FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

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

                For the quarterly period ended November 30, 1998

                                       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 1-7924


                             VALLEY RESOURCES, INC.
             (Exact name of Registrant as specified in its charter)

                Rhode Island                            05-0384723
      (State or other jurisdiction of               (I.R.S.  Employer
       incorporation or organization)               Identification No.)
 
             1595 Mendon Road                             02864
         Cumberland, Rhode Island                       (Zip Code)
 (Address of principal executive offices)

                                 (401) 334-1188
              (Registrant's telephone number, including area code)
 
                                 Not Applicable

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

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

                                                                 Outstanding at
       Class of Common Stock                                      Nov. 30, 1998

           $1 Par Value                                             4,974,975


<PAGE>

                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                NOVEMBER 30, 1998

                                                                       Page of
                                                                      Form 10-Q

PART    I:    FINANCIAL INFORMATION

Item    1.    Financial Statements

              Consolidated Condensed Statements of Operations--for
              the three-months ended November 30, 1998
              and 1997...................................................     3

              Consolidated Condensed Balance Sheets--November 30,
              1998 and August 31, 1998................................... 4 & 5

              Consolidated Condensed Statements of Cash Flows--for
              the three-months ended November 30, 1998 and 1997..........     6

              Notes to Consolidated Condensed Financial Statements.......     7

Item    2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................     8


PART   II:    OTHER INFORMATION

Item    4.    Submission of Matters to a Vote of Security Holders........    10

Item    6.    Exhibits and Reports on Form 8-K...........................    10


<PAGE>



                          PART I: FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS



VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>

                                                       For the 3 Months Ended
                                                        Nov. 30,       Nov. 30,
                                                          1998           1997   

                                                         (in thousands except 
                                                          share and per share
                                                                numbers)
<S>                                                    <C>            <C>

Operating Revenues:
Utility Gas Revenues                                   $   9,824      $  10,084
Nonutility Revenues                                        5,446          5,741
                                                       ---------      ---------
          Total                                           15,270         15,825
                                                       ---------      ---------
Operating Expenses:
   Cost of Gas Sold                                        5,142          5,594
   Cost of Sales - Nonutility                              3,788          4,027
   Operations                                              4,611          4,715
   Maintenance                                               409            398
   Depreciation and Amortization                             857            825
   Taxes - Other Than Federal Income                         866            852
         - Federal Income                                   (449)          (525)
                                                       ---------      --------- 
             Total                                        15,224         15,886
                                                       ---------      ---------
Operating Income (Loss)                                       46            (61)
Other Income - Net of Tax                                     68             49
                                                       ---------      ---------
Total Income (Loss)                                          114            (12)
                                                       ---------      --------- 
Interest Charges:
   Long-Term Debt                                            619            622
   Other                                                     132            127
                                                       ---------      ---------
             Total                                           751            749
                                                       ---------      ---------
Net Loss                                               $    (637)     $    (761)
                                                       =========      ========= 

Average Number of Common Shares Outstanding            4,984,431      4,939,253

Basic Loss Per Average Common Share Outstanding           $(0.13)        $(0.15)

Dividends Declared on Common Stock                       $0.1875         $0.185

</TABLE>



The accompanying Notes are an integral part of these statements.



<PAGE>



VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
 
 
 
                                                        (Unaudited)
                                                           Nov. 30,   Aug. 31,
                                                             1998       1998 
                                                           --------   --------
                                                              (in thousands)
<S>                                                        <C>        <C>
ASSETS
Utility Plant - Net                                        $ 51,808   $ 51,310
                                                           --------   --------
Leased Property - Net                                         2,113      2,303
                                                           --------   --------
Nonutility Property-Net                                       4,117      4,106
                                                           --------   --------
Other Investments                                             1,641      1,637
                                                           --------   --------
Current Assets:
   Cash                                                         938        813
   Accounts Receivable - Net                                 10,521      9,684
   Deferred Fuel Costs                                        1,009        485
   Deferred Unbilled Gas Costs                                1,303        438
   Fuel and Other Inventories (Note 3)                        6,287      5,819
   Prepayments                                                1,100      1,353
   Common Stock held for Dividend Reinvestment-amounting
     to 18,053 and 10,116 shares respectively (Note 4)          229        121
                                                           --------   --------
          Total                                              21,387     18,713
                                                           --------   --------
Deferred Debits:
   Recoverable Postretirement Benefits                          173        231
   Recoverable Vacations Accrued                                638        633
   Unamortized Debt Discount and Expense                      1,695      1,712
   Prepaid Pensions                                           9,215      8,824
   Recoverable Deferred FIT                                   5,997      6,109
   Recoverable Transition Obligation                             21         21
   Other                                                      3,132      2,882
                                                           --------   --------
                                                             20,871     20,412
                                                           --------   --------
           Total                                           $101,937   $ 98,481
                                                           ========   ========

</TABLE>


The accompanying Notes are an integral part of these statements.


<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets (Cont'd)
<TABLE>
<CAPTION>

 
                                                          (Unaudited)
                                                            Nov. 30,    Aug. 31,
                                                              1998        1998
                                                           ---------    --------
                                                              (in thousands)
<S>                                                         <C>         <C>
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                                             $  4,993    $ 4,993
   Paid In Capital                                            24,791     24,811
   Retained Earnings                                           6,616      8,187
   Less: Accounts Receivable from ESOP                        (2,726)    (2,768)
                                                            --------    ------- 
           Total Common Stock Equity                          33,674     35,223
                                                            --------    -------
Long-Term Debt (Less Current Maturities):
   8% First Mortgage Bonds, Due 2022                          20,039     20,039
   7.7% Debentures, Due 2027                                   7,000      7,000
   Note Payable                                                2,561      2,599
                                                            --------    -------
           Total Long-Term Debt                               29,600     29,638
                                                            --------    -------
                  Total Capitalization                        63,274     64,861
                                                            --------    -------
Revolving Credit Arrangement                                   2,400      2,400
                                                            --------    -------
Obligation Under Capital Lease                                 1,336      1,528
                                                            --------    -------
Current Liabilities:
   Current Maturities of Long-Term Debt                        2,289      2,289
   Obligation Under Capital Lease                                777        775
   Notes Payable                                               6,000      2,300
   Accounts Payable                                            5,914      4,275
   Security Deposits & Refund Obligations                        991        977
   Taxes Accrued (Debit)                                        (560)       435
   Accrued Interest                                            1,088        794
   Other                                                         715        741
                                                            --------    -------
           Total                                              17,214     12,586
                                                            --------    -------
Commitments and Contingencies
Deferred Credits                                               4,550      4,513
                                                            --------    -------
Deferred Federal Income Taxes                                 13,163     12,593
                                                            --------     ------
                                                            $101,937    $98,481
                                                            ========    =======
</TABLE>

The accompanying Notes are an integral part of these statements.



<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>

                                                                   For the 3 Months
                                                                        Ended
                                                                  Nov. 30,   Nov. 30,
                                                                    1998       1997   
                                                                    (in thousands)
<S>                                                               <C>        <C>
Cash Flows from Operating Activities:
   Net Loss                                                       $  (637)   $  (761)
   Adjustments to Reconcile Net Loss to Net Cash used in
   Operating Activities:
     Depreciation and Amortization                                    857        825
     Provision for Uncollectibles                                     312        573
     Deferred Federal Income Taxes                                    570        671
     Amortization of ITC                                              (12)       (12)
   Change in Assets and Liabilities:
     Accounts Receivable                                           (1,148)      (350)
     Deferred Fuel Costs                                             (525)    (1,389)
     Unbilled Gas Costs                                              (865)    (1,472)
     Fuel and Other Inventories                                      (468)      (363)
     Other Current Assets                                            (247)      (114)
     Accounts Payable, Accrued Expenses and Current Liabilities       657        628
     Other - Net                                                      294        404
                                                                  -------    -------
           Net Cash (Used) by Operating Activities                 (1,212)    (1,360)
                                                                  -------    ------- 
Cash Flows from Investing Activities:
   Utility Capital Expenditures                                    (1,206)    (1,212)
   Nonutility Capital Expenditures                                   (160)      (349)
   Other Investments                                                   (4)        (7)
                                                                  -------    ------- 
           Net Cash (Used) by Investing Activities                 (1,370)    (1,568)
                                                                  -------    ------- 
Cash Flows from Financing Activities:
   Dividends Paid                                                    (935)      (917)
   Capital Stock Transactions                                         (20)       962
   Retirement of Long-Term Debt                                       (38)       (46)
   Increase in Notes Payable                                        3,700      3,000
                                                                  -------    -------
           Net Cash Provided by Financing Activities                2,707      2,999
                                                                  -------    -------

Net Increase in Cash                                                  125         71
Cash - Beginning                                                      813        820
                                                                  -------    -------
Cash - Ending                                                     $   938    $   891
                                                                  =======    =======

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                                     $   456    $   179
                                                                  =======    =======
     Federal Income Taxes                                         $   -0-    $   -0-
                                                                  =======    =======
   Capital Lease Obligations Incurred                             $     4    $   139
                                                                  =======    =======
</TABLE>

The accompanying Notes are an integral part of these statements.


<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1
------

     The  Corporation  computes basic and diluted  earnings and loss per average
common share in accordance  with SFAS 128, based on the weighted  average number
of shares outstanding during the period.
<TABLE>
<CAPTION>
                                                             (Unaudited)
                                                         Three Months Ended
                                                            November 30,
                                                       1998              1997    
                                                    ----------        ----------
<S>                                                 <C>               <C>
     Net Loss                                       $(636,615)        $(761,081)
     Weighted average shares outstanding            4,984,431         4,939,253
     Basic and diluted losses per share             $   (0.13)        $   (0.15)
</TABLE>
 
Note 2
------

     In the opinion of the Corporation,  the accompanying unaudited consolidated
condensed  financial  statements  contain all  adjustments  (consisting  of only
normal recurring accruals and matters discussed in "Management's  Discussion and
Analysis of Financial Condition and Results of Operations") necessary to present
fairly the  financial  position at November 30, 1998,  the results of operations
for the  three-months  ended  November 30, 1998 and 1997 and  Statements of Cash
Flows for the three-months ended November 30, 1998 and 1997.

     The results of operations  for the  three-month  periods ended November 30,
1998 and 1997 are not  necessarily  indicative of the results to be expected for
the full year.

Note 3
------

Inventories - Fuel and Other Inventories:
                  (in Thousands)
<TABLE>
<CAPTION>
                                                      (Unaudited)
                                                      November 30,   August 31,
                                                         1998           1998    
                                                      -----------    --------- 
<S>                                                     <C>            <C>
     Fuels (at average cost)                            $3,851         $3,543
     Merchandise and Other (at average cost)             1,195          1,241
     Merchandise (at LIFO)                               1,241          1,035
                                                        ------         ------
                                                        $6,287         $5,819
                                                        ======         ======
</TABLE>

Note 4
------

     Pursuant to the  dividend  reinvestment  plan,  stockholders  can  reinvest
dividends  and make limited  additional  investments  in shares of Common Stock.
Shares issued through  dividend  reinvestment can be acquired on the open market
or original issue.





<PAGE>

                                 PART I - ITEM 2

Management's Discussion and Analysis of Financial
  Condition and Results of Operations

Results of Operations
---------------------

For the three months ended  November 30, 1998 versus 1997

     For the first quarter of fiscal 1999, the  consolidated net loss for Valley
Resources was $636,600 or $0.13 per share versus a net loss of $761,100 or $0.15
per share in the year earlier  quarter.  The utility  operations  lost  $748,700
versus $1,005,400 in fiscal 1998's first quarter. Nonutility operations provided
net income of  $112,100 in the first  quarter of fiscal 1999 versus  $244,300 in
the prior year's first quarter.

     Utility gas revenues  and volumes for the first  quarter of fiscal 1999 and
fiscal 1998 were as follows:
<TABLE>
<CAPTION>

                                                Revenues            Volumes (Mcf's)
                                                --------            ---------------
                                       1999         1998          1999           1998
                                       ----         ----          ----           ----
<S>                                <C>          <C>             <C>           <C>
Base Firm Sales Service            $8,563,800   $ 8,842,900     1,118,900     1,188,000
Base Firm Transportation              157,700        73,100       134,000        58,800
                                   ----------   -----------     ---------     ---------
     Subtotal                       8,721,500     8,916,000     1,252,900     1,246,800

Seasonal/dual fuel service            718,000       746,600     1,462,200     1,550,000
PGPA Revenues                         333,400       354,500          --            --
Other Revenues                         51,400        66,500          --            --
                                   ----------   -----------     ---------     ---------
     Total Utility Gas Revenues    $9,824,300   $10,083,600     2,715,100     2,796,800
                                   ==========   ===========     =========     =========
</TABLE>

 
     Base  firm  sales  service,  utility  service  to the  traditional  utility
customer that purchases a bundled service, declined primarily as some commercial
and industrial  customers elected to take service under the firm  transportation
service option. Although not significant in the first quarter,  weather was 10.4
percent warmer than the prior year and depressed firm sales in all categories in
the month of November.

     Increased  firm  transportation  from  the  above-mentioned  customers  and
increased usage of natural gas by existing firm transportation customers brought
this  service  level  increased  revenues  and  volumes as  compared to the year
earlier first quarter.

     Interruptible  service is provided on both a bundled sales basis as well as
transportation  only  service.  Interruptible  sales service  revenues  declined
$78,800 from the quarter  earlier  level  inspite of a 21.2 percent  increase in
volumes  sold.  The revenue  decline  relates  directly to the falling  price of
competitive fuels,  primarily fuel oil.  Interruptible  transportation  revenues
increased on a  comparative  basis as a result of downward  billing  adjustments
included in the first quarter of the prior year. The margin on seasonal sales is
passed through to firm customers through the PGPA and has no impact on operating
income.

     Nonutility  revenues totaled $5,446,000 for the three months ended November
30,  1998,  a decrease of 5.1 percent  from the first  quarter in fiscal 1998. A
decline in retail sales was  responsible  for the decrease from the prior fiscal
year. Retail  merchandise  sales experienced  declines as a result of lower unit
sales of residential home heating  equipment and  installations  due to a milder
than  normal  fall  season.  Revenues  from  all  other  nonutility  operations,
wholesale,  propane and AEC, improved as a result of increased units and volumes
sold.  Wholesale  revenues  benefited  from a stronger  regional  economy  which
increased  sales of existing  product lines.  Although the company  continues to
operate at a loss due to start up costs,  AEC revenues  increased as a result of
natural gas  vehicle  conversions.  Propane  revenues  increased  as a result of
offering fixed price contracts to customers  which increased  volumes of propane
sold.
<PAGE>

     Cost of gas sold  decreased  8.1 percent  from the prior year for the three
months ended  November  30, 1998 as a result of decreased  usage of firm natural
gas and lower  natural gas prices.  The average cost per Mcf of gas  distributed
was $3.94 versus $4.53 during the first quarter of fiscal 1998.

     The  decline  in  nonutility  sales  was  responsible  for the 5.9  percent
decrease  in cost of  sales-nonutility.  The slight  decline in other  operation
expense versus fiscal 1998 was attributable to decreased uncollectible expenses,
while maintenance expenses remained flat when compared to the prior fiscal year.

     Other  income  increased  $18,700  for the  quarter  compared to last year,
driven by an increase in income associated with other investments.

     For the three months ended  November 30, 1998,  interest  expense  remained
flat when  compared to the same  quarter  last year.  Interest  expense for both
periods was impacted by the corporate  refinancing and equity offering completed
at the end of fiscal 1997.

Liquidity and Capital Resources 
------------------------------- 

     Operations  during the first quarter  typically do not generate  sufficient
cash to meet gas costs and construction  requirements.  Management  believes the
available financing are sufficient to meet cash requirements for the foreseeable
future.  The  available  borrowings  under lines of credit at November 30, 1998,
were $31,000,000; there were $6,000,000 of short term borrowings outstanding.
 
     Cash  flow  was  negatively  impacted  during  the  first  quarter  by  the
requirement  to  increase  inventories  of  supplemental  fuels  to meet  winter
requirements.  Construction  expenditures  continued  during  the  first  fiscal
quarter, as planned, due to more favorable weather conditions, thereby adversely
effecting liquidity.

     A  receivable  lag that is  generally  experienced  during the first fiscal
quarter is expected to be reversed  in the second  fiscal  quarter and  revenues
should increase with colder weather. Cash flow should be favorable affected by a
reduction in construction expenditures which normally accompanies winter weather
conditions in the fiscal second quarter.

     In the first fiscal quarter, the Corporation  purchased a weather insurance
product  which applies to the winter  heating  season from November 1998 through
March 1999. This product  provides  insurance  against extreme shifts in weather
conditions  on both a colder than and warmer than normal basis as  determined by
degree  days.  The  insurance  coverage  either  pays to or  receives  from  the
Corporation  cash when degree days for the  measurement  period fall outside the
predetermined  variance  from  normal.  The  measurement  period  occurs  at the
expiration  of the policy.  The  Corporation  will not be able to determine  the
impact on earnings  or cash flow until the  expiration  of the policy  period in
March 1999.

Year 2000 Issues
----------------

     Certain of the software  applications  currently in use by the  Corporation
are  certified to be Year 2000  compliant by the software  vendors from whom the
applications were purchased.

     Certain other software applications currently in use by the Corporation are
not Year 2000 compliant.  The  Corporation has made plans to modify,  replace or
upgrade those  applications  which are not Year 2000 compliant before January 1,
2000. The  Corporation has conducted a survey and is compiling cost estimates of
the effort involved to perform those  modifications,  replacements and upgrades.
Currently,  management  believes  that  the cost to  bring  all of its  software
applications  into Year 2000 compliance will not have a material  adverse effect
on the  Corporation's  results of operations,  and involves a remaining  capital
outlay of  approximately  $50,000 to $100,000.  The Corporation is surveying its
significant  vendors  as to their year 2000  compliance.  Based on the nature of
their responses,  the Corporation will develop contingency plans as appropriate.
There can be no  guarantee  that the  systems  of other  companies  on which the
Corporation's systems rely will be timely converted, or that a failure to

<PAGE>

convert  by another  company,  or a  conversion  that is  incompatible  with the
Corporation's  systems,  would  not  have  a  material  adverse  impact  on  the
Corporation.

     The costs of the  project  and the date on which the  Corporation  plans to
complete the Year 2000  modifications  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;  actual  results could differ  materially  from those plans.  Specific
factors that might cause such material  differences include, but are not limited
to, the availability and cost of personnel  trained in this area, the ability to
locate and correct all  relevant  computer  programs  and  microprocessors,  and
similar uncertainties.
 
Forward Looking Statements; Risk and Uncertainties
--------------------------------------------------

     Statements  contained  in this  report  that are not  historical  facts are
forward-looking  statements  made pursuant to the safe harbor  provisions of the
Private  Securities  Litigation  Reform Act of 1995. In addition,  words such as
"believes,"  "anticipates,"  "expects" and similar  expressions  are intended to
identify forward looking statements. Certain factors that could cause the actual
results to differ  materially  from  those  projected  in these  forward-looking
statements  include,  but are not limited to: variations in weather,  changes in
the regulatory  environment,  customers' preferences on energy sources,  general
economic conditions, increased competition and other uncertainties, all of which
are  difficult  to  predict,  and many of which are  beyond  the  control of the
Corporation.



                           PART II: OTHER INFORMATION

Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

     The Annual Meeting of  Stockholders of Valley  Resources,  Inc. was held on
December 8, 1998, for the purpose of electing a board of directors.  Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities  Exchange
Act of  1934  and  there  was no  solicitation  in  opposition  to  management's
solicitations.

     All of  management's  nominees for directors  were elected by the following
vote:

                                                        Shares         Shares
                                                         Voted          Voted
                                                         "For"       "Withheld"
                                                        ------       ----------

     James M. Dillon                                   4,410,675       62,263
     Jonathan K. Farnum                                4,417,194       55,744
     John F. Guthrie, Jr.                              4,413,878       59,060


Item 6 - Exhibits and Reports on Form 8-K

     (a)   27.  Financial Data Schedule.

     (b)   The Company did not file a Form 8-K.




<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.

                                  VALLEY RESOURCES, INC. AND SUBSIDIARIES


 
                                                   S/K. W. Hogan
                                  ----------------------------------------------
                                                     K. W. Hogan
                                  Senior Vice President, Chief Financial Officer
                                                    and Secretary


January 14, 1999