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 February 28, 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                     February 28, 1997

             $1 Par Value                               4,265,606
<PAGE>


                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                FEBRUARY 28, 1997

                                                                       Page of
                                                                      Form 10-Q
                                                                      ---------
PART    I:    FINANCIAL INFORMATION

Item    1.    Financial Statements

              Consolidated Condensed Statements of Operations--for
              the three- and six-months ended February 28, 1997
              and 1996....................................................... 3

              Consolidated Condensed Balance Sheets--February 28,
              1997 and August 31, 1996................................... 4 & 5

              Consolidated Condensed Statements of Cash Flows--for
              the six-months ended February 28, 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    6.    Exhibits and Reports on Form 8-K............................... 9


<PAGE>

                                                         
                          PART I: FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS



VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                             3 Months Ended          6 Months Ended
                                         Feb. 28,      Feb. 29,   Feb. 28,      Feb. 29,
                                          1997          1996        1997         1996
                                        (in thousands except share and per share numbers)
<S>                                    <C>          <C>          <C>          <C> 
Operating Revenues:
   Utility Gas Revenues                $   25,177   $   24,563   $   36,123   $   33,962
   Nonutility Revenues                      5,755        5,687       11,149       10,383
                                        ----------   ----------   ----------   ----------   
      Total                                30,932       30,250       47,272       44,345
                                        ----------   ----------   ----------   ----------

Operating Expenses:
   Cost of Gas Sold                        14,175       12,746       20,578       17,798
   Cost of  Sales - Nonutility              3,894        3,961        7,720        7,277
   Operations                               4,698        4,713        9,255        8,981
   Maintenance                                388          414          826          803
   Depreciation and Amortization              778          750        1,555        1,462
   Taxes - Other Than Federal Income        1,352        1,321        2,224        2,153
         - Federal Income                   1,631        1,889        1,122        1,409
                                       ----------   ----------   ----------   ----------
      Total                                26,916       25,794       43,280       39,883
                                       ----------   ----------   ----------   ----------
Operating Income                            4,016        4,456        3,992        4,462
Other Income - Net of Tax                      93          233          158          271
                                       ----------   ----------   ----------   ----------
   Total Income                             4,109        4,689        4,150        4,733
                                       ----------   ----------   ----------   ----------
Interest Charges:
   Long-Term Debt                             477          479          964          948
   Other                                      372          355          698          706
                                       ----------   ----------   ----------   ----------
Total                                         849          834        1,662        1,654
                                       ----------   ----------   ----------   ----------
Net Income                             $    3,260   $    3,855   $    2,488   $    3,079
                                       ==========   ==========   ==========   ==========

                                      
Average Number of Common
  Shares Outstanding                    4,261,726    4,258,330    4,261,672    4,250,996

Earnings Per Average Common Share
  Outstanding                          $     0.76   $     0.91   $     0.58   $     0.72

Dividends Declared on Common Stock     $   0.1825   $     0.18   $    0.365   $     0.36
</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)
                                                           Feb. 28,    Aug. 31,                                                   
                                                             1997        1996   
                                                           --------    --------
                                                              (in thousands)
<S>                                                        <C>        <C>
ASSETS
Utility Plant - Net                                        $ 49,876   $ 49,442
                                                           --------   --------
Leased Property - Net                                         2,638      2,945
                                                           --------   --------
Nonutility Property-Net                                       3,657      3,568
                                                           --------   --------
Other Investments                                             1,531      1,510
                                                           --------   --------
Current Assets:
   Cash                                                         692        507
   Accounts Receivable - Net                                 16,746      9,946
   Deferred Fuel Costs                                        3,208        827
   Deferred Unbilled Gas Costs                                1,603        439
   Fuel and Other Inventories (Note 3)                        4,716      6,048
   Prepayments                                                  701      1,409
   Common Stock held for Dividend Reinvestment-amounting
     to 14,422 and 10,813 shares respectively (Note 4)          177        131
                                                           --------   --------
           Total                                             27,843     19,307
                                                           --------   --------
Deferred Debits:
   Recoverable Postretirement Benefits                          577        693
   Recoverable Vacations Accrued                                723        633
   Unamortized Debt Discount and Expense                      1,494      1,523
   Prepaid Pensions                                           6,633      6,171
   Recoverable Deferred FIT                                   6,183      5,970
   Recoverable Transition Obligation                          1,700      1,700
   Other                                                      3,007      3,227
                                                           --------   --------
                                                             20,317     19,917
                                                           --------   --------
           Total                                           $105,862   $ 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)
                                               Feb. 28,     Aug. 31,
                                                 1997         1996   
                                               --------     -------- 
                                            (in thousands)
<S>                                           <C>          <C>   
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                               $   4,280    $   4,280
   Paid In Capital                               18,170       18,204
   Retained Earnings                              8,683        7,750
   Less: Accounts Receivable from ESOP           (3,142)      (3,142)
                                              ---------    ---------
           Total Common Stock Equity             27,991       27,092
                                              ---------    ---------
Long-Term Debt (Less Current Maturities):
   8% First Mortgage Bonds, Series Due 2022      20,155       20,212
   9% Notes Payable, Due 1999                     2,139        2,139
   Notes Payable                                    905          905
                                              ---------    ---------
           Total Long-Term Debt                  23,199       23,256
                                              ---------    ---------
                  Total Capitalization           51,190       50,348
                                              ---------    ---------
Revolving Credit Arrangement                      2,300        2,200
                                              ---------    ---------
Obligation Under Capital Lease                    1,760        2,134
                                              ---------    ---------
Current Liabilities:
   Current Maturities of Long-Term Debt             500          500
   Obligation Under Capital Lease                   878          811
   Notes Payable                                 20,700       14,900
   Accounts Payable                               5,943        5,243
   Security Deposits & Refund Obligations         1,091        1,097
   Taxes Accrued                                    494          190
   Accrued Interest                                 556          552
   Other                                            906          712
                                              ---------    ---------
           Total                                 31,068       24,005
                                              ---------    ---------
Commitments and Contingencies
Deferred Credits                                  6,756        6,740
                                              ---------    ---------
Deferred Federal Income Taxes                    12,788       11,262
                                              ---------    ---------
                                              $ 105,862    $  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 6 Months 
                                                                           Ended 
                                                                   Feb. 28,    Feb. 29,
                                                                    1997        1996   
                                                                  --------    --------
                                                                     (in thousands)
<S>                                                                <C>        <C>    
Cash Flows from Operating Activities:
   Net Income                                                      $ 2,488    $ 3,079
   Adjustments to Reconcile Net Income to Net Cash used in
   Operating Activities:
     Depreciation and Amortization                                   1,555      1,462
     Provision for Uncollectibles                                      778        672
     Deferred Federal Income Taxes                                   1,410        774
   Change in Assets and Liabilities:
     Accounts Receivable                                            (7,578)    (6,269)
     Deferred Fuel Costs                                            (2,381)    (1,304)
     Unbilled Gas Costs                                             (1,164)    (1,381)
     Fuel and Other Inventories                                      1,332      1,874
     Other Current Assets                                              200        679
     Accounts Payable, Accrued Expenses and Current Liabilities        998      2,550
     Other - Net                                                       392        (54)
                                                                   -------    -------
        Net Cash (Used) Provided by Operating Activities            (1,970)     2,082
                                                                   -------    -------
   Cash Flows from Investing Activities:
   Utility Capital Expenditures                                     (1,708)    (2,435)
   Nonutility Capital Expenditures                                    (371)      (298)
   Other Investments                                                   (20)       (12)
                                                                   -------    -------
        Net Cash (Used) by Investing Activities                     (2,099)    (2,745)
                                                                   -------    -------
Cash Flows from Financing Activities:
     Dividends Paid                                                 (1,555)    (1,527)
     Capital Stock Transactions                                        (34)        56
     Issuance of Long Term Debt                                        100      2,200
     Retirement of Long-Term Debt                                      (57)      (825)
     Increase in Notes Payable                                       5,800      1,400
                                                                   -------    -------
        Net Cash Provided by Financing Activities                    4,254      1,304
                                                                   -------    -------
Net Increase in Cash                                                   185        641
Cash - Beginning                                                       507        455
                                                                   -------    -------
Cash - Ending                                                      $   692    $ 1,096
                                                                   =======    =======

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                                      $ 1,658    $ 1,732
                                                                   =======    =======
     Federal Income Taxes                                          $   -0-    $   -0-
                                                                   =======    =======
   Capital Lease Obligations Incurred                              $   201    $    99
                                                                   =======    =======
</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 February 28, 1997 the results of operations
for the three- and six-months  ended February 28, 1997 and 1996 and Statement of
Cash Flows for the six-months ended February 28, 1997 and 1996.

     The  results  of  operations  for the three- and  six-month  periods  ended
February 28, 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)
                                                 February 28,        August 31,
                                                    1997                1996  
                                                 ------------        ----------
<S>                                                 <C>                <C>       
       Fuels (at average cost)                      $2,140             $3,623
       Merchandise and Other (at average cost)       1,106              1,199
       Merchandise (at LIFO)                         1,470              1,226
                                                    ------             ------
                                                    $4,716             $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 February 28, 1997 vs 1996

     Utility gas  revenues for the three  months  ended  February 28, 1997,  the
second fiscal quarter,  totaled  $25,177,300,  an increase of 3 percent over the
same period in fiscal  1996.  The revenue  increase is  primarily  the result of
collections through the PGPA and increased  transportation  revenues offset by a
decrease in base revenues.  PGPA revenues increased due to increases in the cost
of  natural  gas  paid by the  utilities;  this  increase  does not  impact  the
profitability  of the company  because it is a pass-through of gas cost changes.
Revenues  generated  from the  regulated  base  tariffs  declined 8 percent when
compared to the prior year as a result of decreased natural gas sales.

     Gas sales to firm  customers  during  the  second  fiscal  quarter  totaled
3,367,400  Mcf, a decrease of 8 percent from the prior year. The decrease in gas
sales is the result of warmer  weather.  Weather during the second  quarter,  as
measured by degree days, was 10 percent warmer than the same period last year.

     Valley Gas transports natural gas owned by customers if delivered to Valley
Gas's gate station.  Transportation  revenues for the quarter  increased $42,600
over the same period in fiscal 1996 due to increased volumes transported.

     Nonutility  revenues totaled $5,755,400 for the three months ended February
28,  1997,  an increase  of 1 percent  over the second  quarter in fiscal  1996.
During  the  second  quarter  the  operations  of  all  nonutility  subsidiaries
generated  increased  revenues,   except  retail  merchandise.   The  continuing
strategic focus toward commercial and industrial markets, as well as on electric
heating  conversions,  which  generate  higher  margins,  resulted in  increased
profitability  despite  decreased  retail  merchandise  sales.  Propane revenues
increased  due to price  increases,  despite a decline in volume of propane sold
resulting from the warmer weather.

     The primary  contributor to the increase in operating  expenses  during the
second fiscal  quarter was an 11 percent  increase in the cost of gas sold.  The
average  cost of gas  distributed  to firm  customers  was $4.46 per Mcf for the
three  months  ended  February  28, 1997 versus  $3.54 per Mcf during the second
quarter  of fiscal  1996.  Changes  in gas costs are  recovered  from  customers
through the PGPA.

     The decrease in merchandise retail sales is responsible for the decrease in
nonutility cost of sales. Other operation expenses decreased slightly during the
period  as a  result  of a  reduction  in  costs  associated  with  the  propane
operations due to the warmer weather.

     Other income decreased  $140,800 for the quarter compared to last year. The
second  quarter of fiscal 1996  included  other income of $275,000  generated by
off-system  sales.  This was offset slightly by increased  interest income.  Off
-system sales are natural gas sales arranged by the utility to customers outside
the franchise area at market  clearing  prices.  Gas becomes  available for sale
through  acquisition  rights  available  to the  utility and from  supplies  not
required to meet firm market demand. This market did not materialize this winter
and as a result the  company  was unable to generate  revenues  from  off-system
sales.

     For the three months ended February 28, 1997,  interest expense increased 2
percent over the same quarter  last year.  The increase in interest  expense was
the result of increases in short-term borrowings.

                                       8

<PAGE>




For the six months ended February 28, 1997 vs 1996

     For the six months  ended  February 28,  1997,  utility gas  revenues  were
$36,123,400,  an increase of 6 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 revenues. Base revenues generated from
the regulated  tariffs  declined 4 percent as a result of decreased  natural gas
sales. PGPA revenues increased $2,971,300 over the prior six month period.
 
     Seasonal  revenues  increased  by 27 percent but the volume of seasonal gas
sales increased only 5 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.
 
     Gas sold to firm customers decreased 5 percent to 4,617,900 Mcf for the six
months  ended  February  28,  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 percent warmer than the
prior year six month  period.  At February  28,  1997 there were 62,603  utility
customers versus 62,149 at February 29, 1996.

     Nonutility  revenues  for the six months  ended  February  28, 1997 totaled
$11,148,900,  an  increase  of 7 percent  over  fiscal  1996.  The  increase  in
nonutility  revenues  is  the  result  of  increases  in  retail  and  wholesale
merchandise  sales,  revenues generated from propane operations and the addition
of revenues  generated by AEC.  Conversions  of electric  heating , sales in the
commercial markets and increases in the wholesale  operation  contributed to the
increased  revenues.  Propane  revenues  increased  despite  a  drop  in  volume
resulting from the warmer weather due to price  increases in the cost of propane
being passed along to customers.

     Operating  expenses for the six month period were  impacted by increases in
the  cost of gas  sold  and  nonutility  cost of  sales.  The  cost of gas  sold
increased  16 percent when  compared to the same period last year.  Increases in
the purchase price of natural gas was the primary contributor to the increase in
cost of gas sold.  The average cost of gas  distributed  to firm  customers  was
$4.43 per Mcf for the six months ended February 28, 1997 versus $3.63 per Mcf in
the prior year. Nonutility cost of sales increased 6 percent which is
directly attributable to the increase in nonutility revenues.

     The  decrease in other  income of $112,900 for the six month period was the
direct result of the decline in off-system  sales.  The decrease in other income
was offset by increased interest income.

     Interest  expense  remained  flat  for  the  six  month  period.  Increased
short-term borrowings were offset by a reduction in interest accrued on deferred
fuel costs and lower  borrowing  rates.  The PGPA requires a  reconciliation  of
actual  gas  costs  and the  amount  collected  through  the PGPA  clause.  This
reconciliation results in either a deferred fuel cost liability (amounts owed to
customers) or a deferred fuel cost receivable  (amounts owed by customers to the
company).  If there is a liability to customers,  interest expense is accrued by
the company, if there is a receivable  interest income is recorded.  For most of
the first six months of fiscal  1997,  the  deferred  fuel cost was a receivable
from the customer,  versus a liability in fiscal 1996.  This situation  resulted
from the rapid, unanticipated rise in natural gas prices this year.

Liquidity and Capital Resources 

     During the second fiscal quarter the liquidity  position of the Corporation
improved  over the first  quarter as a result of increased  revenues from winter
period  sales,  increased  PGPA  collections  and  increased  nonutility  sales.
Management  believes  the  available  financings  are  sufficient  to meet  cash
requirements for the foreseeable future. The available borrowings under lines of
credit at February 28, 1997, were $8,300,000.

                                       9

<PAGE>

     Cash flows were negatively  impacted during the second quarter by increases
in the cost of natural gas and propane. Sales during the second quarter, despite
being greater than the first quarter,  were less than  anticipated due to warmer
than  normal  winter   weather  which  also   negatively   impacted   liquidity.
Additionally,  the warmer weather  resulted in the holding of supplemental  fuel
inventories which were anticipated to be sold.

     Construction  expenditures  declined during the second fiscal  quarter,  as
planned,  due to constraints caused by the weather,  thereby adding favorably to
liquidity.

     The liquidity  position of the Corporation is anticipated to improve in the
third  quarter as winter bills are  collected  and  increased  gas costs will be
recovered through the PGPA. In addition,  the company anticipates a gas supplier
refund in the third  quarter  which will reduce the deferred  fuel cost account,
which will positively impact liquidity.

     Cash expended on the  construction  program will increase  during the third
fiscal quarter which will negatively impact cash flows;  however, this increased
cash requirement should be offset by the improved cash flows.


                               PART I - ITEM 6(a)

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

27.  Financial Data Schedule

                           PART II - OTHER INFORMATION

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

(a)   None.
(b)  The Company did not file a Form 8-K.




                                       10
<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



April 14, 1997

                                       11