================================================================================
 
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   ----------


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1996    Commission file number 1-27


                                   TEXACO INC.
           (Exact name of the registrant as specified in its charter)


            Delaware                                             74-1383447
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)


      2000 Westchester Avenue
      White Plains, New York                                      10650
(Address of principal executive offices)                        (Zip Code)



        Registrant's telephone number, including area code (914) 253-4000


                                   ----------

     Texaco Inc. (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.

     As of October 31, 1996, there were outstanding 264,459,840 shares of Texaco
Inc. Common Stock - par value $6.25.

================================================================================
<PAGE>

                         PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                        STATEMENT OF CONSOLIDATED INCOME
         FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
         ---------------------------------------------------------------
                 (Millions of dollars, except per share amounts)

                                                                                             (Unaudited)
                                                                        --------------------------------------------------
                                                                        For the nine months         For the three months
                                                                        ended September 30,          ended September 30,
                                                                        -------------------         --------------------
                                                                         1996          1995(a)        1996         1995(a)
                                                                         ----          -------        ----         -------
<S>                                                                    <C>            <C>           <C>           <C>     
         REVENUES
              Sales and services                                       $31,777        $26,237       $10,901       $  8,621
              Equity in income of affiliates, and income from
                  interest, asset sales and other                          852            903           196            193
                                                                       -------        -------       -------       --------
                                                                        32,629         27,140        11,097          8,814
                                                                       -------        -------       -------       --------
         DEDUCTIONS
              Purchases and other costs                                 24,526         20,062         8,399          6,556
              Operating expenses                                         2,105          2,140           721            713
              Selling, general and administrative expenses               1,205          1,159           406            411
              Maintenance and repairs                                      266            272            88             88
              Exploratory expenses                                         243            180            84             66
              Depreciation, depletion and amortization                   1,068          1,091           364            346
              Interest expense                                             328            365           107            120
              Taxes other than income taxes                                361            361           129            115
              Minority interest                                             50             43            17             13
                                                                       -------        -------       -------       --------
                                                                        30,152         25,673        10,315          8,428
                                                                       -------        -------       -------       --------
         Income from continuing operations before income
              taxes and cumulative effect of accounting change           2,477          1,467           782            386
         Provision for income taxes                                        968            488           348             96
                                                                       -------        -------       -------       --------

         Net income from continuing operations before
              cumulative effect of accounting change                     1,509            979           434            290

         Cumulative effect of accounting change                             -           (121)             -              -

                                                                       -------        -------       -------       --------
         NET INCOME                                                    $ 1,509        $   858       $   434       $    290
                                                                       =======        =======       =======       ========

         Preferred stock dividend requirements                             (43)           (46)          (14)           (15)
                                                                       -------        -------       -------       --------

         Net income available for common stock                         $ 1,466        $   812       $   420       $    275
                                                                       -------        -------       -------       --------

         Per common share (dollars)
              Net income from continuing operations before
                 cumulative effect of accounting change                $  5.62        $  3.60       $  1.61       $   1.06
              Cumulative effect of accounting change                         -           (.47)            -              -
                                                                       -------        -------       -------       --------
              Net income                                               $  5.62        $  3.13       $  1.61       $   1.06
                                                                       =======        =======       =======       ========

              Cash dividends paid                                      $  2.45        $  2.40       $   .85       $    .80

         Average number of common shares outstanding
              for computation of earnings per share
              (thousands)                                              260,725        259,862       260,758        260,087

<FN>
(a)  Previously  reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.  
                       See accompanying notes to consolidated financial statements.
</FN>
</TABLE>


                                      - 1 -

<PAGE>

<TABLE>
<CAPTION>

                                            TEXACO INC. AND SUBSIDIARY COMPANIES
                                                 CONSOLIDATED BALANCE SHEET
                                       AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
                                       ----------------------------------------------
                                                   (Millions of dollars)
                                                                                       September 30,             December 31,
                                                                                           1996                     1995
                                                                                           ----                     ----
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                          <C>                    <C>    
ASSETS
   Current Assets
      Cash and cash equivalents                                                              $   903                $   501
      Short-term investments - at fair value                                                      42                     35
      Accounts and notes receivable, less allowance for doubtful
           accounts of  $36 million in 1996 and $28 million in 1995                            4,019                  4,177
      Inventories                                                                              1,526                  1,357
      Net assets of discontinued operations                                                        -                    164
      Deferred income taxes and other current assets                                             204                    224
                                                                                             -------                -------
           Total current assets                                                                6,694                  6,458

   Investments and Advances                                                                    5,114                  5,278

   Properties, Plant and Equipment - at cost                                                  32,143                 31,492
   Less - accumulated depreciation, depletion and amortization                                19,097                 18,912
                                                                                             -------                -------
      Net properties, plant and equipment                                                     13,046                 12,580

   Deferred Charges                                                                              842                    621
                                                                                             -------                -------

           Total                                                                             $25,696                $24,937
                                                                                             =======                =======
LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
      Short-term debt                                                                        $   584                $   737
      Accounts payable and accrued liabilities                                                 3,711                  3,777
      Estimated income and other taxes                                                         1,024                    692
                                                                                             -------                -------
           Total current liabilities                                                           5,319                  5,206

   Long-Term Debt and Capital Lease Obligations                                                5,044                  5,503
   Deferred Income Taxes                                                                         694                    634
   Employee Retirement Benefits                                                                1,182                  1,138
   Deferred Credits and Other Noncurrent Liabilities                                           2,549                  2,270
   Minority Interest in Subsidiary Companies                                                     672                    667
                                                                                             -------                -------
           Total                                                                              15,460                 15,418
   Stockholders' Equity
      Market Auction Preferred Shares                                                            300                    300
      ESOP Convertible Preferred Stock                                                           479                    495
      Unearned employee compensation and benefit plan trust                                     (403)                  (437)
      Common stock (authorized: 350,000,000 shares, $6.25 par
           value; 274,293,417 shares issued)                                                   1,714                  1,714
      Paid-in capital in excess of par value                                                     651                    655
      Retained earnings                                                                        8,027                  7,186
      Currency translation adjustment                                                            (35)                    61
      Unrealized net gain on investments                                                          43                     62
                                                                                             -------                -------
                                                                                              10,776                 10,036
      Less - Treasury stock, at cost                                                             540                    517
                                                                                             -------                -------
         Total stockholders' equity                                                           10,236                  9,519
                                                                                             -------                -------

           Total                                                                             $25,696                $24,937
                                                                                             =======                =======

<FN>
          See accompanying notes to consolidated financial statements.
</FN>
</TABLE>


                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                                           TEXACO INC. AND SUBSIDIARY COMPANIES
                                       CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
                                   FOR THE NINE  MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                                    (Millions of dollars)
                                                                                                   (Unaudited)
                                                                                                   -----------
                                                                                               For the nine months
                                                                                               ended September 30,
                                                                                               -------------------
                                                                                              1996               1995(a)
                                                                                              ----               -------
<S>                                                                                         <C>                <C>    
OPERATING ACTIVITIES
   Net income                                                                               $1,509             $  858
   Reconciliation to net cash provided by (used in)
      operating activities
         Cumulative effect of accounting change                                                  -                121
         Depreciation, depletion and amortization                                            1,068              1,091
         Deferred income taxes                                                                 108                 71
         Exploratory expenses                                                                  243                180
         Minority interest in net income                                                        50                 43
         Dividends from affiliates, greater than (less than)
            equity in income                                                                   141               (117)
         Gains on asset sales                                                                  (49)              (289)
         Changes in operating working capital                                                   36               (451)
         Other - net                                                                           (55)                53
                                                                                             ------            ------
            Net cash provided by operating activities                                         3,051             1,560

INVESTING ACTIVITIES
   Capital and exploratory expenditures                                                      (2,001)           (1,666)
   Proceeds from sale of discontinued operations, net of
      cash and cash equivalents sold                                                            344                 -
   Proceeds from sales of assets                                                                 99             1,043
   Sale of leasehold interests                                                                  231               214
   Purchases of investment instruments                                                       (1,390)             (959)
   Sales/maturities of investment instruments                                                 1,436               964
   Other - net                                                                                   21                13
                                                                                             ------            ------
            Net cash used in investing activities                                            (1,260)             (391)

FINANCING ACTIVITIES
   Borrowings having original terms in excess
      of three months
         Proceeds                                                                               125                94
         Repayments                                                                            (250)             (287)
   Net decrease in other borrowings                                                            (481)             (301)
   Purchases of common stock                                                                    (59)                -
   Dividends paid to the company's stockholders
      Common                                                                                   (638)             (624)
      Preferred                                                                                 (34)              (36)
   Dividends paid to minority shareholders                                                      (49)              (46)
                                                                                             ------            ------
      Net cash used in financing activities                                                  (1,386)           (1,200)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
   CASH EQUIVALENTS                                                                              (3)              (13)
                                                                                             ------            ------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                402               (44)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                  501               404
                                                                                             ------            ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                   $  903            $  360
                                                                                             ======            ======

<FN>
(a)   Previously reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.

                          See  accompanying  notes to consolidated financial statements.
</FN>
</TABLE>


                                       -3-
<PAGE>

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

Note 1. Change in Accounting Principle
--------------------------------------

During 1995,  Texaco adopted Statement of Financial  Accounting  Standards (SFAS
121),  "Accounting  for the  Impairment of Long-Lived  Assets and for Long-Lived
Assets to Be Disposed Of". Under SFAS 121, assets whose carrying amounts are not
expected to be fully recovered by future use or disposition must be written down
to their fair values.

Adoption of SFAS 121  resulted in a non-cash  after-tax  charge of $639  million
against fourth quarter 1995 earnings. Additionally, in accordance with SFAS 121,
a $121 million after-tax  write-down of non-core domestic  producing  properties
held for sale at January 1, 1995,  previously  recorded in the first  quarter of
1995 in income from  continuing  operations,  was  reclassified  as a cumulative
effect of an accounting change.

Adoption of SFAS 121 by Star Enterprise and the Caltex Group of Companies,  each
owned 50% by Texaco, had no effect on 1995 net income.





Note 2. Discontinued Operations
-------------------------------

On February  29,  1996,  Texaco  completed  the  disposition  of its  operations
classified as  discontinued  operations by completing  the sale of its worldwide
lubricant additives business, which included manufacturing  facilities,  as well
as sales and marketing  offices in various  locations in the U.S. and abroad, to
Ethyl Corporation, a fuel and lubricant additives manufacturer.  Ethyl purchased
this  business  for  $196  million,  comprised  of $136  million  in cash  and a
three-year note of $60 million.

The  results  for  Texaco's  worldwide  lubricant  additives  business  had been
accounted for as discontinued operations and the assets and liabilities had been
classified in the Consolidated Balance Sheet at December 31, 1995 as "Net assets
of discontinued operations."

Revenues for the discontinued  operations  totaled $33 million for the first two
months of 1996,  representing  activities through the sale date, and $57 million
and  $171  million  for the  third  quarter  and  first  nine  months  of  1995,
respectively.

 Discontinued operations had no significant impact on the 1996 and 1995 results.



















                                      - 4 -

<PAGE>

Note 3. Inventories
-------------------

The inventories of Texaco Inc. and consolidated subsidiary companies were as
follows:

<TABLE>
<CAPTION>

                                                                                                 As of
                                                                               --------------------------------------
                                                                               September 30,              December 31,
                                                                                   1996                       1995
                                                                                   ----                       ----
                                                                                (Unaudited)
                                                                                         (Millions of dollars)

<S>                                                                             <C>                         <C>   
     Crude oil                                                                  $  354                      $  294

     Petroleum products and other                                                  972                         866

     Materials and supplies                                                        200                         197
                                                                                ------                      ------

          Total                                                                 $1,526                      $1,357
                                                                                ======                      ======
</TABLE>







Note 4. Contingent Liabilities
------------------------------

Information  relative to commitments  and contingent  liabilities of Texaco Inc.
and  subsidiary  companies  is presented in Notes 15 and 17, pages 57-58 and 60,
respectively, of Texaco Inc.'s 1995 Annual Report to Stockholders.  With respect
to the Internal  Revenue Service (IRS) claims  discussed in Note 17, page 60, of
Texaco  Inc.'s 1995 Annual  Report to  Stockholders,  on October 17,  1996,  the
United States Court of Appeals for the Fifth Circuit  affirmed the 1993 U.S. Tax
Court  decision in the so-called  "Aramco  Advantage"  case and upheld  Texaco's
position in this dispute with the IRS.  Disposition  of the amount  remaining in
the Deposit Fund and interest will be determined  when the IRS has exhausted its
legal options.

In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to the company's contingent liabilities and
commitments,  including lawsuits, claims, guarantees, taxes and regulations, the
aggregate  amount of such  liability in excess of financial  reserves,  together
with  deposits  and  prepayments  made  against  disputed  tax  claims,  is  not
anticipated to be materially important in relation to the consolidated financial
position or results of operations of Texaco Inc. and its subsidiaries.




















                                      - 5 -
<PAGE>

Note 5. Caltex Group of Companies
---------------------------------

Summarized  unaudited  financial  information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron  Corporation,  is presented  below and is
reflected on a 100% Caltex Group basis:

<TABLE>
<CAPTION>

                                                                       For the nine months      For the three months
                                                                       ended September 30,       ended September 30,
                                                                       -------------------      --------------------
                                                                        1996       1995          1996       1995
                                                                        ----       ----          ----       ----
                                                                                    (Millions of dollars)

<S>                                                                  <C>         <C>            <C>         <C>   
                  Gross revenues                                     $13,365     $11,603        $4,205      $3,304

                  Income before income taxes                         $ 1,945     $ 1,034        $  221      $  202

                  Net income                                         $ 1,082     $   667        $   93      $   87

</TABLE>


On April 2, 1996, Caltex Petroleum Corporation  ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum  Refining  Company,  Limited to its partner
Nippon Oil Company for approximately $2 billion.  Earnings relating to this sale
of some $630 million was recorded by Caltex in the second quarter of 1996.

Net income for the first nine months of 1995  included a first  quarter net gain
for U.S.  financial  reporting of $171 million relating to the sale of a portion
of land and air utility  rights by a Caltex  affiliate  in Japan  required for a
public project.



                              * * * * * * * * * * *



In the  preparation of preliminary  and unaudited  financial  statements for the
nine-month and three-month  periods ended September 30, 1996 and 1995,  Texaco's
accounting policies have been applied on a basis consistent with the application
of such  policies in  Texaco's  financial  statements  issued in its 1995 Annual
Report  to  Stockholders.   In  the  opinion  of  Texaco,  all  adjustments  and
disclosures  necessary  to present  fairly the  results of  operations  for such
periods have been made. These adjustments are of a normal recurring nature.  The
information  is subject to year-end  audit by  independent  public  accountants.
Texaco makes no forecasts  or  representations  with respect to the level of net
income for the year 1996.




















                                      - 6 -

<PAGE>

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



RESULTS OF OPERATIONS
---------------------

Total  worldwide  net income for Texaco Inc. and  subsidiary  companies  for the
third  quarter of 1996 was $434  million,  or $1.61 per share,  as compared with
$290  million,  or $1.06 per share,  for the third  quarter  of 1995.  Total net
income for the first nine months of 1996 was $1,509 million, or $5.62 per share,
as compared with $858 million,  or $3.13 per share, for the first nine months of
1995. Both years included special items.

Net income before special items for the first nine months of 1996 totaled $1,285
million,  or $4.76 per share. Net income before special items and the cumulative
effect of an  accounting  change for the first nine months of 1995  totaled $785
million,  or $2.84 per share.  Third quarter 1996 results had no special  items.
For the third quarter of 1995, net income before special items was $288 million,
or $1.05 per share.

Net income  for the first nine  months of 1996  included  a second  quarter  net
special gain of $224 million  relating to the sale by Texaco's  affiliate Caltex
Petroleum  Corporation  ("Caltex")  of  its  interest  in the  Nippon  Petroleum
Refining  Company,  Limited  (NPRC).  Net income for the third quarter and first
nine months of 1995 included $44 million in tax benefits  realizable through the
sale of an  interest  in a  subsidiary,  a $27  million  gain  from  the sale of
Texaco's  interest in Pekin Energy  Company,  special charges of $56 million for
the cost of  employee  separations  and $13  million  for the  restructuring  of
certain  Caltex  operations.  Net income for the first nine  months of 1995 also
included first quarter net special gains of $205 million resulting from the sale
of  non-core  U.S.   producing   properties,   partly  offset  by  reserves  for
environmental  remediation of these properties of $13 million, and from the sale
of land by a Caltex  affiliate in Japan.  Nine months 1995 also  included a $121
million  non-cash  charge  from  the  write-down  of  non-core  U.S.   producing
properties held for sale at January 1, 1995,  classified as a cumulative  effect
of an  accounting  change in  accordance  with the 1995 adoption of Statement of
Financial  Accounting  Standards  (SFAS) 121  "Accounting  for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."

On February 29,  1996,  Texaco  completed  the sale of its  worldwide  lubricant
additives  business  for $196  million,  comprised of $136 million in cash and a
three-year  note of $60 million.  This sale  completed  the  disposition  of the
operations classified as discontinued operations. Discontinued operations had no
significant impact on 1996 and 1995 results.

Results for 1996 and 1995 are summarized in the following table:

<TABLE>
<CAPTION>
                                                                                            (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------          --------------------
                                                                         1996           1995          1996           1995
                                                                         ----           ----          ----           ----
                                                                                       (Millions of Dollars)
<S>                                                                    <C>             <C>            <C>           <C>   
Net income before special items and the cumulative
    effect of accounting change                                        $ 1,285         $  785         $ 434         $  288
Gain on sale of an interest in an affiliate                                224              -             -              -
Gains on major asset sales                                                   -            232             -             27
Tax benefits on asset sales                                                  -             44             -             44
Employee separations costs                                                   -            (56)            -            (56)
Other                                                                        -            (26)            -            (13)
                                                                       -------         ------         -----         ------
Net income before cumulative effect of
   accounting change                                                     1,509            979           434            290
Cumulative effect of accounting change                                       -           (121)            -              -
                                                                       -------         ------         -----         ------
Total net income                                                       $ 1,509         $  858         $ 434         $  290
                                                                       =======         ======         =====         ======
</TABLE>



                                      - 7 -
<PAGE>

Texaco's  higher  worldwide  crude  oil  and  natural  gas  production  and  the
continuing  strength in commodity  prices led the company's strong third quarter
and  year-to-date  results.  Texaco has been  successful  this year in reversing
previous  production declines from maturing fields and non-core asset sales. The
company's  success was bolstered by increased  production from new fields in the
Gulf of Mexico,  China and Angola,  and improved  recovery from existing fields,
most notably in the Kern River, Calif., and Partitioned Neutral Zone operations.

In the downstream  sector,  higher  margins,  increased  branded  gasoline sales
volumes  and  better   operating   performance  at  the  company's   refineries,
particularly  on the West Coast,  contributed to improved  results in the United
States.  However, in the international  sector,  results were lower this year as
the effects of intense  competitive  pressure in Europe and poor  margins in the
Caltex  operating areas more than offset solid results achieved by the company's
Latin American marketing operations.

The company has continued its strict  commitment to cost containment  throughout
its  worldwide  operations  as shown by this  year's  decline in per barrel cash
operating expenses.  In addition,  strong earnings and cash flow, both important
measures of the  company's  plan for  growth,  enabled  Texaco to  increase  its
quarterly  dividend rate to $.85 per share in July and to maintain an aggressive
capital expenditure program this year.  Year-to-date  capital  expenditures were
$2,252 million,  up $208 million or 10 percent from last year, with the majority
of funds targeted to key upstream opportunities.


                               OPERATING EARNINGS


PETROLEUM AND NATURAL GAS
     EXPLORATION AND PRODUCTION
        United States

Exploration  and  production  earnings in the U.S. for the third quarter of 1996
were $262 million,  as compared with $162 million for the third quarter of 1995.
For the first nine months of 1996 and 1995,  earnings were $772 million and $595
million, respectively. Results for 1995 included a first quarter special gain of
$125  million  principally   resulting  from  the  sale  of  non-core  producing
properties  partly  offset by reserves for  environmental  remediation  on these
properties of $13 million.  Excluding the net special gain, first nine months of
1995 results totaled $483 million.

In the U.S.  upstream  operations,  the strong  growth in earnings  for both the
comparative  third quarter and nine months of 1996 resulted from increased crude
oil and natural gas production and higher prices.  Increased crude oil,  natural
gas liquids (NGL), and natural gas production, which in total are up 2.5 percent
for the year,  reflects success in adding new production,  most notably from the
Gulf of Mexico, and enhancing production from existing fields,  primarily in the
Kern River, Calif.,  operations.  This new production reverses previous declines
from maturing  fields and non-core  asset sales,  and is in contrast to U.S. oil
industry  statistics  which  indicate  an  overall  decline  in U.S.  crude  oil
production.  Increased  exploratory expenses for both the third quarter and nine
months reflect an increased level of exploration  activity,  and complement this
year's success in acquiring  lease acreage and the discovery and  development of
new prospects.

The Texaco U.S. average natural gas price for the third quarter of 1996 was $.50
per  thousand  cubic feet (MCF)  higher than 1995,  while the price for the nine
months of 1996 was $.48 per MCF higher than 1995. These price  improvements were
primarily  due to  unusually  cold weather  earlier this year and the  resulting
increase in industry demand to replenish depleted natural gas storage.

The 1996 average price for Texaco U.S.  crude oil was $3.05 and $2.07 per barrel
higher for the third quarter and nine months, respectively.  These higher prices
reflect increased demand combined with historically low inventory levels in 1996
and market  uncertainty  related to delays in the possible  resumption  of Iraqi
crude sales.







                                      - 8 -
<PAGE>

         International

Exploration  and production  earnings  outside the U.S. for the third quarter of
1996 were $132  million,  as compared  with $87 million for the third quarter of
1995. For the first nine months of 1996 and 1995, earnings were $365 million and
$253 million, respectively.

In the  international  upstream,  results  for both the third  quarter  and nine
months of 1996 benefited from higher crude oil prices.  Additionally,  crude oil
production   increased  primarily  from  activity  in  Angola,   China  and  the
Partitioned  Neutral Zone,  located between Saudi Arabia and Kuwait.  In Angola,
the production  increases were the result of new offshore  fields as well as the
resumption of onshore production early this year.  Production increased in China
due to  new  fields  and  in the  Partitioned  Neutral  Zone  due to  continuing
development  programs.  Lower  production  from  maturing  fields in the  United
Kingdom (U.K.) and Australia partly offset overall  production  improvements for
the third  quarter  and nine  months of 1996.  Third  quarter  1996  natural gas
production reflected the continued development of the Dolphin field in Trinidad.

     MANUFACTURING, MARKETING AND DISTRIBUTION

         United States

Manufacturing,  marketing  and  distribution  earnings in the U.S. for the third
quarter of 1996 were $94  million,  as  compared  with $59 million for the third
quarter of 1995. For the first nine months of 1996 and 1995,  earnings were $242
million and $70 million,  respectively.  Results for 1995 included third quarter
special  charges of $11  million  relating to  employee  separations.  Excluding
special  charges,  results  for the third  quarter and first nine months of 1995
totaled $70 million and $81 million, respectively.

In the U.S. downstream operations, results for the third quarter and nine months
of 1996 benefited  primarily from higher West Coast refinery margins as compared
to the same period of 1995.  Although  third quarter 1996 refining  margins have
steadily deteriorated from their peak in May, they exceeded the depressed levels
of the comparable period of 1995.

The significant  improvement in West Coast refining  margins this year reflected
product  price  increases  due to shortages  resulting  from  regional  refining
problems and new California gasoline  formulation  requirements during the first
half of the year when the seasonal increase in market demand occurred.  Improved
refinery  operations and continued cost containment  efforts also contributed to
the improved 1996 results.

For the third  quarter  and nine  months  of 1996,  marketing  margins  for most
refined products were lower than the comparable  period of 1995. This was offset
partially by the continued  strength in gasoline and diesel sales volumes,  with
Texaco  branded  gasoline  sales  up  more  than  three  percent  for  both  the
comparative third quarter and nine months. Additionally,  downstream results for
the nine months of 1996 benefited from improved  profits in the distribution and
transportation businesses, particularly in the second quarter.

         International

Manufacturing,  marketing  and  distribution  earnings  outside the U.S. for the
third  quarter of 1996 were $37  million,  as compared  with $16 million for the
third quarter of 1995. For the first nine months of 1996 and 1995, earnings were
$433 million and $279 million,  respectively.  Results for the first nine months
of 1996 included a second  quarter net special gain of $224 million  relating to
the sale by Caltex of its  interest  in NPRC.  Results  for 1995  included a $42
million  third  quarter  special  charge  relating  to employee  separations  in
subsidiary  operations  and Caltex  restructuring  charges and first quarter net
special  gains of $80  million,  principally  relating  to the sale of land by a
Caltex  affiliate in Japan.  Excluding net special  gains,  first nine months of
1996 earnings totaled $209 million.  For the third quarter and first nine months
of 1995,  results  excluding special items totaled $58 million and $241 million,
respectively.

In the international downstream,  comparative third quarter and nine months 1996
earnings  before  special items  reflected  lower margins in both the Europe and
Caltex  operating  areas  offset  partially  by improved  results in Brazil from
increased volumes and higher product margins.

                                      - 9 -

<PAGE>

In Europe,  marketing margins were significantly  depressed from excess gasoline
supply  and a  highly  competitive  market,  especially  in the  U.K.,  and only
partially offset by higher refining  margins.  In the Caltex operating  markets,
significantly lower margins in Korea and Thailand, primarily due to higher crude
costs not fully recovered in the market,  were somewhat offset by higher margins
in Bahrain and Singapore. Additionally, earnings in Japan were lower as a result
of the April 1996 sale of NPRC.

NONPETROLEUM

Nonpetroleum  earnings for the third  quarter and first nine months of 1996 were
$6 million and $11 million,  respectively,  as compared with $36 million and $47
million for the respective 1995 periods.  Third quarter 1995 results  included a
special  gain of $27 million  from the sale of the  company's  interest in Pekin
Energy  Company.  Excluding the special gain,  results for the third quarter and
first nine months of 1995 totaled $9 million and $20 million, respectively.

Nonpetroleum results for 1996 reflected higher gasification  licensing revenues,
while 1995 mainly reflected improved loss experience of insurance operations.



                         CORPORATE/NONOPERATING RESULTS

Corporate and  nonoperating  charges for the third quarter and first nine months
of 1996 were $97  million  and $314  million,  respectively,  as  compared  with
charges of $70 million and $265 million for the respective periods of 1995. Nine
months 1995 included first quarter gains of $25 million,  principally from sales
of equity securities held for investment by the insurance  operations.  The 1995
third  quarter  also  included  a special  gain of $44  million  related  to tax
benefits  realizable  through  the sale of an  interest  in a  subsidiary  and a
special charge of $16 million for employee separations.

On October 17,  1996 the United  States  Court of Appeals for the Fifth  Circuit
affirmed the 1993 U.S. Tax Court  decision in the so-called  "Aramco  Advantage"
case and upheld  Texaco's  position in this dispute  with the  Internal  Revenue
Service (IRS). A favorable conclusion of this case could result in a significant
benefit to net income in 1997.

















                                     - 10 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As of  September  30, 1996,  Texaco's  cash,  cash  equivalents  and  short-term
investments  totaled $945 million,  as compared with the 1995 year-end  level of
$536 million. Texaco's total cash provided by operating activities for the first
nine months of 1996  totaled  $3.05  billion.  Total cash  provided by operating
activities for 1996 reflected  strong  operational  earnings and a net inflow of
$430 million primarily  comprised of a cash dividend from Caltex (related to the
sale of Caltex'  interest in NPRC) and the collection of receivables  (primarily
insurance  recoveries  relating to  environmental  matters) which were partially
offset by payments related to litigation and other matters.

During the first nine months of 1996, cash generated from operating  activities,
proceeds from the sale of discontinued operations (discussed below) and proceeds
from normal asset sales were used to support  Texaco's  capital and  exploratory
expenditures  of $2,001 million,  for payment of dividends to common,  preferred
and minority shareholders of $721 million, and for the reduction of debt.

Total debt at September  30, 1996 amounted to $5.6 billion as compared with $6.2
billion at year-end  1995.  Texaco's  ratio of total debt to total  borrowed and
invested  capital was 34.0% at  September  30, 1996,  as compared  with 38.0% at
year-end  1995. At September  30, 1996,  Texaco's  long-term  debt included $688
million of debt scheduled to mature within one year,  which the company has both
the intent and the  ability to  refinance  on a  long-term  basis.  The  company
maintained a revolving credit facility with  commitments of $2.0 billion,  which
was unused at both  September 30, 1996 and at year-end  1995. In November  1996,
the company decreased the amount of this credit facility to $1.5 billion,  which
remains unused.

During the first nine months of 1996, Texaco received $231 million from the sale
of certain  equipment  leasehold  interests in conjunction with a sale/leaseback
arrangement.  In the aggregate,  through September 30, 1996, Texaco has received
$479  million  for these  interests.  Additional  payments  are  expected  to be
received over the remainder of 1996. The company expects to repurchase the total
interests, in early 1997, after the related equipment is placed in service.

During the first quarter of 1996, Texaco sold its worldwide  lubricant  additive
business  for $196  million,  comprised of $136 million in cash and a three-year
note of $60 million. Also during the first quarter of 1996, Texaco received $208
million from the  prepayment of the note  received as part of the  consideration
for the 1994 sale of Texaco Chemical Company and related international  chemical
operations to Huntsman Corporation.

During  1995,  Texaco  announced  a stock  repurchase  program to buy up to $500
million  of its  common  stock  through  open  market  or  privately  negotiated
transactions.   Subject  to  market   conditions   and   applicable   regulatory
requirements, the stock repurchase program is expected to be completed in 1997.

The sale of a 15% interest in the company's  Captain Field in the U.K. North Sea
to Korea Petroleum  Development  Corporation for  approximately  $210 million is
expected to be completed in early 1997.

In the third quarter of 1996,  Texaco  increased  its quarterly  dividend on its
common stock to 85 cents per share from 80 cents per share,  an increase of 6.25
percent.

On October 17, 1996 the United  States  Court of Appeals for the Fifth 
Circuit  affirmed the 1993 U.S. Tax Court  decision in the so-called  "Aramco
Advantage" case and upheld Texaco's position in this dispute with the IRS. In
March 1988,  prior to the commencement of the Tax Court action, Texaco,  as a
condition  of its  emergence  from  Chapter 11  proceedings,  made certain 
cash deposits to the IRS in contemplation  of potential tax claims.  The
remaining  portion of these deposits,  together with interest,  currently 
exceed $700 million.  Disposition of the deposits and interest will be 
determined  when the IRS has exhausted  its legal  options.  A favorable  
conclusion of this case could  result in the  receipt  of a  significant  
portion  of the  deposits  and interest in 1997.

The company considers its financial position  sufficient to meet its anticipated
future financial requirements.


                                     - 11 -
<PAGE>

EMPLOYEE SEVERANCE PROGRAM
--------------------------

On July 5, 1994, Texaco announced its plan for growth which included a series of
action steps to increase  competitiveness  and profitability.  This program also
called for reductions in overhead,  including reduced layers of supervision, and
improvements in operating  efficiencies.  Implementation of Texaco's program was
expected to result in the reduction of approximately  2,500 employees  worldwide
by June 30, 1995,  involving  U.S.  and  international  upstream and  downstream
segments, as well as various support staff functions.  During the second quarter
of 1994,  Texaco recorded an after-tax charge of $88 million for the anticipated
severance  costs  associated  with the employee  reductions.  As a result of the
continued  successful  application  of its  overhead  reduction  initiative,  on
October 2, 1995,  Texaco  announced that it had expanded this program to include
approximately 1,500 additional employee separations  worldwide by year-end 1996.
In this  regard,  in the third  quarter of 1995,  Texaco  recorded an  after-tax
charge of $56 million for the cost of these additional employee separations.

As of  September  30,  1996,  implementation  of Texaco's  program has  included
reductions of approximately  4,400 employees worldwide with a related commitment
to severance payments of $209 million,  or an after-tax cost of $143 million. Of
this pre-tax commitment, payments of $189 million have been made as of September
30, 1996.

CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------

Capital and exploratory expenditures for continuing operations, including equity
in such  expenditures  of  affiliates,  were  $2,252  million for the first nine
months of 1996,  as compared  with  $2,044  million for the same period of 1995.
Expenditures  for the third quarter of 1996 amounted to $815 million versus $772
million for the third quarter of 1995.

Increased U.S.  exploration  and  development  expenditures  during 1996 reflect
solid opportunities in traditional  offshore and key deepwater areas of the Gulf
of Mexico. Texaco continued its aggressive  acquisition of acreage at the latest
Gulf of Mexico lease sale,  adding to significant  deepwater acreage acquired at
the federal  lease sale earlier this year.  Progress on design and  construction
for the Petronius deepwater project continued during the third quarter.

Aggressive  international  upstream  investment  also  continued  this  year  as
increased expenditures focused in Colombia,  Australia, Nigeria, the Partitioned
Neutral Zone and Denmark,  while  development  work continues in the Captain and
Erskine Fields in the U.K. North Sea and in Indonesia.

Comparative  downstream  expenditure  levels  decreased due to the completion of
major refinery construction projects in Thailand and Singapore by Caltex and the
completion of refinery upgrades in the U.S. and Panama. Increased investments in
1996 relating to the Poseidon oil pipeline, which will service new deepwater and
subsalt  oil  production  from the  central  Gulf of Mexico as well as  selected
worldwide marketing investments  particularly in Latin American growth areas and
by Caltex in Singapore, partially offset the decrease in refinery spending.






















                                     - 12 -
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------

Reference is made to the  discussion of Contingent  Liabilities in Note 4 to the
Consolidated  Financial  Statements  of this Form 10-Q,  Item 1 of Texaco Inc.'s
Forms 10-Q for the quarterly  periods ended March 31, 1996 and June 30, 1996 and
to  Item 3 of  Texaco  Inc.'s  1995  Annual  Report  on  Form  10-K,  which  are
incorporated herein by reference.

In  addition,  in March 1994 six current or former  employees  filed a purported
class action  against the company in the United  States  District  Court for the
Southern  District of New York  (District  Court)  alleging race  discrimination
against African-American employees,  principally with respect to promotions. The
District  Court  referred  the  matter  to  the  Equal  Employment   Opportunity
Commission, which found some disparity in promotions in some pay grades for some
periods of time  between  African-American  employees  and other  employees.  In
November 1996, the plaintiffs filed in the District Court a motion for sanctions
alleging  that  Texaco  concealed  or  withheld   documents   requested  by  the
plaintiffs. A hearing on that motion is scheduled for November 22, 1996.

On November 6, 1996,  a purported  derivative  action was filed in the  District
Court against  Texaco Inc., as nominal  defendant,  its  directors,  and certain
current and former officers and employees. The suit alleges, among other things,
that the  directors  violated  their  fiduciary  duties as a result  of  alleged
discriminatory  employment practices,  discovery abuses and violations of law by
the  company.  The suit seeks,  among other  things,  the  formation of an equal
opportunity  committee and an oversight and  litigation  committee of the Board,
damages in the form of  restitution  of all costs and  expenses  to the  company
resulting from the alleged violations, fees and expenses.

In addition,  the company has received a subpoena  from the office of the United
States Attorney for the Southern  District of New York requesting the production
of documents related to the foregoing matters.



































                                     - 13 -
<PAGE>

Item 5. Other Information
-------------------------
<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------          --------------------
                                                                          1996         1995(a)         1996         1995(a)
                                                                          ----         -------         ----         -------
                                                                                        (Millions of dollars)
<S>                                                                    <C>             <C>            <C>          <C>    
FUNCTIONAL NET INCOME
---------------------
Operating  earnings  from  continuing  operations  before  cumulative  
   effect of accounting change Petroleum and natural gas
      Exploration and production
         United States                                                 $   772         $  595         $ 262        $   162
         International                                                     365            253           132             87
                                                                        ------         ------         -----        -------
           Total                                                         1,137            848           394            249
      Manufacturing, marketing and distribution
         United States                                                     242             70            94             59
         International                                                     433            279            37             16
                                                                        ------         ------         -----        -------
           Total                                                           675            349           131             75
                                                                        ------         ------         -----        -------

           Total petroleum and natural gas                               1,812          1,197           525            324

   Nonpetroleum                                                             11             47             6             36
                                                                        ------         ------         -----        -------
           Total operating earnings                                      1,823          1,244           531            360

Corporate/Nonoperating                                                    (314)          (265)          (97)           (70)
                                                                        ------         ------         -----        -------

Net income from continuing operations before
   cumulative effect of accounting change                                1,509            979           434            290

Cumulative effect of accounting change                                       -           (121)            -              -
                                                                        ------         ------         -----        -------
           Net income                                                   $1,509         $  858         $ 434        $   290
                                                                        ======         ======         =====        =======



CAPITAL AND EXPLORATORY EXPENDITURES -
--------------------------------------
     INCLUDING EQUITY IN AFFILIATES
     ------------------------------
   Exploration and production
         United States                                                  $  894        $   619         $ 273        $   232
         International                                                     762            727           312            289
                                                                        ------         ------         -----        -------
           Total                                                         1,656          1,346           585            521
                                                                        ------         ------         -----        -------
   Manufacturing, marketing and distribution
         United States                                                     234            263            78             96
         International                                                     345            415           144            147
                                                                        ------         ------         -----        -------
           Total                                                           579            678           222            243
                                                                        ------         ------         -----        -------

   Other                                                                    17             20             8              8
                                                                        ------         ------         -----        -------
           Total                                                         2,252          2,044           815            772

Discontinued operations                                                      -              2             -              1
                                                                        ------         ------         -----        -------

           Total, including equity in affiliates                        $2,252         $2,046         $ 815        $   773
                                                                        ======         ======         =====        =======


<FN>
(a)   Previously reported results for 1995 have been reclassified and restated for the adoption of SFAS 121.
</FN>
</TABLE>


                                     - 14 -

<PAGE>

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------          --------------------
                                                                         1996            1995         1996            1995
                                                                         ----            ----         ----            ----
<S>                                                                     <C>            <C>           <C>            <C>   
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------

Exploration and Production
--------------------------

United States
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)                                             388            381           393            373
     Net production of natural gas - available
         for sale (000 MCFPD)                                            1,680          1,627         1,708          1,618
     Total net production (000 BOEPD)                                      668            652           678            643

     Natural  gas sales (000 MCFPD)                                      3,100          3,162         3,059          3,046
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                         208            214           191            207

     Average U.S. crude (per bbl)                                       $17.24         $15.17        $17.93         $14.88
     Average U.S. natural gas (per mcf)                                 $ 2.08         $ 1.60        $ 2.02         $ 1.52
     Average WTI (Spot) (per bbl)                                       $21.30         $18.52        $22.41         $17.85
     Average Kern (Spot) (per bbl)                                      $14.92         $13.90        $14.41         $13.84
 
International
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)
         Europe                                                            115            117           115            118
         Indonesia                                                         143            149           146            153
         Partitioned Neutral Zone                                           75             56            79             63
         Other                                                              62             55            65             56
                                                                       ------         ------        ------         ------
              Total                                                        395            377           405            390
     Net production of natural gas - available
         for sale (000 MCFPD) 
         Europe                                                            182            210           162            172
         Colombia                                                          117            118           124            117
         Other                                                              66             52            77             46
                                                                       ------         ------        ------         ------
              Total                                                        365            380           363            335

     Total net production (000 BOEPD)                                      456            440           466            446

     Natural gas sales (000 MCFPD)                                         456            434           450            398
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                          95             79            74             86

     Average International crude (per bbl)                              $18.64         $16.32        $19.43         $15.45
     Average U.K. natural gas (per mcf)                                 $ 2.56         $ 2.63        $ 2.55         $ 2.55
     Average Colombia natural gas (per mcf)                             $  .94         $  .87        $  .97         $  .92

</TABLE>






                                     - 15 -

<PAGE>

<TABLE>
<CAPTION>
                                                                                             (Unaudited)
                                                                         -------------------------------------------------
                                                                         For the nine months          For the three months
                                                                         ended September 30,           ended September 30,
                                                                         -------------------          --------------------
                                                                         1996            1995         1996            1995
                                                                         ----            ----         ----            ----
<S>                                                                      <C>            <C>           <C>            <C>  
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------

Manufacturing, Marketing and Distribution
-----------------------------------------

United States
-------------
     Refinery input (000 BPD)
         Subsidiary                                                        405            391           417            406
         Affiliate - Star Enterprise                                       320            300           325            297
                                                                         -----          -----         -----          -----
              Total                                                        725            691           742            703
     Refined product sales (000 BPD)
         Gasolines                                                         499            448           515            458
         Avjets                                                            127             89           122             94
         Middle Distillates                                                214            193           217            195
         Residuals                                                          65             53            70             66
         Other                                                             133            130           132            129
                                                                         -----          -----         -----          -----
              Total                                                      1,038            913         1,056            942

International
-------------
     Refinery input (000 BPD)
     Europe                                                                336            284           334            312
     Affiliate - Caltex                                                    368            441           340            451
     Latin America/West Africa                                              64             37            68             43
                                                                         -----          -----         -----          -----
         Total                                                             768            762           742            806

     Refined product sales (000 BPD)
     Europe                                                                453            453           431            487
     Affiliate - Caltex                                                    602            645           555            622
     Latin America/West Africa                                             397            356           408            353
     Other                                                                  61             75            39             54
                                                                         -----          -----         -----          -----
     Total                                                               1,513          1,529         1,433          1,516

</TABLE>





















                                     - 16 -

<PAGE>

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

(a)  Exhibits

     --  (3.2) Copy of  By-Laws of Texaco  Inc.,  as  amended  to and  including
               September 27, 1996.

     --   (11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
               and Subsidiary Companies.

     --   (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
               Total Enterprise Basis.

     --   (20) Copy of  Texaco  Inc.'s  Annual  Report on Form 10-K for the
               fiscal year ended December 31, 1995 (including portions of Texaco
               Inc.'s  Annual  Report to  Stockholders  for the year 1995) and a
               copy of  Texaco  Inc.'s  Quarterly  Reports  on Form 10-Q for the
               quarterly  periods  ended  March 31, 1996 and June 30,  1996,  as
               previously  filed  by the  Registrant  with  the  Securities  and
               Exchange Commission, File
               No. 1-27.

     --   (27) Financial Data Schedule.

(b)  Reports on Form 8-K:

     During the third quarter of 1996, the Registrant  filed a Current Report on
     Form 8-K for the following event:

     1.   July 22, 1996 (date of earliest event reported: July 22, 1996)

          Item 5. Other Events -- reported that Texaco issued an Earnings  Press
          Release for the second  quarter  1996.  Texaco  appended as an exhibit
          thereto a copy of the Press Release  entitled  "Texaco Reports Results
          for the Second Quarter and First Half 1996," dated July 22, 1996.

































                                     - 17 -
<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.




                                                               Texaco Inc.
                                                 -------------------------------
                                                              (Registrant)




                                            By:              R.C. Oelkers
                                                 -------------------------------
                                                (Vice President and Comptroller)




                                            By:                R.E. Koch
                                                 -------------------------------
                                                         (Assistant Secretary)




Date:    November 13, 1996
         -----------------
































                                      - 18-