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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q
(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1997

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-7176



                             THE COASTAL CORPORATION
             (Exact name of registrant as specified in its charter)



            Delaware                                           74-1734212
(State or other jurisdiction of                             (I.R.S. Employer 
 incorporation or organization)                            Identification No.)


              Coastal Tower
           Nine Greenway Plaza
             Houston, Texas                                     77046-0995
(Address of principal executive offices)                        (Zip Code)



       Registrant's telephone number, including area code: (713) 877-1400



                           ---------------------------





     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 _____

     As of April 30, 1997, there were outstanding  105,474,466  shares of Common
Stock,  33-1/3 cents par value per share,  and 376,150  shares of Class A Common
Stock, 33-1/3 cents par value per share, of the Registrant.


<PAGE>

                                     PART I

                              FINANCIAL INFORMATION


Item 1.    Financial Statements.

      The financial  statements of The Coastal  Corporation and its subsidiaries
(the "Company") are presented  herein and are unaudited,  except for balances as
of December  31,  1996,  and  therefore  are  subject to  year-end  adjustments;
however, all adjustments which are, in the opinion of management,  necessary for
a fair statement of the results of operations for the periods  covered have been
made. The  adjustments  which have been made are of a normal  recurring  nature.
Such results are not  necessarily  indicative  of results to be expected for the
year due to seasonal variations and market conditions affecting sales of natural
gas and petroleum products.


                    THE COASTAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)

<TABLE>
<CAPTION>

                                                                                   March 31,        December 31,
                                     ASSETS                                         1997                1996
                                                                                  -----------       ------------
                                                                                  (Unaudited)

<S>                                                                               <C>                <C>        
Current Assets:
   Cash and cash equivalents...............................................       $     109.5        $     106.3
   Receivables, less allowance for doubtful accounts of $14.7 million
      (1997) and $23.4 million (1996)......................................           1,803.0            1,801.0
   Inventories.............................................................             739.2            1,143.9
   Prepaid expenses and other..............................................             137.8              145.2
                                                                                  -----------        -----------
      Total Current Assets.................................................           2,789.5            3,196.4
                                                                                  -----------        -----------

Property, Plant and Equipment - at cost:
   Natural gas systems.....................................................           5,726.2            5,691.5
   Refining, crude oil and chemical facilities.............................           2,238.7            2,213.9
   Gas and oil properties - at full-cost...................................           1,723.5            1,669.4
   Other...................................................................             392.5              386.7
                                                                                  -----------        -----------
                                                                                     10,080.9            9,961.5
   Accumulated depreciation, depletion and amortization....................           3,413.5            3,306.6
                                                                                  -----------        -----------
                                                                                      6,667.4            6,654.9
                                                                                  -----------        -----------

Other Assets:
   Goodwill................................................................             504.1              508.9
   Investments - equity method.............................................             634.8              589.1
   Other...................................................................             690.2              663.8
                                                                                  -----------        -----------
                                                                                      1,829.1            1,761.8
                                                                                  -----------        -----------
                                                                                  $  11,286.0        $  11,613.1
                                                                                  ===========        ===========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 1 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              (Millions of Dollars)

<TABLE>
<CAPTION>

                                                                                   March 31,        December 31,
                      LIABILITIES AND STOCKHOLDERS' EQUITY                           1997               1996
                                                                                  -----------       ------------
                                                                                  (Unaudited)

<S>                                                                               <C>               <C>          
Current Liabilities:
   Notes payable...........................................................       $      255.0       $      105.0
   Accounts payable........................................................            2,154.6            2,425.9
   Accrued expenses........................................................              315.0              408.3
   Current maturities on long-term debt....................................               21.2                8.0
                                                                                  ------------       ------------
      Total Current Liabilities............................................            2,745.8            2,947.2
                                                                                  ------------       ------------

Debt:
   Long-term debt, excluding current maturities............................            3,434.2            3,526.1
                                                                                  ------------       ------------

Deferred Credits and Other:
   Deferred income taxes...................................................            1,380.8            1,404.8
   Other deferred credits..................................................              591.6              598.5
                                                                                  ------------       ------------
                                                                                       1,972.4            2,003.3
                                                                                  ------------       ------------

Preferred Stock:
   Issued by subsidiaries..................................................              100.0              100.0
                                                                                  ------------       ------------

Common Stock and Other Stockholders' Equity:
   Cumulative preferred stock (with aggregate liquidation preference
      of $208.8 million)...................................................                2.6                2.6
   Class A common stock....................................................                 .1                 .1
   Common stock............................................................               36.6               36.6
   Additional paid-in capital..............................................            1,241.0            1,239.6
   Retained earnings.......................................................            1,885.8            1,890.1
                                                                                  ------------       ------------
                                                                                       3,166.1            3,169.0
   Less common stock in treasury - at cost.................................              132.5              132.5
                                                                                  ------------       ------------
                                                                                       3,033.6            3,036.5
                                                                                  ------------       ------------
                                                                                  $   11,286.0       $   11,613.1
                                                                                  ============       ============
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 2 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                      STATEMENT OF CONSOLIDATED OPERATIONS
                     (Millions of Dollars, Except Per Share)

<TABLE>
<CAPTION>

                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                            ---------------------
                                                                                              1997         1996
                                                                                            --------     --------
                                                                                                  (Unaudited)

<S>                                                                                         <C>         <C>      
Operating Revenues......................................................................    $ 3,205.8   $ 3,097.8
                                                                                            ---------   ---------

Operating Costs and Expenses:
   Purchases............................................................................      2,465.4     2,360.5
   Operating expenses...................................................................        404.5       438.4
   Depreciation, depletion and amortization.............................................        115.9       100.3
                                                                                            ---------   ---------
                                                                                              2,985.8     2,899.2
                                                                                            ---------   ---------

Operating Profit........................................................................        220.0       198.6
                                                                                            ---------   ---------

Other Income - net......................................................................         24.6        18.1
                                                                                            ---------   ---------

Other Expenses:
   General and administrative...........................................................         15.0        14.5
   Interest and debt expense, less $2.4 million (1997)
      and $1.5 million (1996) capitalized...............................................         79.2        95.6
   Taxes on income......................................................................         49.2        24.1
                                                                                            ---------   ---------
                                                                                                143.4       134.2
                                                                                            ---------   ---------

Earnings Before Extraordinary Item......................................................        101.2        82.5
Extraordinary item - loss on early extinguishment of debt...............................        (90.6)          -
                                                                                            ---------   ---------

Net Earnings............................................................................         10.6        82.5
Dividends on Preferred Stock............................................................          4.3         4.3
                                                                                            ---------   ---------

Net Earnings Available
   to Common Stockholders...............................................................    $     6.3   $    78.2
                                                                                            =========   =========

Earnings Per Share:
   Before extraordinary item............................................................    $     .91   $     .74
   Extraordinary item...................................................................         (.85)          -
                                                                                            ---------   ---------

Net Earnings Per Common
   and Common Equivalent Share..........................................................    $     .06   $     .74
                                                                                            =========   =========

Cash Dividends Per Common Share.........................................................    $     .10   $     .10
                                                                                            =========   =========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 3 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
      STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
                  (Thousands of Shares and Millions of Dollars)

<TABLE>
<CAPTION>

                                                                        Three Months Ended March 31,
                                                           ------------------------------------------------------
                                                                     1997                          1996
                                                           ------------------------      ------------------------
                                                             Shares        Amount          Shares        Amount
                                                           -----------   ----------      -----------   ----------
                                                                                 (Unaudited)

<S>                                                        <C>           <C>             <C>           <C>       
Preferred stock, par value
   33-1/3 cents per share, authorized 50,000,000 shares:
      Cumulative convertible preferred:
      $1.19, Series A, redemption or liquidation
         amount of $33 per share:
           Beginning balance...........................             60   $        -               61   $        -
           Converted to common.........................             (1)           -                -            -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             59            -               61            -
                                                           ===========   ----------      ===========   ----------

      $1.83, Series B, redemption or liquidation
         amount of $50 per share:
           Beginning balance...........................             74            -               79           .1
           Converted to common.........................             (2)           -               (2)           -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             72            -               77           .1
                                                           ===========   ----------      ===========   ----------

      $5.00, Series C, redemption or liquidation
         amount of $100 per share:
           Beginning balance...........................             32            -               33            -
           Converted to common.........................              -            -                -            -
                                                           -----------   ----------      -----------   ----------
           Ending balance..............................             32            -               33            -
                                                           ===========   ----------      ===========   ----------

      Cumulative preferred:
      $2.125, Series H, liquidation amount
         of $25 per share:
           Beginning and ending balance................          8,000          2.6            8,000          2.6
                                                           ===========   ----------      ===========   ----------

Class A common stock, par value 33-1/3 cents per share,
  authorized 2,700,000 shares:
      Beginning balance................................            382           .1              404           .1
      Converted to common..............................             (2)           -               (5)           -
      Conversion of preferred stock and
         exercise of stock options.....................              -            -                1            -
                                                           -----------   ----------      -----------   ----------
      Ending balance...................................            380           .1              400           .1
                                                           ===========   ----------      ===========   ----------

Common stock, par value 33-1/3 cents per share,
  authorized 250,000,000 shares:
      Beginning balance................................        109,756         36.6          109,168         36.4
      Conversion of preferred stock....................              8            -               12            -
      Conversion of Class A common stock...............              2            -                5            -
      Exercise of stock options........................             95            -              188           .1
                                                           -----------   ----------      -----------   ----------
      Ending balance...................................        109,861   $     36.6          109,373   $     36.5
                                                           ===========   ----------      ===========   ----------
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 4 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
      STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
                  (Thousands of Shares and Millions of Dollars)
                                   (Continued)

<TABLE>
<CAPTION>

                                                                        Three Months Ended March 31,
                                                           ------------------------------------------------------
                                                                     1997                          1996
                                                           ------------------------      ------------------------
                                                             Shares        Amount          Shares        Amount
                                                           -----------   ----------      -----------   ----------
                                                                                 (Unaudited)

<S>                                                        <C>           <C>             <C>           <C>       
Additional paid-in capital:
   Beginning balance...................................                  $  1,239.6                    $  1,225.0
   Exercise of stock options...........................                         1.4                           3.5
                                                                         ----------                    ----------
   Ending balance......................................                     1,241.0                       1,228.5
                                                                         ----------                    ----------

Retained earnings:
   Beginning balance...................................                     1,890.1                       1,547.1
   Net earnings for period.............................                        10.6                          82.5
   Dividends on preferred stock........................                        (4.3)                         (4.3)
   Dividends on common stock...........................                       (10.6)                        (10.6)
                                                                         ----------                    ----------
   Ending balance......................................                     1,885.8                       1,614.7
                                                                         ----------                    ----------
Less treasury stock - at cost..........................          4,395        132.5            4,395        132.5
                                                           ===========   ----------      ===========   ----------

Total..................................................                  $  3,033.6                    $  2,750.0
                                                                         ==========                    ==========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 5 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                      STATEMENT OF CONSOLIDATED CASH FLOWS
                              (Millions of Dollars)

<TABLE>
<CAPTION>

                                                                                       Three Months Ended
                                                                                            March 31,
                                                                                   -------------------------
                                                                                     1997             1996
                                                                                   --------         --------
                                                                                           (Unaudited)

<S>                                                                                <C>              <C>     
Net Cash Flow From Operating Activities:
   Earnings before extraordinary item..........................................    $   101.2        $   82.5
   Add (subtract) items not requiring (providing) cash:
      Depreciation, depletion and amortization.................................        116.8           101.3
      Deferred income taxes....................................................          4.6             5.4
      Amortization of producer contract reformation costs......................            -             8.2
      Distributed (undistributed) earnings from equity investments.............         (8.1)           17.4

   Working capital and other  changes,  excluding  changes  relating to cash and
      non-operating activities:
         Accounts receivable...................................................           .1          (181.1)
         Inventories...........................................................        371.8           (74.9)
         Prepaid expenses and other............................................          5.7            10.8
         Accounts payable......................................................       (243.0)          159.3
         Accrued expenses......................................................        (50.9)           19.6
         Other.................................................................         14.1            14.7
                                                                                   ---------        --------
                                                                                       312.3           163.2
                                                                                   ---------        --------

Cash Flow From Investing Activities:
   Purchases of property, plant and equipment..................................       (142.7)         (145.9)
   Proceeds from sale of property, plant and equipment.........................          2.7             1.2
   Additions to investments....................................................        (92.2)          (17.6)
   Proceeds from investments...................................................          4.4               -
   Recovery of gas supply prepayments..........................................            -              .1
                                                                                   ---------        --------
                                                                                      (227.8)         (162.2)
                                                                                   ---------        --------

Cash Flow From Financing Activities:
   Increase (decrease) in short-term notes ....................................        400.0          (197.0)
   Redemption of mandatory redemption preferred stock..........................            -             (.1)
   Proceeds from issuing common stock..........................................          1.4             3.6
   Proceeds from long-term debt issues.........................................        527.7           271.5
   Payments to retire long-term debt...........................................       (995.5)          (71.7)
   Dividends paid..............................................................        (14.9)          (14.9)
                                                                                   ---------        --------
                                                                                       (81.3)           (8.6)
                                                                                   ---------        --------

Net Increase (Decrease) in Cash and Cash Equivalents...........................          3.2            (7.6)

Cash and Cash Equivalents at Beginning of Period...............................        106.3            58.4
                                                                                   ---------        --------

Cash and Cash Equivalents at End of Period.....................................    $   109.5        $   50.8
                                                                                   =========        ========
</TABLE>


                 See Notes to Consolidated Financial Statements.


                                      - 6 -

<PAGE>

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Summary of Significant Accounting Policies

     For additional  information  relative to operations and financial position,
reference  is made to the  Company's  Annual  Report on Form 10-K for the fiscal
year ended December 31, 1996.  Certain minor  reclassifications  of prior period
statements  have been made to conform  with  current  reporting  practices.  The
effect of the reclassifications  was not material to the Company's  consolidated
results of operations, financial position or cash flows.

     The interstate  natural gas pipeline and certain storage  subsidiaries  are
subject to the  regulations  and  accounting  procedures  of the Federal  Energy
Regulatory Commission ("FERC"). The Company's subsidiaries historically followed
the reporting and accounting  requirements of Statement of Financial  Accounting
Standards No. 71, " Accounting  for the Effects of Certain Types of  Regulation"
("FAS  71").  Effective  November  1,  1996,  these  subsidiaries   discontinued
application of FAS 71. This accounting change has no direct effect on either the
subsidiaries'  ability to include the deferred items in future rate  proceedings
or on their ability to collect the rates set thereby.  The Company believes this
accounting  change  results in financial  reporting  which  better  reflects the
results of operations in the economic  environment  in which these  subsidiaries
operate.

     The Company adopted  Statement of Financial  Accounting  Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of  Liabilities"  in 1997.  The  application  of the new standard did not have a
material effect on the Company's  consolidated results of operations,  financial
position or cash flows.

     The Company adopted Statement of Position 96-1 on Environmental Remediation
Liabilities  in 1997.  The  application  of the new statement is not expected to
have a material  effect on the  Company's  consolidated  results of  operations,
financial position or cash flows.

     The Financial  Accounting  Standards Board ("FASB") has issued Statement of
Financial  Accounting  Standards No. 128, "Earnings per Share" ("FAS 128") to be
effective  for periods  ending after  December  15,  1997.  FAS 128 replaces the
presentation of primary earnings per share with a presentation of basic earnings
per share. It also requires dual  presentation of basic and diluted earnings per
share on the face on the income  statement for all entities with complex capital
structures.  The Company has computed  basic and diluted  earnings per share for
the three month periods ended March 31, 1997 and 1996,  respectively,  following
the  guidance  in FAS 128.  The results are not  materially  different  from the
amounts presented in the Statement of Consolidated Operations.

     The FASB has issued  Statement of Financial  Accounting  Standards No. 129,
"Disclosure of Information about Capital  Structure" ("FAS 129") to be effective
for periods ending after December 15, 1997.  FAS 129  establishes  standards for
disclosing information about an entity's capital structure. The Company does not
believe that the  application of the new standard will have a material effect on
its consolidated results of operations, financial position or cash flows.

     Supplemental  information  relative to the Statement of  Consolidated  Cash
Flows  includes the  following:  the Company made cash payments for interest and
financing fees, net of amounts  capitalized,  of $80.6 million and $62.7 million
for the three months ended March 31, 1997 and 1996, respectively.  Cash payments
for income taxes amounted to $36.6 million and $1.7 million for the three months
ended March 31, 1997 and 1996, respectively.


                                      - 7 -

<PAGE>

2.    Inventories

      Inventories were as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                                  March 31,         December 31,
                                                                                    1997                1996
                                                                                 -----------        ------------
                                                                                 (Unaudited)

   <S>                                                                           <C>                 <C>       
   Refined products, crude oil and chemicals...............................      $     572.9         $    920.3
   Natural gas in underground storage......................................             22.4               77.7
   Coal, materials and supplies............................................            143.9              145.9
                                                                                 -----------         ----------
                                                                                 $     739.2         $  1,143.9
                                                                                 ===========         ==========
</TABLE>

     Elements  included in inventory cost are material,  labor and manufacturing
expense.  Natural gas in underground storage at December 31, 1996 included $26.3
million which was  transferred  to Property,  Plant and Equipment for regulatory
and accounting purposes.

3. Notes Payable

     At  March  31,  1997,   the  Company  had  $505.0  million  of  outstanding
indebtedness to banks under short-term lines of credit. The Company's  financial
statements at March 31, 1997,  reflect $250.0  million of short-term  borrowings
which  have  been  reclassified  as  long-term,  based  on the  availability  of
committed  credit lines with  maturities in excess of one year and the Company's
intent to  maintain  such  amounts as  long-term  borrowings.  There was no such
reclassification as of December 31, 1996.

4. Common Stock

     On March 31,  1997,  3,043,255  shares of Common  Stock of the Company were
reserved  for employee  stock option  plans,  702,071  shares were  reserved for
conversion  of the Series A, B, and C  Preferred  Stocks,  379,882  shares  were
reserved for  conversion of  outstanding  Class A Common Stock and 21,715 shares
were reserved for conversion of Class A Common Stock subject to future issuance.
The Class A Common Stock reserved for future  issuance  consists of 2,280 shares
reserved  for  employee  stock  option  plans and  19,435  shares  reserved  for
conversion of the Series A, B, and C Preferred Stocks.

     During the quarter  ended March 31, 1997,  the Company  granted  options to
purchase  common  shares under stock  option plans as follows - 759,300  options
with an exercise  price of $47.06 and 4,750  options  with an exercise  price of
$47.69.  The exercise  prices are equal to the market price of the common shares
at grant date.


                                      - 8 -

<PAGE>

5. Income Taxes

     Provisions for income taxes were as follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                            ---------------------
                                                                                              1997         1996
                                                                                            --------     --------
                                                                                                  (Unaudited)

   <S>                                                                                      <C>          <C>     
   Current Income Taxes:
      Federal...........................................................................    $    38.0    $   14.6
      Foreign...........................................................................          1.5          .6
      State.............................................................................          5.1         3.5
                                                                                            ---------    --------
                                                                                                 44.6        18.7
                                                                                            ---------    --------

   Deferred Income Taxes:
      Federal...........................................................................          4.5         6.0
      Foreign...........................................................................           .9          .5
      State.............................................................................          (.8)       (1.1)
                                                                                            ---------    --------
                                                                                                  4.6         5.4
                                                                                            ---------    --------

                                                                                            $    49.2    $   24.1
                                                                                            =========    ========
</TABLE>

     Interim  period  provisions for federal income taxes are based on estimated
effective annual income tax rates.

6. Extraordinary Item

     In February 1997, the Company purchased and retired $798.0 million of notes
and debentures  with interest rates ranging from 9-3/4% to 10-3/4%.  None of the
issues were  eligible  for  redemption  and the purchase  included  payment of a
premium. The Company incurred an extraordinary charge of $90.6 million ($.85 per
share), net of income taxes of $48.7 million,  in connection with the repurchase
of these debt securities.

7. Litigation, Regulatory and Environmental Matters

   Litigation Matters

     A subsidiary of Coastal initiated a suit against  TransAmerican Natural Gas
Corporation  ("TransAmerican")  in the District Court of Webb County,  Texas for
breach of two gas purchase agreements.  In February 1993,  TransAmerican filed a
Third Party  Complaint and a  Counterclaim  in this action  against  Coastal and
certain  subsidiaries.   TransAmerican   alleged  breach  of  contract,   fraud,
conspiracy,  duress,  tortious  interference  and  violations  of the Texas Free
Enterprises and Anti-trust Act arising out of the gas purchase agreements. Final
judgment in this matter was entered April 22, 1994.  The  subsidiary was awarded
approximately $2 million, including pre-judgment interest and attorney fees. All
of TransAmerican's claims and causes of action were denied. The Court of Appeals
for the Fourth Judicial District has denied TransAmerican's appeal in this case.
TransAmerican  subsequently  filed a Writ of Error with the Texas Supreme Court,
which was denied in December 1996. In January 1997,  TransAmerican's  Motion for
Rehearing of its Writ of Error was filed and subsequently  denied.  On March 24,
1997,  the Texas  Supreme  Court  issued its Mandate and payment of the judgment
against  TransAmerican in the approximate amount of $2 million,  which amount is
expected to be paid in late May of 1997.

     In December  1992,  certain of Colorado  Interstate  Gas Company's  ("CIG")
natural gas lessors in the West  Panhandle  Field filed a complaint  in the U.S.
District Court for the Northern District of Texas, claiming underpayment, breach
of fiduciary duty, fraud and negligent  misrepresentation.  Management  believes
that CIG has numerous  defenses to the lessors'  claims,  including (i) that the
royalties were properly paid, (ii) that the majority of the claims were released
by written agreement and (iii) that the majority of the claims are barred by the
statute of  limitations.  In March of 1995,  the Trial  Court  granted a partial
summary  judgment  in  favor  of CIG,  holding  that the  four-year  statute  of
limitations had not been tolled, that the releases are valid, and dismissing all
tort claims and claims for breach of any duty of disclosure.

                                      - 9 -

<PAGE>

The remaining claim for  underpayment of royalties was tried to a jury which, in
May 1995,  made  findings  favorable  to CIG.  On June 7, 1995,  the Trial Court
entered a judgment  that the lessors  recover no monetary  damages  from CIG and
permanently  estopping  the  lessors  from  asserting  any  claim  based  on  an
interpretation  of the  contract  different  than  that  asserted  by CIG in the
litigation.  The lessors'  motion for a new trial is pending.  One June 7, 1996,
the same plaintiffs sued CIG in state court in Amarillo,  Texas for underpayment
of  royalties.  CIG removed the second  lawsuit to federal court which granted a
stay of the second suit pending the outcome of the first lawsuit.

     A natural gas producer  has filed a claim on behalf of the U.S.  government
in the U.S.  District Court for the District of Columbia under the federal False
Claims Act. The Second Amended Complaint filed on May 24, 1996,  against seventy
(70)  defendants,  including  ANR Pipeline  Company  ("ANR  Pipeline"),  CIG and
Coastal States Gas Transmission Company, alleges that the defendants' methods of
measuring  the  heating  content  and  volume  of  natural  gas  purchased  from
federally-owned  or Indian  properties have caused  underpayment of royalties to
the U.S.  government.  The  Company's  subsidiaries,  together  with  the  other
pipeline  defendants,  filed a motion to dismiss.  On March 27, 1997,  the Court
granted the motion and  dismissed,  without  prejudice,  the claims  against the
Company's subsidiaries and most of the other pipeline defendants.

     In October 1996, the Company, along with several subsidiaries, was named as
a  defendant  in a suit filed by several  former and  current  African  American
employees in the United States District Court,  Southern  District of Texas. The
suit alleges racially discriminatory employment policies and practices and seeks
damages in the amount of at least $100 million and punitive  damages of at least
three  times  that  amount.  Plaintiffs'  counsel  are  seeking to have the suit
certified as a class action. Coastal vigorously denies these allegations and has
filed responsive pleadings.

     Numerous  other  lawsuits  and other  proceedings  which have arisen in the
ordinary course of business are pending or threatened against the Company or its
subsidiaries.

     Although no  assurances  can be given and no  determination  can be made at
this time as to the outcome of any particular lawsuit or proceeding, the Company
believes there are meritorious defenses to substantially all of the above claims
and that any  liability  which  may  finally  be  determined  should  not have a
material  adverse  effect  on the  Company's  consolidated  financial  position,
results of operations or cash flows.

     Regulatory Matters

     From  November 1, 1992 to November 1, 1993,  gas inventory  demand  charges
were collected from ANR Pipeline's former resale  customers.  This method of gas
cost recovery  required  refunds for any  over-collections.  In April 1994,  ANR
Pipeline  filed  with the  FERC a refund  report  showing  over-collections  and
proposing refunds totaling $45.1 million.  Certain customers  disputed the level
of those refunds. The FERC approved ANR Pipeline's refund allocation methodology
and ANR  Pipeline,  in March 1995,  paid  undisputed  refunds of $45.1  million,
together  with  applicable  interest,   subject  to  further   investigation  of
customers'  claims.  The FERC's  approval of ANR  Pipeline's  refund  allocation
methodology  was  upheld by the  United  States  Court of  Appeals  for the D.C.
Circuit in April 1996. Disputed issues related to the refunds are the subject of
further  proceedings  before the FERC.  In March 1997,  an Initial  Decision was
issued, which adopted most of ANR Pipeline's positions,  but which will not take
effect until the FERC has reviewed the exceptions that have been filed.

     ANR  Pipeline  filed a general  rate  increase on November 1, 1993.  Issues
related to the general  rate  increase  are the subject of  continuing  FERC and
judicial  proceedings.  Under a March 1994 order,  certain costs were reduced or
eliminated, resulting in revised rates that reflect an $85.7 million increase in
the cost of service  underlying that approved and a $182.8 million increase over
the cost of service  underlying ANR Pipeline's  approved rates for its Order 636
restructured  services.  In September  1994,  the FERC  accepted ANR  Pipeline's
filing to place the new rates  into  effect  May 1,  1994,  subject  to  further
modifications.  ANR Pipeline  submitted  revised rates in  compliance  with this
order in October 1994,  which rates are currently in effect,  subject to refund.
In January 1997, an Initial Decision was issued on the issues set for hearing by
the March 1994 order. That Initial Decision,  which accepted some but not all of
ANR Pipeline's rate change proposals, does not take effect until reviewed by the
FERC. ANR Pipeline and other parties have filed exceptions regarding some of the
findings in the Initial Decision.


                                     - 10 -

<PAGE>

     The  FERC  has  also  issued a series  of  orders  in ANR  Pipeline's  rate
proceeding  that  apply a new  policy  governing  the  order of  attribution  of
revenues  received by ANR Pipeline  related to transition costs under Order 636.
Under that new policy,  ANR Pipeline is required to first attribute the revenues
it receives for its services to the recovery of its transition costs under Order
636 rather than to the recovery of its base cost of service.  The FERC's  change
in its revenue  attribution policy has the effect of understating ANR Pipeline's
currently   effective   maximum  rates  and  accelerating  its  amortization  of
transition  costs for  regulatory  accounting  purposes.  In light of the FERC's
policy,  ANR Pipeline has filed with the FERC to increase its discount  recovery
adjustment  in its pending rate  proceeding.  ANR  Pipeline has sought  judicial
review of these  orders  before the United  States Court of Appeals for the D.C.
Circuit.

     In May 1997,  certain of ANR Pipeline's  customers  filed a motion with the
FERC for  immediate  refund of  approximately  $77 million,  which the customers
claim ANR  Pipeline  is holding in  escrow.  The refund  claim is related to ANR
Pipeline's  settlement  with Dakota  Gasification  Company,  which was  recently
approved by the FERC. ANR Pipeline believes that the customers' claim is grossly
overstated  and will  respond to the FERC,  identifying  the  amounts  which ANR
Pipeline is currently holding in escrow for refund to its customers.

     On March 29,  1996,  CIG filed with the FERC under  Docket No.  RP96-190 to
increase its rates by  approximately  $30 million  annually,  to realign certain
transportation services and to add tariff language that would allow CIG to enter
into "negotiated" rates (rates which could exceed CIG's  "cost-based"  rates) in
certain  circumstances  subject to FERC  policies.  On April 25, 1996,  the FERC
accepted the rate change filing and the  transportation  service  realignment to
become  effective  October 1, 1996,  subject to refund,  and also  accepted  the
"negotiated  rate"  tariff  provision  to become  effective  May 1, 1996.  While
certain parties have sought judicial review of the acceptance of the "negotiated
rate" tariff  provisions,  those provisions are currently in effect although CIG
has so far not  entered  into  any  "negotiated  rate"  agreements  under  these
provisions.  With  respect  to the rate  change and the  transportation  service
realignment,  a hearing is  schedule  for August 1997 in the event that the case
cannot be settled.

     In July 1996,  the United  States  Court of  Appeals  for the D.C.  Circuit
upheld the basic  structure of the FERC's Order 636 (issued in April 1992),  but
remanded to the FERC, for further consideration,  certain limited aspects of the
Order. In its order  responding to the remand (Order 636-C,  issued February 27,
1997) the FERC:  (1)  reaffirmed the right of pipelines to recover 100% of their
prudently  incurred  transition costs, but required pipelines to file a proposal
for  the  level  of  costs  to  be  allocated  to  interruptible  transportation
customers;  and (2)  reduced  from  20-years  to  5-years,  the term "cap" to be
applied to evaluation of bids for renewal of contracts on existing volumes.  ANR
Pipeline and CIG have sought  rehearing and  clarification  of these holdings as
they relate to past and future periods.

     CIG, ANR  Pipeline,  ANR Storage  Company and Wyoming  Interstate  Company,
Ltd.,  subsidiaries  of the Company,  are regulated by the FERC.  Certain of the
above  regulatory  matters and other regulatory  issues remain  unresolved among
these companies,  their customers, their suppliers and the FERC. The Company has
made  provisions  which  represent  management's   assessment  of  the  ultimate
resolution  of these issues.  As a result,  the Company  anticipates  that these
regulatory  matters will not have a material  adverse effect on its consolidated
financial  position,  results of  operations  or cash  flows.  While the Company
estimates the provisions to be adequate to cover  potential  adverse  rulings on
these and other  issues,  it cannot  estimate  when each of these issues will be
resolved.

     Environmental Matters

     The Company's  operations  are subject to extensive  and evolving  federal,
state and local  environmental  laws and  regulations.  The Company  anticipates
capital  expenditures  of  approximately  $42 million in 1997 in order to comply
with  such  laws and  regulations.  The  majority  of the 1997  expenditures  is
attributable to construction  projects at the Company's  refining,  chemical and
terminal facilities.  The Company currently anticipates capital expenditures for
environmental  compliance  for the years 1998 through 2000 of $20 to $40 million
per year.  Additionally,  appropriate  governmental  authorities may enforce the
laws and regulations with a variety of civil and criminal enforcement  measures,
including monetary penalties and remediation requirements.

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault  or the  legality  of the  original  act,  for  disposal  of a  "hazardous
substance."  Certain  subsidiaries of the Company and a company in which Coastal
owns a 50% interest have been named as a potentially  responsible  party ("PRP")
in several "Superfund" waste disposal sites. At the 16 sites for which there

                                     - 11 -

<PAGE>

is  sufficient   information,   total   clean-up   costs  are  estimated  to  be
approximately $333 million, and the Company estimates its pro-rata exposure,  to
be paid over a period of several years,  is  approximately  $7.4 million and has
made  appropriate  provisions.  At 4 other sites, the  Environmental  Protection
Agency  ("EPA") is  currently  unable to provide the Company with an estimate of
total  clean-up costs and,  accordingly,  the Company is unable to calculate its
share of those costs. Finally at 10 other sites, the Company has paid amounts to
other PRPs or to the EPA as is proportional share of associated  clean-up costs.
As to these latter  sites,  the Company  believes  that its  activities  were de
minimis.  Additionally,  certain  subsidiaries of the Company have been named as
PRPs in two state sites.  At one site, the North Carolina  Department of Health,
Environment  and Natural  Resources has estimated the total clean-up costs to be
approximately  $50  million,  but the Company  believes  that the  subsidiaries'
activities  at this site were de minimis.  At the other state site,  the Florida
Department of Environmental  Protection has demanded reimbursement of its costs,
which  total  $40,000,  and  suitable  remediation.   There  is  not  sufficient
information to estimate the remedial costs or the Company's pro-rata exposure at
this site.

     By letter dated April 8, 1997, the United States Department of Justice (the
"Department")  notified ANR Coal  Company,  LLC ("ANR  Coal"),  a subsidiary  of
Coastal,  that the EPA has requested the  Department to bring an action  against
ANR Coal for alleged violations of the Clean Water Act resulting from discharges
from a mine in which ANR Coal had a  leasehold  interest  in the  minerals.  The
letter  offers to  settle  the  matter  prior to  litigation  for  $900,000  and
agreement to implement  certain  injunctive  relief which includes the necessary
improvements to the existing water treatment  system.  ANR Coal does not believe
that it has any responsibility for these discharges,  but is currently reviewing
the matter.  The Company believes that this threatened  action,  if an action is
brought and the allegations  substantiated,  could result in monetary  sanctions
which,  while not  material to the Company and its  subsidiaries,  could  exceed
$100,000.

     In October  1996,  the New Jersey  Department of  Environmental  Protection
issued an  administrative  order  and  notice  of civil  administrative  penalty
assessment  (the  "Order")  to Coastal  Eagle  Point Oil  Company  ("CEPOC"),  a
subsidiary of Coastal. The Order alleged that sulphur dioxide emissions from the
sulfur  recovery  unit  ("SRU") and carbon  monoxide  emissions  from the marine
thermal  oxidizer at CEPOC's New Jersey  refinery  exceeded permit limits during
the last quarter of 1995 and first  quarter of 1996.  CEPOC and the State of New
Jersey  have  verbally  reached  a  settlement  agreement  of  $301,200  for the
violations alleged in the Order and for the emission exceedances incurred at the
SRU  during the  remainder  of 1996.  CEPOC is  awaiting  issuance  of the final
consent Order from the state.

     In April 1996,  Coastal Oil & Gas  Corporation  ("COG"),  a  subsidiary  of
Coastal,  received a letter from the EPA Region VIII  notifying  it that the EPA
believes that COG's facility located in Patrick Draw, Wyoming is in violation of
certain PCB regulations  promulgated  pursuant to the Toxic  Substances  Control
Act.  The EPA has  offered COG an  opportunity  to resolve  this matter  without
litigation.  The Company is currently having  discussions with the EPA regarding
resolution  of the matter.  If the EPA were to  initiate an action,  the Company
believes that the EPA could seek penalties which,  although not material,  could
exceed $100,000.

     Future information and developments will require the Company to continually
reassess  the  expected  impact of these  environmental  matters.  However,  the
Company  has  evaluated  its total  environmental  exposure  based on  currently
available  data,  including  its  potential  joint and  several  liability,  and
believes that compliance with all applicable laws and regulations  will not have
a material  adverse impact on the Company's  liquidity,  consolidated  financial
position or results of operations.



                                     - 12 -

<PAGE>

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

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations includes certain forward-looking  statements reflecting the Company's
expectations  in the near future;  however,  many  factors  which may affect the
actual  results,   including  commodity  prices,  market  conditions,   industry
competition  and changing  regulations,  are difficult to predict.  Accordingly,
there is no assurance that the Company's expectations will be realized.

     The Notes to Consolidated  Financial Statements contain information that is
pertinent to the following analysis.

                         Liquidity and Capital Resources

     The Company uses the following consolidated ratios to measure liquidity and
its ability to meet future funding needs and debt service requirements.

<TABLE>
<CAPTION>
                                                                                   Twelve Months Ended
                                                                           ------------------------------
                                                                             March 31,     December 31,
                                                                                1997           1996
                                                                           --------------  --------------
                                                                             (Unaudited)

      <S>                                                                       <C>               <C>  
      Net return on average common stockholders' equity..............           11.7%             14.8%
      Cash flow from operating activities to long-term debt..........           20.7%             15.9%
      Total debt to total capitalization.............................           54.2%             53.7%
      Times interest earned (before tax).............................            2.5               2.5
</TABLE>

     The decrease in the net return on average common  stockholders'  equity can
be attributed to the  extraordinary  charge in the 1997 first quarter.  The cash
flows from operating  activities to long-term debt ratio increased primarily due
to changes in working capital.

     In February 1997,  the Company  purchased and retired $798 million of notes
and debentures  with interest rates ranging from 9-3/4% to 10-3/4%.  None of the
issues were  eligible  for  redemption  and the purchase  included  payment of a
premium.  The Company  incurred an after-tax  extraordinary  charge in the first
quarter of 1997 of $90.6 million ($.85 per share),  net of income taxes of $48.7
million, in connection with the repurchase of these debt securities.

     Also in February  1997,  the Company  issued $200.0 million of 6.70% senior
debentures  due in 2027 and $200.0  million of 7.42%  senior  debentures  due in
2037. The net proceeds from the sale of the debentures  were used to refinance a
portion of the bank borrowings incurred in connection with the retirement of the
debt  securities  referred  to  above.  The  6.70%  senior  debentures  are  not
redeemable  at the option of the Company  prior to maturity;  but each holder of
such  senior  debentures  has the right to require  the  Company to redeem  such
debentures,  in whole or in part,  on February 15, 2007,  at a redemption  price
equal to 100% of the aggregate  principal amount thereof plus accrued and unpaid
interest. The 7.42% senior debentures are not redeemable prior to maturity.

     Financing  for capital  expansion,  mandatory  debt  retirements  and other
expenditures  will be provided by internally  generated  funds,  existing credit
lines, proceeds from the sale of selective non-core assets and new financings.

     Funding for certain proposed projects is anticipated to be provided through
non-recourse project financings in which the projects' assets and contracts will
be  pledged  as  collateral.  Equity  participation  by other  entities  will be
considered.  To the extent required,  cash for equity  contributions to projects
will be from general corporate funds.

     The Company continues to maintain a financial  position that will enable it
to generate and obtain capital for financing  needs in the  foreseeable  future.
Unused lines of credit at March 31, 1997 were as follows (millions of dollars):

         Short-term......................................  $   748.3
         Long-term*......................................      582.9
                                                           ---------

                                                           $ 1,331.2
                                                           =========

 *$52.4 million of unused long-term credit lines is dedicated to a specific use.


                                     - 13 -

<PAGE>

     In September 1996, Coastal and Westcoast Energy Inc.  ("Westcoast") jointly
announced plans to form one of North America's  largest marketers of natural gas
and electricity  through the combination of the operations of the two companies'
related  marketing  and  service  subsidiaries.  Agreements  were  concluded  in
February  1997,  which  created  new  entities in which  Coastal  and  Westcoast
indirectly own 50% each.

     The FASB has issued  Statement of Financial  Accounting  Standards No. 128,
"Earnings  per Share"  ("FAS  128") to be  effective  for periods  ending  after
December 15, 1997.  FAS 128 replaces the  presentation  of primary  earnings per
share with a  presentation  of basic  earnings per share.  It also requires dual
presentation  of basic and diluted  earnings per share on the face on the income
statement  for all entities  with complex  capital  structures.  The Company has
computed basic and diluted  earnings per share for the three month periods ended
March 31, 1997 and 1996,  respectively,  following  the guidance in FAS 128. The
results are not materially different from the amounts presented in the Statement
of Consolidated Operations.

     The FASB has issued  Statement of Financial  Accounting  Standards No. 129,
"Disclosure of Information about Capital  Structure" ("FAS 129") to be effective
for periods ending after December 15, 1997.  FAS 129  establishes  standards for
disclosing information about an entity's capital structure. The Company does not
believe that the  application of the new standard will have a material effect on
its consolidated results of operations, financial position or cash flows.

                              Results of Operations

     The change in the Company's earnings for the three-month period ended March
31, 1997 in comparison to the same period in 1996 is a result of the following:

     Operating  Revenues.  The  operating  revenues  by segment  were as follows
(millions of dollars):

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                            ---------------------
                                                                                               1997        1996
                                                                                            ---------   ---------
                                                                                                  (Unaudited)

      <S>                                                                                   <C>         <C>      
      Natural gas.......................................................................    $ 1,231.1   $ 1,003.4
      Refining, marketing and chemicals.................................................      1,854.0     1,956.9
      Exploration and production........................................................        167.3        87.7
      Coal..............................................................................         54.3       107.3
      Power.............................................................................         26.0        20.2
      Other.............................................................................          8.0         8.0
      Adjustments and eliminations......................................................       (134.9)      (85.7)
                                                                                            ---------   ---------

                                                                                            $ 3,205.8   $ 3,097.8
                                                                                            =========   =========
</TABLE>

     Operating  Profit  (Loss).  The  operating  profit (loss) by segment was as
follows (millions of dollars):

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                            ---------------------
                                                                                              1997         1996
                                                                                            ---------   ---------
                                                                                                  (Unaudited)

      <S>                                                                                   <C>         <C>      
      Natural gas.......................................................................    $   185.5   $   126.1
      Refining, marketing and chemicals.................................................        (50.8)       34.8
      Exploration and production........................................................         66.1        14.1
      Coal .............................................................................         12.5        18.4
      Power.............................................................................          4.1         2.4
      Other.............................................................................          2.6         2.8
                                                                                            ---------   ---------
                                                                                            $   220.0   $   198.6
                                                                                            =========   =========
</TABLE>


                                     - 14 -

<PAGE>

     Natural Gas. The  increase in operating  revenues of $227.7  million can be
attributed  to  increased  prices for the gas  marketing  companies  and a $42.0
million  gain  recognized  in  connection  with  the  merger  of  the  Company's
unregulated gas marketing operations with similar operations of Westcoast Energy
Inc.,  offset  by  reduced  sales  volumes  for  the  gas  marketing  companies.
Transportation,  storage and  gathering  revenues for the  regulated  operations
increased slightly from the prior period.

     Purchases  increased by $177.8  million in the 1997 period due to increased
prices offset by reduced  volumes,  primarily  for the gas marketing  companies.
Gross profit increased by $49.9 million from the 1996 first quarter.

     Operating  profit  increased  by $59.4  million  as a result  of the  $42.0
million gain discussed above; increased gross profit of $13.1 million associated
with ANR Pipeline's  remaining gas purchase  contracts;  higher  transportation,
storage and gathering  revenues of $6.4 million;  reduced operating  expenses of
$11.5  million and other  increases of $.5 million,  being  partially  offset by
reduced gross margins of $14.1 million.  The reduced operating  expenses are due
to decreases for gas and gas liquids handling costs, gas purchase deferrals, and
gas used in operations.

     Refining,  Marketing and Chemicals.  Operating revenues decreased by $102.9
million in the 1997  first  quarter  due to lower  volumes  partially  offset by
higher  prices.  Purchases for the segment  decreased by $24.0  million,  also a
result of lower volumes and higher prices,  resulting in a gross profit decrease
of $78.9 million.

     The  operating  profit  decrease of $85.6  million  results from  decreased
margins of $42.7 million; lower volumes of $29.0 million; decreased gross profit
from the sale,  trading and exchanging of third-party  products of $5.0 million;
increased  operating  expenses  of $4.6  million  and  other  decreases  of $4.3
million.  Included  in the  operating  loss for the first  quarter of 1997 is an
inventory  loss of $60.0  million which  resulted  from the falling  product and
crude oil prices.  The milder winter weather in the  northeastern  United States
and an  ongoing  refocusing  of the  Company's  marketing  assets  to  eliminate
marginal activities and more directly support the Company's core refining assets
contributed to the volume decrease.

     Exploration  and  Production.  The increase in operating  revenues of $79.6
million resulted from increased  prices and volumes.  The higher volumes reflect
the  continued  growth  of the  Company's  drilling  program.  Operating  profit
increased by $52.0  million as increased  prices of $42.4  million and increased
volumes of $39.4  million  were  partially  offset by  increases  for  operating
expenses of $11.6 million;  depreciation,  depletion and  amortization  of $17.1
million and other of $1.1 million.  The higher  operating  expenses  result from
increases for processing  plant  operations,  additional  offshore  activity and
production  taxes. The  depreciation,  depletion and amortization  increase is a
result of increased production volumes.

     Coal.  Operating  revenues from the coal segment decreased by $53.0 million
in the 1997 first quarter due  primarily to the sale of the Company's  Utah coal
operations  in December  1996.  Operating  profit  decreased  by $5.9 million as
reductions due to the sale of the Utah coal  operations of $13.3 million,  lower
prices for the mines in the  eastern  United  States of $1.1  million  and other
decreases of $2.4 million were partially offset by the favorable resolution of a
contingency  in the first quarter of 1997 for $9.0 million and higher volumes of
$1.9 million. The other decrease results primarily from nonrecurring income from
the sale of coke from the Company's Aruba refinery.

     Power. The operating  revenue increase of $5.8 million and operating profit
increase of $1.7 million are  primarily a result of the El Salvador  operations.
Most  of  the  plants  in  which  the  Power   segment   has   investments   are
partially-owned,  thus the equity  earnings from those plants are  classified as
other  income-net  rather  than  operating   profit.   Equity  income  from  the
partially-owned  plants amounted to $10.4 million for the first quarter of 1997,
compared with $7.5 million for the same period last year.

     Other  Income-Net.  Other income-net  increased by $6.5 million in the 1997
first quarter due to increased equity income from investments.

     Interest and Debt  Expense.  Interest  and debt expense  decreased by $16.4
million due to reduced rates on variable rate debt and lower debt levels.

     Taxes on Income.  Federal  income taxes  increased by $21.9  million in the
1997  period  as a  result  of  increased  earnings  before  taxes  and a higher
effective  federal income tax rate. State income taxes increased by $1.9 million
and foreign income taxes increased by $1.3 million.

     Extraordinary  Item.  The 1997  extraordinary  item,  net of income  taxes,
resulted from the early retirement of debt.

                                     - 15 -

<PAGE>

                              Environmental Matters

     The Company's  operations  are subject to extensive  and evolving  federal,
state and local  environmental  laws and  regulations.  The Company  anticipates
capital  expenditures  of  approximately  $42 million in 1997 in order to comply
with  such  laws and  regulations.  The  majority  of the 1997  expenditures  is
attributable to construction  projects at the Company's  refining,  chemical and
terminal facilities.  The Company currently anticipates capital expenditures for
environmental  compliance  for the years 1998 through 2000 of $20 to $40 million
per year.  Additionally,  appropriate  governmental  authorities may enforce the
laws and regulations with a variety of civil and criminal enforcement  measures,
including monetary penalties and remediation requirements.

     The Comprehensive  Environmental Response,  Compensation and Liability Act,
also known as "Superfund," as reauthorized, imposes liability, without regard to
fault  or the  legality  of the  original  act,  for  disposal  of a  "hazardous
substance."  Certain  subsidiaries of the Company and a company in which Coastal
owns a 50% interest have been named as a potentially  responsible  party ("PRP")
in several  "Superfund" waste disposal sites. At the 16 sites for which there is
sufficient  information,  total clean-up costs are estimated to be approximately
$333 million, and the Company estimates its pro-rata exposure, to be paid over a
period of several years, is approximately  $7.4 million and has made appropriate
provisions.  At 4 other sites, the  Environmental  Protection  Agency ("EPA") is
currently unable to provide the Company with an estimate of total clean-up costs
and,  accordingly,  the Company is unable to calculate its share of those costs.
Finally at 10 other sites,  the Company has paid amounts to other PRPs or to the
EPA as is  proportional  share of associated  clean-up costs. As to these latter
sites, the Company  believes that its activities were de minimis.  Additionally,
certain  subsidiaries of the Company have been named as PRPs in two state sites.
At one site, the North Carolina  Department of Health,  Environment  and Natural
Resources  has  estimated  the  total  clean-up  costs to be  approximately  $50
million, but the Company believes that the subsidiaries' activities at this site
were  de  minimis.   At  the  other  state  site,  the  Florida   Department  of
Environmental  Protection has demanded  reimbursement of its costs,  which total
$40,000,  and  suitable  remediation.  There is not  sufficient  information  to
estimate the remedial costs or the Company's pro-rata exposure at this site.

     Future information and developments will require the Company to continually
reassess  the  expected  impact of these  environmental  matters.  However,  the
Company  has  evaluated  its total  environmental  exposure  based on  currently
available  data,  including  its  potential  joint and  several  liability,  and
believes that compliance with all applicable laws and regulations  will not have
a material  adverse impact on the Company's  liquidity,  consolidated  financial
position or results of operations.

Item 2.B.  Other Developments.

     In March 1997, Great Lakes Gas  Transmission  Limited  Partnership  ("Great
Lakes") announced plans to construct  approximately  1,000 miles of pipeline and
associated  compression  facilities at a cost of  approximately  $2.5 billion to
meet  customer  requests  for  new  firm  transportation  service.  Coastal  and
TransCanada Pipelines Limited  ("TransCanada"),  a non-affiliated  company, each
own 50% of Great  Lakes.  A request to  transport  up to an  additional 2 Bcf of
natural gas per day was received from TransCanada.  The proposed  expansion will
be  located  along  the  Great  Lakes'  existing  mainline  system,  which  is a
2,000-mile system from the  Manitoba-Minnesota  border to an  interconnection on
the Michigan-Ontario  border at St. Clair,  Michigan. The expansion project will
serve markets  primarily in the  Northeastern  United States and eastern Canada.
Construction  of this  project is  planned  to begin in the  winter of  1998-99,
subject to receipt of satisfactory regulatory approvals.

     On March 27, 1997,  ANR  Pipeline,  a subsidiary  of Coastal,  received the
necessary FERC  authorizations to construct and operate, at an estimated cost of
$19.1 million,  11.9 miles of 42-inch loopline on ANR Pipeline's  system between
Sandwich, Illinois and Bridgman, Michigan. The facilities will increase capacity
by 135 MMcf per day and will alleviate the capacity  constraints on that segment
of the mainline  system.  The facilities are expected to be placed in service by
the end of 1997.

     On March 31, 1997, ANR Pipeline and  Transcontinental Gas Pipe Line Company
("Transco"),  a subsidiary of The Williams Companies,  filed an application with
the FERC for a Certificate of Public  Convenience and Necessity  authorizing the
construction   and   operation  of  a  new   interstate   natural  gas  pipeline
(the"Independence  Pipeline")  to serve  markets  for natural gas in the Eastern
United  States.  As  proposed,   the  Independence  Pipeline  would  consist  of
approximately  370  miles of  36-inch  diameter  pipe,  with an  initial  winter
capacity of up to 900 MMcf per day. It would extend from ANR Pipeline's existing
compressor  station  at  Defiance,  Ohio,  to  Transco's  facilities  at  Leidy,
Pennsylvania.

                                     - 16 -

<PAGE>

Affiliates of ANR Pipeline and Transco would each own 50% of the estimated  $630
million project. The Independence  Pipeline is planned to be in service November
1999, subject to receipt of satisfactory regulatory approvals.

     In connection with the Independence  Pipeline project, ANR Pipeline filed a
companion  application  with the FERC on March 31, 1997,  for a  Certificate  of
Public  Convenience and Necessity  authorizing the construction and operation of
approximately  72 miles of mainline  looping  and  additional  compression.  The
proposed  expansion would link the  Independence  Pipeline with planned pipeline
expansions designed to transport gas primarily from  Canadian-producing  regions
into the  Midwest.  The  proposed  facilities  will  increase  the  transmission
capacity on ANR Pipeline's mainline between a point west of Joliet, Illinois and
Defiance,  Ohio by up to 750 MMcf per day. The  facilities,  as  proposed,  will
provide additional  west-to-east  transportation service at an estimated cost of
$124.8  million.  The project is also  planned to be in service  November  1999,
subject to receipt of satisfactory regulatory approvals.

                                     - 17 -

<PAGE>

                                     PART II

                                OTHER INFORMATION


Item 1.   Legal Proceedings.

          The information  required  hereunder is incorporated by reference into
Part II of this  Report  from  Note 7 of the  Notes  to  Consolidated  Financial
Statements set forth in Part I of this Report and from Item 2.A.,  "Management's
Discussion  and  Analysis of  Financial  Condition  and Results of  Operations -
Environmental Matters" set forth in Part I of this Report.

Item 2.   Changes in Securities.

          None.

Item 3.   Defaults Upon Senior Securities.

          None.

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

          None.

Item 5.   Other Information.

          None.

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

          (a) Exhibits.

              11    -    Statement re Computation of Per Share Earnings.
              27    -    Financial Data Schedule.

          (b) Reports on Form 8-K.

              (1)   A  report  on  Form  8-K  was  filed  on  January  6,  1997.
                    The items reported were:

                    (i)  Item 2. Acqusition or Disposition of Assets.

                    (ii) Item 7. Financial Statements and Exhibits.

                         (b) Pro Forma Financial Information.

                         (c) Exhibits.

                            (2.1)  Purchase and Sale Agreement dated as of
                                   October 23, 1996.

                            (2.2)  Amendment to Purchase and Sale Agreement
                                   dated as of December 20, 1996.

                             (99)   Press release.

              (2)   A  report  on  Form 8-K was filed on February 18, 1997. The
                    item reported was:

                    Item 7.  Financial Statements and Exhibits.

                    (c)  Exhibts.

                         (12)  Ratio of Earnings to Fixed Charges.


                                     - 18 -

<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.

                                                 THE COASTAL CORPORATION
                                                        (Registrant)

Date:  May 13, 1997                      By:           COBY C. HESSE
                                              --------------------------------
                                                       Coby C. Hesse
                                                  Executive Vice President
                                              and Principal Accounting Officer
                                                 (As Authorized Officer and
                                                  Chief Accounting Officer)


                                     - 19 -

<PAGE>

                                INDEX TO EXHIBITS


Exhibit
Number                                Description
-------------------------------------------------------------------------------

     11       Statement Re Computation of Per Share Earnings
     27       Financial Data Schedule


                                     - 20 -

<PAGE>

                                                                      EXHIBIT 11

                    THE COASTAL CORPORATION AND SUBSIDIARIES
                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
                 (Millions of Dollars, Except Per Share Amounts,
                            and Thousands of Shares)

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                                   March 31,
                                                                                            ---------------------
                                                                                              1997        1996
                                                                                            ---------   ---------
                                                                                                  (Unaudited)

<S>                                                                                         <C>         <C>
COMMON STOCK AND EQUIVALENTS:
Net earnings applicable to common stock and
   common stock equivalents.............................................................    $     6.3   $    78.2
                                                                                            =========   =========

Average number of common shares outstanding.............................................      105,414     104,873
Class A common shares...................................................................          381         397
Common and Class A common share equivalents:
   $1.19 Cumulative Convertible Preferred, Series A*....................................          219         226
Dilutive effect of outstanding stock options after
   application of treasury stock method*................................................          777         530
                                                                                            ---------   ---------
Average common and common equivalent shares.............................................      106,791     106,026
                                                                                            =========   =========

Net earnings per average common and common equivalent share outstanding:
   Earnings before extraordinary item...................................................    $     .91   $     .74
   Extraordinary item...................................................................         (.85)          -
                                                                                            ---------   ---------
   Net earnings.........................................................................    $     .06   $     .74
                                                                                            =========   =========

ASSUMING FULL DILUTION:
Net earnings applicable to common stock and
   common stock equivalents.............................................................    $     6.3   $    78.2
Dividends applicable to dilutive preferred stock:
   Series B.............................................................................            -           -
   Series C.............................................................................            -          .1
                                                                                            ---------   ---------
Adjusted net earnings assuming full dilution............................................    $     6.3   $    78.3
                                                                                            =========   =========

Average number of common shares outstanding.............................................      105,414     104,873
Class A common shares...................................................................          381         397
Common and Class A common share equivalents:
   Series A Preferred Stock*............................................................          219         226
Equivalent common and Class A common shares from
   Series B and C Preferred Stock*......................................................            -         525
Dilutive effect of outstanding stock options after
   application of treasury stock method*................................................          777         593
                                                                                            ---------   ---------
Fully diluted shares....................................................................      106,791     106,614
                                                                                            =========   =========

Fully diluted earnings per share**:
   Earnings before extraordinary item...................................................    $     .91   $     .73
   Extraordinary item...................................................................         (.85)          -
                                                                                            ---------   ---------
   Net earnings.........................................................................    $     .06   $     .73
                                                                                            =========   =========

<FN>
*    Convertible  securities and options are not considered in the  calculations
     if the effect of the conversion is anti-dilutive.

**   Reporting not required by generally accepted accounting  principles because
     of small  variances from earnings on average  common and common  equivalent
     shares.
</FN>
</TABLE>

                                     - 21 -