FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

          (X) QUARTERLY REPORT PURSUANT TO SECTION 13 1OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended February 28, 1999

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
           For the transition period from _____________to ____________

                          Commission File number 1-7924


                             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)
 
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                                  Feb. 28, 1999

              $1 Par Value                                         4,985,129

<PAGE>


                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                FEBRUARY 28, 1999

                                                                       Page of
                                                                      Form 10-Q

PART   I:    FINANCIAL INFORMATION

Item   1.    Financial Statements

             Consolidated Condensed Statements of Earnings--for
             the three- and six-months ended February 28, 1999
             and 1998........................................................ 3

             Consolidated Condensed Balance Sheets--February 28,
             1999 and August 31, 1998.................................... 4 & 5

             Consolidated Condensed Statements of Cash Flows--for
             the six-months ended February 28, 1999 and 1998................. 6

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

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

 
PART  II:    OTHER INFORMATION

Item   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 Earnings
(Unaudited)
<TABLE>
<CAPTION>

                                           3 Months Ended             6 Months Ended
                                        Feb. 28,     Feb. 28,      Feb. 28,     Feb. 28,
                                          1999         1998          1999         1998   
                                        --------     --------      --------     -------- 
                                        (in thousands except share and per share numbers)
<S>                                    <C>          <C>          <C>          <C>
Operating Revenues:
  Utility Gas Revenues                 $   23,345   $   24,830   $   33,169   $   34,913
  Nonutility Revenues                       5,856        5,598       11,302       11,339
                                       ----------   ----------   ----------   ----------
     Total                                 29,201       30,428       44,471       46,252
                                       ----------   ----------   ----------   ----------

Operating Expenses:
  Cost of Gas Sold                         12,725       13,688       17,868       19,281
  Cost of Sales - Nonutility                3,621        3,800        7,409        7,827
  Operations                                4,492        4,818        9,103        9,533
  Maintenance                                 428          417          837          815
  Depreciation and Amortization               852          825        1,708        1,651
  Taxes - Other Than Federal Income         1,330        1,368        2,196        2,220
        - Federal Income                    1,775        1,593        1,326        1,068
                                       ----------   ----------   ----------   ----------
        Total                              25,223       26,509       40,447       42,395
                                       ----------   ----------   ----------   ----------
  Operating Income                          3,978        3,919        4,024        3,857
  Other Income - Net of Tax                    81           72          150          122
                                       ----------   ----------   ----------   ----------
  Total Income                              4,059        3,991        4,174        3,979
                                       ----------   ----------   ----------   ----------
Interest Charges:
  Long-Term Debt                              610          611        1,230        1,233
  Other                                       157          149          288          276
                                       ----------   ----------   ----------   ----------
     Total                                    767          760        1,518        1,509
                                       ----------   ----------   ----------   ----------
Net Income                             $    3,292   $    3,231   $    2,656   $    2,470
                                       ==========   ==========   ==========   ==========
Average Number of Common
  Shares Outstanding                    4,976,890    4,970,959    4,980,682    4,955,018

Basic Earnings Per Average Common
  Share Outstanding                         $0.66        $0.65        $0.53        $0.50

Dividends Declared on Common Stock        $0.1875       $0.185       $0.375        $0.37

</TABLE>


The accompanying Notes are an integral part of these statements.



<PAGE>

                                                         
VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
 
                                                         (Unaudited)
                                                           Feb. 28,   Aug. 31,
                                                             1999       1998   
                                                           --------   -------- 
                                                              (in thousands)
<S>                                                        <C>        <C>                   
ASSETS
Utility Plant - Net                                        $ 51,755   $ 51,310
                                                           --------   --------
Leased Property - Net                                         1,926      2,303
                                                           --------   --------
Nonutility Property-Net                                       4,147      4,106
                                                           --------   --------
Other Investments                                             1,659      1,637
                                                           --------   --------
Current Assets:
  Cash                                                          554        813
  Accounts Receivable - Net                                  16,384      9,684
  Deferred Fuel Costs                                           -0-        485
  Deferred Unbilled Gas Costs                                 1,695        438
  Fuel and Other Inventories (Note 3)                         4,752      5,819
  Prepayments                                                   806      1,353
  Common Stock held for Dividend Reinvestment-amounting
    to 7,899 and 10,116 shares respectively (Note 4)            101        121
                                                           --------   --------
          Total                                              24,292     18,713
                                                           --------   --------
Deferred Debits:
  Recoverable Postretirement Benefits                           115        231
  Recoverable Vacations Accrued                                 761        633
  Unamortized Debt Discount and Expense                       1,678      1,712
  Prepaid Pensions                                            9,606      8,824
  Recoverable Deferred FIT                                    5,997      6,109
  Recoverable Transition Obligation                              21         21
  Other                                                       3,250      2,882
                                                           --------   --------
                                                             21,428     20,412
                                                           --------   --------
          Total                                            $105,207   $ 98,481
                                                           ========   ========
</TABLE>


The accompanying Notes are an integral part of these statements.


<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                                                 (Unaudited)
                                                                   Feb. 28,     Aug. 31,
                                                                     1999         1998   
                                                                 -----------    -------- 
                                                                       (in thousands)
<S>                                                              <C>            <C>

CAPITALIZATION & LIABILITIES
Capitalization:
  Common Stock                                                   $  4,993       $  4,993
  Paid In Capital                                                  24,779         24,811
  Retained Earnings                                                 8,983          8,187
  Less: Accounts Receivable from ESOP                              (2,683)        (2,768)
                                                                 --------       -------- 
         Total Common Stock Equity                                 36,072         35,223
                                                                 --------       --------
Long-Term Debt (Less Current Maturities):
  8% First Mortgage Bonds, Series Due 2022                         20,029         20,039
  7.7% Debentures, Due 2027                                         7,000          7,000
  Notes Payable                                                     2,524          2,599
                                                                 --------       --------
         Total Long-Term Debt                                      29,553         29,638
                                                                 --------       --------
               Total Capitalization                                65,625         64,861
                                                                 --------       --------
Revolving Credit Arrangement                                        2,400          2,400
                                                                 --------       --------
Obligation Under Capital Lease                                      1,149          1,528
                                                                 --------       --------
Current Liabilities:
  Current Maturities of Long-Term Debt                              2,289          2,289
  Obligation Under Capital Lease                                      777            775
  Notes Payable                                                     5,200          2,300
  Accounts Payable                                                  4,892          4,275
  Security Deposits & Refund Obligations                              974            977
  Taxes Accrued                                                     1,586            435
  Deferred Fuel Costs                                                 929            -0-
  Accrued Interest                                                    727            794
  Other                                                               891            741
                                                                 --------       --------
         Total                                                     18,265         12,586
                                                                 --------       --------
Commitment and Contingencies
Deferred Credits                                                    4,516          4,513
                                                                 --------       --------
Deferred Federal Income Taxes                                      13,252         12,593
                                                                 --------       --------
                                                                 $105,207       $ 98,481
                                                                 =========      ========
</TABLE>

The accompanying Notes are an integral part of these statements. 



<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                                                  For the 6 Months
                                                                       Ended
                                                                 Feb. 28,   Feb. 28,
                                                                   1999       1998   
                                                                 --------   -------- 
                                                                    (in thousands)
<S>                                                              <C>        <C>
Cash Flows from Operating Activities:
  Net Income                                                     $ 2,656    $ 2,470
  Adjustments to Reconcile Net Income to Net Cash used in
  Operating Activities:
    Depreciation and Amortization                                  1,708      1,651
    Provision for Uncollectibles                                     624      1,081
    Deferred Federal Income Taxes                                    659        578
    Amortization of ITC                                              (24)       (24)
  Change in Assets and Liabilities:
    Accounts Receivable                                           (7,324)    (6,412)
    Deferred Fuel Costs                                            1,414        (64)
    Unbilled Gas Costs                                            (1,257)      (974)
    Fuel and Other Inventories                                     1,067      1,555
    Other Current Assets                                            (215)      (174)
    Accounts Payable, Accrued Expenses and Current Liabilities     1,764      1,755
    Other - Net                                                      (35)       485
                                                                 -------    -------
          Net Cash Provided by Operating Activities                1,037      1,927
                                                                 -------    -------
  Cash Flows from Investing Activities:
  Utility Capital Expenditures                                    (1,860)    (2,016)
  Nonutility Capital Expenditures                                   (336)      (641)
  Other Investments                                                  (23)       (17)
                                                                 -------    ------- 
          Net Cash Used by Investing Activities                   (2,219)    (2,674)
                                                                 -------    ------- 
  Cash Flows from Financing Activities:
    Dividends Paid                                                (1,859)    (1,850)
    Capital Stock Transactions                                       (33)       877
    Retirement of Long-Term Debt                                     (85)      (134)
    Increase in Notes Payable                                      2,900      2,000
                                                                 -------    -------
          Net Cash Provided by Financing Activities                  923        893
                                                                 -------    -------

  Net (Decrease) Increase in Cash                                   (259)       146
  Cash - Beginning                                                   813        820
                                                                 -------    -------
  Cash - Ending                                                  $   554    $   966
                                                                 =======    =======

Supplemental Disclosures of Cash Flow Information
  Cash Paid During the Period for:
    Interest                                                     $ 1,585    $ 1,262
                                                                 =======    =======
  Federal Income Taxes                                           $   -0-    $   -0-
                                                                 =======    =======
  Capital Lease Obligations Incurred                             $    11    $   177
                                                                 =======    =======
</TABLE>
 
The accompanying Notes are an integral part of these statements.



<PAGE>

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Note 1
------

     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 February 28, 1999,  the results of operations
for the three- and six-months  ended February 28, 1999 and 1998 and Statement of
Cash Flows for the six-months ended February 28, 1999 and 1998.

     The  results  of  operations  for the three- and  six-month  periods  ended
February 28, 1999 and 1998 are not  necessarily  indicative of the results to be
expected for the full year.

Note 2
------

     The  Corporation  computes  basic and diluted  earnings per average  common
share in  accordance  with SFAS 128,  based on the  weighted  average  number of
shares outstanding during the period.
<TABLE>
<CAPTION>

                                                  (Unaudited)                 (Unaudited)
                                                3 Months Ended              6 Months Ended
                                                  February 28,                February 28,
                                               1999         1998           1999         1998
                                            ----------   ----------     ----------   ----------
<S>                                         <C>          <C>            <C>          <C>
     Net Income                             $3,292,123   $3,231,534     $2,655,508   $2,470,453
     Weighted average shares outstanding     4,976,890    4,970,959      4,980,682    4,955,018
     Basic and diluted earnings per share        $0.66        $0.65          $0.53        $0.50
</TABLE>


Note 3
------

Inventories - Fuel and Other Inventories:             
                  (in Thousands)
<TABLE>
<CAPTION>
                                                      (Unaudited)
                                                      February 28,    August 31,
                                                          1999           1998        
                                                      ------------    ----------
<S>                                                      <C>            <C>     
     Fuels (at average cost)                             $2,259         $3,543
     Merchandise and Other (at average cost)              1,154          1,241
     Merchandise (at LIFO)                                1,339          1,035
                                                         ------         ------
                                                         $4,752         $5,819
                                                         ======         ======
</TABLE>

Note 4
------

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




<PAGE>

                                 PART I - ITEM 2

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

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

For the three months ended  February 28, 1999 compared to the three months ended
February 28, 1998

     The  consolidated  net income of Valley Resources for the second quarter of
fiscal  1999,  was  $3,292,100  or $0.66 per  share  compared  to net  income of
$3,231,500 or $0.65 per share for the year earlier  second  quarter.  Net income
from utility  operations  totaled $2,802,500 as compared to $2,959,700 in fiscal
1998's second quarter.  Nonutility operations provided net income of $489,600 in
the second  quarter of fiscal 1999 as  compared to $271,800 in the prior  year's
second  quarter.  The  weather-related  declines of the utility  operations were
offset  by  nonutility   earnings  generated  from  the  Corporation's   weather
insurance.

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

                                              Revenues                 Volumes (Mcf's)
                                              --------                 ---------------
                                         1999          1998          1999          1998
                                         ----          ----          ----          ----
<S>                                  <C>           <C>             <C>           <C>
     Base Firm Sales Service         $21,777,500   $23,162,400     3,077,900     3,302,300
     Base Firm Transportation            178,200        84,400       151,800        83,300
                                     -----------   -----------     ---------     ---------
        Firm Gas Sales                21,955,700    23,246,800     3,229,700     3,385,600

     Interruptible Service               338,800       482,100     1,125,800     1,281,400
     PGPA Revenues                       876,100       986,200          --            --
     Other Revenues                      173,900       114,600          --            --
                                     -----------   -----------     ---------     ---------
        Total Utility Gas Revenues   $23,344,500   $24,829,700     4,355,500     4,667,000
                                     ===========   ===========     =========     =========
</TABLE>


     Base firm sales service are traditional bundled sales to utility customers.
Base revenues and volumes  declined as a result of the impact of warmer  weather
on sales in  fiscal  1999  and  eligible  commercial  and  industrial  customers
electing to purchase  unbundled  service under the firm  transportation  service
option.  Weather during the second quarter of fiscal 1999 was 3.2 percent warmer
than the prior year which negatively impacted firm gas sales.

     Firm  transportation  revenues  and volumes  increased  over the prior year
second  quarter  from  both base  firm  sales  service  customers  switching  to
unbundled  service,  as mentioned above, and increased  utilization of base firm
transportation service by existing customers.

     Interruptible  service,  seasonal and  dual-fuel,  is provided on a bundled
basis  as well as  transportation  only  service.  Interruptible  sales  service
revenues declined $112,400 from the year-earlier quarter level in spite of an 11
percent  increase in volumes  sold.  Revenues from  interruptible  customers are
benchmarked to competitive fuel prices and gas supply availability.  The decline
in  interruptible  revenues  is  directly  related to the  falling  price of the
benchmark competitive fuels,  primarily fuel oil.  Interruptible  transportation
revenues   declined  as  a  result  of  customers   choosing  to  move  to  firm
transportation  and, in certain  instances,  electing an alternate  fuel to meet
their energy needs. The margin on interruptible  bundled sales is passed through
to firm customers  through the PGPA (Purchased Gas Price  Adjustment) and has no
impact on operating income.

     Nonutility  revenues totaled $5,856,300 for the three months ended February
28,  1999,  an increase of 4.6 percent  over the second  quarter in fiscal 1998.
Revenues associated with a weather insurance product (see "Liquidity and Capital
Resources" below) is primarily responsible for the increase. Slightly offsetting
this  increase  was a decline in retail and propane  sales.  Retail  merchandise
sales  continue  to  experience  declines  primarily  due to lower unit sales of
residential home heating equipment.  Propane sales were negatively impacted by a
warmer 

<PAGE>

than normal  winter  season in fiscal  1999.  Propane  profit  margins  remained
strong,  despite a slight  decline in propane  gallons sold,  due to competitive
pricing and fixed price contracts.  Wholesale revenues benefited from a stronger
regional  economy and increased sales of existing  product lines. AEC (Alternate
Energy  Corporation)  revenues  increased  slightly  as a result of natural  gas
vehicle conversions, although this subsidiary still operates at a loss.
 
     The average cost of gas  distributed  to firm  customers  was $3.28 per Mcf
during the second  quarter of fiscal  1999  compared to $3.54 per Mcf during the
second quarter of fiscal 1998. Changes in gas costs are recovered from customers
through the PGPA.

     The decline in nonutility  merchandise  sales in the fiscal 1999 period was
responsible  for the 4.7  percent  decrease in cost of  sales-nonutility.  Other
operation  expense declined slightly from the second quarter of fiscal 1998 as a
result of decreased  uncollectible expenses and lower overtime costs in the face
of the warmer weather.  Maintenance  expenses remained flat when compared to the
prior fiscal year.

     For the three months ended  February 28, 1999,  interest  expense  remained
flat when  compared to the same  quarter  last year.  Interest  expense for both
periods  continues to be positively  impacted by the corporate  refinancing  and
equity offering completed at the end of fiscal 1997.

For the six months  ended  February  28, 1999  compared to the six months  ended
February 28, 1998

     For the six months ended February 28, 1999, the consolidated net income for
Valley  Resources was  $2,655,500  or $0.53 per share  compared to net income of
$2,470,500  or $0.50  per share for the  comparable  period in the prior  fiscal
year.  The utility  operations  provided  net income of  $2,053,800  compared to
$1,954,300  in the  comparable  period  in the  prior  fiscal  year.  Nonutility
operations  provided  net income of $601,700  for the six month period of fiscal
1999 comparable to $516,200 in the prior year's six month period. Net income for
the  six  months  ended  February  28,  1999  was  positively  impacted  by  the
Corporation's weather insurance product.

     Utility gas  revenues  and volumes for the six months ended fiscal 1999 and
fiscal 1998 were as follows:
<TABLE>
<CAPTION>

                                              Revenues                 Volumes (Mcf's)
                                              --------                 ---------------
                                         1999          1998          1999          1998
                                         ----          ----          ----          ----
<S>                                  <C>           <C>             <C>           <C>
     Base Firm Sales Service         $30,341,300   $32,005,300     4,196,800     4,490,200
     Base Firm Transportation            335,900       157,400       285,800       142,100
                                     -----------   -----------     ---------     ---------
        Firm Gas Sales                30,677,200    32,162,700     4,482,600     4,632,300

     Interruptible Service             1,056,800     1,228,700     2,588,100     2,831,400
     PGPA Revenues                     1,209,400     1,340,600          --            --
     Other Revenues                      225,400       181,200          --            --
                                     -----------   -----------     ---------     ---------
        Total Utility Gas Revenues   $33,168,800   $34,913,200     7,070,700     7,463,700
                                     ===========   ===========     =========     =========
</TABLE>

     Base firm sales  service  revenues  and  volumes,  sold  through  regulated
tariffs,  declined for the six month period of fiscal 1999 primarily as a result
of  weather,  which was 5.1  percent  warmer than the prior year period and 10.2
percent warmer than normal. To a lesser extent, the decline was due to customers
switching to base firm transportation service as mentioned above.

     Decreased  demand  for  natural  gas from  customers  with  alternate  fuel
capabilities  produced a 14 percent  decline in  interruptible  revenues  in the
fiscal 1999 period as compared to 1998.  Sales to  interruptible  customers  are
dependent upon the availability of natural gas and the price of alternate fuels.
Margins earned from  interruptible  bundled sales are returned to firm customers
through the PGPA and do not impact the profitability of the Corporation.

<PAGE>

     Nonutility  revenues  for the six months  ended  February  28, 1999 totaled
$11,302,300,  a decrease of less than one percent  from the fiscal 1998  period.
Nonutility revenues decreased as a result of lower retail merchandise units sold
and a slight decrease in propane revenues,  despite an increase in gallons sold.
Propane  revenues  declined  due to the warmer  than  normal  weather  impact on
product pricing. Offering fixed price contracts to customers positively impacted
the  volume  of  propane  sold.   Retail   commercial   merchandise   sales  and
installations  also  declined  for the  1999  period.  Wholesale  sales  margins
increased  when  compared to the prior  fiscal  period as a result of  expanding
product line sales and a stronger regional economy. The total nonutility revenue
decline was  mitigated by revenue  recorded from the weather  insurance  product
mentioned above.

     Operating expenses for the 1999 six month period were impacted by decreases
in the cost of gas sold and  nonutility  cost of sales.  Decreases in the demand
for natural gas and a decline in the cost of gas  contributed to the decrease in
gas costs.  The average cost of gas  distributed to firm customers was $3.50 per
Mcf for the six months ended February  28,1999  compared to $3.90 per Mcf in the
prior year period.  Nonutility  cost of sales  decreased  due to the decrease in
sales mentioned above.

     Other  operation  expenses  decreased  4.5 percent for the six months ended
February 28,1999 when compared to the period in the prior fiscal year. Operation
expenses were positively  impacted by a decline in uncollectible and general and
administrative expenses.

     Interest  expense  increased  less than one  percent for the 1999 six month
period  when  compared  to the prior year.  Interest  expense  for both  periods
continues to be positively impacted by the 1997 corporate  refinancing mentioned
above.
 
Liquidity and Capital Resources 
------------------------------- 

     During the second  quarter of fiscal  1999 the  liquidity  position  of the
Corporation  improved over the first  quarter as a result of increased  revenues
from  winter  period  sales.   Management   believes  the  available   financing
arrangements  are  sufficient  to meet  cash  requirements  for the  foreseeable
future.  The funds  available  under lines of credit at February 28, 1999,  were
$31,800,000 and there were $5,200,000 of short-term borrowings outstanding.
 
     Cash flows were  negatively  impacted  during the second  quarter of fiscal
1999 by purchases of natural gas to meet winter sales  demand.  Sales during the
quarter, although greater than the first quarter, were less than anticipated due
to warmer than normal winter weather which also negatively  impacted  liquidity.
Also,  the  warmer  weather  resulted  in  the  holding  of  supplemental   fuel
inventories which the Corporation had anticipated to be sold.

     Construction  expenditures  declined  during the  second  quarter of fiscal
1999, as planned,  due to constraints  imposed by local  communities  during the
winter period, thereby improving liquidity.

     The liquidity  position of the Corporation is anticipated to improve in the
third  quarter,  as well,  as winter bills are  collected.  Cash expended on the
construction  program are also expected to increase  during the third quarter of
fiscal  1999 which will  negatively  impact  cash  flows.  This  increased  cash
requirement is expected to be offset by the improved cash flows.

     In the first fiscal quarter, the Corporation  purchased a weather insurance
product  which applies to the winter  heating  season from November 1998 through
March 1999.  This  product  provides  insurance  against  unfavorable  shifts in
weather conditions. The insurance coverage pays the Corporation cash when degree
days for the  measurement  period fall outside the  predetermined  variance from
normal.  The policy  acts like a "collar" in that  payments  are due the insurer
when weather conditions  positively impact revenues above a predetermined limit.
The measurement  period occurs at the expiration of the policy.  The Corporation
expects to receive a payment from the policy  during the third  fiscal  quarter,
thereby favorably impacting liquidity.

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

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

<PAGE>

     Certain other software applications currently in use by the Corporation are
not Year 2000 compliant.  The  Corporation has made plans to modify,  replace or
upgrade  those  applications  which are not Year 2000  compliant  before July 1,
1999. The Corporation is conducting a survey and compiling cost estimates of the
effort  involved to perform  those  modifications,  replacements  and  upgrades.
Currently,  management  believes  that  the cost to  bring  all of its  software
applications  into Year 2000 compliance will not have a material  adverse effect
on the  Corporation's  results of operations,  and involves a remaining  capital
outlay of approximately $50,000 to $100,000.  There can be no guarantee that the
systems  of other  companies  on which the  Corporation's  systems  rely will be
timely  converted,  or that a  failure  to  convert  by  another  company,  or a
conversion that is incompatible with the Corporation's systems, would not have a
material adverse impact on the Corporation.  The Corporation has been in contact
with its primary  third party  service  providers.  These  companies,  including
telephone  and  electric   providers,   have  indicated  that  their  Year  2000
remediation efforts were in progress and on schedule.

     The costs of the  project  and the date on which the  Corporation  plans to
complete the Year 2000  modifications  are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources,  third-party modification plans and
other factors.  However,  there can be no guarantee that these estimates will be
achieved;  actual  results could differ  materially  from those plans.  Specific
factors that might cause such material  differences include, but are not limited
to, the availability and cost of personnel  trained in this area, the ability to
locate and correct all  relevant  computer  programs  and  microprocessors,  and
similar  uncertainties.   The  company  has  and  maintains  contingency  plans,
schedules,  functions and  responsibilities  to insure and maintain services and
minimize  interruptions.  These responsibilities are active continuously.  These
activities are under review to identify  changes that may be appropriate.  These
discussions and actions are being taken as a precautionary measure.
 
Forward Looking Statements; Risk and Uncertainties
--------------------------------------------------

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


                           PART II: OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K

       (a)   Financial Data Schedule.

       (b)   None.




<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,  1999