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 May 31, 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                        May 31, 1999
          ---------------------                       --------------

              $1 Par Value                              4,983,597


<PAGE>


                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                  May 31, 1999

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

PART    I:    FINANCIAL INFORMATION

Item    1.    Financial Statements

              Consolidated Condensed Statements of Earnings--for
              the three- and nine-months ended May 31, 1999
              and 1998......................................................  3

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

              Consolidated Condensed Statements of Cash Flows--for
              the nine-months ended May 31, 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           9 Months Ended
                                          May 31,     May 31,      May 31,      May 31,
                                           1999        1998         1999         1998
                                          -------     -------      -------      -------
                                        (in thousands except share and per share numbers)
<S>                                     <C>          <C>          <C>          <C>
Operating Revenues:
   Utility Gas Revenues                   $18,303      $17,207      $51,471      $52,120
   Nonutility Revenues                      5,278        5,380       16,581       16,719
                                          -------      -------      -------      -------
     Total                                 23,581       22,587       68,052       68,839
                                          -------      -------      -------      -------

Operating Expenses:
   Cost of Gas Sold                         9,332        8,726       27,200       28,008
   Cost of  Sales - Nonutility              3,587        3,786       10,996       11,613
   Operations                               4,326        4,309       13,429       13,842
   Maintenance                                437          431        1,274        1,246
   Depreciation and Amortization              854          826        2,563        2,476
   Taxes - Other Than Federal Income        1,149        1,120        3,344        3,340
         - Federal Income                     926          870        2,252        1,938
                                          -------      -------      -------      -------
             Total                         20,611       20,068       61,058       62,463
                                          -------      -------      -------      -------
   Operating Income                         2,970        2,519        6,994        6,376
   Other Income - Net of Tax                   53           36          203          158
                                          -------      -------      -------      -------
   Total Income                             3,023        2,555        7,197        6,534
                                          -------      -------      -------      -------
Interest Charges:
   Long-Term Debt                             588          629        1,818        1,862
   Other                                      115           97          403          373
                                          -------      -------      -------      -------
     Total                                    703          726        2,221        2,235
                                          -------      -------      -------      -------
Net Income                                $ 2,320      $ 1,829      $ 4,976      $ 4,299
                                          =======      =======      =======      =======
Average Number of Common
  Shares Outstanding                    4,975,467    4,976,848    4,978,924    4,962,375

Basic Earnings Per Average Common
  Share Outstanding                         $0.47        $0.37        $1.00        $0.87

Dividends Declared on Common Stock        $0.1875      $0.1875      $0.5625      $0.5575

</TABLE>


The accompanying Notes are an integral part of these statements.





                                       3
<PAGE>



VALLEY RESOURCES, INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>

                                                           (Unaudited)
                                                             May 31,    Aug. 31,
                                                              1999        1998
                                                             -------    --------
                                                               (in thousands)
<S>                                                         <C>         <C>
ASSETS
Utility Plant - Net                                         $ 51,811    $51,310
                                                            --------    -------
Leased Property - Net                                          1,752      2,303
                                                            --------    -------
Nonutility Property-Net                                        4,175      4,106
                                                            --------    -------
Other Investments                                              1,668      1,637
                                                            --------    -------
Current Assets:
   Cash                                                          961        813
   Accounts Receivable - Net                                  12,490      9,684
   Deferred Fuel Costs                                           -0-        485
   Deferred Unbilled Gas Costs                                   525        438
   Fuel and Other Inventories (Note 3)                         4,624      5,819
   Prepayments                                                   712      1,353
   Common Stock held for Dividend Reinvestment-amounting
     to 9,431 and 10,116 shares respectively (Note 4)            116        121
                                                            --------    -------
           Total                                              19,428     18,713
                                                            --------    -------
Deferred Debits:
   Recoverable Postretirement Benefits                            58        231
   Recoverable Vacations Accrued                                 829        633
   Unamortized Debt Discount and Expense                       1,660      1,712
   Prepaid Pensions                                            9,997      8,824
   Recoverable Deferred FIT                                    5,997      6,109
   Recoverable Transition Obligation                              21         21
   Other                                                       3,370      2,882
                                                            --------    -------
                                                              21,932     20,412
                                                            --------    -------
           Total                                            $100,766    $98,481
                                                            ========    =======
</TABLE>



The accompanying Notes are an integral part of these statements.




                                       4
<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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


                                                (Unaudited)
                                                  May 31,         Aug. 31,
                                                   1999             1998
                                                  -------         --------
                                                       (in thousands)
<S>                                               <C>               <C>
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                                   $  4,993          $  4,993
   Paid In Capital                                  24,741            24,811
   Retained Earnings                                10,373             8,187
   Less: Accounts Receivable from ESOP              (2,640)           (2,768)
                                                  --------          --------
           Total Common Stock Equity                37,467            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                                     2,486             2,599
                                                  --------          --------
           Total Long-Term Debt                     29,515            29,638
                                                  --------          --------
                  Total Capitalization              66,982            64,861
                                                  --------          --------
Revolving Credit Arrangement                         2,400             2,400
                                                  --------          --------
Obligation Under Capital Lease                         971             1,528
                                                  --------          --------
Current Liabilities:
   Current Maturities of Long-Term Debt                150             2,289
   Obligation Under Capital Lease                      781               775
   Notes Payable                                       900             2,300
   Accounts Payable                                  4,717             4,275
   Security Deposits & Refund Obligations              974               977
   Taxes Accrued                                     2,182               435
   Deferred Fuel Costs                               1,602               -0-
   Accrued Interest                                    989               794
   Other                                               855               741
                                                  --------          --------
           Total                                    13,150            12,586
                                                  --------          --------
Commitment and Contingencies
Deferred Credits                                     4,487             4,513
                                                  --------          --------
Deferred Federal Income Taxes                       12,776            12,593
                                                  --------          --------
                                                  $100,766          $ 98,481
                                                  ========          ========
</TABLE>

The accompanying Notes are an integral part of these statements.





                                       5

<PAGE>

VALLEY RESOURCES, INC. AND SUBSIDIARIES

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

                                                                   For the 9 Months
                                                                        Ended
                                                                  May 31,    May 31,
                                                                   1999       1998
                                                                  -------    -------
                                                                    (in thousands)
<S>                                                               <C>        <C>
Cash Flows from Operating Activities:
  Net Income                                                      $ 4,976    $ 4,299
  Adjustments to Reconcile Net Income to Net Cash used in
  Operating Activities:
     Depreciation and Amortization                                  2,563      2,476
     Provision for Uncollectibles                                     937      1,553
     Deferred Federal Income Taxes                                    183        404
     Amortization of ITC                                              (36)       (36)
  Change in Assets and Liabilities:
     Accounts Receivable                                           (3,743)    (2,783)
     Deferred Fuel Costs                                            2,086       (135)
     Unbilled Gas Costs                                               (87)       (85)
     Fuel and Other Inventories                                     1,194      1,254
     Other Current Assets                                            (527)      (427)
     Accounts Payable, Accrued Expenses and Current Liabilities     2,251      1,931
     Other - Net                                                       40        685
                                                                  -------    -------
          Net Cash Provided by Operating Activities                 9,837      9,136
                                                                  -------    -------
  Cash Flows from Investing Activities:
  Utility Capital Expenditures                                     (2,624)    (2,519)
  Nonutility Capital Expenditures                                    (512)      (825)
  Other Investments                                                   (31)       (24)
                                                                  -------    -------
          Net Cash Used by Investing Activities                    (3,167)    (3,368)
                                                                  -------    -------
  Cash Flows from Financing Activities:
     Dividends Paid                                                (2,790)    (2,786)
     Capital Stock Transactions                                       (70)       877
     Issuance of Long Term Debt                                       -0-        100
     Retirement of Long-Term Debt                                  (2,262)      (172)
     Decrease in Notes Payable                                     (1,400)    (1,900)
                                                                 --------    -------
          Net Cash Used in Financing Activities                    (6,522)    (3,881)
                                                                 --------    -------

Net Increase in Cash                                                  148      1,887
Cash - Beginning                                                      813        820
                                                                  -------    -------
Cash - Ending                                                     $   961    $ 2,707
                                                                  =======    =======

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                                     $ 2,026    $ 1,744
                                                                  =======    =======
     Federal Income Taxes                                         $   750    $   -0-
                                                                  =======    =======
   Capital Lease Obligations Incurred                             $    30    $   224
                                                                  =======    =======
</TABLE>


The accompanying Notes are an integral part of these statements.






                                       6

<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 May 31, 1999, the results of operations for the
three- and  nine-months  ended May 31, 1999 and 1998 and Statement of Cash Flows
for the nine-months ended May 31, 1999 and 1998.

     The results of operations for the three- and  nine-month  periods ended May
31, 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               9 Months Ended
                                                      May 31,                      May 31,
                                                1999         1998            1999         1998
                                             ----------   ----------      ----------   ----------
<S>                                          <C>          <C>             <C>          <C>
     Net Income                              $2,320,303   $1,828,521      $4,975,811   $4,298,973
     Weighted average shares outstanding      4,975,467    4,976,848       4,978,924    4,962,375
     Basic and diluted earnings per share         $0.47        $0.37           $1.00        $0.87
</TABLE>


Note 3
------

Inventories - Fuel and Other Inventories:
                     (in Thousands)
<TABLE>
<CAPTION>

                                                       (Unaudited)
                                                         May 31,      August 31,
                                                          1999           1998
                                                       ----------     ----------
<S>                                                      <C>            <C>
       Fuels (at average cost)                           $2,038         $3,543
       Merchandise and Other (at average cost)            1,139          1,241
       Merchandise (at LIFO)                              1,447          1,035
                                                         ------         ------
                                                         $4,624         $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.





                                       7
<PAGE>

                                   I - ITEM 2

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

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

For the three months ended May 31, 1999 compared to the three months ended
May 31, 1998

     The  consolidated  net income of Valley  Resources for the third quarter of
fiscal  1999 was  $2,320,300  or $0.47  per  share  compared  to net  income  of
$1,828,500  or $0.37 per share for the year earlier  third  quarter.  Net income
from utility  operations  totaled $2,135,800 as compared to $1,642,700 in fiscal
1998's third quarter.  Nonutility  operations provided net income of $184,500 in
the third  quarter of fiscal 1999 as  compared  to $185,800 in the prior  year's
third quarter.

     Utility gas revenues  and volumes for the third  quarter of fiscal 1999 and
fiscal 1998 were comprised of the following:
<TABLE>
<CAPTION>

                                            Revenues                              Volumes (Mcf's)
                                            --------                              ---------------
                                        1999             1998                  1999              1998
                                        ----             ----                  ----              ----
<S>                                 <C>              <C>                     <C>               <C>
Base Firm Sales Service             $16,792,900      $15,709,700             2,326,400         2,164,800
Base Firm Transportation                173,700          120,500               143,100           102,500
                                    -----------      -----------             ---------         ---------
   Firm Gas Sales                    16,966,600       15,830,200             2,469,500         2,267,300

Interruptible Service                   581,200          643,000             1,096,300         1,295,300
PGPA Revenues                           662,000          646,100                  ----              ----
Other Revenues                           92,900           87,700                  ----              ----
                                    -----------      -----------             ---------         ---------
   Total Utility Gas Revenues       $18,302,700      $17,207,000             3,565,800         3,562,600
                                    -----------      -----------             ---------         ---------
</TABLE>


     Base firm sales service are traditional bundled sales to utility customers.
Base firm revenues  increased as a result of colder weather when compared to the
prior year third  quarter,  which  caused base firm Mcf volumes to increase  7.5
percent. Weather during the third quarter of fiscal 1999 was 10.3 percent colder
than the prior year.

     Firm  transportation  revenues  and volumes  increased  over the prior year
third quarter due to eligible  commercial and industrial  customers  electing to
purchase unbundled service under the firm transportation  service option.  Also,
throughput  volumes increased as a result of existing  customers  switching from
interruptible service to firm transportation service.

     Interruptible  service,  seasonal  and  dual-fuel  is provided on a bundled
basis  as well as  transportation  only  service.  Interruptible  sales  service
revenues  declined  $39,400 from the year-earlier  quarter level.  Interruptible
sales  volumes  remained  flat when  compared  to the prior year third  quarter.
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  $5,278,200 for the three months ended May 31,
1999,  a decrease of 1.9 percent from the third  quarter in fiscal 1998.  Slight
declines in wholesale,  propane and AEC sales were  responsible for the decrease
from the prior year  third  quarter.  Retail  sales and the  remaining  revenues
associated  with the  weather  insurance  product  (see  "Liquidity  and Capital
Resources")  slightly offset the decline in nonutility revenues.



                                       8
<PAGE>

Wholesale  unit sales declines and decreased  sales by AEC  negatively  impacted
nonutility  revenues.  Propane revenues  decreased  slightly,  despite increased
volumes sold more, as a result of lower retail prices due to  competition,  when
compared to the prior year third quarter. Retail merchandise sales increased due
to commercial  installation  projects being completed and increased  retail unit
sales.

     The average cost of gas  distributed  to firm  customers  was $3.61 per Mcf
during the third  quarter of fiscal  1999  compared  to $3.92 per Mcf during the
third quarter of fiscal 1998.  Changes in gas costs are recovered from customers
through the PGPA.

     The  decline in  nonutility  sales in the third  fiscal  quarter of 1999 as
compared  to 1998,  was  responsible  for the 5.2  percent  decrease  in cost of
sales-nonutility.  Other operation and maintenance  expenses  remained flat when
compared to the prior fiscal year third quarter.

     For the three months ended May 31, 1999,  interest  expense  decreased  3.2
percent when compared to the same quarter last year.  Long-term interest expense
declined due to the  retirement of the 9% notes  payable due March 1999,  offset
slightly by increased short-term borrowings.

For the nine months ended May 31, 1999 compared to the nine months ended May 31,
1998

     For the nine months ended May 31,  1999,  the  consolidated  net income for
Valley  Resources was  $4,975,800  or $1.00 per share  compared to net income of
$4,299,000  or $0.87  per share for the  comparable  period in the prior  fiscal
year.  The utility  operations  provided  net income of  $4,189,600  compared to
$3,597,000  in the  comparable  period  in the  prior  fiscal  year.  Nonutility
operations  provided  net income of $786,200 for the nine month period of fiscal
1999  comparable to $702,000 in the prior year's nine month  period.  Net income
for  the  nine  months  ended  May  31,  1999  was  positively  impacted  by the
Corporation's weather insurance product.

     Utility gas  revenues and volumes for the nine months ended fiscal 1999 and
fiscal 1998 were comprised of the following:
<TABLE>
<CAPTION>

                                               Revenues                      Volumes (Mcf's)
                                               --------                      ---------------
                                        1999           1998                 1999          1998
                                        ----           ----                 ----          ----
<S>                                 <C>            <C>                  <C>           <C>
Base Firm Sales Service             $47,134,200    $47,715,000           6,523,100     6,655,000
Base Firm Transportation                509,600        277,900             428,900       244,600
                                    -----------    -----------          ----------    ----------
   Firm Gas Sales                    47,643,800     47,992,900           6,952,000     6,899,600

Interruptible Service                 1,637,900      1,871,800           3,684,400     4,126,700
PGPA Revenues                         1,871,400      1,986,700                ----          ----
Other Revenues                          318,300        268,800                ----          ----
                                   ------------    -----------          ----------    ----------
   Total Utility Gas Revenues       $51,471,400    $52,120,200          10,636,400    11,026,300
                                    -----------    -----------          ----------    ----------
</TABLE>

     Base firm sales  service  revenues  and  volumes,  sold  through  regulated
tariffs, remained flat for the nine month period of fiscal 1999 when compared to
the prior nine month  period,  primarily  as a result of weather,  which was 0.3
percent warmer than the prior year period. For the nine-month period weather was
8.5 percent  warmer than  normal.  The slight  decline was also due to customers
switching to base firm transportation service as mentioned above.

     Firm transportation revenues and volumes increased over the prior year nine
month period,  as mentioned  above,  due to existing  customers  switching  from
interruptible service to firm transportation service and eligible commercial and
industrial  customers  electing to  purchase  unbundled  service  under the firm
transportation service option.



                                       9
<PAGE>

     Interruptible service revenues to seasonal and dual-fuel customers declined
$230,600,  when  compared  to the prior year nine month  period,  as a result of
decreased demand for natural gas. 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.

     Nonutility  revenues  for  the  nine  months  ended  May 31,  1999  totaled
$16,580,500,  a decrease of less than one percent  from the fiscal 1998  period.
Nonutility  revenues  continue  to be impacted by  decreased  retail  commercial
sales,  lower  propane  revenues,  despite an  increase in gallons  sold,  and a
decline in AEC revenues. Retail commercial sales and installations declined from
the prior year due to the timing of projects being  completed.  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.  Nonutility  revenue  declines were mitigated by revenue  recorded
from the weather  insurance product mentioned above and an increase in wholesale
sales  margins  as a result of  expanding  product  line  sales  and a  stronger
regional economy.

     Operating  expenses  for the  1999  nine  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
$3.52 per Mcf for the nine months ended May 31,1999 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 3.0 percent for the nine months ended
May 31,1999  when  compared to the period in the prior  fiscal  year.  Operation
expenses  continue to be positively  impacted by a decline in uncollectible  and
general and  administrative  expenses.  Maintenance  expenses remained flat when
compared to the prior fiscal year.

     Interest  expense  decreased  less than one percent for the 1999 nine month
period when  compared to the prior year.  The interest  expense  decline was the
result  of the  decrease  in  long-term  debt  related  to the 9% notes  payable
mentioned above.

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

     During  the third  quarter of fiscal  1999 the  liquidity  position  of the
Corporation  improved over the second  quarter as a result of the  collection of
accounts  receivable  and the timing of tax  payments.  Management  believes the
available  financing  arrangements are sufficient to meet cash  requirements for
the  foreseeable  future.  The funds  available under lines of credit at May 31,
1999,  were  $28,100,000  and  there  were  $900,000  of  short-term  borrowings
outstanding.

     Cash flows were favorably  impacted during the third quarter of fiscal 1999
due to the collection of accounts  receivable  from winter heating sales.  Sales
during the third  quarter were less than  anticipated  due to warmer than normal
weather which negatively  impacted liquidity.  Additionally,  the warmer weather
resulted in the holding of supplemental  fuel inventories which were anticipated
to be sold.

     Construction  expenditures  increased  during  the third  quarter of fiscal
1999, due to more favorable weather, thereby adversely affecting liquidity.

     The  liquidity  position of the  Corporation  will be  seasonally  affected
during  the  fourth  quarter  when  revenues  decline as a result of the lack of
heat-sensitive sales in the utility companies.  Planned cash expenditures on the
construction  program will increase  during the fourth  fiscal  quarter and will
also negatively impact cash flow.

     In the first fiscal quarter, the Corporation  purchased a weather insurance
product  which applied to the winter  heating  season from November 1998 through
March  1999.  This  product  provided  insurance  against   unfavorable  weather
conditions.  The insurance  coverage pays the Corporation  cash when degree days
for the measurement  period fall outside the predetermined  variance from normal
and  payments  are due the insurer when


                                       10
<PAGE>

weather conditions  positively impact revenues above a predetermined  limit. The
Corporation  received a payment from the policy during the third fiscal quarter,
thereby favorably impacting liquidity.

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

     The Corporation  believes  substantially  all 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.

     The Corporation has made plans to modify,  replace or upgrade the remainder
of the software  applications which are not Year 2000 compliant before August 1,
1999.  The  Corporation  has compiled 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.




                                       11

<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/S.Partridge
                                        ---------------------------------------
                                                      S. Partridge
                                        Vice President, Chief Financial Officer,
                                                Secretary and Treasurer


July 14,  1999
















                                       12