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 May 31, 1997

                                       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      May 31, 1997  

                           $1 Par Value             4,264,346

<PAGE>


                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                  MAY 31, 1997

                                                                     Page of
                                                                    Form 10-Q
                                                                    ---------

PART    I:    FINANCIAL INFORMATION

Item    1.    Financial Statements

              Consolidated Condensed Statements of Income--for
              the three and nine months ended May 31, 1997
              and 1996.....................................................  3

              Consolidated Condensed Balance Sheets--May 31,
              1997 and August 31, 1996...................................4 & 5

              Consolidated Condensed Statements of Cash Flows--for
              the nine months ended May 31, 1997 and 1996..................  6

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

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

Item 6(a)     Exhibits..................................................... 10

 
PART   II:    OTHER INFORMATION

Item    6.    Exhibits and Reports on Form 8-K..............................11

<PAGE>


PART I:  FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS


VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                                         3 Months Ended                  9 Months Ended
                                                    May 31,         May 31,          May 31,           May 31,
                                                      1997            1996            1997              1996
                                                    (in thousands except share and per share numbers)
<S>                                                 <C>          <C>              <C>               <C>
Operating Revenues:
   Utility Gas Revenues                             $   21,289   $   19,126       $   57,412        $   53,088
   Nonutility Revenues                                   4,992        4,539           16,141            14,923
                                                    ----------   ----------       ----------        ----------
             Total                                      26,281       23,665           73,553            68,011
                                                    ----------   ----------       ----------        ----------
 
Operating Expenses:
   Cost of Gas Sold                                     12,568       10,152           33,146            27,950
   Cost of Sales - Nonutility                            3,414        3,095           11,134            10,372
   Operations                                            4,405        4,488           13,659            13,470
   Maintenance                                             426          430            1,253             1,232
   Depreciation and Amortization                           778          750            2,333             2,212
   Taxes - Other Than Federal Income                     1,176        1,121            3,400             3,273
      - Federal Income                                     847          920            1,969             2,330
                                                    ----------   ----------       ----------        ----------
Total                                                   23,614       20,956           66,894            60,839
                                                    ----------   ----------       ----------        ----------
Operating Income                                         2,667        2,709            6,659             7,172
Other Income - Net of Tax                                  111           61              268               332  
                                                    ----------   ----------       ----------        ----------   
Total Income                                             2,778        2,770            6,927             7,504
                                                    ----------   ----------       ----------        ----------
Interest Charges:
   Long-Term Debt                                          492          489            1,457             1,438
   Other                                                   330          286            1,026               991
                                                    ----------   ----------       ----------        ----------
             Total                                         822          775            2,483             2,429
                                                    ----------   ----------       ----------        ----------
Net Income                                          $    1,956   $    1,995       $    4,444        $    5,075     
                                                    ==========   ==========       ==========        ==========     
Average Number of Common
  Shares Outstanding                                 4,264,660    4,262,970        4,262,679         4,255,017

Earnings Per Average Common Share
  Outstanding                                            $0.46        $0.47           $1.04              $1.19
 
Dividends Declared on Common Stock                       $0.185       $0.1825         $0.55              $0.5425


</TABLE>

The accompanying Notes are an integral part of these statements.

                                       3
<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
 
 
                                                                                    (Unaudited)
                                                                                      May 31,         Aug. 31,
                                                                                       1997             1996   
                                                                                       ----             ----   
                                                                                          (in thousands)
<S>                                                                                   <C>               <C>
ASSETS
Utility Plant - Net                                                                   $49,987           $49,442
                                                                                      -------           -------
Leased Property - Net                                                                   2,505             2,945
                                                                                      -------           -------
Nonutility Property-Net                                                                 3,677             3,568
                                                                                      -------           -------   
Other Investments                                                                       1,577             1,510
                                                                                      -------           -------
Current Assets:
   Cash                                                                                   741               507
   Accounts Receivable - Net                                                           14,797             9,946
   Deferred Fuel Costs                                                                    -0-               827
   Deferred Unbilled Gas Costs                                                            496               439
   Fuel and Other Inventories (Note 3)                                                  4,098             6,048
   Prepayments                                                                            557             1,409
   Common Stock held for Dividend Reinvestment-amounting
     to 15,682 and 10,813 shares respectively (Note 4)                                    187               131
                                                                                      -------           -------
           Total                                                                       20,876            19,307
                                                                                      -------           -------
Deferred Debits:
   Recoverable Postretirement Benefits                                                    520               693
   Recoverable Vacations Accrued                                                          795               633
   Unamortized Debt Discount and Expense                                                1,480             1,523
   Prepaid Pensions                                                                     6,864             6,171
   Recoverable Deferred FIT                                                             6,070             5,970
   Recoverable Transition Obligation                                                    1,700             1,700
   Other                                                                                3,209             3,227
                                                                                      -------           -------
                                                                                       20,638            19,917
                                                                                      -------           -------
           Total                                                                      $99,260           $96,689
                                                                                      =======           =======
                                                                                      

</TABLE>

The accompanying Notes are an integral part of these statements.


                                       4
<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

 
                                                                                   (Unaudited)
                                                                                      May 31,          Aug. 31,
                                                                                       1997             1996   
                                                                                       ----             ----   
                                                                                           (in thousands)
<S>                                                                                  <C>               <C>
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                                                                      $  4,280          $  4,280
   Paid In Capital                                                                     18,159            18,204
   Retained Earnings                                                                    9,851             7,750
   Less: Accounts Receivable from ESOP                                                 (2,951)           (3,142)
                                                                                     --------          -------- 
           Total Common Stock Equity                                                   29,339            27,092
                                                                                     --------          --------
Long-Term Debt (Less Current Maturities):
   8% First Mortgage Bonds, Series Due 2022                                            20,130            20,212
   9% Notes Payable, Due 1999                                                           2,139             2,139
   Notes Payable                                                                          905               905
                                                                                     --------          --------
           Total Long-Term Debt                                                        23,174            23,256
                                                                                     --------          --------
                  Total Capitalization                                                 52,513            50,348
                                                                                     --------          --------
Revolving Under Capital Lease                                                           2,300             2,200
                                                                                     --------          --------
Obligation Under Capital Lease                                                          1,636             2,134
                                                                                     --------          --------
Current Liabilities:
   Current Maturities of Long-Term Debt                                                   500               500
   Obligation Under Capital Lease                                                         869               811
   Notes Payable                                                                       12,000            14,900
   Accounts Payable                                                                     4,799             5,243
   Deferred Fuel Costs                                                                  1,304               -0-
   Security Deposits & Refund Obligations                                               1,075             1,097
   Taxes Accrued                                                                        2,246               190
   Accrued Interest                                                                       939               552
   Other                                                                                  911               712
                                                                                     --------          --------
           Total                                                                       24,643            24,005
                                                                                     --------          --------
Commitments and Contingencies
Deferred Credits                                                                        6,682             6,740
                                                                                     --------          --------
Deferred Federal Income Taxes                                                          11,486            11,262
                                                                                     --------          --------
                                                                                     $ 99,260          $ 96,689
                                                                                     ========          ========
</TABLE>
The accompanying Notes are an integral part of these statements.


                                       5
<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                                                                            For the 9 Months
                                                                                                 Ended
                                                                                       May 31,           May 31,
                                                                                        1997               1996   
                                                                                        ----               ----   
                                                                                             (in thousands)
<S>                                                                                   <C>               <C>
Cash Flows from Operating Activities:
   Net Income                                                                         $ 4,444           $ 5,075
   Adjustments to Reconcile Net Income to Net Cash provided by
   Operating Activities:
     Depreciation and Amortization                                                      2,333             2,212
     Provision for Uncollectibles                                                       1,159             1,087
Deferred Federal Income Taxes                                                             108               434
   Change in Assets and Liabilities:
     Accounts Receivable                                                               (6,011)           (3,516)
     Deferred Fuel Costs                                                                2,131            (1,858)
     Unbilled Gas Costs                                                                   (57)              (49)
     Fuel and Other Inventories                                                         1,950             1,668
     Other Current Assets                                                                 103               319
     Accounts Payable, Accrued Expenses and Current Liabilities                         1,590             1,966
     Other - Net                                                                          809               130
                                                                                       ------            ------
           Net Cash Provided by Operating Activities                                    8,559             7,468
                                                                                       ------            ------
Cash Flows from Investing Activities:
   Utility Capital Expenditures                                                        (2,457)           (3,248)
   Nonutility Capital Expenditures                                                       (530)             (460)
   Other Investments                                                                      (67)              (55)
                                                                                       ------            ------
           Net Cash Used in Investing Activities                                       (3,054)           (3,763)
                                                                                       ------            ------
Cash Flows from Financing Activities:
     Dividends Paid                                                                    (2,344)           (2,305)
     Capital Stock Transactions                                                           (45)              130
     Issuance of Long Term Debt                                                           100             2,200
     Retirement of Long-Term Debt                                                         (82)             (825)
     Decrease in Notes Payable                                                         (2,900)           (2,600)
                                                                                       ------            ------
           Net Cash Used in Financing Activities                                       (5,271)           (3,400)
 
Net Increase in Cash                                                                      234               305
Cash - Beginning                                                                          507               455
                                                                                      -------           -------
Cash - Ending                                                                         $   741           $   760
                                                                                      =======           =======
Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                                                         $ 2,092           $ 2,136
                                                                                      =======           =======
     Federal Income Taxes                                                             $   386           $   725
                                                                                      =======           =======
   Capital Lease Obligations Incurred                                                 $   314           $ 1,804
                                                                                      =======           =======
</TABLE>

The accompanying Notes are an integral part of these statements.

                                       6
<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1
------

     The Corporation computes earnings per average common share based on the
weighted average number of shares outstanding during the period.

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 as of May 31, 1997 the results of operations  for
the three and nine  months  ended May 31,  1997 and 1996 and  Statement  of Cash
Flows for the nine months ended May 31, 1997 and 1996.

     The results of operations for the three- and  nine-month  periods ended May
31, 1997 and 1996 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)                
                                                           May 31,            August 31,
                                                            1997                 1996        
                                                            ----                 ----
<S>                                                        <C>                  <C>        
       Fuels (at average cost)                             $1,582               $3,623
       Merchandise and Other (at average cost)              1,183                1,199
       Merchandise (at LIFO)                                1,333                1,226
                                                           ------               ------
                                                           $4,098               $6,048
                                                           ======               ======

</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.

                                       7
<PAGE>





                                PART I - ITEM II

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

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

For the three months ended May 31, 1997 versus 1996

     Utility gas revenues  for the three  months  ended May 31, 1997,  the third
fiscal quarter,  totaled $21,288,900,  an increase of 11.3 percent over the same
period in fiscal 1996.  Revenues increased due to higher collections through the
PGPA and increased  transportation and seasonal revenue. PGPA revenues increased
as a result of an  increase  in the PGPA rate  charged to firm  customers;  this
increase  resulted  from prior  period  underrecoveries  being  collected in the
quarter and higher  estimated  gas costs for fiscal 1997.  PGPA  revenues do not
impact  operating  margin.   Revenues  generated  from  regulated  base  tariffs
decreased  3.2 percent when  compared to the prior year as a result of decreased
natural gas sales  resulting from warmer weather in the quarter when compared to
the same quarter last year.

     Gas  sales to firm  customers  during  the  third  fiscal  quarter  totaled
2,492,200 Mcf, a decrease of 3.0 percent from the prior year third quarter.  The
decrease  in gas sales is the result of a decline in usage by all firm  customer
categories.  Weather during the third  quarter,  as measured by degree days, was
1.6 percent  warmer than the same period last year. The weather during the third
fiscal  quarter does not have the same impact on gas sales as the second  fiscal
quarter, the winter period.

     Valley Gas transports natural gas owned by customers if delivered to Valley
Gas's gate station.  Transportation  revenues for the quarter  increased $94,700
over the same period in fiscal 1996 due to increased volumes transported.

     Nonutility  revenues totaled  $4,992,400 for the three months ended May 31,
1997, an increase of 10.0 percent over the third quarter in fiscal 1996.  During
the  third  quarter,  except  for the  propane  operations,  all the  nonutility
subsidiaries generated increased revenues.  The retail merchandising  operations
are continuing to be positively  impacted by the focus on the commercial markets
and electric heating conversions.  The Corporation's  subsidiary,  AEC completed
the  installation  and  upgrade of two  natural gas  refueling  stations,  which
contributed to increased third quarter revenues.  Propane revenues decreased due
to a decline in volumes of propane sold.

     The primary  contributor to the increase in operating  expenses  during the
third fiscal  quarter was a 23.7 percent  increase in the cost of gas sold.  The
average cost of gas  distributed to firm customers  during the quarter was $3.38
per Mcf for the three  months ended May 31, 1997 versus $3.90 per Mcf during the
third  quarter  of  fiscal  1996.  Changes  in gas  costs,  both  increases  and
decreases, are recovered from customers through the PGPA in subsequent periods.
    
     The  increase  in  nonutility  sales is  responsible  for the 10.3  percent
increase in cost of sales.  Other operation and maintenance  expenses  decreased
slightly during the period due to cost controls implemented by the utilities.

     Other income  increased  $49,300 for the quarter compared to last year. The
increase  is  the  result  of  the  receipt  of  income  associated  with  other
investments.

                                       8
<PAGE>
      
     For the three months ended May 31, 1997,  interest  expense  increased  6.0
percent over the same quarter  last year.  The increase in interest  expense was
the result of increases in short-term  borrowings,  slightly offset by decreased
PGPA interest.

For the nine months ended May 31, 1997 versus 1996

     For the  nine  months  ended  May  31,  1997,  utility  gas  revenues  were
$57,412,200,  an increase of 8.1 percent  over the same period in fiscal 1996. A
decrease in base revenues  generated from firm customers was offset by increased
collections through the PGPA and seasonal and transportation revenues.

     Base revenues  generated from the regulated tariffs declined 3.5 percent as
a result of  decreased  natural  gas sales  resulting  from  warmer  than normal
weather.  PGPA revenues  increased  $5,543,700  over the prior year's nine month
period due to an increase in the PGPA rate charged to firm customers.

     Seasonal  revenues  during the nine month period were 18.8  percent  higher
than the same  period  in  fiscal  1996 but the  volume  of  seasonal  gas sales
increased only 13.4 percent.  Sales to seasonal customers are dependent upon the
availability  of natural gas and the price of alternate  fuels.  Margins  earned
from seasonal sales are returned to firm  customers  through the PGPA and do not
impact the profitability of the company.

     Valley Gas transports natural gas owned by customers if delivered to Valley
Gas's gate station.  Transportation revenues for the nine month period increased
$180,100  over  the  same  period  in  fiscal  1996  due  to  increased  volumes
transported.

     Gas sold to firm  customers  decreased 4.3 percent to 7,110,200 Mcf for the
nine  months  ended May 31,  1997.  The  decrease  in gas sales is the result of
warmer  weather  which was  partially  offset by an  increase  in the  number of
customers.  Weather, as measured by degree days, was 4.6 percent warmer than the
prior  year nine  month  period.  At May 31,  1997  there  were  62,181  utility
customers versus 61,979 at May 31, 1996.

     Nonutility  revenues  for  the  nine  months  ended  May 31,  1997  totaled
$16,141,400,  an increase  of 8.2 percent  over  fiscal  1996.  The  increase in
nonutility  revenues  was the  result  of  increases  in  retail  and  wholesale
merchandise sales,  revenues generated from propane operations and sales made by
AEC.  Conversions  from electric  heating,  sales in the commercial  markets and
increases in the wholesale  operation  contributed  to the  increased  revenues.
Propane revenues for the nine month period increased over the prior year period,
despite weather related decreases in gallons sold, due to price increases in the
cost of propane being passed along to customers.

     Operating  expenses  for the  1997  nine  month  period  were  impacted  by
increases in the cost of gas sold and nonutility cost of sales.  The cost of gas
sold  increased  when  compared to the same period last year as a result of both
the purchase price of natural gas and the increased gas cost related to the PGPA
revenue  reconciliation.  The average cost of gas  distributed to firm customers
was $3.98 per Mcf for the nine months  ended May 31, 1997  compared to $3.61 per
Mcf in the prior year period.  Nonutility  cost of sales  increased  7.3 percent
which is directly attributable to the increase in nonutility revenues.
 
     The  decrease in other  income of $63,600 for the nine month period was the
direct result of the decline in off-system  sales.  The decrease in other income
was offset by increased  interest  income and the recognition of income on other
investments.

                                       9
<PAGE>

     Interest expense increased 2.3 percent for the nine month period.  Interest
on  increased  short-term  borrowings  were  slightly  offset by a reduction  in
interest accrued on deferred fuel costs and lower borrowing rates.

Liquidity and Capital Resources 

     During the third fiscal quarter the liquidity  position of the  Corporation
improved  over the second  quarter  as a result of the  collection  of  accounts
receivable, the timing of tax payments and the receipt of a natural gas supplier
refund.  Management believes the available financing are sufficient to meet cash
requirements for the foreseeable future. The available borrowings under lines of
credit at May 31, 1997, were $17,000,000.
 
     Cash  flows were  impacted  during  the third  quarter by the  receipt of a
natural  gas  supplier  refund in the  amount of  $1,700,000.  This  refund  was
credited  to the PGPA  which had a  positive  impact  on  liquidity  during  the
quarter. Sales during the third quarter were less than anticipated due to warmer
than normal weather which impacted liquidity.
 
     On June 26, 1997,  Valley  Resources,  Inc. filed a registration  statement
with the Securities and Exchange  Commission,  to issue,  in a public  offering,
620,000  shares of common stock and  $7,000,000 of debentures  due 2027. The net
proceeds to the Corporation are expected to provide  approximately  $13,313,000,
of cash. The Corporation intends to contribute $6,663,100 of the net proceeds of
the offering to the Utilities as a capital contribution, subject to the approval
of the Rhode Island Division of Public Utilities, and the remainder will be used
to make loans to its other  subsidiaries  and to repay  short-term  debt and for
working capital requirements.

     Construction  expenditures  increased  during the third fiscal quarter,  as
planned, due to more favorable weather, thereby adversely effecting liquidity.

     The  liquidity  position of the  Corporation  will be  seasonally  affected
during the fourth quarter when gas  inventories  are  replenished for use during
winter  months and  revenues  decline as a result of the lack of  heat-sensitive
sales in the utility companies.

     Cash expended on the  construction  program will increase during the fourth
fiscal quarter which also impacts cash flows.

                               PART I - ITEM 6(a)

Item 6(a) - Exhibits
--------------------
            

27.  Financial Data Schedule

                                       10
<PAGE>





                           PART II - OTHER INFORMATION

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

(a)
  10) Loan Agreement between Valley  Resources,  Inc. and Fleet National Bank
      dated June 30, 1997. 
(b) The Company did not file a Form 8-K.

                                   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




July 11, 1997



                                       11
<PAGE>