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 29, 2000

                                       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                        February 29, 2000

               $1 Par Value                                 4,988,456


<PAGE>



                             VALLEY RESOURCES, INC.


                                    FORM 10-Q

                                FEBRUARY 29, 2000

                                                                      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 29, 2000 and
              February 28, 1999..............................................  3

              Consolidated Condensed Balance Sheets--February 29,
              2000 and August 31, 1999...................................  4 & 5

              Consolidated Condensed Statements of Cash Flows--for
              the six-months ended February 29, 2000 and February 28, 1999...  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............................... 12


<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. 29,      Feb. 28,      Feb. 29,       Feb. 28,
                                                            2000          1999          2000           1999
                                                          --------      --------      --------       --------
                                                           (in thousands except share and per share numbers)
<S>                                                     <C>           <C>           <C>            <C>
Operating Revenues:
   Utility Gas Revenues                                 $    26,693   $    23,345   $    36,973    $    33,169
   Nonutility Revenues                                        6,152         5,856        12,270         11,302
                                                        -----------   -----------   -----------    -----------
      Total                                                  32,845        29,201        49,243         44,471
                                                        -----------   -----------   -----------    -----------

Operating Expenses:
   Cost of Gas Sold                                          15,164        12,725        20,791         17,868
   Cost of Sales - Nonutility                                 4,256         3,621         8,508          7,409
   Operations                                                 4,801         4,492         9,133          9,103
   Maintenance                                                  469           428           917            837
   Depreciation and Amortization                                914           852         1,827          1,708
   Taxes - Other Than Federal Income                          1,434         1,330         2,326          2,196
         - Federal Income                                     1,729         1,775         1,422          1,326
                                                        -----------   -----------   -----------    -----------
         Total                                               28,767        25,223        44,924         40,447
                                                        -----------   -----------   -----------    -----------
   Operating Income                                           4,078         3,978         4,319          4,024
   Other Income (Loss) - Net of Tax                              91            81          (226)           150
                                                        -----------   -----------   -----------    -----------
   Total Income                                               4,169         4,059         4,093          4,174
                                                        -----------   -----------   -----------    -----------
Interest Charges:
   Long-Term Debt                                               571           610         1,140          1,230
   Other                                                        233           157           412            288
                                                        -----------   -----------   -----------    -----------
      Total                                                     804           767         1,552          1,518
                                                        -----------   -----------   -----------    -----------
Net Income                                              $     3,365   $     3,292   $     2,541    $     2,656
                                                        ===========   ===========   ===========    ===========
Average Number of Common
  Shares Outstanding                                      4,986,620     4,976,890     4,983,013      4,980,682

Basic & Diluted Earnings Per Average
  Common Share Outstanding                                    $0.67         $0.66         $0.51          $0.53

Dividends Declared on Common Stock .                        $0.1875       $0.1875        $0.375         $0.375


</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. 29,   Aug. 31,
                                                             2000       1999
                                                           --------   --------
                                                              (in thousands
<S>                                                        <C>        <C>
ASSETS
Utility Plant - Net                                        $ 52,774   $ 52,334
                                                           --------   --------
Leased Property - Net                                         1,189      1,556
                                                           --------   --------
Nonutility Property-Net                                       4,236      4,163
                                                           --------   --------
Other
Investments                                                   1,701      1,740
                                                           --------   --------
Current Assets:
   Cash                                                         491        750
   Accounts Receivable - Net                                 17,116      9,817
   Deferred Unbilled Gas Costs                                1,817        432
   Fuel and Other Inventories (Note 3)                        4,788      5,959
   Prepayments                                                  992      1,511
   Common Stock held for Dividend Reinvestment-amounting
     to 4,572 and 10,116 shares respectively (Note 4)           101        143
                                                           --------   --------
           Total                                             25,305     18,612
                                                           --------   --------
Deferred Debits:
   Recoverable Vacations Accrued                                771        611
   Unamortized Debt Discount and Expense                      1,609      1,643
   Prepaid Pensions                                          11,268     10,388
   Recoverable Deferred FIT                                   5,950      6,062
   Recoverable Transition Obligation                             11         11
   Other                                                      4,065      3,103
                                                           --------   --------
           Total                                             23,674     21,818
                                                           --------   --------
                                                           $108,879   $100,223
                                                           ========   ========

</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. 29,     Aug. 31,
                                                      2000         1999
                                                    --------     --------
                                                        (in thousands)
<S>                                                 <C>          <C>
CAPITALIZATION & LIABILITIES
Capitalization:
   Common Stock                                     $  4,993     $  4,993
   Paid In Capital                                    24,765       24,756
   Retained Earnings                                   9,324        8,650
   Less: Accounts Receivable from ESOP                (2,492)      (2,594)
                                                    --------     --------
           Total Common Stock Equity                  36,590       35,805
                                                    --------     --------
Long-Term Debt (Less Current Maturities):
   8% First Mortgage Bonds, Series Due 2022           19,932       20,029
   7.7% Debentures, Due 2027                           7,000        7,000
   Notes Payable                                       2,342        2,444
                                                    --------     --------
           Total Long-Term Debt                       29,274       29,473
                                                    --------     --------
                  Total Capitalization                65,864       65,278
                                                    --------     --------
Revolving Credit Arrangement                           2,400        2,400
                                                    --------     --------
Obligation Under Capital Lease                           577          775
                                                    --------     --------
Current Liabilities:
   Current Maturities of Long-Term Debt                  150          150
   Obligation Under Capital Lease                        612          781
   Notes Payable                                       8,200        4,800
   Accounts Payable                                    7,803        5,386
   Security Deposits & Refund Obligations              1,142          968
   Taxes Accrued                                       1,798          609
   Deferred Fuel Costs                                   624          427
   Accrued Interest                                      728          761
   Other                                                 878          716
                                                    --------     --------
           Total                                      21,935       14,598
                                                    --------     --------
Commitment and Contingencies
Deferred Credits                                       4,494        4,304
                                                    --------     --------
Deferred Federal Income Taxes                         13,609       12,868
                                                    --------     --------
                                                    $108,879     $100,223
                                                    ========     ========
</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. 29,   Feb. 28,
                                                                       2000       1999
                                                                     --------   --------
                                                                       (in thousands)
<S>                                                                  <C>        <C>
Cash Flows from Operating Activities:
   Net Income                                                        $ 2,541    $ 2,656
   Adjustments to Reconcile Net Income to Net Cash used in
   Operating Activities:
     Depreciation and Amortization                                     1,827      1,708
     Provision for Uncollectibles                                        625        624
     Deferred Federal Income Taxes                                       741        659
     Amortization of ITC                                                 (24)       (24)
   Change in Assets and Liabilities:
     Accounts Receivable                                               (7,924)    (7,324)
     Deferred Fuel Costs                                                  198      1,414
     Unbilled Gas Costs                                                (1,385)    (1,257)
     Fuel and Other Inventories                                         1,172      1,067
     Other Current Assets                                                (319)      (215)
     Accounts Payable, Accrued Expenses and Current Liabilities         3,780      1,764
     Other - Net                                                         (532)       (35)
                                                                      -------    -------
           Net Cash Provided by Operating Activities                      700      1,037
                                                                      -------    -------
Cash Flows from Investing Activities:
     Utility Capital Expenditures                                      (1,953)    (1,860)
     Nonutility Capital Expenditures                                     (388)      (336)
     Other Investments                                                     39        (23)
                                                                      -------    -------
           Net Cash Used by Investing Activities                       (2,302)    (2,219)
                                                                      -------    -------
Cash Flows from Financing Activities:
     Dividends Paid                                                    (1,867)    (1,859)
     Capital Stock Transactions                                             9        (33)
     Retirement of Long-Term Debt                                        (199)       (85)
     Increase in Notes Payable                                          3,400      2,900
                                                                      -------    -------
           Net Cash Provided by Financing Activities                    1,343        923
                                                                      -------    -------

   Net (Decrease) in Cash                                                (259)      (259)
   Cash - Beginning                                                       750        813
                                                                      -------    -------
   Cash - Ending                                                      $   491    $   554
                                                                      =======    =======

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
     Interest                                                         $ 1,585    $ 1,585
                                                                      =======    =======
     Federal Income Taxes                                             $   125    $   -0-
                                                                      =======    =======
   Capital Lease Obligations Incurred                                 $   -0-    $    11
                                                                      =======    =======
</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 February 29, 2000,  the results of operations
for the three- and six-months  ended February 29, 2000 and February  28,1999 and
Statement of Cash Flows for the six-months  ended February 29, 2000 and February
28, 1999.

     The  results  of  operations  for the three- and  six-month  periods  ended
February 29, 2000 and February 28, 1999 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
                                            -----------------------      -----------------------
                                             Feb. 29,     Feb. 28,        Feb. 29,     Feb. 28,
                                               2000         1999            2000         1999
                                            ----------   ----------      ----------   ----------
<S>                                         <C>          <C>             <C>          <C>
Net Income                                  $3,364,578   $3,292,123      $2,541,089   $2,655,508
Weighted average shares outstanding          4,986,620    4,976,890       4,983,013    4,980,682
Basic and diluted earnings per share             $0.67        $0.66           $0.51        $0.53

</TABLE>

Note 3
------

Inventories - Fuel and Other Inventories:
              (in Thousands)
<TABLE>
<CAPTION>
                                                        (Unaudited)
                                                       February 29,   August 31,
                                                           2000         1999
                                                       ------------  -----------
<S>                                                       <C>           <C>
       Fuels (at average cost)                            $2,160        $3,462
       Merchandise and Other (at average cost)             1,170         1,234
       Merchandise (at LIFO)                               1,458         1,263
                                                          ------        ------
                                                          $4,788        $5,959
                                                          ======        ======
</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.

Note 5
------

     On December 1, 1999,  Southern  Union  Company and Valley  Resources,  Inc.
announced that they have signed a definitive merger agreement under which Valley
Resources,  Inc.  will  ultimately  merge  into  Southern  Union  Company  in  a
transaction which is valued at approximately $160 million,  including assumption
of debt. See the section in  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations"  entitled "Valley  Resources  Inc./Southern
Union Company Merger" for further details.





                                       7
<PAGE>


                                 PART I - ITEM 2

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

OVERVIEW

     The  discussion  and analysis  that follows  reflect the  operations of the
Corporation  and its six active "subsidiaries"  Valley Gas and  Bristol & Warren
(collectively  the "Utilities"),  regulated natural gas distribution  companies;
Valley Appliance and Merchandising Company ("VAMCO"), a merchandising, appliance
rental, and service company;  Valley Propane, Inc. ("Valley Propane"), a propane
sales and service company;  Morris Merchants,  Inc. ("Morris  Merchants") (d/b/a
the Walter F. Morris Company), a representative distributor of franchised lines;
and Alternate  Energy  Corporation  ("AEC"),  which sells,  designs and installs
natural gas refueling  facilites,  natural gas conversion systems and energy use
control devises.

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

For the three months ended  February 29, 2000 compared to the three months ended
February 28, 1999

     The  consolidated  net income of Valley Resources for the second quarter of
fiscal  2000 was  $3,364,600  or $0.67  per  share  compared  to net  income  of
$3,292,100 or $0.66 per share for the year earlier  second  quarter.  Net income
from utility  operations  totaled  $3,197,000  as compared to  $2,802,500 in the
fiscal 1999 second quarter.  Colder weather and its impact on firm gas sales was
responsible  for the  improvement  in utility  earnings.  Nonutility  operations
contributed  $167,600 to consolidated net income in the second quarter of fiscal
2000 as compared to $489,600 in the prior year's second quarter.  The decline in
the contribution from nonutlity operations is primarily attributable to earnings
generated from the  Corporation's  weather  insurance  product in the prior year
second fiscal quarter.  Although the Corporation  purchased a weather  insurance
product for the period November 1, 1999 through March 31, 2000, no earnings were
generated or recorded from this  insurance  product during the second quarter of
fiscal 2000 as a result of colder weather during the period.

Utility Gas Operations
----------------------

     Utility gas  revenues  and volumes in Mcf's  (thousand  cubic feet) for the
second quarter of fiscal 2000 and fiscal 1999 were as follows:
<TABLE>
<CAPTION>

                                           Revenues                    Volumes (Mcf's)
                                           --------                    ---------------
                                      2000          1999              2000         1999
                                      ----          ----              ----         ----
<S>                               <C>           <C>                <C>           <C>
Base Firm Sales Service           $23,912,300   $21,777,500        3,401,500     3,077,900
Base Firm Transportation              181,900       178,200          155,400       151,800
                                  -----------   -----------        ---------     ---------
   Base Firm Gas Sales             24,094,200    21,955,700        3,556,900     3,229,700

Interruptible Service                 599,500       338,800        1,139,400     1,125,800
PGPA Revenues                       1,909,800       876,100              ---           ---
Other Revenues                         89,500       173,900              ---           ---
                                  -----------   -----------        ---------     ---------
   Total Utility Gas Revenues     $26,693,000   $23,344,500        4,696,300     4,355,500
                                  -----------   -----------        ---------     ---------
</TABLE>


     Base firm sales service and  transportation  are sales to utility customers
under  regulated  tariff  schedules.  Base firm gas sales  revenues  and volumes
increased  as a result of the colder  weather  in the  second  quarter of fiscal
2000.  Weather  during this period was 6 percent  colder than the prior year but
was 5.2 percent warmer than a normal year.




                                       8
<PAGE>

     Interruptible  service,  seasonal  and  dual-fuel,  is  provided  on both a
bundled sales basis as well as transportation only service.  Interruptible sales
service  revenues  increased  $260,700  over  the  year-earlier  quarter  level.
Revenues from interruptible customers are benchmarked to competitive fuel prices
and gas supply availability.  Interruptible gas sales improved during the second
fiscal  quarter as a result of the utilities  allowing  their  customers to take
service  earlier  than normal due to the oil  shortage in the  Northeast  during
January 2000.  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.

     Cost of gas sold  increased  19.2  percent  over the prior year period as a
result of increased gas sales,  resulting from the colder weather, and increased
wholesale  natural gas prices.  The average cost per Mcf of gas  distributed was
$3.86 during the second  fiscal  quarter of 2000 as compared to $3.28 during the
second quarter of fiscal 1999.

     Other operating  expenses increased 2.8 percent over the prior year period,
primarily due to normal wage increases and the timing of general  administrative
expenses.

     For the three months ended February 29, 2000,  interest  expense  increased
15.3 percent over the prior year as a result of increased short-term  borrowings
and higher interest rates.

Nonutility Operations
---------------------

     The  nonutility   operations  are  comprised  of  the  sales  and  cost  of
sales-nonutility for the Corporation's other subsidiaries and are segmented into
two categories, Contract Sales and All Other Operations. Contract Sales consists
of the Morris Merchants operations.  All Other Operations is comprised of VAMCO,
Valley Propane, AEC, corporate and eliminations.

Contract Sales
--------------

     Contract  revenues totaled  $3,709,500,  a decrease of 1.6 percent from the
prior year  period.  A slight  decline  in unit  sales as a result of  decreased
customer demand was responsible for the revenue decline.

     Cost of sales -  nonutility  declined  1.7 percent  from fiscal 1999 second
quarter levels as a direct result of the decline in unit sales mentioned above.

     Other operating  expenses  increased 10.9 percent  resulting from increased
wages and benefits,  promotional selling expenses and professional services when
compared with the prior year period.

All Other Operations
--------------------

     Nonutility   revenues   associated  with  this  business   segment  totaled
$2,442,500  for the three  months ended  February  29,  2000,  an increase of 17
percent  over the second  quarter in fiscal  1999.  Retail  sales of  commercial
products  and the  related  installations  were  primarily  responsible  for the
increase over the prior year period as a result of increases in demand for these
services.  Propane revenues in the second quarter of fiscal 2000 were positively
impacted by colder  weather and  increases in retail prices when compared to the
prior year period.  However,  propane gross profit margins declined,  despite an
increase in propane  gallons sold,  due to  competitive  pricing and fixed price
contracts.  AEC revenues  remained  flat when compared to the prior year period.
Offsetting the colder  weather's  positive  contribution to utility earnings was
the reduction in nonutility revenues due to the Corporation's  weather insurance
product.  The weather insurance product increases  nonutility  revenues when the
weather is more than 3 percent  warmer  than the  10-year  average  temperature,
which the weather was in the second fiscal  quarter of 1999.  The colder weather
during the second quarter in fiscal 2000 resulted in no anticipated payment from
the weather  insurance  product and a resultant decline in the corporate segment
of nonutility revenues.

     Cost of sales -  nonutility  for retail,  AEC and propane  operations  were
$1,285,100  as compared to $599,900 for the prior year period.  This increase is
the direct result of the increased retail commercial sales and propane sales and
prices as mentioned above.

                                       9
<PAGE>


     Other operating  expenses totaled $825,700,  a 23 percent increase over the
second fiscal  quarter of 1999. An increase in labor,  commissions  and expenses
related to the servicing of customers under the heating  equipment and appliance
plan programs were responsible for the increase over the prior year period.


For the six months  ended  February  29, 2000  compared to the six months  ended
February 28, 1999

     For the six months ended February 29, 2000, the consolidated net income for
Valley  Resources was  $2,541,100  or $0.51 per share  compared to net income of
$2,655,500  or $0.53  per share for the  comparable  period in the prior  fiscal
year.  The utility  operations  provided  net income of  $2,500,200  compared to
$2,053,800  in the  comparable  period  in the  prior  fiscal  year.  Nonutility
operations  contributed  $40,900  to  consolidated  net income for the six month
period of fiscal 2000 compared to $601,700 in the prior year's six month period.
Net income for the six months ended February 29, 2000 was positively impacted by
increased firm natural gas sales, offset by merger-related  expenses of $400,000
or $0.08 per share in the current year and a decline in nonutility earnings from
the Corporation's weather insurance product.

Utility Gas Operations
----------------------

     Utility gas  revenues  and volumes for the six months  ended in fiscal 2000
and fiscal 1999 were as follows:
<TABLE>
<CAPTION>

                                              Revenues                           Volumes (Mcf's)
                                              --------                           ---------------
                                       2000                1999                2000              1999
                                       ----                ----                ----              ----
<S>                                 <C>                <C>                   <C>               <C>
Base Firm Sales Service             $32,471,100        $30,341,300           4,504,800         4,196,800
Base Firm Transportation                350,700            335,900             285,200           285,800
                                    -----------        -----------           ---------         ---------
   Base Firm Gas Sales               32,821,800         30,677,200           4,790,000         4,482,600

Interruptible Service                 1,647,400          1,056,800           2,561,400         2,588,100
PGPA Revenues                         2,424,700          1,209,400                ----              ----
Other Revenues                           78,800            225,400                ----              ----
                                    -----------        -----------           ---------         ---------
   Total Utility Gas Revenues       $36,972,700        $33,168,800           7,351,400         7,070,700
                                    -----------        -----------           ---------         ---------
</TABLE>


     Base firm gas sales service  revenues and volumes,  sold through  regulated
tariffs, increased for the six month period of fiscal 2000 primarily as a result
of weather, which was 3.7 percent colder than the prior year period although 6.2
percent warmer than normal.

     Increased  demand  for  natural  gas from  customers  with  alternate  fuel
capabilities produced a 14.3 percent increase in interruptible Mc's sold in the
fiscal 2000 period as compared to 1999.  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.

     Cost of gas sold  increased  16.4  percent  over the prior year period as a
result of increased  natural gas demand and higher wholesale natural gas prices.
The average cost per Mcf of gas  distributed  was $4.02 for the six months ended
February 29, 2000 as compared to $3.50 during the six months ended  February 28,
1999.

     Other operating expenses declined 3.5 percent from the prior year six month
period,   primarily   due  to   decreased   expenses   relating  to  funding  of
post-retirement  benefits and general  operating  expenses,  offset  slightly by
increased overtime labor resulting from the colder winter period.

     Interest  expense  increased  12.1  percent over the prior six month period
stemming from increased short-term borrowings and higher interest rates.


                                       10
<PAGE>

Contract Sales
--------------

     Contract revenues totaled  $7,425,700 for the six months ended February 29,
2000, a 3.8 percent decline from the prior year's six month period. A decline in
unit sales and customers  building inventory at the end of fiscal 1999 accounted
for the revenue decline.

     Cost of sales -  nonutility  declined 4.4 percent  when  compared  with the
prior fiscal six month  period.  The decline was the direct result of lower unit
sales as mentioned above.

     Other operating expenses increased 3.5 percent when compared with the prior
fiscal year's  comparable  six month period.  An increase in labor and benefits,
selling expenses and professional services was responsible for the increase.

All Other Operations
--------------------

     The nonutility  revenues for this business segment for the six months ended
February  29, 2000  totaled  $4,844,700,  an increase of 35.3  percent  over the
fiscal 1999 corresponding  period. Retail and commercial sales and installations
and AEC sales were primarily  responsible for the increase over the prior fiscal
year  period.   Residential   retail  sales  of  home  heating   equipment   and
installations,  the  completion  of projects in the retail  commercial  area and
AEC's sale of its first  natural gas fuel cell  positively  impacted  nonutility
revenues.  Propane revenues increased due to the colder weather this past winter
period and increased  product  pricing.  Propane gross profit  margins  declined
slightly,  despite an  increase  in propane  gallons  sold,  due to  competitive
pricing and fixed price contracts.  As mentioned above nonutility  revenues were
impacted by a decline  resulting from the revenues  recorded in the prior fiscal
year period related to the weather insurance product.

     Cost of sales -  nonutility  for retail,  AEC and propane  operations  were
$2,587,500 for the six month period in fiscal 2000 as compared to $1,216,600 for
the corresponding  period of the prior fiscal year. This increase was the direct
result of the  increased  retail,  commercial,  propane and AEC sales  mentioned
above.

     Other operating  expenses totaled  $1,499,600,  an increase of 17.4 percent
over the  prior  year's  six  month  fiscal  period.  Other  operation  expenses
increased  over the prior  fiscal  year period due to  merger-related  expenses,
legal and investment banking fees,  incurred in the first fiscal period of 2000.
See section entitled "Valley Resources Inc./Southern Union Company Merger" below
for further details.

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

     During the second  quarter of fiscal  2000 the  liquidity  position  of the
Corporation  improved over the first  quarter as a result of increased  revenues
from  winter  period  sales and the  completion  of  several  retail  commercial
projects.   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 29, 2000 were  $20,800,000 and there
were $8,200,000 of short-term borrowings outstanding.

     Cash flows were  negatively  impacted  during the second  quarter of fiscal
2000 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.

     Construction  expenditures  declined  during the  second  quarter of fiscal
2000, 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 winter bills are collected.  Cash expended on the  construction
program are also  expected to increase  during the third  quarter of fiscal 2000
which will  negatively  impact cash flows.  This increased  cash  requirement is
expected to be offset by the improved cash flows.


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<PAGE>


     In the first fiscal quarter, the Corporation  purchased a weather insurance
product  which applies to the winter  heating  season from November 1999 through
March 2000.  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 a  predetermined  variance.  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, as
a result of warmer  weather  during the month of March 2000,  thereby  favorably
impacting liquidity.

Valley Resources, Inc./Southern Union Company Merger
----------------------------------------------------

     On December 1, 1999,  Southern  Union  Company and Valley  Resources,  Inc.
announced  that they signed a  definitive  merger  agreement  under which Valley
Resources,  Inc.  will  ultimately  merge  into  Southern  Union  Company  in  a
transaction which is valued at approximately $160 million,  including assumption
of debt. Under the terms of the agreement,  Valley Resources,  Inc. shareholders
will  receive  $25.00 in cash per  share of  common  stock  held.  The  business
combination will be accounted for under the purchase method of accounting.

     This transaction  requires the approval of the holders of a majority of the
outstanding  Valley  Resources,  Inc.  shares,  the  Rhode  Island  Legislature,
regulators in Rhode Island, as well as regulators in Missouri,  Pennsylvania and
Florida where Southern Union currently has operations. The merger is expected to
be completed in September 2000.

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

     The  Corporation  can report that the transition  rollover to the Year 2000
was completed  according to normal operating  procedures with no interruption to
business  services.  The  Corporation's  software  applications,   hardware  and
embedded chips have experienced no problems.  The interaction with third parties
has also proceeded according to normal business schedules without  difficulties.
The  Corporation's  Year  2000  related  costs  have  not been  material  to the
Corporation.

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.  This provides only an example of some of the risks,  uncertainties
and  assumptions  that may affect  forward-looking  statements.  If any of these
risks or uncertainties materialize or fail to materialize,  as applicable, or if
the underlying assumptions prove incorrect, actual results may differ materially
from those projected in the forward-looking statements.




                           PART II: OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K

       (a)   Financial Data Schedule.

       (b)   None.


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<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


April 14,  2000









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