<PAGE>

                   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 January 31, 1998.
                                    ----------------

[ ]  Transition report pursuant to Section 13 or 15(d)
     of the Securities Exchange Act of 1934

Commission file number 1-4003
                       ------


                               Dresser Industries, Inc.               
               -------------------------------------------------------
                (Exact name of registrant as specified in its charter)


           Delaware                                             C 75-0813641   
-------------------------------                              -------------------
(State or other jurisdiction of                                (IRS Employer 
incorporation or organization)                               Identification No.)

P.O. Box 718
2001 Ross                                                     75221 (P.O. Box)
Dallas, Texas                                                 75201     
-------------------------------                               ------------------
(Address of principal executive                                  (Zip Code)   
offices)

          Registrant's telephone number, including area code - 214-740-6000

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, and (2) has been subject to such filing requirements
for the past 90 days.  Yes   X  .  No      .
                           -----      -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

           CLASS                                OUTSTANDING AT FEBRUARY 28, 1998
----------------------------                    --------------------------------
Common Stock, par value $.25                               175,489,466

<PAGE>

                                        INDEX

                                                                    PAGE 
                                                                   NUMBER
                                                                   ------ 
Part I.   Financial Information

     Management's Representation                                         3
     Condensed Consolidated Statements of Earnings 
          for the three months ended January 31, 1998 
          and 1997                                                       4
     Condensed Consolidated Balance Sheets
          as of January 31, 1998 and October 31, 1997                    5
     Condensed Consolidated Statements of Cash Flows
          for the three months ended January 31, 1998 and 1997           6
     Notes to Condensed Consolidated Financial Statements             7-11
     Management's Discussion and Analysis of Financial                
          Condition and Results of Operations                        12-15 

Part II. Other Information
           
     Legal Procedures                                                   16
     Changes in Securities                                              16
     Exhibits and Reports on Form 8-K                                   17

Signature                                                               17

Exhibit Index

     Exhibit 10.1   Agreement and Plan of Merger dated February 25, 1998 by and
                    between Halliburton Company, Halliburton, N.C., Inc. and
                    Dresser Industries, Inc.

     Exhibit 10.2   Stock Option Agreement, dated February 25, 1998 by and
                    between Dresser Industries, Inc. and Halliburton Company

     Exhibit 10.3   Form of Severance Agreement

     Exhibit 10.4   Agreement between Dresser Industries, Inc. 
                    and George H. Juetten and amendment

     Exhibit 10.5   Form of Waiver of Rights Under the Dresser Industries, Inc.
                    Long-Term Incentive and Retention Plan

     Exhibit 27     Financial Data Schedule


                                       2

<PAGE>

                             MANAGEMENT'S REPRESENTATION


The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations.  The Company believes that the disclosures are adequate to make the
information presented not misleading.  These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements, the notes to consolidated financial statements and management's
discussion and analysis included in the Company's 1997 Annual Report on 
Form 10-K.

In the opinion of the Company, all adjustments have been included that were
necessary to present fairly the financial position of Dresser Industries, Inc.
and subsidiaries as of January 31, 1998 and October 31, 1997, the results of
operations for the three months ended January 31, 1998 and 1997, and cash flows
for the three months ended January 31, 1998 and 1997. These adjustments
consisted of normal recurring adjustments.  The results of operations for such
interim periods do not necessarily indicate the results for the full year.




                                       3
<PAGE>
                                       

                  DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                     (In Millions Except per Share Data)

<TABLE>
                                                          Three Months Ended
                                                              January 31,      
                                                       -------------------------
                                                          1998           1997   
                                                       ----------     ----------
                                                             (Unaudited)
<S>                                                    <C>            <C>
Revenues . . . . . . . . . . . . . . . . . . . . .     $ 1,736.2      $ 1,704.5 
Cost of revenues . . . . . . . . . . . . . . . . .      (1,338.1)      (1,342.7)
                                                       ----------     ----------
     Gross earnings. . . . . . . . . . . . . . . .         398.1          361.8 

Selling, engineering, administrative 
     and general expenses. . . . . . . . . . . . .        (263.2)        (258.0)

Special charges  . . . . . . . . . . . . . . . . .         (30.2)            - 

Other income (deductions)
     Interest expense, net . . . . . . . . . . . .         (13.7)         (14.8)
     Other, net. . . . . . . . . . . . . . . . . .          (3.4)          (2.2)
                                                       ----------     ----------

     Earnings before items below . . . . . . . . .          87.6           86.8 

Income taxes . . . . . . . . . . . . . . . . . . .         (31.5)         (30.4)

Minority interest. . . . . . . . . . . . . . . . .           6.0           (4.3)
                                                       ----------     ----------

     Net earnings  . . . . . . . . . . . . . . . .     $    62.1      $    52.1 
                                                       ----------     ----------
                                                       ----------     ----------

Basic earnings per common share  . . . . . . . . .     $    0.35     $     0.30 

Diluted earnings per common share. . . . . . . . .     $    0.35     $     0.30 

Cash dividends per common share. . . . . . . . . .     $    0.19     $     0.17 

Basic average common shares 
     outstanding . . . . . . . . . . . . . . . . .         175.4          175.8 

Diluted average common shares
     outstanding . . . . . . . . . . . . . . . . .         176.3          176.7 
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>

                  DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In Millions)

<TABLE>
                                                                      January 31,    October 31,
            ASSETS                                                       1998            1997
                                                                      -----------    -----------
<S>                                                                   <C>            <C>
Current Asset                                                         (Unaudited)
     Cash and cash equivalents . . . . . . . . . . . . . . . . .       $  113.8       $  162.8 
     Notes and accounts receivable, net. . . . . . . . . . . . .        1,147.2        1,181.8 
     Inventories, net. . . . . . . . . . . . . . . . . . . . . .          990.7          972.3 
     Deferred income taxes . . . . . . . . . . . . . . . . . . .           96.2           96.0 
     Other current assets. . . . . . . . . . . . . . . . . . . .           79.2           58.7 
                                                                       --------       --------
          Total Current Assets . . . . . . . . . . . . . . . . .        2,427.1        2,471.6 

Investments in and receivables from 
     unconsolidated affiliates . . . . . . . . . . . . . . . . .          317.3          320.3 
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . .          805.8          803.7 
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . .          182.3          181.7 
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .          218.1          217.8 

Property, plant and equipment - at cost. . . . . . . . . . . . .        2,671.8        2,658.0 
Accumulated depreciation and amortization. . . . . . . . . . . .        1,570.6        1,554.3 
                                                                       --------       --------
          Net Property . . . . . . . . . . . . . . . . . . . . .        1,101.2        1,103.7 
                                                                       --------       --------
            Total Assets . . . . . . . . . . . . . . . . . . . .       $5,051.8       $5,098.8 
                                                                       --------       --------
                                                                       --------       --------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
     Short-term debt   . . . . . . . . . . . . . . . . . . . . .       $   86.7       $   48.1 
     Accounts payable. . . . . . . . . . . . . . . . . . . . . .          579.9          566.0 
     Contract advances . . . . . . . . . . . . . . . . . . . . .          369.2          334.6 
     Accrued compensation and benefits . . . . . . . . . . . . .          218.4          253.8 
     Income taxes. . . . . . . . . . . . . . . . . . . . . . . .          109.1          122.1 
     Other current liabilities . . . . . . . . . . . . . . . . .          379.9          362.8 
                                                                       --------       --------
          Total Current Liabilities. . . . . . . . . . . . . . .        1,743.2        1,687.4 

Employee retirement and postemployment 
     benefit obligations . . . . . . . . . . . . . . . . . . . .          616.5          622.3 
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .          757.9          758.0 
Deferred compensation, insurance 
     reserves and other liabilities. . . . . . . . . . . . . . .          147.5          155.2 
Minority interest  . . . . . . . . . . . . . . . . . . . . . . .          111.5          143.7 

Shareholders' Equity
     Common shares . . . . . . . . . . . . . . . . . . . . . . .           46.2           46.2 
     Capital in excess of par value. . . . . . . . . . . . . . .          451.4          452.8 
     Retained earnings . . . . . . . . . . . . . . . . . . . . .        1,611.2        1,615.8 
     Cumulative translation adjustments. . . . . . . . . . . . .         (140.8)        (112.2)
     Pension liability adjustment. . . . . . . . . . . . . . . .           (3.9)          (3.9)
                                                                       --------       --------
           . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,964.1        1,998.7 
     Less treasury shares, at cost . . . . . . . . . . . . . . .          288.9          266.5 
                                                                       --------       --------
          Total Shareholders' Equity . . . . . . . . . . . . . .        1,675.2        1,732.2 
                                                                       --------       --------
          Total Liabilities and 
            Shareholders' Equity . . . . . . . . . . . . . . . .       $5,051.8       $5,098.8 
                                                                       --------       --------
                                                                       --------       --------
Actual common shares outstanding . . . . . . . . . . . . . . . .          175.5          175.6 
</TABLE>


    See accompanying Notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>
                                       
                   DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In Millions)

<TABLE>
                                                                         Three Months Ended
                                                                            January 31,
                                                                       ----------------------
                                                                        1998            1997
                                                                       -------        -------
                                                                           (Unaudited)     
<S>                                                                    <C>           <C>
Cash flows from operating activities:
   Net earnings. . . . . . . . . . . . . . . . . . . . . . . . .       $  62.1       $  52.1 
   Adjustments to reconcile net earnings 
    to cash flow: 
     Depreciation and amortization . . . . . . . . . . . . . . .          60.9          62.4                
     Equity earnings from 
      unconsolidated affiliates. . . . . . . . . . . . . . . . .         (23.9)        (11.0)              
     Minority interest . . . . . . . . . . . . . . . . . . . . .          (6.0)          4.3 
     Contract advances . . . . . . . . . . . . . . . . . . . . .          38.3         (14.2)
     Changes in working capital. . . . . . . . . . . . . . . . .        (100.9)        (91.0)
     Other - net . . . . . . . . . . . . . . . . . . . . . . . .           4.2          (3.2)
                                                                       -------        -------

       Net cash provided (used) by 
         operating activities. . . . . . . . . . . . . . . . . .          34.7           (.6)
                                                                       -------        -------

Cash flows from investing activities:
   Capital expenditures. . . . . . . . . . . . . . . . . . . . .         (59.4)         (49.6)
   Business acquisitions . . . . . . . . . . . . . . . . . . . .          (7.0)          (3.6)
   Proceeds from sales of assets . . . . . . . . . . . . . . . .           1.1             .5 
                                                                       -------        -------
     Net cash used by investing 
      activities . . . . . . . . . . . . . . . . . . . . . . . .         (65.3)         (52.7)
                                                                       -------        -------

Cash flows from financing activities:
   Dividends paid. . . . . . . . . . . . . . . . . . . . . . . .         (33.4)         (29.9)
   Purchases of common shares for 
    Treasury . . . . . . . . . . . . . . . . . . . . . . . . . .         (39.8)            - 
   Issuance of common shares . . . . . . . . . . . . . . . . . .          16.6            6.8 
   Increase in short-term debt . . . . . . . . . . . . . . . . .          38.5           37.7 
   Increase(decrease)in long-term debt . . . . . . . . . . . . .            -             4.4 
                                                                       -------        -------

     Net cash (used) provided by 
      financing activities . . . . . . . . . . . . . . . . . . .         (18.1)          19.0 
                                                                       -------        -------

Effect of translation adjustments on 
     cash  . . . . . . . . . . . . . . . . . . . . . . . . . . .           (.3)           1.7 
                                                                       -------        -------

Net decrease in cash and cash 
     equivalents . . . . . . . . . . . . . . . . . . . . . . . .         (49.0)         (32.6)

Cash and cash equivalents, 
     beginning of period . . . . . . . . . . . . . . . . . . . .         162.8          232.4 
                                                                       -------        -------

Cash and cash equivalents, 
     end of period . . . . . . . . . . . . . . . . . . . . . . .       $ 113.8        $ 199.8 
                                                                       -------        -------
                                                                       -------        -------
</TABLE>

    See accompanying Notes to Condensed Consolidated Financial Statements.

                                       6
<PAGE>

                     DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
               NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               JANUARY 31, 1998
                                  (UNAUDITED)

NOTE A - INFORMATION BY INDUSTRY SEGMENT (IN MILLIONS)             

<TABLE>
                                                                        Three Months Ended
                                                                            January 31,
                                                                      ----------------------
                                                                        1998          1997
                                                                      --------      --------
<S>                                                                   <C>           <C>
REVENUES

     Petroleum Products and Services . . . . . . . . . . . . . .      $  645.3      $  602.7 

     Engineering Services. . . . . . . . . . . . . . . . . . . .         500.1         457.2 

     Energy Equipment  . . . . . . . . . . . . . . . . . . . . .         595.2         648.4 

     Eliminations. . . . . . . . . . . . . . . . . . . . . . . .          (4.4)         (3.8)
                                                                      --------      --------
          Total revenues . . . . . . . . . . . . . . . . . . . .      $1,736.2      $1,704.5 
                                                                      --------      --------
                                                                      --------      --------

OPERATING PROFIT 

     Petroleum Products and Services . . . . . . . . . . . . . .      $   93.6      $   72.0 

     Engineering Services. . . . . . . . . . . . . . . . . . . .          31.9          26.4 

     Energy Equipment. . . . . . . . . . . . . . . . . . . . . .          37.8          31.7 
                                                                      --------      --------

          Total segment operating profit . . . . . . . . . . . .         163.3         130.1 

Amortization of acquisition intangibles. . . . . . . . . . . . .          (7.9)         (7.6)
General corporate expenses . . . . . . . . . . . . . . . . . . .         (23.9)        (20.8)
Nonrecurring items . . . . . . . . . . . . . . . . . . . . . . .         (30.2)           - 
Interest expense, net  . . . . . . . . . . . . . . . . . . . . .         (13.7)        (14.9)
                                                                      --------      --------
     Earnings before taxes and minority
          interest . . . . . . . . . . . . . . . . . . . . . . .      $   87.6      $   86.8 
                                                                      --------      --------
                                                                      --------      --------
</TABLE>

                                       7
<PAGE>

                  DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               JANUARY 31, 1998
                                 (UNAUDITED)


NOTE B - UNCONSOLIDATED AFFILIATED COMPANIES                       

The Company has several investments in less than majority owned affiliates.  
A summary of the impact of these investments on the condensed consolidated 
financial statements follows (in millions):

<TABLE>
                                                   Three Months Ended 
                                                       January 31,     
                                                  --------------------
                                                   1998          1997
                                                  ------        ------
<S>                                               <C>           <C>
  Share of earnings of unconsolidated 
    affiliates
       Ingersoll-Dresser Pump (49%
          owned) . . . . . . . . . .              $  9.4        $  9.2 
       Bredero-Shaw (50% owned). . .                12.6            - 
       Other affiliates. . . . . . .                 1.9           1.8 
                                                  ------        ------
                                                  $ 23.9        $ 11.0
                                                  ------        ------
                                                  ------        ------
</TABLE>


<TABLE>
                                                January 31,     October 31,
                                                   1998            1997    
                                                -----------     -----------
<S>                                             <C>             <C>
  Investments in and receivables 
    from unconsolidated affiliates
       Ingersoll-Dresser Pump (49%
          owned) . . . . . . . . . .              $ 134.7         $ 133.2 
       Bredero-Shaw (50% owned). . .                136.7           139.0 
       Other affiliates. . . . . . .                 45.9            48.1 
                                                  -------         -------
                                                  $ 317.3         $ 320.3 
                                                  -------         -------
                                                  -------         -------
</TABLE>

NOTE C - INVENTORIES                                               

The determination of inventory values and cost of sales under the LIFO method 
for interim financial results is based on management's estimates of expected 
year-end inventories.

Inventories include the following (in millions):

<TABLE>
                                                 January 31,      October 31,
                                                    1998             1997    
                                                 -----------      -----------
  <S>                                            <C>              <C>
  Finished products and work in
    process. . . . . . . . . . . . .               $ 774.4         $ 783.2 
  Raw materials and supplies . . . .                 216.3           189.1 
                                                   -------         -------
                                                   $ 990.7         $ 972.3 
                                                   -------         -------
                                                   -------         -------
</TABLE>

                                       8
<PAGE>


                      DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JANUARY 31, 1998 
                                     (UNAUDITED)

NOTE D - DIVIDENDS

On January 15, 1998 the Company declared a quarterly dividend of $.19 per share
of common stock payable on March 20, 1998 to shareholders of record on March 2,
1998.

NOTE E - LITIGATION AND CONTINGENCIES

The Company is involved in certain legal actions and claims arising in the
ordinary course of business.  See Note J - Commitments and Contingencies - in
the Company's 1997 Annual Report on Form 10-K for a complete discussion of these
matters.  A discussion of significant changes subsequent to October 31, 1997
follows.

ASBESTOSIS LITIGATION

The Company has approximately 70,200 pending claims at January 31, 1998, with
approximately 6,200 new claims filed and approximately 2,000 claims resolved
during the first quarter of the fiscal year. Certain settlements previously
reported, covering approximately 24,600 claims, are carried as pending until
releases are signed.

Management recognizes the uncertainties of litigation and the possibility that
one or more adverse rulings could materially impact operating results.  However,
based upon the nature of and management's understanding of the facts and
circumstances which gave rise to such actions and claims, management believes
that such litigation and claims will be resolved without material effect on the
Company's financial position or results of operations.


                                       9

<PAGE>

                      DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   JANUARY 31, 1998
                                     (UNAUDITED)

NOTE F - BAROID FINANCIAL INFORMATION

Dresser Industries, Inc. (Dresser) merged with Baroid Corporation (Baroid) on
January 21, 1994.  Baroid has ceased filing periodic reports with the Securities
and Exchange Commission.  Baroid's 8% Senior Notes (the Notes) remain 
outstanding and are fully guaranteed by the Company.  As long as the Notes 
remain outstanding, summarized financial information of Baroid is required to
be presented as follows (in millions):

<TABLE>
                                        January 31,     October 31,
                                           1998            1997   
                                        -----------     ----------- 
     <S>                                <C>             <C>
     Baroid Corporation
       Current assets . . . . . . . . .     $1,004.9        $  919.9 
       Noncurrent assets. . . . . . . .        452.1           447.4 
                                            --------        -------- 
          Total . . . . . . . . . . . .     $1,457.0        $1,367.3 
                                            --------        -------- 
                                            --------        -------- 
       Current liabilities. . . . . . .     $  559.5        $  441.8 
       Noncurrent liabilities . . . . .        242.4           300.9 
       Shareholders' equity . . . . . .        655.1           624.6 
                                            --------        -------- 
          Total . . . . . . . . . . . .     $1,457.0        $1,367.3 
                                            --------        -------- 
                                            --------        -------- 
<CAPTION>
                                             Three Months Ended  
                                                 January 31,      
                                        --------------------------- 
                                           1998            1997   
                                        -----------     ----------- 

       Revenues                             $ 525.4       $ 429.9 
                                            -------       ------- 
                                            -------       ------- 
       Gross earnings                       $ 149.8       $ 122.9 
                                            -------       ------- 
                                            -------       ------- 
       Earnings from operations             $  72.7       $  52.7 
       Other income (deductions)                (.6)         (5.0)
                                            -------       ------- 
       Earnings before taxes
         and minority interests                72.1          47.7 
       Income taxes                           (26.0)        (16.7)
       Minority interest                        (.3)           .1 
                                            -------       ------- 
       Net earnings                         $  45.8       $  31.1 
                                            -------       ------- 
                                            -------       ------- 
</TABLE>


                                      10

<PAGE>

                      DRESSER INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   JANUARY 31, 1998
                                     (UNAUDITED)

NOTE G - SUBSEQUENT EVENT

On February 26, 1998 the Company and Halliburton Company ("Halliburton")
announced that they had entered into a definitive merger agreement in which
Halliburton N.C., Inc., a wholly-owned subsidiary of Halliburton, will be merged
into the Company with the shareholders of the Company receiving one newly issued
share of Halliburton common stock for each common share of the Company.  The
transaction will be accounted for as a pooling of interests and is expected to
be treated as tax-free to shareholders of the Company's stock.  The transaction
is expected to be completed in the fall of 1998 and is subject to regulatory
approvals in the United States, Europe and several other countries, shareholder
approvals and customary closing conditions.

















                                      11

<PAGE>

                         MANAGEMENT'S DISCUSSION AND ANALYSIS
                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


CONSOLIDATED RESULTS OF OPERATIONS - THREE MONTHS ENDED JANUARY 31, 1998
COMPARED TO 1997

Excluding nonrecurring charges, diluted earnings per share of $.42 increased 
40% from the $.30 earned a year ago.  The Company incurred $12.0 million or 
$.07 per share of nonrecurring charges (after tax and minority interest).  
These charges relate to the Company's two joint ventures with Ingersoll-Rand 
(Dresser-Rand and Ingersoll-Dresser Pump) and include charges related to 
capacity reductions and other efficiency measures.  Including these charges, 
diluted earnings per share of $.35 was 17% higher than last year's quarter.  
Diluted earnings per share and basic earnings per share were essentially the 
same.

Revenues for the quarter increased 2% to $1.74 billion, and operating profit
improved 26% to $163.3 million.  Excluding the impact of the Bredero-Shaw joint
venture, which was fully consolidated last year but is now reported on the
equity method, revenues increased 8% and operating profit increased 32%. 
Backlog at the end of the quarter was a record $6.2 billion, 32% higher than a
year ago.  Of that total, Engineering Services was $4.0 billion, Energy
Equipment was $1.7 billion and Petroleum Products and Services was $.5 billion. 
The improvement reflects the higher level of global energy activities as well as
the success of new market initiatives.  See Industry Segment Analysis for
discussion by Operation.

Minority interest for the current quarter was a $6.0 million credit due to the
49% share of the Dresser-Rand joint venture's loss relating to the nonrecurring
charges.

INDUSTRY SEGMENT ANALYSIS - THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO 1997

See Note A to Condensed Consolidated Financial Statements for details of
financial information by Industry Segment. 


                                      12

<PAGE>

                         MANAGEMENT'S DISCUSSION AND ANALYSIS
                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


PETROLEUM PRODUCTS AND SERVICES SEGMENT

Revenues rose 7% in the quarter to $645.3 million, and operating profit
increased 30% to $93.6 million.  Operating margins were also substantially
higher.  The gains reflected a 14% increase in worldwide drilling activity, as
well as improving product mix, market share and product and service pricing for
the Company's subsurface drilling and production operations.  As of the
beginning of the quarter, the method of reporting the results of the 
Bredero-Shaw joint venture changed from a full consolidation to the equity 
method. Adjusting for this change, revenues and operating profit on a 
comparable basis increased 27% and 44%, respectively.

Baroid Drilling Fluids, Sperry-Sun and Security DBS all had improved
performances over last year attributed to (i) volume increases at Baroid in both
domestic and international operations; (ii) higher volume and margin
improvements at Security DBS; and (iii) volume increases at Sperry-Sun in both
the directional drilling and formation evaluation product lines.

Earnings of the Bredero-Shaw joint venture were well above the prior year,
reflecting high activity levels in the North Sea, Canada and Far East markets.
SubSea had revenues that were substantially higher than prior year and current
quarter earnings compared to a loss last year.  Wellstream sales and earnings
were up substantially over last year, with strong performance in the North Sea
and Brazil. Wellstream U.K. facility began production in December, 1997.

ENGINEERING SERVICES SEGMENT (M.W. KELLOGG OPERATIONS)

M. W. Kellogg revenues of $500.1 million are up 9% over last year on higher
activity from LNG projects in the Far East and Africa. Earnings of $31.9 million
are up 21% due to the higher activity levels and from good performance on
several projects nearing completion.  Backlog of $4.0 billion at January 31,
1998 was up 54% from a year ago and 9% from October 31, 1997.

ENERGY EQUIPMENT SEGMENT

Segment operating profit increased 19% to $37.8 million despite an 8% decline 
in revenues to $595.2 million.  The revenue decline was principally at 
Dresser-Rand.  Margin improvements at several major units, including Wayne, 
Energy Valve and Valve and Controls contributed to the earnings gain. 


                                      13

<PAGE>

                         MANAGEMENT'S DISCUSSION AND ANALYSIS
                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ENERGY EQUIPMENT SEGMENT (CONTINUED)

Excluding nonrecurring restructuring charges, Dresser-Rand was slightly
profitable in the first quarter of 1998 and essentially level with last year.
However, current year revenues were down 24% from last year, primarily due to
(i) several large low-margin complete machine orders completed in the first
quarter last year and (ii) lower aftermarket sales.  The earnings impact of the
lower volume was offset by cost reduction measures implemented last year. 
Excluding nonrecurring restructuring charges, earnings from IDP were level with
1997.

Successful product introductions at the Wayne fuel dispenser business resulted
in a substantial increase in earnings over last year, with growth in the U.S.,
Europe and South America.

Energy Valve earnings were up from last year on higher revenues, with the
favorable variances coming from cost improvements, better product mix and
increased U.S. volume.  Although revenues were down, Valve and Controls earnings
improved over last year as a result of improved margins and lower operating
costs.

Waukesha earnings were down slightly from last year on a slight increase in
sales caused by a combination of inflationary cost increases, weak natural gas
prices and aggressive discounting by competitors.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Operating activities generated positive cash flow of $34.7 million during the
three months ended January 31, 1998 compared with a $.6 million use of cash a
year ago.  The change between years was essentially due to an increase in M.W.
Kellogg's contract advances in 1998 versus a decrease last year.  Significant
expenditures during the three months included $59.4 million for capital
expenditures, $39.8 million for common share purchases and $33.4 million for
dividends.

Total debt was $844.6 million as of January 31, 1998 compared with $806.1
million at October 31, 1997.  Total debt was 34% of total book capitalization as
of January 31, 1998 compared with 32% as of October 31, 1997.  Net debt to net
book capitalization was 30% at January 31, 1998 compared with 27% at October 31,
1997.


                                      14

<PAGE>

                         MANAGEMENT'S DISCUSSION AND ANALYSIS
                   OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


LEGAL AND ENVIRONMENTAL MATTERS

The Company is currently involved in a number of lawsuits and also has been
identified as a potentially responsible party in a number of Superfund sites. 
Note E to Condensed Consolidated Financial Statements includes significant
changes since October 31, 1997.

FORWARD-LOOKING INFORMATION

In accordance with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company notes that the statements in this
Form 10-Q and elsewhere, which are forward-looking and which provide other than
historical information, involve risks and uncertainties that may impact the
Company's results of operations.  These forward-looking statements include,
among others, statements concerning the Company's general business strategies,
financing decisions, corporate structure, backlog, operating trends, industry
trends, cost reduction strategies and their results, expectations for funding
capital expenditures and operations in future periods.  The Company also
continues to face many risks and uncertainties including: litigation,
environmental laws, operations in high risk countries, technological and
structural changes in the industries served by the Company, changes in the price
of oil and natural gas, changes in capital spending by customers in the
hydrocarbon industry for exploration, development, production, processing and
refining and pipeline delivery networks.  The risks and uncertainties inherent
in these forward-looking statements could cause actual results to differ
materially from those expressed in or implied by these statements.



                                      15
<PAGE>

                             PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          In connection with the previously announced merger between the Company
          and Halliburton Company, the following two lawsuits have been filed:
          GRILL V. DRESSER INDUSTRIES, INC. (Del. Ct. Chancery, C.A. No. 16208)
          and WRIGG V. BRADFORD (Del. Ct. Chancery, C.A. No. 16209).  The
          Company and its directors have been named as defendants in these two
          lawsuits filed in late February in the Delaware Court of Chancery.

          The lawsuits each purport to be a class action filed on behalf of the
          Company's stockholders and allege that the consideration to be paid to
          stockholders in the proposed merger between the Company and
          Halliburton Co. is inadequate and does not reflect the true value of
          the Company.  The complaints also each allege that the directors of
          the Company have breached their fiduciary duties in approving the
          merger.  The GRILL action further alleges self-dealing on the part of
          the individual defendants and asserts that the directors are obliged
          to conduct an auction to assure that stockholders receive maximum
          realizable value for their shares.  The actions each seek preliminary
          and permanent injunctive relief as well as damages.

          The Company believes that the lawsuits are without merit and intends
          to defend the lawsuits vigorously.
                                           
ITEM 2.   CHANGES IN SECURITIES

          (c)  In January 1998, the Company issued 1,616 shares of Common Stock
               ($.25 par value) to one officer of the Company in connection with
               exercises of stock options.  Under the terms of the Company's
               1989 Restricted Incentive Stock Plan (Plan), one restricted share
               will be issued for every five shares of the related stock option
               exercised.  Stock issued pursuant to the Plan are not registered.
               No consideration for the unregistered shares was exchanged.

               In issuing the above securities, the Company relied on the
               exemption from the registration and prospectus delivery
               requirements of the Securities Act of 1933 (the Securities Act)
               provided by Section 4(2) of the Securities Act.


                                      16

<PAGE>

                             PART II.  OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits.

               Exhibit 10.1   Agreement and Plan of Merger dated February 25,
                              1998 by and between Halliburton Company,
                              Halliburton, N.C., Inc. and Dresser Industries,
                              Inc.

               Exhibit 10.2   Stock Option Agreement, dated February 25, 1998 by
                              and between Dresser Industries, Inc. and
                              Halliburton Company.

               Exhibit 10.3   Form of Severance Agreement.

               Exhibit 10.4   Agreement between Dresser Industries, Inc. and
                              George H. Juetten and amendment.

               Exhibit 10.5   Form of Waiver of Rights Under the Dresser
                              Industries, Inc. Long-Term Incentive and Retention
                              Plan.

               Exhibit 27     Financial Data Schedule.

          (b)  A report on Form 8-K dated February 26, 1998 was filed for Item
               1.


                                      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.

                                       DRESSER INDUSTRIES, INC.



                                       By:  /s/ Kenneth J. Kotara
                                            Kenneth J. Kotara
                                            Controller


Dated: March 13,1998


                                      17

<PAGE>

                                    EXHIBIT INDEX


EXHIBIT   DESCRIPTION
-------   ----------- 

10.1      Agreement and Plan of Merger dated February 25, 1998 by and between
          Halliburton Company, Halliburton, N.C., Inc. and Dresser Industries,
          Inc.

10.2      Stock Option Agreement, dated February 25, 1998 by and between Dresser
          Industries, Inc. and Halliburton Company.

10.3      Form of Severance Agreement.

10.4      Agreement between Dresser Industries, Inc.and George H. Juetten and
          amendment.

10.5      Form of Waiver of Rights Under the Dresser Industries, Inc. Long-Term
          Incentive and Retention Plan.

27        Financial Data Schedule.  (Pursuant to Item 601(c)(iv) of Regulation
          S-K, the Financial Data Schedule is not deemed to be "filed" for
          purposes of Section 11 of the Securities Act of 1933, as amended, or
          Section 18 of the Securities Exchange Act of 1934, as amended.)