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, 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                                     Nov. 30, 1997
       ---------------------                                     -------------

           $1 Par Value                                            4,965,557

<PAGE>

                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                NOVEMBER 30, 1997

                                                                      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, 1997
              and 1996...................................................     3

              Consolidated Condensed Balance Sheets--November 30,
              1997 and August 31, 1997................................... 4 & 5

              Consolidated Condensed Statements of Cash Flows--for
              the three-months ended November 30, 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...................................................     9


PART   II:    OTHER INFORMATION

Item     4.   Submission of Matters to a Vote of Security Holders........     9

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,
                                                      1997               1996
                                                      ----               ----

                                                             (in thousands)
                                                           (except share and
                                                          per share numbers)

<S>                                                <C>                <C>    
Operating Revenues:
   Utility Gas Revenues                            $  10,084          $  10,946
   Nonutility Revenues                                 5,741              5,394
                                                   ---------          ---------
             Total                                    15,825             16,340
                                                   ---------          ---------
Operating Expenses:
   Cost of Gas Sold                                    5,594              6,403
   Cost of Sales - Nonutility                          4,027              3,826
   Operations                                          4,715              4,557
   Maintenance                                           398                438
   Depreciation and Amortization                         825                778
   Taxes - Other Than Federal Income                     852                871
         - Federal Income                               (525)              (509)
                                                   ---------          --------- 
             Total                                    15,886             16,364
                                                   ---------          ---------
Operating Income (Loss)                                  (61)               (24)
Other Income - Net of Tax                                 49                 65
                                                   ---------          ---------
Total Income (Loss)                                      (12)                41
                                                   ---------          ---------
Interest Charges:
   Long-Term Debt                                        622                487
   Other                                                 127                326
                                                   ---------          ---------
             Total                                       749                813
                                                   ---------          ---------
Net Loss                                           $    (761)         $    (772)
                                                   =========          ========= 

Average Number of Common Shares Outstanding        4,939,253          4,261,618

Loss Per Average Common Share Outstanding             ($0.15)            ($0.18)

Dividends Declared on Common Stock                    $0.185            $0.1825

</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)
                                                      Nov. 30,         Aug. 31,
                                                        1997             1997   
                                                        ----             ----   
                                                           (in thousands)
<S>                                                   <C>              <C>
ASSETS
Utility Plant - Net                                   $ 50,982         $50,447
                                                      --------         -------
Leased Property - Net                                    2,288           2,377
                                                      --------         -------
Nonutility Property-Net                                  3,913           3,712
                                                      --------         -------
Other Investments                                        1,598           1,592
                                                      --------         -------
Current Assets:
   Cash                                                    891             820
   Accounts Receivable - Net                            10,961          11,183
   Deferred Fuel Costs                                     596             -0-
   Deferred Unbilled Gas Costs                           1,912             440
   Fuel and Other Inventories (Note 3)                   6,484           6,120
   Prepayments                                           1,017           1,290
   Common Stock held for Dividend Reinvestment-
     amounting to 27,471 and 31,179 shares 
     respectively (Note 4)                                 306             352
                                                      --------         -------
           Total                                        22,167          20,205
                                                      --------         -------
Deferred Debits:
   Recoverable Postretirement Benefits                     404             462
   Recoverable Vacations Accrued                           608             596
   Unamortized Debt Discount and Expense                 1,728           1,745
   Prepaid Pensions                                      7,528           7,095
   Recoverable Deferred FIT                              6,034           6,044
   Recoverable Transition Obligation                       373             373
   Other                                                 3,369           3,049
                                                      --------         -------
                                                        20,044          19,364
                                                      --------         -------
           Total                                      $100,992         $97,697
                                                      ========         =======
</TABLE>



The accompanying Notes are an integral part of these statements.

                                       4
<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>

 
                                                   (Unaudited)
                                                     Nov. 30,           Aug. 31,
                                                       1997               1997
                                                       ----               ----
                                                          (in thousands)
<S>                                                  <C>                <C>
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                                      $  4,993           $ 4,900
   Paid In Capital                                     24,903            24,035
   Retained Earnings                                    6,602             8,279
   Less: Accounts Receivable from ESOP                 (2,878)           (2,907)
                                                     --------           ------- 
           Total Common Stock Equity                   33,620            34,307
                                                     --------           -------
Long-Term Debt (Less Current Maturities):
   8% First Mortgage Bonds, Series Due 2022            20,090            20,090
   7.7% Debentures, Due 2027                            7,000             7,000
   9% Notes Payable, Due 1999                           2,139             2,139
   Note Payable                                         2,711             2,757
                                                     --------           -------
           Total Long-Term Debt                        31,940            31,986
                                                     --------           -------
                  Total Capitalization                 65,560            66,293
                                                     --------           -------
Revolving Credit Arrangement                            2,300             2,300
                                                     --------           -------
Obligation Under Capital Lease                          1,532             1,541
                                                     --------           -------
Current Liabilities:
   Current Maturities of Long-Term Debt                   150               150
   Obligation Under Capital Lease                         756               836
   Notes Payable                                        4,900             1,900
   Accounts Payable                                     6,090             4,298
   Security Deposits & Refund Obligations               1,037             1,035
   Taxes Accrued (Debit)                                 (804)              362
   Deferred Fuel Costs                                    -0-               793
   Accrued Interest                                     1,111               541
   Other                                                  754               697
                                                     --------           -------
           Total                                       13,994            10,612
                                                     --------           -------
Commitments and Contingencies
Deferred Credits                                        5,115             5,130
                                                     --------           -------
Deferred Federal Income Taxes                          12,491            11,821
                                                     --------           -------
                                                     $100,992           $97,697
                                                     ========           =======
</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 3 Months
                                                                   Ended
                                                           Nov. 30,     Nov. 30,
                                                             1997        1996   
                                                             ----        ----   
                                                              (in thousands)
<S>                                                        <C>          <C>
Cash Flows from Operating Activities:
   Net Loss                                                $  (761)     $  (772)
   Adjustments to Reconcile Net Loss to Net Cash used in
   Operating Activities:
     Depreciation and Amortization                             825          778
     Provision for Uncollectibles                              573          377
     Deferred Federal Income Taxes                             671          983
     Amortization of ITC                                       (12)         -0-
   Change in Assets and Liabilities:
     Accounts Receivable                                      (350)        (949)
     Deferred Fuel Costs                                    (1,389)      (1,202)
     Unbilled Gas Costs                                     (1,472)      (1,386)
     Fuel and Other Inventories                               (363)        (739)
     Other Current Assets                                     (114)          44
     Accounts Payable, Accrued Expenses and Current 
       Liabilities                                             628         (164)
     Other - Net                                               404          483
                                                           -------      -------
           Net Cash (Used) by Operating Activities          (1,360)      (2,547)
                                                           -------      ------- 
Cash Flows from Investing Activities:
   Utility Capital Expenditures                             (1,212)      (1,051)
   Nonutility Capital Expenditures                            (349)        (186)
   Other Investments                                            (7)         (13)
                                                           -------      ------- 
           Net Cash (Used) by Investing Activities          (1,568)      (1,250)
                                                           -------      ------- 
Cash Flows from Financing Activities:
     Dividends Paid                                           (917)        (778)
     Capital Stock Transactions                                962           (2)
     Insurance of Revolving Credit Arrangement                 -0-          100
     Retirement of Long-Term Debt                              (46)         (18)
     Increase in Notes Payable                               3,000        4,600
                                                           -------      -------
           Net Cash Provided by Financing Activities         2,999        3,902
                                                           -------      -------

Net Increase in Cash                                            71          105
Cash - Beginning                                               820          507
                                                           -------      -------
Cash - Ending                                              $   891      $   612
                                                           =======      =======

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                              $   179      $   371
                                                           =======      =======
     Federal Income Taxes                                  $   -0-      $   -0-
                                                           =======      =======
   Capital Lease Obligations Incurred                      $   139      $   101
                                                           =======      =======
</TABLE>

The accompanying Notes are an integral part of these statements.

                                       6
<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1
------

     The  Corporation  computes  its loss 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 at November 30, 1997,  the results of operations
for the  three-months  ended  November 30, 1997 and 1996 and  Statements of Cash
Flows for the three-months ended November 30, 1997 and 1996.

     The results of operations  for the  three-month  periods ended November 30,
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)
                                                   November 30,       August 31,
                                                       1997              1997
                                                       ----              ----
<S>                                                   <C>               <C>   
Fuels (at average cost)                               $4,053            $3,809
Merchandise and Other (at average cost)                1,151             1,253
Merchandise (at LIFO)                                  1,280             1,058
                                                      ------            ------
                                                      $6,484            $6,120
                                                      ======            ======
</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 2

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

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

     Utility gas revenues for the three months ended November 30 1997, the first
fiscal  quarter,  totaled  $10,083,600,  a decrease of 7.9 percent from the same
period in fiscal  1997.  Revenues  decreased  due to a decline in  interruptible
sales and  transportation  and lower  revenues  generated  from  regulated  base
tariffs offset slightly by increased PGPA revenues.

     Interruptible  sales  revenues  decreased  by $756,400 for the three months
ended  November 30, 1997,  when compared to the prior year as a result of a 56.9
percent decrease in gas sales. The level of interruptible  sales is dependent on
availability  of gas and the price of the customer's  alternate fuel. The margin
on seasonal sales is passed  through to firm customers  through the PGPA and has
no impact on operating income.

     Valley Gas transports natural gas owned by customers if delivered to Valley
Gas's  gate  station on both an  interruptible  and firm  basis.  Transportation
revenue  declined by $1,400 in the first  quarter of fiscal 1998.  Interruptible
transportation  revenues  declined by $74,500  during the first quarter from the
same period in fiscal 1997.  Interruptible  transportation  is used by customers
when their  alternate fuel price is above natural gas. During the first quarter,
large commercial and industrial sales customers were allowed to choose their gas
supplier under the Utilities firm transportation  tariffs.  These transportation
revenues generate  approximately the same margin as firm gas sales to this class
of  customer.  A total of $73,100 of  revenues  was  recorded  under  these firm
transportation tariffs.

     Revenues generated from base tariffs decreased 3.9 percent when compared to
the prior year as a result of lower firm  natural gas sales  primarily  due to a
transfer of sales customers to transportation as mentioned  earlier.  Offsetting
the base revenue  decline was an increase in PGPA  revenues.  An increase in the
PGPA rate charged to firm customers due to higher estimated gas costs for fiscal
1998 was responsible for the PGPA revenue increase.  PGPA revenues do not impact
operating margin.

     Total firm gas throughput, firm gas sales and firm transportation,  for the
first quarter  totaled  1,246,800 Mcf compared to 1,250,600 Mcf during the first
quarter of fiscal  1997.  Gas sales to firm  customers  during the first  fiscal
quarter  totaled  1,188,000  Mcf, a decrease of 5.0 percent  from the prior year
first  quarter.  The  decrease  in gas  sales is the  result of  commercial  and
industrial  customers  transferring to firm  transportation.  Weather during the
first quarter,  as measured by degree days, was 2.7 percent colder than the same
period last year.  The colder  weather  during the first fiscal quarter does not
have the same  impact on gas sales as the  second  fiscal  quarter,  the  winter
heating period. At November 30, 1997, there were 61,971 utility customers versus
61,445 at November 30, 1996.
 
     Nonutility  revenues totaled $5,740,800 for the three months ended November
30, 1997, an increase of 6.4 percent over the first quarter in fiscal 1997.  The
increase in nonutility  revenues is attributable to increased retail merchandise
sales.  Retail  merchandise  revenues  increased as a result of  commercial  and
industrial  sales of  gas-fueled  products  and the sale of  heating  systems to
customers converting to natural gas and propane.  The Corporation's  subsidiary,
AEC  experienced  a decline in revenues due to the timing of projects  currently
being completed.

     Cost of gas sold  decreased  12.6 percent when compared with the prior year
resulting  from a decline in  seasonal  and firm gas sales  offset  slightly  by
decreased  expenses related to the  reconciliation of the PGPA. The average cost
per Mcf of gas  distributed  was $4.53 versus $3.96 during the first  quarter of
fiscal 1997.

                                       8
<PAGE>

     The  increase  in  nonutility  sales  is  responsible  for the 5.2  percent
increase in cost of sales-nonutility.  Other operation expenses increased during
the  period  primarily  due to normal  salary  increases.  Maintenance  expenses
declined  slightly due to decreased  repairs on the LNG and propane peak shaving
facilities.

     Interest  expense totaled  $748,700 for the three months ended November 30,
1997,  a 7.8  percent  decrease  from the prior year.  A decrease in  short-term
interest expense was only partially offset by increased  long-term debt interest
associated with the corporate refinancing and equity offering done 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, 1997,
were $32,100,000.
 
     Cash  flows  were  negatively  impacted  during  the first  quarter  by the
requirement  to  increase  inventories  of  supplemental  fuels  to meet  winter
requirements and the unexpected increases in the price of natural gas.

     On September 24, 1997,  Valley Resources issued 93,000 additional shares of
common stock in fulfillment of the over-allotment option exercised in connection
with the August 1997  offering.  This common stock issuance  favorably  impacted
liquidity.
 
     Construction  expenditures  increased  during the first fiscal quarter,  as
planned, adversely effecting liquidity.

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


                               PART I - ITEM 6(a)

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

27.  Financial Data Schedule


                           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 9, 1997, 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.
                                       9
<PAGE>

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

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

       Melvin G. Alperin                           4,193,521           59,093
       Alfred P. Degen                             4,194,976           57,638
       C. Hamilton Davison                         4,187,143           65,471


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

       (a)   None.

       (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  Amendment  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, 1998

                                      10