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                               UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549
                         -----------------------

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

                                FORM 10-Q

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

                             QUARTERLY REPORT

                  Pursuant to Section 13 or 15(d) of the
                     Securities Exchange Act of 1934

               For the Quarter Ended September 30, 1996
                        Commission File No. 1-8157

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

                            PANENERGY CORP
          (Exact name of registrant as specified in its charter)

                          A Delaware Corporation
                 (State of Incorporation or Organization)

                                74-2150460
                    (IRS Employer Identification No.)

     5400 Westheimer Court, P.O. Box 1642, Houston, Texas 77251-1642
       (Address of principal executive offices, including zip code)

                              (713) 627-5400
           (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 twelve months (or for such shorter period that the
registrant was required to file such reports), 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 registrant's classes
of common stock, as of the latest practicable date:

                Class                    Outstanding at October 31, 1996
      --------------------------         -------------------------------
      Common Stock, $1 par value                   151,066,410


===========================================================================<PAGE>
<PAGE>
                        PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements - Unaudited
                     PanEnergy Corp and Subsidiaries
                       CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                        Periods Ended September 30        
                                        Three Months                Nine Months     
                                      ------------------         ------------------ 
Millions, except per share amounts      1996    1995     1996      1995   
----------------------------------    --------         --------  --------  -------- 
<S>                                           <C>      <C>       <C>       <C>      
Operating Revenues 
 Sales of natural gas and 
   petroleum products        $1,428.6 $  746.4         $3,771.7  $2,476.4 
   Transportation and storage 
   of natural gas               370.8    370.4          1,131.4   1,128.3 
 Other                           32.6     16.9    77.6     44.4 
                             -------- --------         --------  -------- 
   Total (Note 2)             1,832.0  1,133.7          4,980.7   3,649.1 
                             -------- --------         --------  -------- 
Costs and Expenses
 Natural gas and petroleum 
   products purchased         1,360.5    682.9          3,494.4   2,293.8 
 Operating and maintenance      153.3    149.4            464.3     432.4 
 General and administrative      56.5     51.5            191.0     152.7 
 Depreciation and amortization   73.1     70.0            217.3     208.3 
 Miscellaneous taxes             19.4     21.3             61.5      65.6 
                             -------- --------         --------  -------- 
   Total                      1,662.8    975.1          4,428.5   3,152.8 
                             -------- --------         --------  -------- 
Operating Income                169.2    158.6            552.2     496.3 
                             -------- --------         --------  -------- 
Other Income and Deductions
 Equity in earnings of 
   unconsolidated affiliates     13.4     11.0    26.5     44.3 
 Other income, net of deductions 13.9     12.8             23.9       9.9 
                             -------- --------         --------  -------- 
   Total                         27.3     23.8             50.4      54.2 
                             -------- --------         --------  -------- 
Earnings Before Interest and Tax         196.5   182.4              602.6     550.5 
Interest Expense                 57.1     59.4            171.2     176.4 
                             -------- --------         --------  -------- 
Earnings Before Minority Interest 
  and Income Tax                139.4    123.0            431.4     374.1 
Minority Interest                 2.2      -       2.2      -   
Income Tax                       51.1     49.4            161.5     148.9 
                             -------- --------         --------  -------- 
NET INCOME                   $   86.1 $   73.6         $  267.7  $  225.2 
                             ======== ========         ========  ======== 
Average Common Shares Outstanding        151.0   149.9    150.8     149.5 
                             ======== ========         ========  ======== 
Earnings per Common Share    $   0.57 $   0.49         $   1.78  $   1.51 
                             ======== ========         ========  ======== 
Dividends per Common Share   $  0.240 $  0.225         $  0.705  $   0.66 
                             ======== ========         ========  ======== 
</TABLE>
         See accompanying notes to consolidated financial statements
<PAGE>
Item 1.  Financial Statements - Unaudited (Continued)

                     PanEnergy Corp and Subsidiaries
                       CONSOLIDATED BALANCE SHEET
                                 ASSETS
<TABLE>
<CAPTION>
                                              September 30,        December 31,
Millions                                   1996                        1995    
--------                                   ------------         ------------
<S>                                                <C>                             <C>        
Current Assets
 Cash and cash equivalents            $    37.2      $    50.8 
 Accounts and notes receivable, net       734.3          505.1 
 Inventory and supplies                   128.7          135.8 
 Current deferred income tax               71.7           80.8 
 Other (Notes 2 and 5)                    266.5          239.8 
                                      ---------      --------- 
   Total                                1,238.4        1,012.3 
                                      ---------      --------- 

Investments
 Affiliates                               263.0          164.3 
 Other                                     55.3           65.8 
                                      ---------      --------- 
   Total                                  318.3          230.1 
                                      ---------      --------- 

Plant, Property and Equipment
 Original cost                          8,610.6        8,400.7 
 Accumulated depreciation and amortization            (3,309.3) (3,250.9)
                                      ---------      --------- 
   Net plant, property and equipment    5,301.3        5,149.8 
                                      ---------      --------- 

Deferred Charges
 Goodwill, net                            193.5          239.7 
 Prepaid pension                          275.0          259.3 
 Other (Notes 2 and 5)                    627.8          736.1 
                                      ---------      --------- 
   Total                                1,096.3        1,235.1 
                                      ---------      --------- 

TOTAL ASSETS                          $ 7,954.3      $ 7,627.3 
                                      =========      ========= 
</TABLE>

         See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
Item 1.  Financial Statements - Unaudited (Continued)

                     PanEnergy Corp and Subsidiaries
                       CONSOLIDATED BALANCE SHEET
                  LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                               September 30,       December 31,
Millions                                   1996                        1995    
--------                                   -------------           ------------
<S>                                                <C>                         <C>       
Current Liabilities
 Long-term debt due within 
   one year (Note 7)                   $  542.4       $  179.6 
 Notes payable                             17.0          145.0 
 Accounts payable                         570.0          391.2 
 Rate refund provisions (Note 2)           38.7           53.6 
 Accrued interest                          62.9           69.1 
 Taxes payable                             80.6           65.0 
 Other (Notes 2 and 5)                    383.8          419.9 
                                       --------       -------- 
   Total                                1,695.4        1,323.4 
                                       --------       -------- 
Deferred Liabilities and Credits
 Deferred income tax                    1,239.7        1,182.9 
 Other (Notes 2 and 5)                    739.3          802.1 
                                       --------       -------- 
   Total                                1,979.0        1,985.0 
                                       --------       -------- 

Long-term Debt (Note 7)                 1,769.7        2,091.6 
                                       --------       -------- 
Commitments and Contingent Liabilities
 (Notes 2, 3, 5 and 6)

Minority Interest                         106.3            -   
                                       --------       -------- 
Common Stockholders' Equity
 Common stock, 151 million (1996) and 
   150.2 million (1995) shares issued and
   outstanding, $1 par value per share    151.0          150.2 
 Paid-in capital                        2,234.0        2,219.7 
 Retained earnings (deficit)               18.9         (142.6)
                                       --------       -------- 
   Total (Note 4)                       2,403.9        2,227.3 
                                       --------       -------- 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $7,954.3  $7,627.3 
                                       ========       ======== 
</TABLE>

         See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
Item 1.  Financial Statements - Unaudited (Continued)
                     PanEnergy Corp and Subsidiaries
                  CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                          Nine Months Ended    
                                                       September 30      
                                                       --------------------  
Millions                                      1996      1995    
--------                                     -------   -------  
<S>                                                     <C>           <C>      
Operating Activities
 Net income                                  $ 267.7   $ 225.2 
 Adjustments to reconcile net income to operating
   cash flows:
      Depreciation and amortization            217.3     208.3 
      Deferred income tax expense               49.1      78.4 
      Earnings of unconsolidated affiliates,
        net of distributions                   (18.5)    (13.6)
      Net pension benefit                      (15.7)    (14.8)
      Other non-cash items in net income         5.2     (32.5)
      Net change in operating assets 
        and liabilities                        107.0     (14.3)
                                             -------   ------- 
 Net Cash Flows Provided by Operating Activities         612.1     436.7 
                                             -------   ------- 
Investing Activities
 Capital expenditures                         (416.2)   (291.8)
 Investment expenditures                       (59.9)     (6.5)
 Investment decreases                           13.2      25.9 
 Property retirements and other                 34.2      10.1 
                                             -------   ------- 
 Net Cash Flows Used in Investing Activities  (428.7)   (262.3)
                                             -------   ------- 
Financing Activities
 Retirement of debt                            (53.9)   (185.1)
 Issuance of debt                              100.0     200.0 
 Net decrease in notes payable                (128.0)      -   
 Accounts payable - banks                      (16.3)    (53.0)
 Common stock issuance                           8.8      12.3 
 Dividends paid                               (106.3)    (98.2)
 Other                                          (1.3)     (3.4)
                                             -------   ------- 
 Net Cash Flows Used in Financing Activities  (197.0)   (127.4)
                                             -------   ------- 
Net Change in Cash
 Increase (decrease) in cash and cash equivalents        (13.6)     47.0 
 Cash and cash equivalents, beginning of period 50.8      33.3 
                                             -------   ------- 
 Cash and Cash Equivalents, End of Period    $  37.2   $  80.3 
                                             =======   ======= 
Supplemental Disclosures
 Cash paid for interest (net of amount capitalized)    $ 168.1   $ 167.6 
 Cash paid for income tax                       43.6      47.8 
</TABLE> 
 
       See accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
                    PanEnergy Corp and Subsidiaries
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  General

    PanEnergy Corp (PanEnergy) and its subsidiaries (the Company) are
    involved in the transportation, storage, gathering and processing of
    natural gas.  The Company is also a leading marketer of natural gas,
    electricity, liquefied petroleum gases and related energy services.  The
    interstate natural gas transmission operations of Texas Eastern
    Transmission Corporation (TETCO), Algonquin Gas Transmission Company
    (Algonquin), Panhandle Eastern Pipe Line Company (PEPL) and Trunkline
    Gas Company (Trunkline), and the liquefied natural gas (LNG) operations
    of Trunkline LNG Company and Algonquin LNG, Inc. are subject to the
    rules, regulations and accounting procedures of the Federal Energy
    Regulatory Commission (FERC).  

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect certain reported amounts of assets and
    liabilities and disclosure of contingent liabilities at the date of the
    financial statements.  Certain amounts of reported revenues and expenses
    are also affected by these estimates and assumptions.  Actual results
    could differ from those estimates.  The consolidated financial
    statements reflect all normal recurring adjustments that are, in the
    opinion of management, necessary for fair presentation.  Certain amounts
    for the prior periods have been reclassified in the consolidated
    financial statements to conform to the current presentation.  

2.  Natural Gas Revenues and Regulatory Matters 

    When rate cases are pending final FERC approval, a portion of the
    revenues collected by each interstate natural gas pipeline is subject
    to possible refunds.  The Company has established adequate reserves
    where required for such cases.  The following is a summary of
    significant pending rate cases before FERC and certain regulatory
    matters.  

    FERC Order 636 and Transition Costs

    During 1993, the Company's interstate natural gas pipelines began
    providing restructured services pursuant to FERC Order 636.  This order
    requires pipeline service restructuring that unbundles sales,
    transportation and storage services.  Order 636 allows pipelines to
    recover eligible costs resulting from implementation of the order
    (transition costs).  On July 16, 1996, the U.S. Court of Appeals for the
    District of Columbia upheld, in general, all aspects of Order 636 and
    remanded certain issues for further explanation.  One of the issues
    remanded for further explanation is whether pipelines should be entitled
    to recover 100% of gas supply realignment (GSR) costs.  This matter is
    substantially mitigated by TETCO's and PEPL's Order 636 settlements.
<PAGE>
<PAGE>
    TETCO's final and nonappealable Order 636 settlement, implemented on
    August 1, 1994, provides for the recovery of certain transition costs
    through volumetric and reservation charges through 2002 and beyond, if
    necessary.  Pursuant to the settlement, TETCO will absorb a certain
    portion of the transition costs, the amount of which continues to be
    subject to change dependent upon natural gas prices and deliverability
    levels.  In 1993, the Company established an additional provision to
    reflect the impact of the settlement and increased its liabilities in
    1995 upon producers' discoveries of additional natural gas reserves. 
    PEPL's transition cost recoveries, which are subject to certain
    challenges pending before FERC and the courts, will occur through 1999. 

    At September 30, 1996 and December 31, 1995, the Company's interstate
    pipelines had recorded $68.3 million and $274.6 million (1996), and
    $70 million and $310 million (1995), of current and long-term regulatory
    assets, respectively, representing transition costs incurred or
    estimated to be incurred that will be recovered.  At September 30, 1996
    and December 31, 1995, the Company had recorded estimated current and
    long-term liabilities related to Order 636 transition costs of
    $84 million and $140 million (1996), and $125 million and $165 million
    (1995), respectively.  

    In July 1996, TETCO received $76 million for the sale of the right to
    receive certain Order 636 GSR surcharges, with limited recourse.  In the
    opinion of management, the probability that TETCO will be required to
    perform under the recourse provisions is remote.  

    In the past, during the normal course of business, the Company's
    interstate pipelines entered into certain gas purchase contracts
    containing take-or-pay provisions, which may expose the Company to
    financial risk.  Trunkline is currently collecting certain take-or-pay
    settlement costs with respect to such contracts through volumetric
    surcharges with interest through 1997 and intends to file after 1997 for
    recovery of amounts not fully recovered by these surcharges. 

    In 1993, the U.S. Department of the Interior (the Department) announced
    its intention to seek additional royalties from gas producers as a
    result of payments received by such producers in connection with past
    take-or-pay settlements, and buyouts and buydowns of gas sales contracts
    with natural gas pipelines.  The Company's pipelines, with respect to
    certain producer contract settlements, may be contractually required to
    reimburse or, in some instances, to indemnify producers against such
    royalty claims.  The potential liability of the producers to the
    government and of the pipelines to the producers involves complex issues
    of law and fact which are likely to take a substantial period of time
    to resolve. On August 27, 1996, the U.S. Court of Appeals for the
    District of Columbia Circuit overturned a lower court ruling in favor
    of the government in litigation brought on behalf of producers
    challenging the Department's attempts to seek the additional royalties.
    The Department is seeking further review of the appellate ruling.  If
    the Company's pipelines ultimately have to reimburse or indemnify the
    producers, the Company's pipelines will file with FERC to recover a
    portion of these costs from pipeline customers.  
<PAGE>
<PAGE>
    The Company believes the exposure associated with gas purchase contract
    commitments and the termination of the Company's pipeline merchant
    services is substantially mitigated by transition cost recoveries
    pursuant to TETCO's settlement, Order 636 and other mechanisms.  As a
    result, the Company believes that Order 636 transition cost issues and
    take-or-pay settlement matters will not have a material adverse effect
    on future consolidated results of operations or financial position.  

    Jurisdictional Transportation and Sales Rates

    PEPL - On April 1, 1992 and November 1, 1992, PEPL placed into effect,
    subject to refund, general rate increases. FERC issued an order on
    May 25, 1995 on the earlier rate proceeding and PEPL has requested
    rehearing of certain matters in that order.  On February 5, 1996, FERC
    issued an order on the latter rate proceeding and PEPL has also
    requested rehearing of various items in this order.  On September 12,
    1996, PEPL filed a settlement proposal relating to both rate proceedings
    on behalf of itself and the majority of its largest customers.  The
    settlement proposal is pending FERC review.  

    Trunkline - Effective August 1, 1996, Trunkline placed into effect,
    subject to refund, a general rate increase.  

    Algonquin - On June 14, 1996, Algonquin submitted a compliance filing
    reflecting changes in net plant, property and equipment pursuant to a
    FERC order issued on Algonquin's March 29, 1996 limited rate filing. 
    On October 16, 1996, FERC accepted the filing and denied all protests
    and requests for rehearing and technical conferences.  

 3. Other Contingencies

    TEPPCO Partners, L.P. - The Company has a 10.45% ownership interest in
    TEPPCO Partners, L.P., a master limited partnership (MLP) that owns and
    operates a petroleum products pipeline.  A subsidiary partnership of the
    MLP has $339.5 million in First Mortgage Notes outstanding at
    September 30, 1996 with recourse to the general partner, a subsidiary
    of PanEnergy.  These notes have annual principal payments due through
    2010.  In the opinion of management, the probability that the PanEnergy
    subsidiary will be required to perform under this recourse provision is
    remote.  

    Petrolane Incorporated (Petrolane) - In connection with the sale of
    Petrolane in 1989, Texas Eastern Corporation (TEC), a subsidiary of
    PanEnergy, agreed to indemnify Petrolane against certain obligations for
    guaranteed leases and environmental matters.  Certain of the lease
    obligations relate to Petrolane's divestiture of supermarket operations
    prior to its acquisition by TEC and as of December 31, 1995 totaled
    approximately $73 million over the remaining terms of the leases, which
    expire in 2006.  In the opinion of management, the probability that TEC
    will be required to perform under this indemnity provision is remote. 
    
<PAGE>
<PAGE>
    Northern Border Pipeline Company (Northern Border) - PEPL owns an
    effective 5.95% ownership interest in Northern Border through an MLP. 
    Under the terms of a settlement related to a transportation agreement
    between PEPL and Northern Border, PEPL guarantees payment to Northern
    Border under a transportation agreement by an affiliate of Pan-Alberta
    Gas Limited.  The transportation agreement requires estimated total
    payments of $163 million for 1996 through 2001.  In the opinion of
    management, the probability that PEPL will be required to perform under
    this guarantee is remote. 

4.  Common Stockholders' Equity

    Under the most restrictive covenants contained in the Company's debt
    agreements, $1.1 billion of PanEnergy's consolidated common stock-
    holders' equity was available for the payment of dividends at
    September 30, 1996.

5.  Environmental Matters 

    TETCO is currently conducting PCB (polychlorinated biphenyl) assessment
    and cleanup programs at certain of its compressor station sites under
    conditions stipulated by a U.S. Consent Decree.  The programs include
    on- and off-site assessment, installation of on-site source control
    equipment and groundwater monitoring wells, and on- and off-site cleanup
    work.  TETCO expects to complete these cleanup programs during 1997. 
    Groundwater monitoring activities will continue beyond 1997.  

    In 1987, the Commonwealth of Kentucky instituted suit in state court
    against TETCO, alleging improper disposal of PCBs at TETCO's three
    compressor station sites in Kentucky.  This suit, which is still
    pending, seeks penalties for violations of Kentucky environmental
    statutes.  The Company previously established a reserve for potential
    fines and penalties.  TETCO has completed cleanup of these sites.  

    The Company has also identified environmental contamination at certain
    sites on the PEPL and Trunkline systems and is undertaking cleanup
    programs at these sites.  The contamination resulted from the past use
    of lubricants containing PCBs and the prior use of wastewater collection
    facilities and other on-site disposal areas.  Soil and sediment testing,
    to date, has detected no significant off-site contamination.  The
    Company has communicated with the Environmental Protection Agency and
    appropriate state regulatory agencies on these matters.  In August 1995,
    Trunkline entered into a consent order under a cleanup program with the
    Tennessee Department of Environment and Conservation for the cleanup of
    its Tennessee facility.  In June 1996, Trunkline entered into an
    agreement with the Indiana Department of Environmental Management for
    the cleanup of one of its Indiana facilities.  Cleanups in other states
    by PEPL and Trunkline are also proceeding.  The environmental cleanup
    programs are expected to continue until 2002.  

<PAGE>
<PAGE>
    At September 30, 1996 and December 31, 1995, the Company had total
    current and long-term liabilities recorded of $75.6 million and
    $167.3 million (1996), and $56.3 million and $225.8 million (1995),
    respectively, for remaining estimated cleanup costs on the TETCO, PEPL
    and Trunkline systems.  These cost estimates represent gross cleanup
    costs expected to be incurred, have not been discounted or reduced by
    customer recoveries and do not include fines, penalties or third-party
    claims.  Estimated liabilities for remaining TETCO PCB cleanup costs
    were reduced in the fourth quarter 1995 as a result of
    lower-than-projected cleanup costs incurred on completed sites.  As a
    result of the reduction in estimated cleanup costs, the related
    regulatory assets were also reduced.  At September 30, 1996 and
    December 31, 1995, the Company had total current and long-term
    regulatory assets recorded of $25.1 million and $135 million (1996), and
    $21.3 million and $176.6 million (1995), respectively, representing
    costs to be recovered from customers.

    The federal and state cleanup programs are not expected to interrupt or
    diminish the Company's ability to deliver natural gas to customers.  The
    Company believes the ultimate resolution of matters relating to the
    environmental issues discussed above will not have a material adverse
    effect on consolidated results of operations or financial position.  

6.  Litigation

    In connection with a rupture and fire that occurred on TETCO's 36-inch
    natural gas pipeline on March 23, 1994 in Edison, New Jersey, claims
    have been made and numerous lawsuits have been filed in the Superior
    Court of New Jersey, Middlesex County against TETCO and other private
    and governmental entities by or on behalf of hundreds of individuals and
    businesses.  These claimants seek compensatory damages for personal
    injuries and/or property losses, as well as punitive damages.  The
    property insurers of an apartment complex adjacent to the asphalt plant
    where the rupture occurred also have filed suits against TETCO and other
    defendants in Superior Court seeking to recover amounts paid under
    pertinent policies of insurance.  TETCO has settled the claims of the
    property insurers and some individuals and businesses, while retaining
    the right to seek recovery of those settlement amounts from other
    defendants.  Quality Materials, Inc.  (Quality), the owner of the
    asphalt plant, filed  suit in the U.S. District  Court for the District
    of New Jersey against TETCO seeking to recover unspecified property
    damages, lost income and punitive damages.  TETCO filed a counterclaim
    against Quality.  In April 1996, the U.S. District Court dismissed the
    suit by Quality and the counterclaim by TETCO on the grounds that all
    claims should be resolved in the pending Middlesex County litigation. 

    The findings of an investigation of the incident by the Company and the
    National Transportation Safety Board (NTSB) indicate third-party damage
    to be the cause of the rupture.  Additionally, an NTSB report found that
    TETCO's pipeline operations met or exceeded federal safety regulations. 
    The Company recorded a provision in 1994 for costs related to this
    incident that are not recoverable under the Company's insurance
    policies.  
<PAGE>
<PAGE>
    On August 30, 1995, two plaintiffs filed a lawsuit with class action
    allegations in Jefferson County, Texas, against PanEnergy, TEC and
    TETCO, among others.  While that suit ultimately was dismissed, one of
    the two original plaintiffs refiled the suit on June 3, 1996 in the
    Circuit Court of the City of St. Louis, Missouri.  The defendants now
    have removed the suit to the U.S. District Court for the Eastern
    District of Missouri, Eastern Division.  The plaintiff seeks recovery
    of compensatory and punitive damages, in unspecified amounts, for
    personal injuries and property damage resulting from alleged exposure
    to PCBs.  

    A lawsuit filed in the United States District Court for the District of
    Columbia by natural gas producer Jack Grynberg was served in July 1996
    naming TETCO, PEPL, Trunkline and PanEnergy Services, Inc. (a sub-
    sidiary, formerly Centana Energy Corporation) as defendants, among
    others.  The action was brought under the federal False Claims Act
    against 70 defendants, including every major pipeline, asserting that
    the defendants intentionally underreported volumes and heating content
    of gas purchased from producers on federal lands, with the result that
    the United States was underpaid royalties.  The plaintiff seeks recovery
    of the royalty amounts due the United States, treble damages, civil
    penalties and compliance with "appropriate" techniques for measuring
    gas.  

    The Company expects the resolution of all the above litigation matters
    will not have a material adverse effect on consolidated results of
    operations or financial position.  

    The Company is also involved in various other legal actions and claims
    arising in the normal course of business.  Based upon its current
    assessment of the facts and the law, management does not believe that
    the outcome of any such action or claim will have a material adverse
    effect upon the consolidated financial position of the Company. 
    However, these actions and claims in the aggregate seek substantial
    damages against the Company and are subject to the uncertainties
    inherent in any litigation.  The Company is defending itself vigorously
    in all the above suits.  

7.  Subsequent Events

    On October 1, 1996, TETCO redeemed its outstanding $150 million,
    10% debentures due 2011 and its outstanding $100 million,
    10 1/8% debentures also due 2011.  Accordingly, the Company has
    classified these debentures as current liabilities in the consolidated
    balance sheet as of September 30, 1996.  The Company recorded a non-cash
    extraordinary charge of $16.8 million (net of income tax of
    $10.2 million) in October 1996 in connection with this early retirement
    of debt.  
<PAGE>
<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

The following information is provided to facilitate increased understanding
of the 1996 and 1995 interim consolidated financial statements and
accompanying notes presented in Item 1.  The discussion of the Company's
"Operating Environment and Outlook" addresses key trends and future plans.
Material period-to-period variances in the consolidated statement of income
are discussed under "Results of Operations." The "Capital Resources, Liquidity
and Financial Position" section analyzes cash flows and financial position. 
Throughout these discussions, management addresses items that are reasonably
likely to materially affect future earnings or liquidity.  

This quarterly report may contain certain forward-looking information
regarding the Company, including projections, estimates, forecasts, plans and
objectives.  Although management believes that all such statements are based
upon reasonable assumptions, no assurance can be given that the actual results
will not differ materially from those contained in such forward-looking
statements.  

Important factors that could cause actual results to differ include, but are
not limited to, general economic conditions, natural gas and liquids prices,
competition from other pipelines and alternative fuels, weather conditions,
state and federal regulation, legal and regulatory proceedings, the
development of new markets, services and products, and the condition of the
capital markets utilized by the Company.  

OPERATING ENVIRONMENT AND OUTLOOK

The changing environment resulting from the restructuring of the natural gas
industry under Order 636 has led to industry consolidations and created
additional growth opportunities for the Company.  The Company continues its
growth strategy of expanding non-jurisdictional businesses, while also
continuing to advance interstate gas pipeline market-expansion projects and
provide new services to customers.  

In the Energy Services segment, on August 1, 1996, a company that combines the
marketing operations of Gas and Power Services with those of Mobil Corporation
(Mobil) was formed.  The Company operates and owns 60% of the new marketing
company (PTMS) which conducts business as PanEnergy Trading and Market
Services, L.L.C. in the United States and as PanEnergy Marketing L.P. in
Canada.  The Company also acquired Mobil's interest in certain natural gas
gathering, processing and related assets for approximately $300 million and
has entered into an agreement to purchase a 500-mile intrastate gathering
pipeline in northern Louisiana.  

In April 1996, FERC issued Order 888 requiring traditional power companies to
render open-access transmission under uniform tariffs, which should further
open the electric power market to competition.  To capitalize on this order,
in August 1996, the Company formed a partnership for the construction of a
proposed 250-megawatt, gas fired, combined cycle power plant and the joint
marketing of the plant's generation.  In addition, the Company in October 1996
acquired a 32.5% interest in an independent power producer engaged in the
ownership and management of energy assets.  An agreement was also entered into
with this producer to jointly pursue the potential acquisition, financing and
management of other electric generating facilities.  
<PAGE>
The Company plans to continue to pursue strategic opportunities that emerge,
in the U.S. and internationally, via joint ventures, expansion projects and
acquisitions in both the Natural Gas Transmission and the Energy Services
segments.  

RESULTS OF OPERATIONS

Consolidated net income for the nine months ended September 30, 1996 was
$267.7 million, or $1.78 per share on 150.8 million average common shares
outstanding, compared with $225.2 million, or $1.51 per share on 149.5 million
average common shares outstanding, for the same period in 1995. 

Earnings Before Interest and Tax Analysis

Consolidated earnings before interest and tax increased to $602.6 million in
the first nine months of 1996 compared with $550.5 million for the same period
in 1995, reflecting improvements in both the Natural Gas Transmission and
Energy Services groups.  Improved operations from business expansions and
increased margins, coupled with low storage levels as a result of slightly
colder-than-normal winter temperatures, contributed to a $52.1 million, or 9%,
increase in earnings before interest and tax.  This increase is net of a
non-recurring $17 million charge in first quarter 1996 for a work
force reduction.  


Ea         rnings Before Interest and Tax by Business Group
--         ------------------------------------------------
    <TABLE>
    <CAPTION>
                                                  Nine Months Ended 
                                                  September 30   
                                                  ----------------- 
    Millions                               1996     1995  
    --------                              ------   ------ 
    <S>                                   <C>      <C>    
    Natural Gas Transmission
       TETCO                              $247.9   $225.0 
       Algonquin                            53.7     57.8 
       PEPL                                116.1    116.4 
       Trunkline                            31.9     26.7 
                                          ------   ------ 
       Total                               449.6    425.9 
                                          ------   ------ 
    Energy Services
       Field Services                       81.9     64.8 
       Gas and Power Services               37.7     11.2 
       Crude Oil                             7.6      6.4 
                                          ------   ------ 
       Total                               127.2     82.4 
                                          ------   ------ 
    Other Operations                        25.8     42.2 
                                          ------   ------ 
    Consolidated Earnings Before  
      Interest and Tax                    $602.6   $550.5 
                                          ======   ====== 
    </TABLE>
<PAGE>
       Equity in Earnings (Losses) of Unconsolidated Affiliates
            (included in Earnings Before Interest and Tax)
    --------------------------------------------------------
    <TABLE>
    <CAPTION>
                                                  Nine Months Ended 
                                                  September 30   
                                                  ----------------- 
    
    Millions                               1996     1995  
    --------                              ------   ------ 
    <S>                                   <C>      <C>    
    Natural Gas Transmission
       Northern Border Partners, L.P.     $  3.2   $  6.1 
                                          ------   ------ 
    Energy Services
       Various affiliates                    1.5      1.6 
                                          ------   ------ 
    Other Operations
       National Methanol Company            10.8     21.8 
       TEPPCO Partners, L.P.                 6.3      4.7 
       Midland Cogeneration Venture          8.3      8.8 
       Other affiliates                     (3.6)     1.3 
                                          ------   ------ 
       Total                                21.8     36.6 
                                          ------   ------ 
    Total                                        Equity in Earnings    $ 26.5    $ 44.3 
                                          ======   ====== 
    </TABLE>
<PAGE>
<PAGE>

                            Operating Data
                            --------------
    <TABLE>
    <CAPTION>
                                                 Nine Months Ended 
                                                 September 30   
                                                 ----------------- 
                                          1996      1995  
                                          -----     ----- 
    <S>                                   <C>       <C>   
    Natural Gas Transmission Volumes, 
      Trillion British Thermal Units

       Market Area 
         TETCO                              895       801 
         Algonquin                          233       242 
         PEPL                               472       443 
         Trunkline                          391       288 
         Eliminations                       (40)      (35)
                                          -----     ----- 
           Total                          1,951     1,739 
                                          -----     ----- 

       Supply Area 
         TETCO                              106        92 
         PEPL                                26        34 
         Trunkline                           72        86 
                                          -----     ----- 
           Total                            204       212 
                                          -----     ----- 
       Total Volumes                      2,155     1,951 
                                          =====     ===== 

    Energy Services Volumes

       Field Services
         Natural gas gathered/
           processed, TBtu/d(1)             2.7       1.8 
         NGL production, MBbl/d(2)         67.8      53.2 
 
       Gas and Power Services
         Natural gas marketed, TBtu/d       4.7       3.4 
         Electricity marketed, GWh(3)     2,058       227 

       Crude Oil
         Crude oil pipeline volumes, MBbl/d          68.0 79.0 
         NGL pipeline volumes, MBbl/d      19.6      16.6 

    ----------
    (1)  Trillion British thermal units per day.
    (2)  Thousand barrels per day.
    (3)  Gigawatt-hours.  
       </TABLE>
<PAGE>
<PAGE>
Natural Gas Transmission

Earnings before interest and tax for Natural Gas Transmission increased
$23.7 million, or 6%, to $449.6 million in the first nine months of 1996
compared with the same period in 1995.  

TETCO - Earnings before interest and tax for TETCO increased $22.9 million
comparing the first nine months of 1996 with the prior-year period.  Revenues
increased $31.4 million, or 5%, primarily due to colder weather and new pipe-
line expansion projects.  Higher operating expenses, including $2.3 million
of severance expense recorded in the first quarter 1996, partially offset the
increase in revenues.

Algonquin - Algonquin's earnings before interest and tax decreased
$4.1 million in the first nine months of 1996 compared with the same period
in 1995.  The primary reason for the decline was $4 million of revenues
recognized in the first quarter 1995 applicable to the resolution of a
regulatory issue.  Lower natural gas demand for electric power generation due
to higher gas prices as compared to alternate fuels was mostly offset by
earnings from new services and projects.  

PEPL - PEPL's earnings before interest and tax decreased $0.3 million
comparing the first nine months of 1996 with the prior-year period.  Higher
earnings in 1996 primarily from colder weather and lower net operating
expenses more than offset $9.5 million of severance expense recorded in the
first quarter 1996.  Also contributing to the decrease was a $2.9 million
reduction in equity earnings from Northern Border Partners, L.P. and a
$1.1 million net decrease related to regulatory settlements, which included
$11.4 million and $20.7 million recorded in the third quarters of 1996 and
1995, respectively.  

Trunkline - Earnings before interest and tax for Trunkline increased
$5.2 million comparing the first nine months of 1996 with the same period in
1995.  The net increase was due to higher throughput and transportation
revenues during the colder winter weather and lower expenses, which were
partially offset by the recognition of additional lease expense in the third
quarter 1996 and $5 million of severance expense in the first quarter 1996. 

Energy Services

Earnings before interest and tax for Energy Services increased $44.8 million,
or 54%, comparing the first nine months of 1996 with the same period in 1995,
primarily from strong marketing margins and increased natural gas liquids
(NGL) prices in addition to higher natural gas, NGL and trading volumes.  The
increased volumes resulted primarily from PTMS trading activity and the
acquisition of certain natural gas gathering and processing assets from Mobil. 

Field Services - Field Services' earnings before interest and tax increased
$17.1 million for the first nine months of 1996 as compared with the
prior-year period.  Net revenues increased $63.9 million, or 45%, resulting
from higher NGL prices and increased gathering and processing volumes related
to expansion projects and the Mobil asset acquisition.  These improvements
were partially offset by higher operating expenses and the $8.1 million gain
on the sale of an investment in Seagull Shoreline System in 1995.  <PAGE>
<PAGE>
Gas and Power Services - Earnings before interest and tax for Gas and Power
Services increased $26.5 million for the first nine months of 1996 compared
with the same period in 1995, primarily due to higher gas volumes, improved
margins resulting from colder weather and gas price volatility, and higher
risk management margins.  The increase in margins was partially offset by
higher operating expenses.  Total marketed gas volumes increased 38% to
4.7 TBtu/d primarily as a result of the formation of PTMS in the third quarter
1996.  

Crude Oil - Earnings before interest and tax for Crude Oil increased
$1.2 million comparing the first nine months of 1996 with the same period in
1995, primarily because of higher marketing margins due to higher crude
prices.  

Risk Management - The Company uses financial instruments to reduce its
exposure to market fluctuations in the price and transportation costs of
natural gas and petroleum products.  The Company's general strategy is to
hedge price and location risk with futures, swaps and options; however, net
open positions in terms of price, volume and specified delivery point do
occur.  In addition to hedging activities, the Company also engages in the
trading  of such instruments.  The Company manages open positions with strict
policies which limit its exposure to market risk and require reporting to
management potential financial exposure on a daily basis.  These policies
include statistical risk tolerance limits using weighted price movements to
calculate a daily earning at risk (DEAR) as well as a total value at risk
(VAR) measurement.  

Other Operations

Earnings before interest and tax from other operations decreased $16.4 million
comparing the first nine months of 1996 with the same period in 1995. Equity
in earnings from National Methanol Company declined $11 million to
$10.8 million in 1996 due primarily to significantly lower methanol margins. 
Also contributing to the decrease in other operations was a 1995 provision
reversal of $10.4 million on the LNG Project, which was partially offset by
increased LNG tanker charter revenues and higher LNG sales prices in 1996.  

CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL POSITION

Operating Cash Flow
<TABLE>
<CAPTION>
                                               Nine Months Ended     
                                               September 30       
                                               --------------------   
Millions                                                1996    1995    
--------                                               ------  ------   
<S>                                      <C>         <C>      
Net Cash Flows Provided by Operating Activities        $612.1  $436.7   
                                         ------      ------   
</TABLE>

Historical Analysis - Operating cash flows increased $175.4 million comparing
the first nine months in 1996 with the same period in 1995.  This increase
primarily reflects higher 1996 earnings and decreased net cash outflows
related to transition costs.  
<PAGE>
Order 636 Transition Costs - With implementation of Order 636 and the
elimination of pipeline merchant services, the Company's interstate natural
gas pipelines are incurring certain costs related to the transition, primarily
TETCO's gas purchase contract commitments.  TETCO's gross commitments under
gas purchase contracts that do not contain market-sensitive pricing provisions
are approximately $160 million, $115 million, $60 million and $25 million for
the years 1996 through 1999, respectively, with no significant amounts
thereafter.  These estimates reflect significant assumptions regarding
deliverability and natural gas prices.  

TETCO's final and nonappealable Order 636 settlement, implemented on August 1,
1994, provides for the recovery of certain transition costs through volumetric
and reservation charges through 2002 and beyond, if necessary.  Pursuant to
the settlement, TETCO will absorb a certain portion of the transition costs,
the amount of which continues to be subject to change dependent upon natural
gas prices and deliverability levels.  The Company has established provisions
to reflect the impact of the settlement.  PEPL's transition cost recoveries,
which are subject to certain challenges pending before FERC and the courts,
will occur through 1999.  In July 1996, TETCO received $76 million for the
sale of certain Order 636 GSR surcharges, with limited recourse.  See Note 2
of the Notes to Consolidated Financial Statements. 

Environmental Matters - For information concerning cleanup programs and
environmental litigation, see Notes 5 and 6 of the Notes to Consolidated
Financial Statements.  

Litigation - For information concerning other litigation matters, see Note 6
of the Notes to Consolidated Financial Statements.  

Other - See Notes 2 and 3 of the Notes to Consolidated Financial Statements
for a discussion of certain other regulatory proceedings and other
contingencies.

The carrying value of LNG project assets is expected to be recovered through
estimated future cash flows.  Current estimates of future cash flows are based
on significant business relationships and assumptions of future natural gas
prices, supply availability and demand for LNG, which are subject to change. 
The Company has chartered its two LNG tankers to Nigeria LNG Limited for
22 years starting as early as 1999.  

The Company believes the regulatory, environmental and legal issues discussed
above will not have a material adverse effect on the Company's consolidated
results of operations, financial position or liquidity.  
<PAGE>
<PAGE>
Investing Cash Flow

<TABLE>
<CAPTION>
                                                       Nine Months Ended    
                                                        September 30      
                                               -       --------------------   
Millions                                          1996          1995    
--------                                        ------ ------
<S>                                        <C>                 <C>      
Net Cash Flows Used in Investing Activities     $428.7 $262.3
                                           ------      ------
</TABLE>

Capital and Investment Expenditures - Capital and investment expenditures
totaled $476.1 million in the first nine months of 1996, compared with
$298.3 million for the same period in 1995.  Expenditures in 1996 included
approximately $200 million of asset purchases from Mobil.  The Company
currently expects to invest up to $900 million in 1996 capital and investment
expenditures, with approximately 70% for Energy Services and 25% for Natural
Gas Transmission, with the remainder budgeted for international and other
development projects.  The Company's 1996 expenditure plans include
approximately $700 million for market-expansion projects by the Natural Gas
Transmission and Energy Services segments.  The Company's current estimate for
1997 capital and investment expenditures is $400 million to $600 million.  

Financing Cash Flow

<TABLE>
<CAPTION>
                                                       Nine Months Ended    
                                                        September 30      
                                               -       --------------------   
Millions                                          1996          1995    
--------                                        ------ ------
<S>                                        <C>                 <C>      
Net Cash Flows Used in Financing Activities      $197.0        $127.4   
                                                 ------        ------   
</TABLE>

Debt and Credit Facilities - PanEnergy has two variable-rate bank credit
agreements, dated January 31, 1996 and September 18, 1996, respectively, that
permit PanEnergy to borrow up to $400 million under a five-year facility and
$400 million under a 364-day facility.  At September 30, 1996, there were no
amounts outstanding under the credit agreements.  

In September 1996, PanEnergy issued $100 million of seven-year notes bearing
interest at 7 3/8%.  In October 1996, PanEnergy issued $150 million of 10-year
notes bearing interest at 7%.  As of the date of this report, PanEnergy, TETCO
and PEPL have effective shelf registration statements with the Securities and
Exchange Commission for the issuance of $50 million, $100 million and
$100 million, respectively, of unsecured debt securities.  <PAGE>
<PAGE>
On October 1, 1996, TETCO redeemed its outstanding $150 million, 10% deben-
tures due 2011 and its outstanding $100 million, 10 1/8% debentures also due
2011.  The Company recorded a non-cash extraordinary charge of $16.8 million
(net of income tax of $10.2 million) in October 1996 in connection with this
early retirement of debt.  

Common Stockholders' Equity - The board of directors increased the quarterly
dividend on common stock from $0.225 to $0.24 per common share effective with
the 1996 second quarter.  

Financing Requirements - Dividends and debt repayments for the next 12 months,
along with operating and investing requirements as previously discussed in the
Operating and Investing Cash Flow sections, are expected to be funded by cash
from operations, debt issuances, periodic sales of customer accounts with
limited recourse and/or available credit facilities.  

Accounting Standards

Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," was
issued in June 1996.  The Company does not expect the implementation of this
standard in 1997 to have a significant effect on consolidated results of
operations or financial position.  

<PAGE>
<PAGE>
                       PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

See Notes 2, 5 and 6 of the Notes to Consolidated Financial Statements in
Part I of this Report, which are incorporated herein by reference.  See also
Item 3 of PanEnergy's Annual Report on Form 10-K for the year ended
December 31, 1995.  

Item 6.  Exhibits and Reports on Form 8-K 

(a)  Exhibits  

   Exhibit Number                        Description                    
        10        Agreement between George L. Mazanec and PanEnergy Corp,
                  dated July 19, 1996.  

        27        Financial Data Schedule

   The total amount of securities of the Registrant or its subsidiaries
   authorized under any instrument with respect to long-term debt not filed
   as an Exhibit does not exceed 10% of the total assets of the Registrant
   and its subsidiaries on a consolidated basis.  The Registrant agrees, upon
   request of the Securities and Exchange Commission, to furnish copies of
   any or all of such instruments.  

(b)  Reports on Form 8-K  

   A Current Report dated September 9, 1996 was filed under Item 5, "Other
   Information," to provide certain information related to the "safe harbor"
   provisions of the Private Securities Litigation Reform Act of 1995.  

   A Current Report dated September 13, 1996 was filed under Item 5, "Other
   Events," and Item 7, "Financial Statements, Pro Forma Financial
   Information and Exhibits," to report an underwriting agreement entered
   into for the public offering of certain notes.  

<PAGE>
<PAGE>
                                SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned duly authorized officer and chief accounting officer.  




                                       PanEnergy Corp
                                        (Registrant)


                                     /s/ Sandra P. Meyer       

                               --------------------------------
                               Sandra P. Meyer, Vice President,
                                 Treasurer and Controller



Date:  November 12, 1996