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 JUNE 30, 1999

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM ......... TO ..........
                          COMMISSION FILE NUMBER 1-7584


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


           DELAWARE                                           74-1079400
(STATE OR OTHER JURISDICTION OF                            (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                             IDENTIFICATION NO.)

        2800 POST OAK BOULEVARD
             P. O. BOX 1396
             HOUSTON, TEXAS                                     77251
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 215-2000

                                      NONE
              (FORMER NAME,FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)


         INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE  ACT OF
1934  DURING  THE  PRECEDING  12 MONTHS  (OR FOR SUCH  SHORTER  PERIOD  THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS),  AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES  X  NO
                                              ---   ---

 THE NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OUTSTANDING AS
OF JUNE 30, 1999 WAS 100.

REGISTRANT  MEETS THE CONDITIONS SET FORTH IN GENERAL  INSTRUCTIONS  H(1)(a) AND
(b) OF FORM  10-Q AND IS  THEREFORE  FILING  THIS  FORM  10-Q  WITH THE  REDUCED
DISCLOSURE FORMAT.


<PAGE>






                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

         COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:

TRANSCONTINENTAL GAS PIPE LINE CORPORATION AND SUBSIDIARIES (TRANSCO)

     The accompanying  interim condensed  consolidated  financial  statements of
Transco do not include all notes in annual  financial  statements  and therefore
should be read in conjunction  with the  consolidated  financial  statements and
notes  thereto  in  Transco's  1998  Annual  Report on Form 10-K and 1999  First
Quarter Report on Form 10-Q. The accompanying  condensed  consolidated financial
statements  have not been  audited  by  independent  auditors  but  include  all
adjustments  both normal recurring and others which, in the opinion of Transco's
management,  are necessary to present fairly its financial  position at June 30,
1999, and results of operations for the three and six months ended June 30, 1999
and 1998, and cash flows for the six months ended June 30, 1999 and 1998.

     Certain matters discussed in this report, excluding historical information,
include   forward-looking    statements.    Although   Transco   believes   such
forward-looking statements are based on reasonable assumptions, no assurance can
be given that every  objective  will be achieved.  Such  statements  are made in
reliance on the "safe harbor" protections  provided under the Private Securities
Reform  Act of 1995.  Additional  information  about  issues  that could lead to
material  changes in performance is contained in Transco's 1998 Annual Report on
Form  10-K,  1999  First  Quarter  Report on Form 10-Q and Year 2000  disclosure
contained in this document.





<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEET
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                    June 30,              December 31,
                                                                                      1999                    1998
                                                                                -----------------       -----------------
         ASSETS
<S>                                                                               <C>                     <C>
Current Assets:
     Cash                                                                         $      1,353            $       1,470
     Receivables:
         Affiliates                                                                        869                   10,892
         Others                                                                         36,444                   21,689
     Advances to affiliates                                                            411,888                  416,164
     Transportation and exchange gas receivables:
         Affiliates                                                                        878                    1,370
         Others                                                                         36,507                   56,475
     Inventories                                                                        90,619                   79,787
     Deferred income taxes                                                             110,417                   99,598
     Other                                                                              20,294                   16,714
                                                                                -----------------       -----------------
         Total current assets                                                          709,269                  704,159
                                                                                -----------------       -----------------

Investments, at cost plus equity in undistributed earnings                              30,829                    8,915
                                                                                -----------------       -----------------

Property, Plant and Equipment:
     Natural gas transmission plant                                                  4,252,801                4,259,502
     Less-Accumulated depreciation and amortization                                    630,393                  616,120
                                                                                -----------------       -----------------
         Total property, plant and equipment, net                                    3,622,408                3,643,382
                                                                                -----------------       -----------------

Other Assets                                                                           180,198                  168,495
                                                                                -----------------       -----------------

                                                                                  $  4,542,704            $   4,524,951
                                                                                =================       =================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>





<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                   June 30,              December 31,
                                                                                     1999                   1998
                                                                                ----------------       ----------------

            LIABILITIES AND STOCKHOLDER'S EQUITY
<S>                                                                              <C>                    <C>
Current Liabilities:
        Payables:
            Affiliates                                                           $     74,405           $     25,050
            Others                                                                     77,639                 72,285
        Transportation and exchange gas payables:
            Affiliates                                                                    377                    379
            Others                                                                      9,928                  8,354
        Accrued liabilities                                                           138,721                156,631
        Reserve for rate refunds                                                      141,051                238,403
                                                                                ----------------       ----------------
            Total current liabilities                                                 442,121                501,102
                                                                                ----------------       ----------------

Long-Term Debt, less current maturities                                               975,554                975,768
                                                                                ----------------       ----------------

Other Long-Term Liabilities:
        Deferred income taxes                                                         857,458                846,306
        Other                                                                         120,977                139,734
                                                                                ----------------       ----------------
            Total other long-term liabilities                                         978,435                986,040
                                                                                ----------------       ----------------

Commitments and contingencies (Note 3)

Common Stockholder's Equity:
        Common stock $1.00 par value:
            100 shares authorized, issued and outstanding                                   -                      -
        Premium on capital stock and other paid-in capital                          1,652,430              1,652,430
        Retained earnings                                                             494,164                409,611
                                                                                ----------------       ----------------
            Total common stockholder's equity                                       2,146,594              2,062,041
                                                                                ----------------       ----------------

                                                                                 $  4,542,704           $  4,524,951
                                                                                ================       ================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>



<PAGE>




                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                     Three months ended
                                                                                           June 30
                                                                           ----------------------------------------
                                                                                 1999                   1998
                                                                           -----------------      -----------------
<S>                                                                        <C>                    <C>
Operating Revenues:
   Natural gas sales                                                       $     168,277          $     143,237
   Natural gas transportation                                                    185,656                156,011
   Natural gas storage                                                            33,891                 33,990
   Other                                                                           2,491                  1,202
                                                                           -----------------      -----------------
        Total operating revenues                                                 390,315                334,440
                                                                           -----------------      -----------------

Operating Costs and Expenses:
   Cost of natural gas sales                                                     168,277                143,238
   Cost of natural gas transportation                                             10,657                 10,758
   Operation and maintenance                                                      40,776                 38,346
   Administrative and general                                                     32,933                 31,396
   Depreciation and amortization                                                  40,174                 31,155
   Taxes - other than income taxes                                                 9,161                  8,713
   Other                                                                             756                    375
                                                                           -----------------      -----------------
        Total operating costs and expenses                                       302,734                263,981
                                                                           -----------------      -----------------

Operating Income                                                                  87,581                 70,459
                                                                           -----------------      -----------------

Other (Income) and Other Deductions:
   Interest expense                                                               13,875                 22,784
   Interest income - affiliates                                                   (5,662)                (7,045)
   Allowance for equity and borrowed funds used during construction (AFUDC)       (1,139)                (2,654)
   Miscellaneous other deductions, net                                               879                    313
                                                                           -----------------      -----------------
        Total other deductions                                                     7,953                 13,398
                                                                           -----------------      -----------------

Income before Income Taxes                                                        79,628                 57,061

Provision for Income Taxes                                                        30,217                 21,701
                                                                           -----------------      -----------------

Net Income                                                                 $      49,411          $      35,360
                                                                           =================      =================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>




<PAGE>


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

                   CONDENSED CONSOLIDATED STATEMENT OF INCOME
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Six months ended
                                                                                           June 30
                                                                           ----------------------------------------
                                                                                 1999                   1998
                                                                           -----------------      -----------------
<S>                                                                        <C>                    <C>
Operating Revenues:
   Natural gas sales                                                       $     316,348          $     275,957
   Natural gas transportation                                                    353,717                320,880
   Natural gas storage                                                            68,893                 72,122
   Other                                                                           5,579                  4,849
                                                                           -----------------      -----------------
        Total operating revenues                                                 744,537                673,808
                                                                           -----------------      -----------------

Operating Costs and Expenses:
   Cost of natural gas sales                                                     316,348                275,958
   Cost of natural gas transportation                                             21,641                 20,952
   Operation and maintenance                                                      82,309                 82,740
   Administrative and general                                                     67,564                 61,389
   Depreciation and amortization                                                  80,387                 71,782
   Taxes - other than income taxes                                                17,009                 17,786
   Other                                                                           1,772                    790
                                                                           -----------------      -----------------
        Total operating costs and expenses                                       587,030                531,397
                                                                           -----------------      -----------------

Operating Income                                                                 157,507                142,411
                                                                           -----------------      -----------------

Other (Income) and Other Deductions:
   Interest expense                                                               31,927                 45,389
   Interest income - affiliates                                                  (11,394)               (13,643)
   Allowance for equity and borrowed funds used during construction (AFUDC)       (1,994)                (4,673)
   Miscellaneous other deductions, net                                             1,719                    896
                                                                           -----------------      -----------------
        Total other deductions                                                    20,258                 27,969
                                                                           -----------------      -----------------

Income before Income Taxes                                                       137,249                114,442

Provision for Income Taxes                                                        52,696                 43,492
                                                                           -----------------      -----------------

Net Income                                                                 $      84,553          $      70,950
                                                                           =================      =================


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>




<PAGE>


                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION


                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                 Six months ended
                                                                                                     June 30
                                                                                         ---------------------------------
                                                                                             1999                1998
                                                                                         -------------       -------------

<S>                                                                                      <C>                 <C>
Cash flows from operating activities:
          Net income                                                                     $   84,553          $   70,950
          Adjustments to reconcile  net income to net cash provided by operating
            activities:
              Depreciation and amortization                                                  82,835              74,572
              Deferred income taxes                                                             334               2,243
              Allowance for equity funds used during construction (AFUDC)                    (1,389)             (3,410)
              Changes in operating assets and liabilities:
                 Receivables                                                                 (4,586)             11,916
                 Receivables sold                                                             1,000             (12,000)
                 Transportation and exchange gas receivables                                 20,460              (2,499)
                 Inventories                                                                (10,832)             (5,825)
                 Payables                                                                    61,460             (11,290)
                 Transportation and exchange gas payables                                     1,572              (2,448)
                 Accrued liabilities                                                        (17,631)             32,302
                 Reserve for rate refunds                                                   (97,352)             70,603
                 Other, net                                                                 (36,394)            (27,207)
                                                                                         -------------       -------------
                       Net cash provided by operating activities                             84,030             197,907
                                                                                         -------------       -------------

Cash flows from financing activities:
          Additions to long-term debt                                                            -              298,343
          Retirement of long-term debt                                                           -             (160,000)
          Debt issue costs                                                                       -               (2,060)
                                                                                         -------------       -------------
                       Net cash provided by financing activities                                 -              136,283
                                                                                         -------------       -------------

Cash flows from investing activities:
          Property, plant and equipment:
              Additions, net of equity AFUDC                                                (62,762)           (144,597)
              Changes in accounts payable                                                    (6,750)             (9,596)
          Advances to affiliates, net                                                         4,275            (183,788)
          Other, net                                                                        (18,910)              3,458
                                                                                         -------------       -------------
                       Net cash used in investing activities                                (84,147)           (334,523)
                                                                                         -------------       -------------

Net decrease in cash                                                                           (117)               (333)
Cash at beginning of period                                                                   1,470               1,321
                                                                                         -------------       -------------
Cash at end of period                                                                    $    1,353          $      988
                                                                                         =============       =============

Supplemental disclosures of cash flow information:
   Cash paid during the year for:
          Interest (exclusive of amount capitalized)                                     $   53,478          $   24,659
          Income taxes paid                                                                  42,459              25,367
          Income tax refunds received                                                            -                  (77)


The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
</TABLE>


<PAGE>



                   TRANSCONTINENTAL GAS PIPE LINE CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                       1. CORPORATE STRUCTURE AND CONTROL

      Transcontinental Gas Pipe Line Corporation (Transco) is a wholly-owned
subsidiary of Williams Gas Pipeline Company (WGP).  WGP is a wholly-owned
subsidiary of The Williams Companies, Inc. (Williams).

                            2. BASIS OF PRESENTATION

      The condensed  consolidated  financial  statements include the accounts of
Transco and its majority-owned subsidiaries.  Companies in which Transco and its
subsidiaries  own 20  percent  to 50  percent  of the  voting  common  stock are
accounted  for  under  the  equity  method.  Equity in  earnings  and  losses of
unconsolidated affiliates is included in other operating revenues.

      The condensed  consolidated  financial  statements have been prepared from
the books and records of Transco without audit. Certain information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles have been condensed or omitted.
These condensed  consolidated financial statements should be read in conjunction
with the  consolidated  financial  statements and the notes thereto  included in
Transco's  1998 Annual Report on Form 10-K and 1999 First Quarter Report on Form
10-Q.

      Through an agency agreement,  Williams Energy Services Company (WESCO), an
affiliate of Transco,  manages all jurisdictional merchant gas sales of Transco,
receives all margins  associated  with such  business  and, as Transco's  agent,
assumes  all market and credit risk  associated  with  Transco's  jurisdictional
merchant gas sales.  Consequently,  Transco's  merchant gas sales service has no
impact on its operating income or results of operations.

      Because of its rate structure and historical maintenance schedule, Transco
typically experiences lower operating income in the second and third quarters as
compared to the first and fourth quarters.

      Certain  reclassifications  have been made in the 1998  financial
statements to conform to the 1999 presentation.

                    3. CONTINGENT LIABILITIES AND COMMITMENTS

      There have been no new  developments  from those  described in Transco's
1998 Annual Report on Form 10-K or 1999 First Quarter Report on Form 10-Q other
than as described below.

RATE AND REGULATORY MATTERS

      GENERAL RATE CASE (DOCKET NO. RP97-71) On January 20, 1998,  Transco filed
a Stipulation  and Agreement for approval by the FERC,  documenting a settlement
with all of the active parties in this proceeding.  The settlement  resolved all
cost of service, throughput and other issues in this proceeding,  except rate of
return,  capital  structure  and certain minor cost  allocation  and rate design
issues. On June 12, 1998, the FERC issued an order approving the settlement.  On
October 30, 1998,  Transco issued  refunds in connection  with the settlement in
the  amount  of  $89.5  million,  including  interest,  for  which  Transco  had
previously  provided a reserve.  The issues not resolved by the settlement  were
litigated by the parties before a FERC  Administrative Law Judge (ALJ). On March
30, 1999, the ALJ issued her initial  decision which is consistent with the rate
of return and  capital  structure  policies  FERC  announced  in  RP95-197  (see
discussion below).  Applying these policies, the ALJ recommended  utilization of
Transco's own capital  structure,  consisting  of 60.2% equity,  and a return on
equity of 12.40%. The ALJ's decision is subject to FERC review. Transco believes
the  remaining  reserve  is  adequate  for any  additional  refunds  that may be
required and has not made any adjustments to its reserve pending FERC review.

         GENERAL  RATE CASE (DOCKET NO.  RP95-197)  On July 29,  1998,  the FERC
issued  an order  on  rehearing  of its  August  1,  1997  order in the  Phase I
proceeding  determining the capital structure and rate of return for Transco. As
to capital  structure,  the FERC vacated its policy  formulated in the August 1,
1997 order which  favored use of the  pipeline's  own capital  structure  if the
pipeline's equity ratio falls within the range of the equity ratios of the proxy
companies  used to determine the  pipeline's  return on equity.  In the July 29,
1998  order,  the FERC  returned  to its  traditional  policy,  under  which the
pipeline's  own capital  structure  will be used if the pipeline  issues its own
non-guaranteed  debt and has its own bond rating,  and if the pipeline's  equity
ratio is reasonable  when compared to the equity ratios  approved by the FERC in
other  proceedings and when compared to those of the proxy  companies.  Applying
its new policy,  the FERC affirmed the use of Transco's  own capital  structure,
consisting  of 57.58%  equity,  in developing  Transco's  rate of return in this
proceeding.  As discussed in greater  detail  below,  the FERC also modified its
methodology for determining return on equity.  Applying its revised  methodology
to Transco in this proceeding,  the FERC approved a rate of return on equity for
Transco of 12.49%.  A joint request for rehearing of the July 29, 1998 order was
filed with the FERC and,  on December 1, 1998,  the FERC  denied  rehearing.  On
January  29,  1999,  most of the same  parties  that were  involved in the joint
request for  rehearing  filed a notice of appeal with the United States Court of
Appeals for the District of Columbia (D.C. Circuit Court).  Transco made refunds
on March 1, 1999 of  approximately  $96.0  million,  including  interest,  under
Docket No. RP95-197 for which Transco had previously provided a reserve.  During
the first half of 1999,  Transco engaged in an analysis of the court appeal and,
particularly,   its  likely   results.   Based  on  developments  in  regulatory
proceedings  in the second  quarter of 1999  involving  Transco and others,  and
advice recently  received from counsel,  Transco adjusted its remaining  reserve
for rate refunds  ($28.1  million of principal  and $5.9 million of interest) in
the

<PAGE>


second  quarter of 1999 to take into  account the FERC's  revised rate of return
methodology as applied in the July 29, 1998, and December 1, 1998 orders.

      On March 24,  1998,  the ALJ  issued an initial  decision  on the Phase II
issues  not  resolved  by the  June 19,  1996 and  October  9,  1996  settlement
agreements in this docket,  as well as, in Transco's  roll-in  proposal filed in
Docket No. RP97-71.  As to the main issue  addressed in the decision,  rolled-in
pricing,  the ALJ determined that the proponents of roll-in,  including Transco,
must satisfy the burden under  Section 5 of the Natural Gas Act and  demonstrate
that Transco's  existing  incremental  rate treatment is unjust and unreasonable
and that the proposed  rolled-in rate treatment is just and reasonable.  The ALJ
ruled that neither Transco nor any of the other roll-in proponents had satisfied
that burden and, therefore,  that Transco's existing  incremental rate treatment
must remain in effect. On April 16, 1999, the FERC issued an order reversing the
ALJ,  concluding  that  Transco's  proposal  did not have to meet the  Section 5
burden  discussed  above and that  under the  appropriate  standard,  Section 4,
Transco had demonstrated that its proposal was just and reasonable. As a result,
the FERC remanded to the ALJ issues  regarding the  implementation  of Transco's
roll-in  proposal.  Several  parties have filed  requests  for  rehearing of the
FERC's April 16, 1999 order.

      RATE OF RETURN  CALCULATION  As noted above,  on August 1, 1997,  the FERC
issued an order  addressing,  among other things,  the authorized rate of return
for  Transco's  1995 rate case (Docket No.  RP95-197).  In that order,  the FERC
continued  its  practice of utilizing a  methodology  for  calculating  rates of
return that incorporates a long-term growth rate component. The long-term growth
rate component  used by the FERC is a projection of U.S. gross domestic  product
growth rates.  Generally,  calculating  rates of return  utilizing a methodology
which includes a long-term growth rate component results in rates of return that
are lower than they would be if the  long-term  growth rate  component  were not
included in the  methodology.  On January 30, 1998,  the FERC  convened a public
conference to explore, among other things,  possible modifications to the FERC's
rate of return  methodology.  As discussed  above, in its July 29, 1998 order on
rehearing  of its August 1, 1997  order,  the FERC  modified  its rate of return
methodology  with  regard  to the  weight  to be given to the  long-term  growth
component.  Under its  previous  methodology,  the FERC  averaged  the short and
long-term growth projections,  thereby giving them equal weight. In its July 29,
1998  order,  the FERC  changed  its  policy  and  will  accord  the  short-term
projection  a  two-thirds  weighting  and the  long-term  projection a one-third
weighting.  The  FERC has  determined  that the  short-term  projection  is more
reliable  and should be given more  weight,  but that the  long-term  projection
should be given some weight in order to normalize  any  distortions  that may be
reflected in the short-term  data. The revised  weighting to be reflected in the
FERC's methodology should lead to somewhat higher rates of return on equity than
were obtained  under the previous  methodology.  In addition,  the FERC will now
permit parties to argue that a pipeline's return on equity be established at any
point  within the range of returns  developed  under the  two-stage  methodology
(rather  than only at the  high,  mid or low  point in the  range)  based on the
pipeline's  relative level of risk. In that regard,  when assessing a pipeline's
relative risk, the FERC determined that it will not lower a pipeline's return on
equity if

<PAGE>


its lower risk is the result of the pipeline's own efficiency, but will focus on
risks faced by the pipeline that are attributable to  circumstances  outside the
control of the pipeline's management.

      PRODUCTION AREA RATE DESIGN (DOCKET NOS. RP92-137,  RP93-136 AND RP98-381)
On August 31, 1998, Transco made a limited NGA Section 4 filing with the FERC to
implement  firm  transportation  service on  Transco's  production  area  supply
laterals  in  accordance  with the option  authorized  by the FERC's  July 3 and
December  18, 1996  orders in Docket  Nos.  RP92-137  and  RP93-136.  The filing
(Docket No.  RP98-381)  was  protested,  and on  September  30,  1998,  the FERC
accepted the filing and suspended its effectiveness until March 1, 1999, subject
to further proceedings. On February 24, 1999, the FERC issued an order rejecting
the filing,  finding that Transco's proposal,  as filed,  conflicts with certain
FERC policies.  The FERC indicated that Transco could pursue  implementation  of
firm  service on  Transco's  production  area supply  laterals to the extent the
service is structured in a way that conforms with those policies. Transco sought
rehearing of the  February 24, 1999 order and on July 29, 1999,  the FERC issued
an order  denying all requests for  rehearing in this  proceeding.  As a result,
Transco's production area supply lateral service remains unchanged.

      GATHERING  FACILITIES  SPIN-DOWN  ORDER  (DOCKET  NOS.   CP96-206-000  AND
CP96-207-000)  In February 1996,  Transco filed an application with the FERC for
an order authorizing the abandonment of certain  facilities  located onshore and
offshore in Texas,  Louisiana  and  Mississippi  by  conveyance  to Williams Gas
Processing - Gulf Coast Company (Gas Processing),  an affiliate of Transco.  The
net book value  recorded by Transco at December 31, 1998 of the  facilities  was
approximately $504 million.  Estimated  operating income recorded by Transco for
the year ended December 31, 1998 associated with the facilities was $15 million;
however,  such operating income may not be  representative of the effects of the
spin-down on Transco's future operating income due to various factors, including
future  regulatory  actions.  Concurrently,  Gas Processing filed a petition for
declaratory  order  requesting a determination  that its gathering  services and
rates be exempt from FERC regulation under the Natural Gas Act. On September 25,
1996,  the  FERC  issued  an  order  dismissing  Transco's  application  and Gas
Processing's  petition for declaratory  order. On October 25, 1996,  Transco and
Gas  Processing  filed a joint request for rehearing of the FERC's  September 25
order, and in August 1997 filed a request that rehearing be expedited.

      On  June 1,  1998,  the  FERC  issued  a  Notice  of  Inquiry  (NOI)  into
alternative  methods for regulating natural gas pipeline facilities and services
on the outer  continental  shelf.  The purpose of the NOI was to generate public
comment  that will assist the FERC in  exploring  possible  alternatives  to the
FERC's current test used to determine whether offshore  pipeline  facilities and
services should be subject to the FERC's Natural Gas Act jurisdiction.

      On June 30, 1999,  informed by the  comments  submitted in response to the
NOI,  the FERC issued a Notice of Proposed  Rulemaking  (NOPR),  which  proposes
regulatory  requirements  under the Outer Continental Shelf Lands Act (OCSLA) to
ensure that gas is  transported on an open and  nondiscriminatory  basis through
pipelines  located  on the OCS.  The  proposed  regulations  will  apply both to
NGA-jurisdictional and NGA-exempt offshore gas transportation service providers,
and will require that those OCS gas transportation service providers, subject to
certain exemptions,  make available information regarding their affiliations and
the  conditions  under  which  service is  rendered.  These  proposed  reporting
requirements   are   intended   by  FERC  to  assure   that  open   access   and
nondiscriminatory  conditions  of service,  including  nondiscriminatory  rates,
exist for  shippers  using OCS  facilities.  The FERC is seeking  comments  from
interested persons on the regulations proposed in the NOPR.

      Also on June 30, 1999,  the FERC  modified,  in a case involving Sea Robin
Pipeline   Company,   the  test  that  the  FERC  will  use  to  determine   the
jurisdictional  status of OCS pipeline systems.  In the Sea Robin case, the FERC
determined that in assessing the jurisdictional  status of offshore  facilities,
the location of gas processing plants will not be afforded greater  significance
than other factors used in the test. In addition,  the FERC  determined that the
location of a collection facility,  where gas is delivered by several relatively
small  diameter  lines for  aggregation  and  preparation  for further  delivery
onshore through a single larger diameter  pipeline,  will be given  considerable
weight  for   determining   the   demarcation   point   between   gathering  and
jurisdictional  transportation on the OCS. The FERC stated that it will use this
modified  test,  and any  additional  refinements  that the FERC may  develop to
further adapt the test to the physical  characteristics of moving gas across the
OCS, to determine the jurisdictional status of the OCS pipeline systems.

      TILDEN/MCMULLEN  FACILITIES SPIN-DOWN PROCEEDING (DOCKET NOS. CP98-236 AND
242) Pending the outcome of the October 1996 rehearing  request on the gathering
facilities  spin-down order and in an effort to expedite abandonment of at least
a portion of the facilities included in the February 1996 application  discussed
above,  Transco  filed an  application  with the FERC in February  1998  seeking
authorization  to abandon  Transco's  onshore  Tilden/McMullen  Gathering System
located  in  Texas by  conveyance  to Gas  Processing.  Gas  Processing  filed a
contemporaneous  request that the FERC declare that the facilities  sought to be
abandoned  would  be  considered  nonjurisdictional  gathering  facilities  upon
transfer to Gas  Processing.  In May 1999,  the FERC issued an order in which it
determined  that certain of the facilities  would be gathering  facilities  upon
transfer to Gas Processing,  i.e., 1) those facilities upstream of and including
the Tilden Plant, 2) the South McMullen and Goebel Laterals  located  downstream
of the Tilden Plant, and 3) the small,  short laterals which branch out from the
McMullen  Lateral  downstream  of the Tilden  Plant at several  points along its
length.  However,  the FERC determined that the McMullen Lateral itself, as well
as two compressor  units, are  jurisdictional  facilities,  but authorized their
abandonment  subject to Gas Processing  obtaining a certificate to operate those
facilities.  The  net  book  value  at  June  30,  1999  of the  Tilden/McMullen
facilities was approximately  $68 million,  the entirety of which is included in
the $504 million net book value for the  gathering  facilities  described in the
February 1996 application  discussed above.  Operating income for the year ended
December 31, 1998 associated with those  facilities is estimated to be less than
$3 million;  however,  such operating  income may not be  representative  of the
effects of the  spin-down on Transco's  future  operating  income due to various
factors, including future regulatory actions. Transco's abandonment authority is
effective  for one year from the date of  issuance  of the order.  Transco  must
notify the FERC of the effective date of the  abandonment  within 10 days of the
transfer. On June 3, 1999, Transco and Gas Processing filed for rehearing of the
order with regard to the  facilities  classified  by the FERC as  jurisdictional
facilities.

ENVIRONMENTAL MATTERS

      Transco  received a letter  stating  that the U.S.  Department  of Justice
(DOJ), at the request of the U.S. Environmental Protection Agency (EPA), intends
to file a civil  action  against  Transco  arising  from  its  waste  management
practices at Transco's  compressor  stations  and metering  stations  located in
eleven (11)  states from Texas to New Jersey.  DOJ stated in the letter that its
complaint  will  seek  civil  penalties  and  injunctive  relief  under  federal
environmental laws.

      DOJ has  offered to discuss  settlement  of the claim.  While no  specific
amount was proposed,  DOJ stated that any settlement must include an appropriate
civil penalty for the alleged violations.

      Transco cannot reasonably estimate the amount of its potential  liability,
if any, at this time. However,  Transco believes it has substantially  addressed
environmental  concerns on its system through ongoing voluntary  remediation and
management programs.

SUMMARY

      While no  assurances  may be  given,  Transco  does not  believe  that the
ultimate  resolution of the foregoing  matters and those  described in Transco's
1998  Annual  Report on Form 10-K and 1999  First  Quarter  Report on Form 10-Q,
taken as a whole and after  consideration  of  amounts  accrued,  recovery  from
customers, insurance coverage or other indemnification arrangements, will have a
materially adverse effect upon Transco's future financial  position,  results of
operations and cash flow requirements.

                       4. DEBT AND FINANCING ARRANGEMENTS

LONG-TERM DEBT

      Williams and certain of its subsidiaries,  including Transco,  are parties
to a $1 billion credit  agreement  (Credit  Agreement),  under which Transco can
borrow up to $400 million if the funds available under the Credit Agreement have
not been borrowed by Williams or other  subsidiaries.  Interest  rates vary with
current market  conditions based on the base rate of Citibank N.A.,  three-month
certificates of deposit of major United States money market banks, federal funds
rate or the  London  Interbank  Offered  Rate.  The  Credit  Agreement  contains
restrictions  which  limit,  under  certain   circumstances,   the  issuance  of
additional  debt,  the  attachment  of liens on any  assets  and any  change  of
ownership of Transco. As of June 30, 1999, Transco had no outstanding borrowings
under this agreement.

SHORT-TERM DEBT

      Transco is a party to a short-term  money market  facility  under which it
can borrow up to $40 million. Interest rates vary with current market conditions
based on the applicable bank rate at the time of the borrowings.  As of June 30,
1999, Transco had no outstanding borrowings under these facilities.

SALE OF RECEIVABLES

      Transco  is a party to an  agreement  that  expires on  January  28,  2000
pursuant  to  which  Transco  can  sell to an  investor  up to $100  million  of
undivided  interest  in certain of its trade  receivables.  At June 30, 1999 and
December 31, 1998,  interests in these receivables held by the investor were $88
million and $87 million, respectively.


<PAGE>



ITEM 2.  MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS.

      The  following   discussion   should  be  read  in  conjunction  with  the
consolidated  financial  statements,  notes and management's  narrative analysis
contained in Items 7 and 8 of Transco's  1998 Annual  Report on Form 10-K and in
Transco's  1999  First  Quarter  Report  on Form  10-Q and  with  the  condensed
consolidated financial statements and notes contained in this report.

                              RESULTS OF OPERATIONS

NET INCOME AND OPERATING INCOME

      Transco's  net  income for the six  months  ended June 30,  1999 was $84.6
million  compared to net income of $71.0  million for the six months  ended June
30,  1998.  Operating  income for the six months  ended June 30, 1999 was $157.5
million  compared to $142.4  million for the six months ended June 30, 1998. The
higher  operating  income of $15.1  million was  primarily  the result of higher
transportation   revenues   discussed   below,   partially   offset   by  higher
administrative and general expense and depreciation expense. The increase in net
income was attributable to the increased operating income, as well as, lower net
interest  expense due  primarily to the  adjustment to reserves for rate refunds
discussed below and rate refunds made in 1998 and early 1999,  partially  offset
by lower  allowance  for funds used  during  construction  due to lower  capital
expenditures.

      Because of its rate structure and historical maintenance schedule, Transco
typically experiences lower operating income in the second and third quarters as
compared to the first and fourth quarters.

TRANSPORTATION REVENUES

      Transco's  operating revenues related to its  transportation  services for
the six months ended June 30, 1999 were $354  million,  compared to $321 million
for the six months ended June 30, 1998. The higher transportation  revenues were
primarily  due to the  positive  adjustment  to the reserve for rate  refunds in
Transco's  general rate case Docket No.  RP95-197 ($28.1  million),  benefits of
expansion  projects  placed into service in 1998 ($9.6 million) and new services
begun in 1998 ($2.9 million). This was partly offset by the positive impact of a
$4 million adjustment  recorded in 1998 related to settlement rates contained in
the January 1998 stipulation and agreement in Transco's general rate case Docket
No. RP97-71 approved by the FERC in June 1998.

      During the first half of 1999, Transco engaged in an analysis of the court
appeal  related  to  Transco's  general  rate  case  Docket  No.  RP95-197  and,
particularly,   its  likely   results.   Based  on  developments  in  regulatory
proceedings  in the second  quarter of 1999  involving  Transco and others,  and
advice recently  received from counsel,  Transco adjusted its remaining  reserve
for rate refunds ($28.1 million of principal and $5.9 million of

<PAGE>


interest)  in the second  quarter of 1999 to reflect the FERC's  revised rate of
return methodology as applied in the July 29, 1998, and December 1, 1998 orders.

      As shown in the table below,  Transco's total  market-area  deliveries for
the six months ended June 30, 1999 increased 28.7 trillion British Thermal Units
(TBtu) (4.1%) when compared to the same period in 1998. The increased deliveries
were  mainly due to higher  deliveries  under the Mobile Bay  Lateral  Expansion
Project  and the  Cherokee  Expansion  Project  in the first six months of 1999.
Transco's  production  area  deliveries  for the six months  ended June 30, 1999
decreased  3.7 TBtu (3.4%) when  compared to the same period in 1998 as a result
of milder weather conditions.

      As a result of a straight  fixed-variable (SFV) rate design,  increases or
decreases  in firm  transportation  volumes  in  comparable  facilities  have no
significant  impact  on  operating  income;   however,   because   interruptible
transportation  rates  have  components  of fixed and  variable  cost  recovery,
increases or decreases in interruptible transportation volumes do have an impact
on operating income.

                                                            Six Months
                                                          Ended June 30,
                                                     -------------------------

Transco System Deliveries (TBtu)                        1999           1998
--------------------------------                     ----------     ----------


Market-area deliveries:
     Long-haul transportation                           437.1          450.3
     Market-area transportation                         294.2          252.3
                                                     ----------     ----------
        Total market-area deliveries                    731.3          702.6
Production-area transportation                          104.5          108.2
                                                     ----------     ----------
        Total system deliveries                         835.8          810.8
                                                     ==========     ==========

Average Daily Transportation Volumes (TBtu)               4.6            4.5

Average Daily Firm Reserved Capacity (TBtu)               6.1            6.2


     Transco's facilities are divided into seven rate zones. Four are located in
the  production  area and  three  are  located  in the  market  area.  Long-haul
transportation is gas that is received in one of the  production-area  zones and
delivered in a market-area zone. Market-area  transportation is gas that is both
received and delivered within market-area zones. Production-area  transportation
is gas that is both received and delivered within production-area zones.

     See Note 3 of the Notes to Condensed  Consolidated Financial Statements for
a discussion of recent developments in Transco's rate and regulatory matters.

SALES REVENUES

     Transco makes jurisdictional  merchant gas sales to customers pursuant to a
blanket  sales  certificate  issued by the FERC,  with most of those sales being
made  through a Firm Sales (FS)  program  which  gives  customers  the option to
purchase  daily  quantities of gas from Transco at  market-responsive  prices in
exchange for a demand charge payment.

<PAGE>
     Through an agency  agreement with Transco,  WESCO, an affiliate of Transco,
manages  Transco's  jurisdictional  merchant gas sales.  The long-term  purchase
agreements  managed by WESCO remain in Transco's  name, as do the  corresponding
sales of such purchased gas. Therefore,  Transco continues to record natural gas
sales revenues and the related accounts receivable and cost of natural gas sales
and the related accounts payable for the jurisdictional  merchant sales that are
managed by WESCO.  Through  the agency  agreement,  WESCO  receives  all margins
associated  with  jurisdictional  merchant gas sales  business and, as Transco's
agent,   assumes  all  market  and  credit  risk   associated   with   Transco's
jurisdictional  merchant gas sales.  Consequently,  Transco's merchant gas sales
service has no impact on Transco's  operating  income or results of  operations.
Transco's  operating  revenues for the six months ended June 30, 1999 related to
its sales  services,  including  Transco's  cash out sales in  settlement of gas
imbalances,  increased $40.4 million to $316 million,  when compared to the same
period in 1998.  The increase was primarily due to higher cash out sales related
to the settlement of imbalances and higher sales volumes,  partially offset by a
lower  average  gas  sales  price of $1.99 per  dekatherm  (Dt) in the first six
months of 1999 versus $2.20 per Dt in 1998.

                                                              Six Months
                                                            Ended June 30,
                                                       -------------------------
Gas Sales Volumes (TBtu)                                 1999             1998
------------------------                               --------         --------

Long-term sales                                          104.2             89.3
Short-term sales                                          17.0             14.7
                                                       --------         --------
     Total gas sales                                     121.2            104.0
                                                       ========         ========

STORAGE REVENUES

     Transco's  operating  revenues related to storage  services  decreased $3.2
million to $68.9 million for the six months ended June 30, 1999 when compared to
the same period in 1998. This revenue decrease  included a $3.9 million decrease
due to lower  underground  storage  rates  charged by others that is included in
operation and maintenance  expenses and a $0.8 million decrease primarily due to
lower  storage  demand  charges,  partly  offset by the impact of an  adjustment
recorded  in 1998 to the  revenue  refund  reserve to reflect  the actual  rates
contained in the RP97-71 Settlement Agreement.

OPERATING COSTS AND EXPENSES

      Excluding the cost of sales and transportation of $338 million for the six
months ended June 30, 1999 and $297 million for the  comparable  period in 1998,
Transco's  operating  expenses  for the six  months  ended June 30,  1999,  were
approximately  $14.5 million  higher than the  comparable  period in 1998.  This
increase was primarily attributable to higher administrative and general expense
and higher depreciation  expense. The higher  administrative and general expense
was primarily  attributable  to higher  professional  services  ($1.2  million),
building rent ($1.0 million) and labor ($1.7 million), along with a $0.5 million
increase in Gas Research  Institute  charges that were offset by a corresponding
revenue  increase  reflecting  the pass through of such costs to customers.  The
higher depreciation  expense was due to a $3.8 million adjustment related to the
RP97-71 settlement rates recorded in 1998, a $3.2 million adjustment on computer
software recorded in 1998 and a $1.6 million increase in 1999,  primarily due to
plant and property  additions.  Slightly lower operation and maintenance expense
was primarily  attributable to lower underground storage rates charged by others
($3.7 million), lower professional services ($1.1 million) and lower contractual
services  ($1.2  million),  partly  offset  by the  effects  of a  $5.7  million
adjustment recorded in 1998 related to the RP97-71 settlement rates.

<PAGE>

                         CAPITAL RESOURCES AND LIQUIDITY

METHOD OF FINANCING

     Transco  funds its  capital  requirements  with cash flows  from  operating
activities,  including  the  sale of trade  receivables,  by  accessing  capital
markets,  by repayments of funds advanced to Williams,  by borrowings  under the
Credit  Agreement  and  short-term  money  market  facilities  and, if required,
advances from Williams.  At June 30, 1999, there were no outstanding  borrowings
under the Credit Agreement or short-term money market  facilities.  Net advances
due Transco and its subsidiaries by Williams totaled $412 million.

CAPITAL EXPENDITURES

     As shown in the table below,  Transco's  capital  expenditures  for the six
months ended June 30, 1999 were $69.5  million,  compared to $154.2  million for
the six months ended June 30, 1998.

                                                              Six Months
                                                            Ended June 30,
                                                        ----------------------
Capital Expenditures                                      1999          1998
--------------------                                    --------     ---------
                                                            (In Millions)

Market-area projects                                    $  12.1      $   53.2
Supply-area projects                                        -            78.6
Maintenance of existing facilities and other projects      57.4          22.4
                                                        --------     ---------
      Total capital expenditures                        $  69.5      $  154.2
                                                        ========     =========


      Transco's capital expenditures budget for 1999 and future capital projects
are  discussed  in its 1998  Annual  Report on Form 10-K and 1999 First  Quarter
Report on Form 10-Q. The following describes significant developments related to
those projects and any new projects proposed by Transco.

      PINE NEEDLE LNG COMPANY, LLC  In May 1999,  Pine Needle LNG  Company,  LLC
(Pine  Needle),  which is owned by wholly  owned  subsidiaries  of  Transco  and
several of its major customers,  placed its liquefied  natural gas (LNG) storage
facility into service. The facility,  which is located in Guilford County, North
Carolina, has 4 billion cubic feet (Bcf)

<PAGE>


of storage  capacity and 400 million  cubic feet per day (MMcf/d) of  withdrawal
capacity.  Wholly owned  subsidiaries of Transco operate the facility and have a
35% ownership interest.

      SUNDANCE EXPANSION PROJECT  In April 1999,  Transco announced its Sundance
Expansion Project,  which would create additional firm  transportation  capacity
from  Transco's  Station  65 in  Louisiana  to  Station  165  in  Virginia.  The
non-binding  open  season  for the  Sundance  Expansion  Project  ended June 18.
Non-binding nominations of approximately 1.3 million dekatherms per day (MMDt/d)
were received. The project has a target in-service date of May 2002.

OTHER CAPITAL REQUIREMENTS AND CONTINGENCIES

      Transco's capital requirements and contingencies are discussed in its 1998
Annual  Report on Form 10-K and 1999 First  Quarter  Report on Form 10-Q.  Other
than as  described in Note 3 of the Notes to  Condensed  Consolidated  Financial
Statements,  there  have  been  no new  developments  from  those  described  in
Transco's  1998 Annual Report on Form 10-K and 1999 First Quarter Report on Form
10-Q with regard to other capital requirements and contingencies.

      RATE  AND  REGULATORY  REFUNDS  Transco  has  provided  reserves  which it
believes are adequate for any rate refunds that may be required.

      YEAR 2000 COMPLIANCE  Williams and its  wholly-owned  subsidiaries,  which
includes Transco,  initiated an  enterprise-wide  project in 1997 to address the
year 2000 compliance issue for both traditional and non-traditional  information
technology areas,  including embedded  technology which is prevalent  throughout
the  company.  The project  focuses on all  technology  hardware  and  software,
external  interfaces with customers and suppliers,  operations  process control,
automation and  instrumentation  systems,  and facility items. The phases of the
project are awareness,  inventory and  assessment,  renovation and  replacement,
testing and validation.  The awareness and  inventory/assessment  phases of this
project  as they  relate to both  traditional  and  non-traditional  information
technology areas have been completed. During the inventory and assessment phase,
all systems with possible year 2000 implications were inventoried and classified
into  five  categories:  1)  highest,  business  critical,  2) high,  compliance
necessary  within a short period of time  following  January 1, 2000, 3) medium,
compliance  necessary  within 30 days from January 1, 2000,  4) low,  compliance
desirable  but not  required,  and 5)  unnecessary.  Categories 1 through 3 were
designated   as   critical   and  are  the   major   focus   of  this   project.
Renovation/replacement  and  testing/validation  of  critical  systems  has been
completed.  While year 2000 date  processes  have been  successfully  validated,
ongoing  testing will continue to ensure data integrity and core  functionality.
Certain non-critical systems may not be compliant by January 1, 2000.

      Testing and  validation  activities  have been  completed  and at June 30,
1999,  100% of the  critical  systems  have been fully  tested or  validated  as
compliant.  Year 2000 test labs are in place and  operational.  As was expected,
few  problems  have  been  detected  during  testing  for items  believed  to be
compliant.

      Transco has initiated a formal communications process with other companies
with which  Transco's  systems  interface or rely on to determine  the extent to
which those companies are addressing their year 2000  compliance.  In connection
with  this   process,   Transco  has  sent   approximately   3,146  letters  and
questionnaires  to third  parties  including  customers,  vendors,  and  service
providers.  Additional  communications are being mailed during the third quarter
of 1999.  Transco is  evaluating  responses  as they are  received or  otherwise
investigating the status of these companies' year 2000 compliance efforts. As of
June 30, 1999  approximately  17% of the companies  contacted have responded and
virtually all of these have indicated that they are already compliant or will be
compliant on a timely basis.  Where necessary,  Transco will be working with key
business  partners  to reduce  the risk of a break in service or supply and with
non-compliant companies to mitigate any material adverse effect on Transco.

      Transco   expects  to  utilize  both   internal   resources  and  external
contractors  to complete the year 2000  compliance  project.  Transco has a core
group of 121 people assigned to this project. This group includes one individual
responsible  for  coordinating,   organizing,   managing,   communicating,   and
monitoring the project and another 120 part-time representatives responsible for
completing the project. Depending on which phase the project is in and what area
is being focused on at any given point in time, there can be an additional 36 to
40 employees who are also contributing a portion of their time to the completion
of this project.  Transco has contracted with an external  contractor for a cost
of up to $6.0 million for the remediation of Transco's customer service system.

      Although all critical  systems over which  Transco has control are planned
to be compliant  and tested  before the year 2000,  Transco has  identified  two
areas that would equate to a most-reasonably  likely worst case scenario.  First
is the  possibility  of service  interruptions  due to  non-compliance  by third
parties.  For  example,  power  failures  along the  communications  network  or
transportation  systems would cause service  interruptions.  This risk should be
minimized by the  enterprise-wide  communications  effort with and evaluation of
third-party  compliance  plans  and by the  development  of  contingency  plans.
Another  area of risk for  non-compliance  is the delay of  system  replacements
scheduled  for  completion  during  1999.  The status of these  systems is being
closely  monitored  to reduce  the  chance of delays  in  completion  dates.  In
situations where planned system implementations will not be in service timely or
are delayed past an implementation date of September 1, 1999,  alternative steps
are being  taken to make  existing  systems  compliant.  It is not  possible  to
quantify the possible financial impact if this most reasonably likely worst case
scenario were to come to fruition.

      Significant  focus on the  contingency  plan phase of the project has been
taking  place in 1999.  Guidelines  for the  contingency  planning  process were
issued in January  1999.  Contingency  plans have been  developed  for  critical
business   processes,   critical   business   partners,   suppliers  and  system
replacements that experience  significant  delays.  Transco's  contingency plans
include manning all operational  stations twenty-four hours a day, putting extra
security measures into place and stocking up on supplies.  In addition,  most of
Transco's   compressor   stations  are  capable  of   independently   generating
electricity in the event of a loss of electricity, and operation of the pipeline
can be done manually in case there is a loss of  telecommunications  capability.
These  plans are  subject  to  on-going  review  as we  continue  to assess  the
readiness of vendors and suppliers, and make changes as appropriate.

      Costs  incurred  for  new  software  and  hardware   purchases  are  being
capitalized  and other costs are being expensed as incurred.  Transco  currently
estimates  the total  cost of the  project,  including  any  accelerated  system
replacements, to be approximately $7.9 million. This $7.9 million has been or is
expected to be spent as follows:

    -Prior to 1998 and during the first quarter of 1998,  Transco conducted the
     project  awareness  and  inventory/assessment  phases  of the  project  and
     incurred minimal costs.

    -During  the  second  quarter  of  1998,  $0.1  million  was  spent  on the
     renovation/replacement  and testing/validation phases and completion of the
     inventory/assessment phase.

    -The   third   and   fourth    quarters    of   1998,    focused   on   the
     renovation/replacement  and  testing/validation  phases and $2.1 million of
     costs were incurred.

    -During   the   first   quarter   of   1999,   renovation/replacement   and
     testing/validation  continued,  contingency planning began and $2.0 million
     was expended.

    -During  the  second   quarter  of  1999,  the  primary  focus  shifted  to
     testing/validation and contingency planning and $1.3 million was spent.

    -The third and fourth  quarters  of 1999 will focus  mainly on  contingency
     planning and final testing with $2.1 million expected to be spent.

    -Approximately  $0.3  million is estimated to be spent during the first two
     quarters of 2000 for monitoring and problem resolution.

      Virtually all of the $5.5 million  incurred through June 30, 1999 has been
expensed with a minimal amount capitalized.  Of the $2.4 million of future costs
necessary to complete the project within the schedule  described,  virtually all
costs will be expensed, with minimal capitalization of costs. This estimate does
not include Transco's potential share of year 2000 costs that may be incurred by
partnerships and joint ventures in which the company participates but is not the
operator. The costs of previously planned system replacements are not considered
to be year 2000 costs and are,  therefore,  excluded from the amounts  discussed
above.

      The preceding discussion contains  forward-looking  statements  including,
without  limitation,  statements  relating to the company's  plans,  strategies,
objectives,  expectations,  intentions,  and adequate  resources,  that are made
pursuant to the "safe harbor"  provisions of the Private  Securities  Litigation
Reform Act of 1995. Readers are cautioned that such  forward-looking  statements
contained  in the year 2000  update are based on certain  assumptions  which may
vary from actual results.  Specifically, the dates on which the company believes
the year 2000 project will be completed and computer systems will be implemented
are based on management's best estimates,  which were derived utilizing numerous
assumptions of future events,  including the continued  availability  of certain
resources,  third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved, or that there will not be
a delay in, or increased costs associated with, the  implementation  of the year
2000 project.  Other specific factors that might cause  differences  between the
estimates and actual results  include,  but are not limited to, the availability
and cost of personnel  trained in these areas, the ability to locate and correct
all relevant computer code, timely responses to and corrections by third-parties
and suppliers,  the ability to implement  interfaces between the new systems and
the systems not being replaced,  and similar  uncertainties.  Due to the general
uncertainty inherent in the year 2000 problem,  resulting in large part from the
uncertainty  of the year 2000  readiness of  third-parties,  the company  cannot
ensure its ability to timely and  cost-effectively  resolve problems  associated
with the year 2000 issue that may affect its operations and business,  or expose
it to third-party liability.

CONCLUSION

      Although no assurances can be given,  Transco currently  believes that the
aggregate of cash flows from operating activities, supplemented, when necessary,
by repayments of funds advanced to Williams,  advances or capital  contributions
from Williams and  borrowings  under the Credit  Agreement or  short-term  money
market  facilities,  will provide Transco with sufficient  liquidity to meet its
capital requirements.  Transco also expects to access public and private markets
on reasonable terms to finance its capital requirements.



<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.      LEGAL PROCEEDINGS.

             See discussion in Note 3 of the Notes to Condensed Consolidated
             Financial Statements included herein.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K.

             (a)   Exhibits.

                   None

             (b) Reports on Form 8-K.

                   None





<PAGE>





                                    SIGNATURE


Pursuant to the  requirements of Section 13 or 15(d) 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.




                                       TRANSCONTINENTAL GAS PIPE LINE
                                       CORPORATION (Registrant)




Dated:  August 12, 1999                By /s/ James C. Bourne
                                       -------------------------------
                                       James C. Bourne
                                       Controller
                                       (Principal Accounting Officer)