FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549


(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, 1998
                                            -------------------------
                                   OR

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

                
Commission File Number       0-12058
                             -------

                          KENAN TRANSPORT COMPANY                
           ------------------------------------------------------
           (Exact name of registrant as specified in its charter)


              North Carolina                         56-0516485     
     -------------------------------               ---------------       
     (State or other jurisdiction of                (IRS Employer
      incorporation or organization)              Identification No.)


             University Square - West, 143 W. Franklin Street
                 Chapel Hill, North Carolina, 27516-3910            
        -----------------------------------------------------------
        (Address of principal executive offices, including Zip Code)


                             (919) 967-8221                        
        -----------------------------------------------------------
           (Registrant's telephone number, including Area Code)


    Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (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 issuer's
classes of common stock, as of the latest practicable date.

                 Class                   Outstanding at April 30, 1998
      --------------------------         -----------------------------
      Common stock, no par value                    2,400,462
<PAGE>
<PAGE>
                         KENAN TRANSPORT COMPANY

                                 INDEX


                                                                     Page
                                                                     ----
Part I - Financial Information

    Consolidated Balance Sheets as of March 31, 1998 and
    December 31, 1997                                                  1

    Consolidated Statements of Income for the three months 
    ended March 31, 1998 and 1997                                      2

    Consolidated Statements of Cash Flows for the three 
    months ended March 31, 1998 and 1997                               3

    Notes to Consolidated Financial Statements                     4 - 5

    Management's Discussion and Analysis of Financial 
    Condition and Results of Operations                            6 - 7



Part II - Other Information

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

    Signatures                                                         9

    Index to Exhibits                                                 10


<PAGE>
<PAGE>
                     PART I - FINANCIAL INFORMATION

                         KENAN TRANSPORT COMPANY
                       CONSOLIDATED BALANCE SHEETS
                         (Dollars in thousands)


                                                March 31,    December 31,
                                                  1998          1997
ASSETS                                        (Unaudited)      (Note 1)
-------------------------------------------------------------------------
Current Assets
   Cash and cash equivalents                      $ 4,604        $ 3,422
   Accounts receivable                             11,230          8,020 
   Operating supplies and parts                       515            521 
   Prepayments       
     Tires                                          1,583          1,471 
     Insurance, licenses and other                  2,130            886 
     Deferred income taxes                          1,851          1,747 
                                                 ------------------------
        Total Current Assets                       21,913         16,067 

Operating Property
   Land                                             3,464          3,464 
   Buildings and leasehold improvements            10,985         10,968 
   Revenue equipment                               71,301         65,974 
   Other equipment                                  5,579          4,755 
                                                 ------------------------
                                                   91,329         85,161 
   Accumulated depreciation                       (35,255)       (32,922)
                                                 ------------------------
        Net Operating Property                     56,074         52,239 

Intangible Assets                                  11,359          7,559 
Other Assets                                        1,571          1,250 
                                                 ------------------------
                                                  $90,917        $77,115 
                                                 ========================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------
Current Liabilities
   Current maturities of long-term debt           $   875        $   500 
   Capital lease obligations                        1,416            995
   Accounts payable                                 3 872          2,517 
   Wages and employee benefits payable              8,532          6,641 
   Claims payable                                   3,570          3,553 
   Income taxes payable                               654            108  
                                                ------------------------
        Total Current Liabilities                  18,919         14,314 

Long-Term Debt                                      9,500          2,000
Capital Lease Obligations                           1,386          2,075
Deferred Income Taxes                              10,540          9,358 

Stockholders' Equity
   Common stock; no par; 20,000,000 shares 
     authorized; 2,400,462 and 2,394,780 
     shares issued and outstanding                  3,293          3,096 
   Retained earnings                               47,279         46,272 
                                                 ------------------------
                                                   50,572         49,368 
                                                 ------------------------
                                                  $90,917        $77,115 
                                                 ========================

The Notes to Consolidated Financial Statements are an integral part of
these balance sheets.

                                  Page 1<PAGE>
<PAGE>
                         KENAN TRANSPORT COMPANY
                   CONSOLIDATED STATEMENTS OF INCOME
             For the Three Months Ended March 31, 1998 and 1997
       (Unaudited and dollars in thousands except per share amounts)


                                                   1998           1997   
------------------------------------------------------------------------
Operating Revenue                                 $28,481        $17,746 

Operating Expenses  
   Wages and employee benefits                     14,277          8,950 
   Fuel and other operating expenses                6,079          3,732 
   Depreciation                                     2,507          1,655 
   Taxes and licenses                               1,653          1,094 
   Claims and insurance                             1,011            644 
   Equipment rents                                    923            130 
                                                 ------------------------
                                                   26,450         16,205 
                                                 ------------------------
Operating Income                                    2,031          1,541 
   Interest expense                                  (138)            (5)
   Interest income and other expenses, net             33             51 
                                                 ------------------------
Income before Provision for Income Taxes            1,926          1,587 
   Provision for income taxes                         751            611 
                                                 ------------------------
Net Income                                        $ 1,175        $   976 
                                                 ========================



Weighted average number of shares
   outstanding (in thousands)                       2,400          2,395 



Basic and diluted earnings per share              $   .49        $   .41 

Operating ratio                                      92.9%          91.3%

Dividends paid per share                          $ .0700        $ .0675 



The Notes to Consolidated Financial Statements are an integral part of
these statements.    


                                  Page 2<PAGE>
<PAGE>
                         KENAN TRANSPORT COMPANY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Three Months Ended March 31, 1998 and 1997
                   (Unaudited and dollars in thousands)


                                                    1998          1997  
------------------------------------------------------------------------
Cash Provided by (Applied to):
   Operations                                     $ 2,990        $ 2,022 
   Purchases of operating property, net            (1,009)          (203)
   Business acquisition                            (7,863)           --
   Debt and lease obligations                       7,232            --
   Dividends                                         (168)          (162)
                                                 ------------------------
Net Increase in Cash and Cash Equivalents           1,182          1,657 
Beginning Cash and Cash Equivalents                 3,422         11,181 
                                                 ------------------------

Ending Cash and Cash Equivalents                  $ 4,604        $12,838 
                                                 ========================


The Notes to Consolidated Financial Statements are an integral part of
these statements.        


                                  Page 3<PAGE>
<PAGE>
                         KENAN TRANSPORT COMPANY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)


1.   Basis of Presentation  
---------------------------
    The financial information included herein is unaudited;  however,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary
for a fair statement of results for the interim periods.

    The balance sheet at December 31, 1997 has been taken from the
audited financial statements at that date.

    The results of operations for the three months ended March 31, 1998
and 1997 are not necessarily indicative of the results to be expected for
the full year.


2.   Business Acquisitions
---------------------------
    On December 1, 1997, the Company purchased the majority of the
transportation assets of Transport South, Inc. for cash and entered into
a long-term contract to provide transportation services to its parent,
RaceTrac Petroleum, Inc. in the southeastern United States and Texas. 

    On February 28, 1998, the Company acquired 100% of the outstanding
stock of Petro-Chemical Transport, Inc., a wholly owned subsidiary of
CITGO Petroleum Corporation. Petro-Chemical Transport is a tank truck
carrier serving the petroleum industry in the Southeast, Midwest and on
the West Coast. The acquisition, net of cash acquired, required a cash
investment totaling $7,863,000. The Company financed the acquisition
through its line of credit facility. 

    The acquisitions have been accounted for using the purchase method of
accounting. The accompanying consolidated statements of income include
results of operations of Transport South during the first quarter of 1998
and results of operations of Petro-Chemical Transport, Inc. beginning
March 1, 1998. The purchased assets and liabilities assumed have been
recorded in the Company's financial statements at their estimated fair
market values. The excess of the purchase cost over the fair value of net
assets acquired in the acquisitions (goodwill) is included in intangible
assets in the accompanying consolidated balance sheets and is being
amortized over 20 years on a straight-line basis.

          The following unaudited pro forma summary presents the
consolidated results of operations of the Company for the first quarter
of 1998 and 1997, as if the acquisitions had occurred as of January 1,
1998 and 1997. The pro forma information does not purport to be
indicative of what would have occurred had the acquisitions been made as
of those dates or of results which may occur in the future (dollars in
thousands except per share amounts).

    Pro-Forma Information (unaudited)
    --------------------------------------------------------------------
                                                     1998        1997
                                                  ----------------------
    Revenue                                         $35,241     $34,736
    Net income                                        1,261       1,211
    Basic and diluted earnings per share                .53         .51






                                  Page 4<PAGE>
<PAGE>
                         KENAN TRANSPORT COMPANY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)


3.   Long-Term Debt
--------------------
    On February 13, 1998, the Company negotiated an unsecured $20,000,000
Reducing Line of Credit Facility with a bank. The agreement replaces the
Company's previous $7,000,000 line of credit. The line reduces $500,000
per quarter beginning July 1, 1998 and matures in March 2003. Interest
under the agreement is at variable rates based, at the Company's option,
on the Bank's Prime Rate or LIBOR. The credit agreement contains various
covenants, none of which negatively impact the Company's liquidity or
capital resources at this time. 

    During the first quarter the Company borrowed $7,500,000 to finance
its acquisition of Petro-Chemical Transport, Inc. At March 31, 1998, the
Company had $10,000,000 outstanding under the new credit facility and
$375,000 payable under a short-term note obligation assumed in the
acquisition of Petro-Chemical. The short-term note was paid in April of
1998. There was no outstanding debt at March 31, 1997. 

    

                                  Page 5     <PAGE>
<PAGE>     
                         KENAN TRANSPORT COMPANY

             MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS


    The following is management's discussion and analysis of certain 
significant factors that have affected the Company's financial position
and operating results during the periods included in the accompanying
financial statements.

Results of Operations
-------------------------------
    Revenue for the first quarter of 1998 was $28,481,000 compared to
$17,746,000 for the first quarter of 1997. Net income was $1,175,000
compared to $976,000 in 1997. Earnings per share were $.49 compared to
$.41 during the same period last year. Miles operated increased 54% from
the first quarter of 1997. 

    First quarter revenue increased 60% as a result of the impact of two
major acquisitions that were completed over the last four months. The
Company purchased the transportation assets of Transport South, Inc. of
Smyrna, Georgia on December 1, 1997 in a cash transaction. On February
28, 1998, the Company purchased the stock of Petro-Chemical Transport,
Inc., the trucking subsidiary of CITGO Petroleum Corporation in a cash
transaction. Revenue attributed to the Transport South business
acquisition were approximately $6,850,000 for the first quarter. Revenues
of Petro-Chemical Transport for March 1998 totaled $3,380,000.

    Operating expenses for the first quarter of 1998 increased
$10,245,000 or 63% over 1997 levels. The increase in operating expenses
was primarily the result of the Company's two recent acquisitions. Lower
fuel prices in 1998 were more than offset by increases in driver pay,
higher outside maintenance costs, and equipment rents. The Company's
operating ratio for the quarter was 92.9% compared to 91.3% in 1997. 

     The average balance of outstanding debt and capital lease
obligations during the first quarter of 1998 was approximately
$8,000,000. There was no outstanding debt during the first quarter of
1997. Interest expense was $138,000 for the first quarter of 1998
compared to $5,000 in 1997.

Liquidity and Capital Resources
-------------------------------
    At March 31, 1998, cash and cash equivalents totaled $4,604,000, an
increase of $1,182,000 from the end of 1997. Working capital of
$2,994,000 was up $1,241,000 from year-end 1997 and the current ratios
were 1.16 and 1.12, respectively. At March 31, 1998, the Company had
outstanding debt and capital lease obligations totaling $13,177,000
compared to $5,570,000 at December 31, 1997. 

    Cash and cash equivalents decreased $8,234,000 from the March 31,
1997 balance as a result of the Company's acquisition of Transport South,
Inc. during the fourth quarter of 1997. 

    The Company has second quarter cash commitments of approximately
$3,500,000 for tractor replacements. Management believes that cash flows
from operations and the Company's bank line of credit will be sufficient
to fund these planned expenditures as well as 1998 working capital
requirements, expansion opportunities and other corporate needs.



                                  Page 6<PAGE>
<PAGE>     

              MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS

                               (continued)


    The Company's operations require the storage of fuel for use in its
tractors in both underground and aboveground tanks. The Company has a
program to maintain its fuel storage facilities in compliance with
environmental regulation. Under the program, the Company incurs costs to
replace tanks, remediate soil contamination resulting from overfills,
spills and leaks and monitor facilities on an ongoing basis. These costs
are recorded when it is probable that a liability has been incurred and
the related amount can be reasonably estimated. Such costs have not been
and are not expected to be material to the Company's operations or
liquidity. 


                                  Page 7<PAGE>
<PAGE>
                         PART II - OTHER INFORMATION


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

  (a)     The Exhibits to this Form 10-Q are listed on the accompanying
          Index to Exhibits.

  (b)     The following reports on Form 8-K have been filed during the
          quarter ended March 31, 1998:

                Financial statement schedules and pro forma financial
                information relating to the Registrant's purchase of the
                majority of transportation assets of Transport South,
                Inc. was filed on Form 8-K/A, February 13, 1998.

                A Current Report on Form 8-K was filed on March 13, 1998,
                announcing the Registrant's acquisition of Petro-
                Chemical, Inc. 

                Financial statement schedules and pro forma financial
                information relating to the Registrant's acquisition of
                Petro-Chemical, Inc. was filed on Form 8K/A, May 13,
                1998.


                                  Page 8<PAGE>
<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.


                                         KENAN TRANSPORT COMPANY
                                              (Registrant)



DATE:      May 14, 1998                      BY:/s/  William L. Boone
                                             ----------------------------
                                             Vice President-Finance and
                                             Chief Financial Officer    


                                  Page 9<PAGE>
<PAGE>
                            INDEX TO EXHIBITS


The exhibits filed as part of this report are listed below:


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

      27        Financial Data Schedule for the quarter ending March 31,
                1998.


                                  Page 10<PAGE>