).   Interest is payable monthly, and quarterly
principal payments  of $75,000 commence  December 1, 1995.   The credit  line is
secured  by the HEP  Units owned  by the Company.   The  credit agreement limits
aggregate dividends paid by the Company to $3.50 per share each fiscal year.


NOTE 5 - LITIGATION SETTLEMENT OF AFFILIATE

In September  1995, the court order approving the settlement in the class action
lawsuit styled In re Hallwood Energy Partners, L.P. Securities Litigation became
final.  As part of the settlement on September  28, 1995, HEP paid $2,870,000 in
cash  (which  was  recorded  as  expense  in the  December  31,  1994  financial
statements) and issued 1,158,696 HEP Units with a market value  of $5,330,000 to
a  nominee of  the class.    These Units  were subsequently  purchased from  the
nominee  by HCRC  for  $5,330,000  in cash.    Other defendants  contributed  an
additional  $900,000  in cash  to  the  settlement.   The  net  proceeds of  the
settlement will be distributed to a class consisting of former owners of limited
partner interests in Energy Development Partners, Ltd. who exchanged their Units
in that entity for units of HEP  pursuant to the merger of EDP and HEP on May 9,
1990.


NOTE 6 - LEGAL PROCEEDINGS

In October  1995, the parties agreed  in principle to settle  the lawsuit styled
Stutes v. Hallwood Petroleum, Inc. et al.  The plaintiff in the  lawsuit alleged
that as  a result of  exposure to benzene in  the petroleum he  was hauling from
various  wells owned  and  operated  by HEP  and  approximately  80 other  named
defendants, he contracted myelogenous leukemia.  The majority  of HEP's share of
the settlement  liability  is covered  by  HEP's liability  insurance  carriers.
HEP's share of the amounts not covered by insurance is not material.

In June 1995, an additional  lawsuit was filed against HEP in  the 15th Judicial
District Court, Lafayette Parish, Louisiana, Docket No. 952601-3B, styled Lamson
Petroleum Corporation v. Hallwood Petroleum, Inc.  et al.  The plaintiffs in the
lawsuit claim  that they  have an additional  valid lease  covering streets  and
roads in the units of the A. L. Boudreaux #1 well, G. S. Boudreaux #1 well, Mary
Guilbeau  #1  well and  Duhon  #1 well  and are  entitled  to a  portion  of the
production  from the  wells.   HEP  has not  yet determined  the  amount of  its
interest in the  properties which is at issue.  At  this time, HEP believes that
the  difference  between  the amount  already  in  escrow  as  a result  of  the
litigation and  the amount of any  liability that may result  upon resolution of
this matter will not be material.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

FINANCING

During the second  quarter of 1995, the Company entered  into a credit agreement
with  a bank that  has committed to  loan the Company  up to $1,500,000.   As of
September 30, 1995, the Company has borrowed $1,200,000 against the credit line.
Borrowings against the  credit line bear interest at the  bank's prime rate plus
2% (10.75% at September 30,  1995).  Interest is payable monthly,  and quarterly
principal payments of  $75,000 commence December  1, 1995.   The credit line  is
secured by the  HEP Units owned  by the  Company.  The  credit agreement  limits
aggregate dividends paid by the Company to $3.50 per share each fiscal year.

Included in the accompanying balance  sheet at September 30, 1995 are  long-term
obligations of  affiliate of $5,350,000.  This  amount represents HEC's share of
HEP's outstanding  long-term obligations which consist  primarily of $24,700,000
borrowed under a  line of credit and $12,857,000 borrowed  under a note purchase
agreement.  HEP's borrowings are secured by a first lien on approximately 80% in
value of HEP's oil and gas properties.

PROPERTY SALES AND CAPITAL BUDGET

During the third quarter of 1995,  HEC purchased 15,275 shares of Hallwood Group
at an average cost of $10.49 per share.   

During the first  quarter of 1995, HEC repurchased 1,500 shares  of its Series D
Preferred Stock for $90.88 per share.  During the second quarter of 1995, in two
separate  transactions, HEC repurchased the remaining 9,864 shares of its Series
D Preferred Stock at $91.80 per share.

On  July 17,  1995, HEC  purchased  58,000 shares  of its  common stock  from an
individual   in  a  privately  negotiated  transaction  for  a  total  price  of
$1,189,000.

CAPITAL PROJECTS

During 1995,  the Company participated in drilling  five wells in Winkler County
and five wells in Reagan and Irion Counties,  Texas, through its interest in the
Saxon Drilling Venture (the "Drilling Venture").  The Company's share of capital
costs  on these  wells was  $225,000 though  September 30,  1995.   The Drilling
Venture is  a joint  venture between  the Company and  HEP which  was originally
established  in 1985.   Under  the terms  of the  Drilling Venture,  the Company
receives an 18.75% interest  in revenues and  costs relating to production  from
certain  wells drilled  in West  Texas,  in return  for payment  of 7.5%  of the
drilling costs.   The Reagan County wells were drilled utilizing the third party
financing described below.    Therefore, HEC has recorded  its share of debt  on
these  wells  ($134,000  at September  30,  1995),  under  the caption  "Current
Liabilities of Affiliate," in the accompanying balance sheet as the debt matures
in August 1996. 

HEC  had  no  other  material  property  acquisitions,   sales,  exploration  or
development  activity during  the third  quarter of  1995.   A summary  of HEP's
significant property transactions follows.

For 1995, HEP has a capital budget of $15,800,000 which includes $11,600,000 for
direct  expenditures  and  $4,200,000  for  indirect  expenditures  through  its
investment  in Hallwood  Spraberry Drilling  Company,  L.L.C. ("HSD").   Through
September  30,   1995,  HEP   incurred  approximately  $13,602,000   in  capital
expenditures  which  includes  $8,557,000  directly  and  $5,045,000  indirectly
through  HSD.  A description of significant exploration and development projects
to date in 1995 follows.

HSD  has incurred  approximately  $5,045,000,  net  to HEP's  interest,  through
September  30, 1995 for  31 drilled wells,  12 recompletions and  acquisition of
drilling  leases on the Rocker  "b" Ranch in Reagan County,  Texas.  HSD has its
own line of  credit of $4,000,000, net  to HEP's interest,  provided by a  third
party lender.   Based on the initial results of  the drilling and recompletions,
HEP spent approximately $815,000 on  additional acreage in the Rocker "b"  Ranch
during  the second  and third  quarters, HSD  has expanded  its project  area to
include certain sections of this acreage.  The line of credit is secured only by
certain leases held by  HSD on the Rocker "b" Ranch and is otherwise nonrecourse
to  HEP.   HSD  has made  a  request to  increase the  size  of the  facility to
$6,400,000, net to HEP's interest.  HSD has funded the drilling to date from the
line  of credit as  well as from  cash flow generated  from drilling activities.
HSD has had up to  three drilling rigs under contract in this area  in 1995, but
plans to scale back to one rig by the end of the year, in order to allow time to
evaluate the results  of the  drilling to date  before moving forward.   The  43
wells drilled or  recompleted since January 1, 1995, have  increased HEP's share
of production on the Rocker  "b" properties by 522 barrels of oil equivalent per
day.  HSD has drilled  five locations and recompleted three wells  subsequent to
September 30.  These wells, together with the 43 wells drilled through September
30, have  added a  total of 1.1  million equivalent barrels  of reserves  net to
HEP's interest, of  which 640,000 were booked as proved  undeveloped reserves at
December  31,  1994.   HSD  has  plans to  drill  two  additional locations  and
recomplete twelve wells prior to year end.

HEP  expended  approximately  $520,000 in  late  August  and  September for  the
drilling of five  exploratory wells in  Reagan County, Texas.   Two of the  five
wells are currently producing at an average  rate of 46 barrels of oil per  day,
one  well was unsuccessful  and is scheduled for  recompletion and the remaining
two are  presently being evaluated.   Two additional wells are  being drilled on
this acreage at the present  time.  The performance of these initial seven wells
will determine future development plans in this area.

HEP  spent approximately  $790,000 on  six successful  drilling wells  and seven
successful recompletions  in the West  Texas Kermit area  where HEP  has working
interests ranging  from 25%  to 80%.   Gross production  on these  properties is
currently averaging 596  barrels of oil  per day and  870 mcf  per day.   Future
projects  in the  area include  secondary recovery  in the  San Andres  and Holt
Formations.   It is  anticipated that  four more wells  will be  recompleted and
eight  more wells will  be drilled in the  fourth quarter of  1995 and the first
quarter of 1996.   Waterflood potential  for this area  is being considered  for
1996.

A workover  in the second  quarter of 1995  on the  G.S. Boudreaux in  Lafayette
Parish, Louisiana, increased gross production rates from  17,500 mcf per day and
370 barrels of condensate per day to current rates of 22,000 mcf per day and 450
barrels of condensate per day.  HEP has a 24% working interest in the well.  The
A.L. Boudreaux in the same area has increased from 20,000 mcf per day  to 26,000
mcf per day.  HEP has  a 26% interest in the  A.L. Boudreaux.  HEP purchased  an
additional interest in the G. S. Boudreaux for $225,000  in the third quarter of
1995. 

In  Richland  County,  Montana, the  Lewis  #1  was  recompleted uphole  to  the
Interlake Formation in the first quarter of 1995, and the well continues to flow
240 barrels of oil  per day and 135 mcf per day.  HEP has incurred approximately
$100,000 for the  drilling of a Red  River/Interlake development well which  was
spud in early September and is presently being completed.  HEP also has plans to
reenter a temporarily abandoned wellbore  in this area in the fourth  quarter of
1995 and  recomplete it  to the  Interlake formation.    HEP has  a 22%  working
interest in the area.

In the first nine  months of 1995, HEP spent approximately $335,000 on a program
started in late 1994 in  New Mexico.  This  amount includes nine successful  and
one unsuccessful non-operated development  wells in Lea County, New  Mexico, and
four  successful operated recompletions in Eddy County, New Mexico, having gross
combined initial  flowing potentials of 3,350  barrels of oil per  day and 4,200
mcf per day.  HEP has  a 5% working interest in the Lea County  field and 25% to
50% interests in the Eddy County wells.  

In May  1995, HEP completed an  exploratory well in Hot  Springs County, Wyoming
for approximately $120,000.  The well is flowing 620 barrels of oil per day.   A
delineation well was drilled in  August and completed in September at a  cost of
$70,000 and is currently flowing 650 barrels of  oil per day.  A third well on a
separate but  nearby structure  was spud  October  10th and  is presently  being
completed.    It is  anticipated that  up to  nine  additional locations  may be
available.  HEP has a 15% working interest in this field.
 
In the first nine months of 1995,  HEP completed two additional coal bed methane
development wells  and acquired working interests  in the San Juan  Basin of New
Mexico, for a total of approximately $215,000.  The two new wells have increased
gross production in this  area by 700 mcf per day.  HEP has working interests in
these new wells of 18% and 25%.

During the  first nine months of  1995, HEP also acquired  additional acreage in
Martin  County, Texas for approximately $90,000 and has acquired interest in two
three-D seismic prospects  in Taylor and Jones  Counties, Texas and  is pursuing
two other three-D projects in this area.   HEP participated in the drilling of a
nonoperated exploratory well in one of the three-D prospects in this area in the
third  quarter.  This well is  flowing 90 barrels of oil  per day and additional
behind pipe reserves  were recorded.   Additional development  drilling on  this
discovery is anticipated in 1996.  HEP has a 12% interest in this area.  HEP has
also  spent approximately $530,000 on two successful development wells in Reagan
County, Texas in  which it has a 90% working interest.  Numerous other projects,
which are individually less significant, are also underway in Montana, Colorado,
North Dakota, Texas and Utah.

DIVIDENDS

HEC paid a dividend  of $1.00 per share of  common stock and Series  E Preferred
Stock on March 3, 1995.   On August 15, 1995, HEC  paid a dividend of $1.50  per
share of common  stock and Series E  Preferred Stock.  On October  31, 1995, HEC
declared  a dividend of  $.80 per share  of common stock and  Series E Preferred
Stock  to all shareholders of  record on November 11, 1995,  payable on or about
November 15, 1995.

The   Board  of  Directors  will  determine  future  dividends,  if  any,  after
consideration of the cash flow and the working capital needs of HEC.

HEP DISTRIBUTIONS

HEP  declared a  limited partner  distribution of  $.20 per  Unit and  a general
partner  distribution of  $615,000 for  the  third quarter  of 1995,  payable on
November  15,  1995.   The  total  of the  distributions  receivable  by HEC  is
$746,000, which has been accrued in receivables from affiliates at September 30,
1995.

RESULTS OF OPERATIONS

The following  table is presented to  contrast HEC's average oil  and gas prices
and production.    Significant fluctuations  are discussed  in the  accompanying
narrative.

<TABLE>

                              OIL AND GAS PRICES AND PRODUCTION
                               (In thousands except for price)
                   For the Three Months Ended    For the Nine Months Ended
                         September 30,                 September 30,

                      1995           1994           1995           1994 <PAGE>
     <CAPTION>     Oil     Gas    Oil     Gas    Oil     Gas    Oil    Gas 
                  (bbl)   (mcf)  (bbl)   (mcf)  (bbl)   (mcf)  (bbl)  (mcf)
     <S>         <C>     <C>    <C>     <C>   <C>      <C>   <C>     <C>
     Average
       price     $17.80   $1.88 $17.26   $2.00 $17.11   $1.75 $16.29  $2.19

     Production     35      449    34      438    97    1,329    95  1,360 
</TABLE>

QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1994

OIL REVENUE

Oil revenue increased $36,000 during the third quarter of 1995  as compared with
the third  quarter of 1994.   This increase is  comprised of an  increase in oil
production from 34,000 barrels in  1994 to 35,000 barrels in 1995  combined with
an increase in oil prices from $17.26 per barrel in 1994 to $17.80 per barrel in
1995.   The  increase in  oil  production is  due to  increased production  from
developmental  drilling  projects  in  West  Texas  partially offset  by  normal
production declines.

GAS REVENUE

Gas revenue decreased $34,000 during the  third quarter of 1995 as compared with
the third quarter of  1994  primarily as a  result of a decrease in  average gas
prices from $2.00  per mcf in  1994 to $1.88  in 1995.   The price decrease  was
partially  offset by  an increase  in  production from  438,000 mcf  in 1994  to
449,000  mcf in  1995.   The  increase in  gas production  is  primarily due  to
increased  production  from  developmental   drilling  projects  in  West  Texas
partially offset by normal production declines and allowable production limits.

PRODUCTION OPERATING EXPENSE

Production  operating expense increased $34,000 during the third quarter of 1995
as compared with the  third quarter of 1994.   The increase is primarily  due to
increased maintenance activity during the third quarter of 1995. 

GENERAL AND ADMINISTRATIVE EXPENSE

General  and   administrative  expense   includes  costs  incurred   for  direct
administrative  services  such as  legal and  audit fees,  as well  as allocated
internal  overhead incurred by Hallwood Petroleum, Inc. ("HPI"), an affiliate of
HEC, which manages and operates certain oil and gas properties on behalf of HEC,
HEP  and their  affiliates.   These costs  increased  $198,000 during  the third
quarter of  1995 as  compared to  the third  quarter of  1994, primarily  due to
increased insurance premiums as well as increased allocated internal overhead.

DEPRECIATION, DEPLETION AND AMORTIZATION 

Depreciation, depletion  and amortization  expense decreased $25,000  during the
third quarter of 1995 as compared with  the third quarter of 1994.  The decrease
is primarily due to lower capitalized costs in 1995. 

INTEREST EXPENSE

Interest expense increased $54,000  during the third quarter of 1995 as compared
with the third quarter of 1994 as a result of HEC's borrowings under its line of
credit during the third quarter of 1995.

OTHER INCOME 

Other income  consists primarily  of HEC's  direct interest  income, as  well as
HEC's  share  of HEP's  interest income,  facilities  income from  two gathering
systems  in New Mexico, pipeline revenue,  equity in income/(loss)  of affiliate
and  miscellaneous income or expense.  The  increase of $55,000 during the third
quarter of 1995 as compared with the third quarter of 1994 is due to an increase
in HEP's equity in  income of affiliate due to  an increase in the  affiliates's
oil  and gas  revenue.  The  remaining increase  is comprised  of numerous other
items, none of which are individually significant.


INCOME TAX PROVISION

There was no income  tax provision recorded  in either 1995 or  1994 due to  the
existence of net operating loss carryforwards.

FIRST NINE MONTHS 1995 COMPARED TO FIRST NINE MONTHS 1994

The  comparisons for the first nine months of  1995 and the first nine months of
1994  are consistent with those discussed in  the third quarter of 1995 compared
to the third quarter of 1994 except for the following:

OIL REVENUE

Oil revenue  increased $112,000 during the first nine months of 1995 as compared
with the first  nine months of  1994 due to an  increase in oil  production from
95,000 barrels in 1994 to  97,000 barrels in 1995  combined with an increase  in
oil prices  from $16.29 per barrel  in 1994 to $17.11  per barrel in  1995.  The
production  increase is due to  increased production from developmental drilling
projects in West Texas partially offset by normal production declines.

GAS REVENUE

Gas revenue  decreased $645,000 during the first nine months of 1995 as compared
with the same period in 1994 due to  a decrease in gas prices from $2.19 per mcf
in  1994 to $1.75  per mcf in 1995  combined with a  decrease in production from
1,360,000 mcf in  1994 to 1,329,000 mcf in 1995.   The decrease in production is
due to normal production declines and allowable production limits.

PRODUCTION OPERATING EXPENSE

Production  operating expense decreased $185,000 during the first nine months of
1995 as compared to the same period during 1994.   The decrease is primarily due
to general operating cost reductions in West Texas.

IMPAIRMENT OF OIL AND GAS PROPERTIES

Impairment of  oil and  gas properties  represents HEC's pro  rata share  of the
write-off of HEP's Indonesian operations.

IMPAIRMENT OF INVESTMENT IN PARENT

Impairment of  investment in parent of  $3,249,000 during the nine  months ended
September 30, 1994 represents an other  than temporary decline in the fair value
of  the Hallwood Group stock held by HEC.  The impairment, which was recorded at
June 30, 1994, reflects the difference between the market value of  the stock at
June 30, 1994 and HEC's original cost basis.

MISCELLANEOUS INCOME

Miscellaneous income decreased $205,000 during the first nine months of 1995  as
compared  with the same period during 1994.  The decrease is primarily due to an
increase  in HEP's equity in  loss of affiliate due to  an impairment of oil and
gas properties recorded by HEP's affiliate.


PART II -  OTHER INFORMATION<PAGE>
ITEM 1  -  LEGAL PROCEEDINGS

        Reference is made to  Item 8 - Note 11 of Form 10-K for the year ended
        December 31, 1994, Item 1 - Note 4 of  Form 10-Q for the quarter ended
        March  31, 1995, Item 1  - Note 5  of Form 10-Q for  the quarter ended
        June 30, 1995 and Item 1 - Notes 5 and 6 of this Form 10-Q.


ITEM 2  -  CHANGES IN SECURITIES

        None.


ITEM 3  -  DEFAULTS UPON SENIOR SECURITIES

        None.


ITEM 4  -  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None. 


ITEM 5  -  OTHER INFORMATION

        None.


ITEM 6  -  EXHIBITS AND REPORTS ON FORM 8-K

        None.

SIGNATURE

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.


                            HALLWOOD ENERGY CORPORATION



 Date: November 13, 1995    By:   /s/Robert S. Pfeiffer         
                                    Robert S. Pfeiffer, 
                                    Vice President
                                    (Chief Financial Officer)<PAGE>