<PAGE>   1





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

                                   FORM 10-Q

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

               For the quarterly period ended September 30, 1996

                                       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 1-12426

                        AQUILA GAS PIPELINE CORPORATION
             (Exact name of registrant as specified in its charter)

                DELAWARE                                   47-0731171
      (State or other jurisdiction                      (I.R.S. Employer
    of incorporation or organization                  Identification No.)

                  100 N.E. Loop 410, Suite 1000, San Antonio,
                                Texas 78216-4754
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (210) 342-0685
              (Registrant's telephone number, including area code)


                                 Not Applicable
            (Former name, former address and former fiscal year, if
                           changed since last report)

         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 on November 1, 1996
           -----                              -------------------------------
Common stock, $.01 par value                             29,400,000
<PAGE>   2
                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                           September 30,        December 31,
                                                                                1996                1995
                                                                          --------------       -------------
                                                                            (Unaudited)
<S>                                                                          <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents ...........................................      $ 28,457             $  8,666
  Accounts receivable .................................................        81,543               77,203
  Inventories and exchanges ...........................................         4,245                4,394
  Materials and supplies ..............................................         5,328                6,147
                                                                             --------             --------
     Total current assets .............................................       119,573               96,410
                                                                             --------             --------

INVESTMENT IN AFFILIATE ...............................................        39,240                   --
                                                                             --------             --------

PIPELINE, PROPERTY, PLANT AND EQUIPMENT, at cost:
    Natural gas pipelines .............................................       419,464              400,984
    Plants and processing equipment ...................................        67,746               63,933
                                                                             --------             --------
                                                                              487,210              464,917
    Less - Accumulated depreciation ...................................       (90,294)             (74,921)
                                                                             --------             --------
                                                                              396,916              389,996
                                                                             --------             --------
INTANGIBLE ASSETS, net ................................................        25,467               18,916
                                                                             --------             --------
OTHER, net ............................................................         1,177                1,316
                                                                             --------             --------

TOTAL ASSETS ..........................................................      $582,373             $506,638
                                                                             ========             ========

                                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current maturities of long-term debt ..............................      $ 12,802             $ 12,796
    Accounts payable ..................................................        80,154               75,309
    Accrued expenses ..................................................        10,067                5,750
    Accrued interest ..................................................         3,097                2,754
    Income taxes payable to UtiliCorp United Inc. .....................         2,408                  828
    Intercompany payable due to Aquila Energy Corporation .............         7,232                1,557
                                                                             --------             --------
        Total current liabilities .....................................       115,760               98,994
                                                                             --------             --------
LONG-TERM DEBT ........................................................       209,578              179,900
                                                                             --------             --------   
DEFERRED INCOME TAXES .................................................        66,072               58,480
                                                                             --------             --------
OTHER LONG-TERM LIABILITIES ...........................................           557                  591
                                                                             --------             --------

COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' EQUITY:
    Preferred stock, $.01 par value, 10,000,000 shares authorized, none
       outstanding ....................................................            --                   --
    Common stock, $.01 par value, 50,000,000 shares authorized, 
       29,400,000 shares issued and outstanding .......................           294                  294
    Additional paid-in capital ........................................        90,297               90,297
    Retained earnings .................................................        99,815               78,082
                                                                             --------             --------
        Total stockholders' equity ....................................       190,406              168,673
                                                                             --------             --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................      $582,373             $506,638
                                                                             ========             ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                       2



<PAGE>   3
                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                  (UNAUDITED)

                (THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                            Three Months Ended                 Nine Months Ended
                                                               September 30,                     September 30,
                                                       -----------------------------    ----------------------------
                                                          1996              1995            1996            1995
                                                       -----------      ------------    ------------    ------------
<S>                                                    <C>              <C>             <C>             <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . .   $   202,548      $    119,435    $    534,587    $    340,330
                                                       -----------      ------------    ------------    ------------

COSTS AND EXPENSES:
  Cost of sales  . . . . . . . . . . . . . . . . . .       170,663            95,322         437,620         269,396
  Operating  . . . . . . . . . . . . . . . . . . . .         5,932             5,297          17,416          15,808
  General and administrative . . . . . . . . . . . .         4,106             3,918          13,889          11,684
  Depreciation and amortization  . . . . . . . . . .         5,990             5,342          17,532          15,472
                                                       -----------      ------------    ------------    ------------
        Total costs and expenses . . . . . . . . . .       186,691           109,879         486,457         312,360
                                                       -----------      ------------    ------------    ------------

INCOME FROM OPERATIONS . . . . . . . . . . . . . . .        15,857             9,556          48,130          27,970

INTEREST AND DEBT EXPENSES, net  . . . . . . . . . .         3,636             2,791          11,287           8,595

EQUITY IN NET LOSS OF AFFILIATE  . . . . . . . . . .            35               --               35             --
                                                       -----------      ------------    ------------    ------------

INCOME BEFORE INCOME TAXES . . . . . . . . . . . . .        12,186             6,765          36,808          19,375

PROVISION IN LIEU OF INCOME TAX INTEREST . . . . . .         4,642             2,494          13,974           7,273
                                                       -----------      ------------    ------------    ------------

NET INCOME . . . . . . . . . . . . . . . . . . . . .   $     7,544      $      4,271    $     22,834    $     12,102
                                                       ===========       ===========     ===========     ===========

EARNINGS PER SHARE . . . . . . . . . . . . . . . . .   $       .26      $        .15    $        .78    $        .41
                                                       ===========       ===========     ===========     ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . .    29,400,000        29,400,000      29,400,000      29,400,000
                                                       ===========       ===========     ===========     ===========

CASH DIVIDENDS PER SHARE OF COMMON STOCK . . . . . .   $     .0125       $     .0125     $     .0375     $     .0375
                                                       ===========       ===========     ===========     ===========
</TABLE>

See accompanying notes to condensed consolidated financial statements.
<PAGE>   4

                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (UNAUDITED)

                             (THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                  September 30,
                                                                                          ---------------------------
                                                                                            1996              1995
                                                                                          ---------         ---------
<S>                                                                                       <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income.........................................................................     $  22,834         $  12,102
  Adjustments to reconcile net income to net cash provided by operating activities:
    Depreciation and amortization....................................................        17,532            15,472
    Deferred income taxes............................................................         7,592             3,843
    Dividend from affiliate..........................................................           300              --
    Equity in net loss of affiliate..................................................            35              --
    Other non-cash items.............................................................           206               266
    Changes in operating assets and liabilities, net of the effect of acquisitions:
      Accounts receivable............................................................        (4,340)           (6,558)
      Inventories and exchanges......................................................           598              (519)
      Materials and supplies.........................................................           819             1,145
      Accounts payable...............................................................         4,645            (5,527)
      Accrued expenses...............................................................         4,317               772
      Accrued interest...............................................................           343            (2,470)
      Income taxes payable to UtiliCorp United Inc. .................................         1,580               650
      Intercompany payable due to Aquila Energy Corporation..........................         5,675             6,473
                                                                                          ---------         ---------
          Net cash provided by operating activities..................................        62,136            25,649
                                                                                          ---------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Business acquisitions, net of cash acquired......................................       (48,329)          (16,278)
    Additions to pipeline, property, plant and equipment.............................       (22,465)          (57,823)
                                                                                          ---------         ---------
          Net cash used in investing activities......................................       (70,794)          (74,101)
                                                                                          ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings under revolving credit agreements, net................................        42,443            12,400
    Borrowings under loan agreements.................................................          --              50,000
    Principal payments of debt.......................................................       (12,759)          (13,287)
    Dividends........................................................................        (1,101)           (1,102)
    Other............................................................................          (134)              283
                                                                                          ---------         ---------
          Net cash provided by financing activities..................................        28,449            48,294
                                                                                          ---------         ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................        19,791              (158)

CASH AND CASH EQUIVALENTS, beginning of period.......................................         8,666             6,631
                                                                                          ---------         ---------
CASH AND CASH EQUIVALENTS, end of period.............................................     $  28,457         $   6,473
                                                                                          =========         =========  
</TABLE>

See accompanying notes to condensed consolidated financial statements.
<PAGE>   5


                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

                             (THOUSANDS OF DOLLARS)


1.  BASIS OF PRESENTATION

    The accompanying condensed consolidated financial statements of Aquila Gas
Pipeline Corporation and subsidiaries (the Company) have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission.  All adjustments of a normal recurring nature have
been made which the Company believes are necessary for a fair presentation of
the Company's financial position and results of operations for such interim
periods.  These interim results are not necessarily indicative of the results
for a full year.  Certain information and note disclosures related to the
unaudited interim periods ended September 30, 1996 and 1995, normally included
in financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to such rules
and regulations although the Company believes the disclosures are adequate to
make the interim period information presented herein not misleading.  Certain
reclassifications have been made to the 1995 amounts to conform to the 1996
presentation.

    The preparation of financial statements  in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results may differ from those estimates.

    The condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995. No changes in accounting principles have occurred since this
date.

2.  STATEMENTS OF CASH FLOWS

    Supplemental disclosure of cash flow information for the nine months ended
September 30, 1996 and 1995 is as follows:

<TABLE>
<CAPTION>
                                                       1996            1995
                                                     --------         -------
       <S>                                           <C>              <C>
       Cash paid during the period                
       for interest, net of amount                
       capitalized                                   $ 11,319         $ 10,257
                                                  
       Cash paid during the period                
       for income and franchise taxes                $  4,987         $  2,826
                                                  
</TABLE>                                          

3.   COMMITMENTS AND CONTINGENCIES

  Letters of Credit

     The Company has issued irrevocable standby letters of credit totaling
$17,170 at September 30, 1996.  The standby letters of credit, which generally
have terms from one to three months, collateralize obligations to third parties
for the purchase of gas.  The standby letters of credit are issued pursuant to a
line of credit maintained by the Company.





                                       5
<PAGE>   6
                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

                             (THOUSANDS OF DOLLARS)

3.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

          Litigation

                  In 1987, HECI Exploration, Inc. (HECI) instituted a suit in
         the 155th Judicial District Court, Fayette County, Texas, against the
         Company alleging various breaches of a take-or-pay contract and
         seeking approximately $3,000 in damages.  The Company's motion for
         summary judgment was granted by the lower court.  A Texas appellate
         court, however, has remanded the case for trial.

                  In the purchase and sale agreement executed in connection
         with the 1987 acquisition of Clajon Gas Company by a predecessor of
         the Company, Clayton Williams, Jr., individually, and certain selling
         entities agreed to jointly and severally indemnify the purchaser from
         liabilities related to the conduct of the acquired business or arising
         out of any assigned contracts prior to the closing date of the
         acquisition, subject to certain limitations.  Thus, certain claims and
         litigation, including the HECI litigation described above, involving
         the acquired business and contracts assigned to the Company are
         subject to these indemnification provisions.  The indemnity provision
         limits Mr. Williams' personal liability to $3,000 in the aggregate.

                  In August 1995, Mr. Charles Menke instituted suit against the
         Company in the 155th Judicial District Court, Waller County, Texas,
         alleging the Company has constructed and was operating a pipeline on
         property owned by Mr. Menke.  Mr. Menke alleges the Company is a
         trespasser on his property and seeks unspecified damages for such
         trespass including punitive damages.  Mr. Menke additionally seeks an
         injunction requiring the Company to cease operation of its pipeline
         and to remove such pipeline from his property.  In October 1995, the
         Court denied Mr. Menke's request for a temporary injunction and set
         this matter for trial in January 1996.  By consent of all parties the
         January 1996 trial date was postponed and no new trial date has been
         set.  The Company believes Mr. Menke's claims for injunctive relief
         are without merit, and believes it has meritorious defenses to the
         damage claims.  The Company has filed a denial of all claims and is
         actively pursuing its defense of this litigation.

          Taxes

                  The Internal Revenue Service (IRS) has examined and proposed
         adjustments to UtiliCorp United Inc.'s (UtiliCorp) consolidated Federal
         income tax returns for 1988 through 1991.  The proposed adjustment
         affecting the Company is to lengthen the depreciable life of certain
         pipeline assets owned by the Company.  At the present, no final
         resolution of the proposed adjustment has been reached with the IRS.
         The Company intends to vigorously contest the proposed adjustment and
         believes there is a reasonable possibility it will prevail.  It is
         expected that additional assessments for the years 1992 through the
         present would be made on the same issue.  Under the provisions of the
         tax sharing agreement with Aquila Energy Corporation (Aquila Energy)
         and UtiliCorp, the Company would be liable to UtiliCorp for additional
         taxes of approximately $5,100 for the audit period and through the
         present plus potential interest of approximately $813.  The additional
         taxes would result in an adjustment to the deferred tax liability with
         no effect on net earnings, while any payment of interest would affect
         net earnings.  The Company expects that the ultimate resolution of this
         matter will not have a material adverse effect on its financial
         position.

   The Company is also a party to additional claims and is involved in various
other litigation and administrative proceedings arising in the normal course of
business.  The Company believes it is unlikely that the final outcome of any of
the claims, litigation or proceedings discussed above to which the  Company  is
a  party  would  have  a  material adverse  effect  on  the Company's financial
position or results of operations.  However, due  to  the  inherent uncertainty
of  litigation, there can  be no assurance that the resolution of any
particular claim or proceeding would not have an adverse effect on the
Company's  results of operations for the fiscal period in which such resolution
occurred.





                                       6
<PAGE>   7
                AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

                             (THOUSANDS OF DOLLARS)

3.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

   The Company, in the normal course of business of its natural gas pipeline
operations, purchases, processes and sells natural gas pursuant to long-term
contracts.  Such contracts contain terms which are customary in the industry.
The Company believes that such terms are commercially reasonable and will not
have a material adverse effect on the Company's financial position or results
of operations.

4.  ACQUISITIONS

   On July 1, 1996 and November 1, 1996, the Company (through AQP Holdings
L.P., a 98% owned subsidiary) completed the acquisition of 15% and 25%,
respectively, of the outstanding capital stock of Oasis Pipe Line Company
(Oasis) and related transportation rights from Dow Hydrocarbons and Resources
Inc. (DHRI) for a purchase price of $47,143 and $84,000, respectively (in each
case subject to certain adjustments).  The transportation rights related to the
15% and 25% capital stock acquisitions of Oasis currently amount to
approximately 120 and 200 million cubic feet per day (MMcf/d), respectively, of
firm intrastate transportation between the Waha, Texas hub and the Katy, Texas
hub, plus the opportunity to utilize excess capacity on an interruptible basis.
Both acquisitions will be accounted for using the purchase method and will be
reflected in the consolidated financial statements using the equity method of
accounting.

   In connection with the November 1, 1996 acquisition of 25% of the capital
stock of Oasis, AQP Holdings L.P. entered into certain option arrangements with
El Paso Natural Gas Company and a subsidiary of Tenneco Energy (Tenneco).  The
option arrangements provide that, under certain circumstances, AQP Holdings
L.P. may be required to sell to a wholly-owned subsidiary of Tenneco one-fifth
of the Oasis capital stock acquired by AQP Holdings L.P. on November 1, 1996
(or 5% of all Oasis capital stock), including one-fifth of the related
transportation rights.  If the option is exercised, the closing of the sale to
the subsidiary of Tenneco will be on April 1, 1997.  The purchase price would
be approximately $16,800, subject to certain adjustments.

   In addition, on July 1, 1996 the Company and DHRI have entered into a
long-term gas supply agreement whereby a subsidiary of the Company will supply
DHRI with a 100 MMcf/d of gas in the Katy, Texas area at market rates.

5.  DEBT

   Revolving Credit Agreements

   Subsequent to September 30, 1996, the Company amended its revolving credit
facilities with Aquila Energy to increase the available borrowings to $165,000
from $100,000 and amended the maturity dates to mature in the fourth quarter of
1998.

   On July 1, 1996, the Company (through AQP Holdings L.P.) entered into a
$3,000 revolving note agreement with Aquila Energy.  The note bears interest at
a bank prime rate (8.25% at September 30, 1996) and matures in December 1999.

   Line Of Credit

   The Company amended its line of credit, which secures standby letters of
credit (see Note 3), to increase the availability to $18,000.  The line of
credit matures June 30, 1997.  At September 30, 1996, the borrowing base was
$18,000 with no principal outstanding.

6.  BENEFIT PLANS

   In 1996, the stockholders approved the 1996 Non-Employee Director Stock Plan
(Stock Plan).  The Stock Plan authorizes the issuance of a maximum of 100,000
shares of the Company's common stock based on the fair market value of the
Company's common stock on the date of issuance.  Each non-employee director is
to receive common stock of the Company equal to $2 on a quarterly basis for
services performed in the preceding quarter.


                                       7
<PAGE>   8
              AQUILA GAS PIPELINE CORPORATION AND SUBSIDIARIES

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

RECENT DEVELOPMENTS:

   On July 1, 1996 and November 1, 1996, the Company (through AQP Holdings
L.P., a 98% owned subsidiary) completed the acquisition of 15% and 25%,
respectively, of the outstanding capital stock of Oasis Pipe Line Company
(Oasis) and related transportation rights from Dow Hydrocarbons and Resources
Inc. (DHRI) for a purchase price of $47.1 and $84.0, respectively (hereinafter
referred to as the "Oasis Acquisition).  Also, see Note 4 to Condensed
Consolidated Financial Statements.  The acquired transportation rights are
utilized by the Company (through AQP Holdings L.P.) to conduct additional
natural gas marketing activities not otherwise available to the Company
(hereinafter referred to as "Oasis Marketing").  The Company primarily funded
the Oasis Acquisition utilizing its existing revolving credit agreements, as
amended.

   The Oasis pipeline system consists of an approximately 600-mile pipeline
system and related mainline compression which connects the Waha, Texas hub
located in the Permian Basin producing area of West Texas to major marketing
pipelines at the Katy, Texas hub near Houston, Texas.  Oasis has a nominal one
(1) billion cubic feet per day of throughput capacity to move gas between West
Texas and the Katy, Texas hub.  Oasis' pipeline is in proximity to many of the
Company's existing gathering systems.

    The following discussion and analysis relates to the condensed consolidated
financial position and results of operations of the Company for the three and
nine months ended September 30, 1996 and 1995.  Reference should be made to the
Condensed Consolidated Financial Statements and the Notes thereto.

<TABLE>
<CAPTION>
                                      Three Months Ended          Period 1995         Nine Months Ended           Period 1995
                                         September 30,           to 1996 Change         September 30,            to 1996 Change
                                      -------------------      -------------------   -------------------      ------------------
                                       1996(a)       1995       Amount    Percent       1996(a)   1995         Amount    Percent
                                      ---------  --------      --------   --------   ----------- -------      ---------  -------
                                                               (Dollars in millions, except price data)
<S>                                    <C>       <C>           <C>        <C>        <C>        <C>          <C>           <C>
FINANCIAL DATA:
Natural gas revenues                   $ 177.8   $ 101.6        $  76.2     75 %      $ 468.4    $ 292.0      $ 176.4       60%
Natural gas liquids (NGLs) revenues       24.8      17.8            7.0     39 %         66.2       48.3         17.9       37%
                                       -------   -------        -------               -------    -------      -------
   Total operating revenues              202.6     119.4           83.2     70 %        534.6      340.3        194.3       57%
                                       -------   -------        -------               -------    -------      -------
Cost of sales                            170.7      95.3           75.4     79 %        437.6      269.4        168.2       62%
                                       -------   -------        -------               -------    -------      -------
   Gross margin                           31.9      24.1            7.8     32 %         97.0       70.9         26.1       37%
                                       -------   -------        -------               -------    -------      -------
Operating expenses                         5.9       5.3             .6     11 %         17.4       15.8          1.6       10%
General and administrative expenses        4.1       3.9             .2      5 %         13.9       11.7          2.2       19%
Depreciation and amortization              6.0       5.4             .6     11 %         17.5       15.5          2.0       13%
Interest and debt expenses, net            3.6       2.8             .8     29 %         11.3        8.6          2.7       31%
Provision in lieu of income tax
  expense                                  4.8       2.4            2.4    100 %         14.1        7.2          6.9       96%
                                       -------   -------        -------               -------    -------      -------
    Net income                         $   7.5   $   4.3        $   3.2     74 %      $  22.8    $  12.1      $  10.7       88 %
                                       =======   =======        =======               =======    =======      =======
OPERATING DATA:
Natural gas (MMcf/d):
    Throughput sold                        327       393            (66)   (17)%          359        374          (15)      (4)%
    Throughput transported                 138       128             10      8 %          141        105           36       34 %
                                       -------   -------        -------               -------    -------      -------
     Total throughput                      465       521            (56)   (11)%          500        479           21        4 %
                                       -------   -------        -------               -------    -------      -------
    Marketed excluding Oasis               391       367             24      7 %          372        316           56       18 %
    Marketed-Oasis                         176        --            176    100 %           59         --           59      100 %
                                       -------   -------        -------               -------    -------      -------
      Total marketed                       567       367            200     54 %          431        316          115       36 %
                                       -------   -------        -------               -------    -------      -------
      Total throughput and
        marketed                         1,032       888            144     16 %          931        795          136       17 %
                                       =======   =======        =======               =======    =======      =======
   Gross NGLs production (MBbls/d)          42        35              7     20 %           41         31           10       32 %
   Average natural gas price ($/Mcf)   $  2.17   $  1.45        $   .72     50 %      $  2.16    $  1.49      $   .67       45 %
   Average NGLs price ($/gallon)       $   .35   $   .26        $   .09     35 %      $   .33    $   .28      $   .05       18 %
</TABLE>                                                                      
-------------------------                                                      

(a)  The amounts for Oasis Marketing have been included since July 1, 1996.
     These per day volumes are being averaged over the respective time period. 
     Volumes included are only those volumes marketed by the Company.
        


                                       8
<PAGE>   9
RESULTS OF OPERATIONS

   The Company's results of operations are determined by the volume of gas
purchased, processed and resold in its gas gathering systems and processing
plants, as well as its off-system marketing activities.  Fluctuations in the
price levels of natural gas and NGLs also affect results of operations since
the Company generally receives a portion of the natural gas and NGLs revenue
from natural gas throughput.  Most of the Company's operating costs do not vary
directly with volume on existing systems; thus, increases or decreases in
volumes on existing systems generally have a direct effect on net income.

COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

   Total operating revenues increased 70% to $202.6 million in 1996 compared to
$119.4 million in 1995.  Natural gas revenues increased 75% to $177.8 million
in 1996 compared to $101.6 million in 1995 partially as the result of the
activity related to the Oasis Marketing which contributed natural gas revenues
of $36.3 million with associated marketed natural gas volumes of 176 MMcf/d.
Excluding Oasis Marketing activity, natural gas revenues increased 39% to
$141.5 million due to a 48% increase in the average natural gas price to $2.15
per Mcf in 1996 from $1.45 per Mcf in 1995 partially offset by a decrease in
natural gas sold and marketed to 718 MMcf/d in 1996 from 760 MMcf/d in 1995.
Natural gas throughput decreased 11% to 465 MMcf/d in 1996 from 521 MMcf/d in
1995 due to a reduction in well connect activity and normal production declines
on the Southeast Texas Pipeline System (SETPS), the Company's principal
gathering system.

   NGLs revenues increased 39% to $24.8 million in 1996 compared to $17.8
million in 1995 as the result of a 20% increase in gross NGLs production to
42,000 barrels per day (Bbls/d) in 1996 compared to 35,000 Bbls/d in 1995 and a
35% increase in the average NGLs price to $.35 per gallon from $.26 per gallon.
Natural gas processed at the Exxon Company U.S.A.'s natural gas processing
plant at Katy, Texas, primarily accounted for the increased NGLs production.

   Cost of sales was $170.7 million, or 84% of operating revenues, in 1996
compared to $95.3 million, or 80% of operating revenues, in 1995.  The increase
in the cost of sales is due partially to the Oasis Marketing activity which
contributed $34.7 million. Excluding Oasis Marketing activity, cost of sales
increased as the result of an increase in the average natural gas price offset
by a decrease in the volume of natural gas sold and marketed.

   Gross margin (operating revenues less cost of sales, which includes only
the direct cost of gas sold and does not include any related operating expenses)
was $31.9 million, or 16% of operating revenues, in 1996 compared to $24.1
million, or 20% of operating revenues, in 1995.  The decrease in percentage is
primarily due to a higher cost of gas supply for the pipeline systems. The
increase in the gross margin is due partially to the Oasis Marketing activity
which contributed gross margin of $1.6 million. Excluding Oasis Marketing
activity, the gross margin increased 26% due primarily to an increase in
average natural gas and NGLs prices of 48% and 35%, respectively, an increase
in NGLs production offset by a decrease in the natural gas sold and marketed
previously noted.

   Operating expenses increased 11% to $5.9 million in 1996 compared to $5.3
million in 1995 primarily as a result of expanded gathering systems and plant
operations as well as an increase in compressor maintenance and rentals.

   General and administrative expenses increased 5% to $4.1 million in 1996
compared to $3.9 million in 1995 due primarily to increased compensation costs.

   Depreciation and amortization increased 11% to $6.0 million in 1996 compared
to $5.4 million in 1995 primarily as the result of fixed asset additions on the
SETPS and the amortization of the purchase price allocated to the
transportation rights related to Oasis.

   Interest and debt expenses increased 29% to $3.6 million in 1996 compared to
$2.8 million in the 1995 period primarily as a result of increased debt
balances incurred for capital expenditures, the 15% Oasis Acquisition and the
recording of interest associated with certain agreed-upon tax issues with the
Internal Revenue Service (IRS) resulting from the IRS examination of certain
UtiliCorp United, Inc. (UtiliCorp) Federal income tax returns.

   Provision in lieu of income tax expense increased 100% to $4.8 million in
1996 compared to $2.4 million in 1995 due to an increase in income before
income taxes in 1996 compared to 1995.  As a result of the agreed-upon issues
with the IRS, discussed in the previous paragraph, the Company is liable to
UtiliCorp for approximately $2.9 million, under the provisions of the tax
sharing agreement, once the IRS assesses UtiliCorp for the agreed-upon issues.
The payment of the income taxes associated with the agreed-upon issues will
have no effect on net earnings as it will be an adjustment to the deferred tax
liability.  Also, see Note 3 to the Condensed Consolidated Financial Statements
relating to other tax matters.





                                       9
<PAGE>   10
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

   Total operating revenues increased 57% to $534.6 million in 1996 compared to
$340.3 million in 1995.  Natural gas revenues increased 60% to $468.4 million
in 1996 compared to $292.0 million in 1995 due partially to the Oasis Marketing
activity, which has been included since July 1, 1996, which contributed natural
gas revenues of $36.3 million with associated marketed natural gas volumes of
59 MMcf/d.  Excluding Oasis Marketing activity, natural gas revenues increased
48% to $432.1 million due to a 44% increase in the average natural gas price to
$2.15 per Mcf in 1996 from $1.49 per Mcf in 1995 and an increase in natural gas
sold and marketed to 731 MMcf/d in 1996 from 690 MMcf/d in 1995.

   NGLs revenues increased 37% to $66.2 million in 1996 compared to $48.3
million in 1995 as the result of a 32% increase in gross NGLs production to
41,000 Bbls/d in 1996 compared to 31,000 Bbls/d in 1995 and an 18% increase in
the average NGLs price to $.33 per gallon from $.28 per gallon.  Natural gas
processed at the Exxon Company U.S.A.'s natural gas processing plant at Katy,
Texas, primarily accounted for the increased NGLs production.

   Cost of sales was $437.6 million, or 82% of operating revenues, in 1996
compared to $269.4 million, or 79% of operating revenues, in 1995.  The
increase in the cost of sales is due partially to the Oasis Marketing activity
which contributed $34.7 million.  Excluding Oasis Marketing related activity,
cost of sales increased as the result of an increase in the average natural gas
price and an increase in natural gas sold and marketed.

   Gross margin (operating revenues less cost of  sales, which includes only
the direct cost of gas sold and does not include any related operating
expenses) was $97.0 million, or 18% of operating revenues, in 1996 compared to
$70.9 million, or 21% of operating revenues, in 1995.  The decrease in
percentage is primarily due to a higher cost of gas supply for the pipeline
systems.  The increase in the gross margin is due partially to the Oasis
Marketing activity which contributed gross margin of $1.6 million.  Excluding
Oasis Marketing activity, the gross margin increased 35% due to an increase in
average natural gas and NGLs prices of 44% and 18%, respectively, an increase
in NGLs production and an increase in the natural gas sold and marketed noted
above offset by a reduction in the NGLs content in the natural gas delivered to
the Company from the wellhead.

   Operating expenses increased 10% to $17.4 million in 1996 compared to $15.8
million in 1995 primarily as a result of expanded gathering systems and plant
operations.

   General and administrative expenses increased 19% to $13.9 million in 1996
compared to $11.7 million in 1995 due to increased compensation costs.

   Depreciation and amortization increased 13% to $17.5 million in 1996
compared to $15.5 million in 1995 primarily as the result of fixed asset
additions on the SETPS.

   Interest and debt expenses increased 31% to $11.3 million in 1996 compared
to $8.6 million in the 1995 period primarily as a result of increased debt
balances incurred for capital expenditures, the 15% Oasis Acquisition and the
recording of interest associated with certain agreed-upon tax issues with the
IRS resulting from the IRS examination of certain UtiliCorp Federal income tax
returns.

   Provision in lieu of income tax expense increased 96% to $14.1 million in
1996 compared to $7.2 million in 1995 due to an increase in income before
income taxes in 1996 compared to 1995.

LIQUIDITY AND CAPITAL RESOURCES

   The Company believes it generates significant cash from operations and
expects such cash and borrowings to be its primary source of liquidity.  The
Company's primary uses of cash are capital expenditures, acquisitions, working
capital requirements, dividends and debt repayment.  The Company's historical
additions to pipeline, property, plant and equipment were $22.5 million and
$76.2 million for the nine months ended September 30, 1996 and the year ended
December 31, 1995, respectively.  Capital expenditures are expected to be
approximately $30 million in 1996, excluding business acquisitions.  In July
1996 and November 1996, the Company completed the 15% and 25%, respectively,
Oasis Acquisitions for a cash purchase price of $47.1 million and $84.0
million, respectively.





                                       10
<PAGE>   11

   The Company maintains revolving credit agreements (the Revolvers) of $100.0
million with Aquila Energy to provide funds for general corporate purposes.
There was $95.5 million and $54.0 million outstanding on the Revolvers at
September 30, 1996 and December 31, 1995, respectively.  The total amount
available to borrow on the Revolvers was $4.5 million at September 30, 1996.
Subsequent to September 30, 1996, the Company amended the Revolvers to increase
the available borrowings to $165.0 million and amended the maturity dates to
extend the expiration dates to the fourth quarter of 1998.  The Revolvers, as
amended, were utilized to fund the Oasis Acquisition.

   The Company also has a Loan Agreement (the Loan) with Aquila Energy for an
amount of $50.0 million to provide funds for general corporate purposes.  The
Loan matures in June 2005.  The Loan requires the Company to meet and maintain
certain financial covenants as well as limits the activities of the Company in
other ways.  At September 30, 1996, the Company was in compliance with such
covenants.

   The 8.29% Senior Notes issued by Aquila Southwest Energy Corporation (Aquila
Southwest) require annual principal payments of $12.5 million annually
beginning in 1992.  Such principal payments are expected to be made from cash
flows from operations and borrowings.  The 8.29% Senior Note purchase agreement
has numerous covenants which affect the Company and Aquila Southwest.  These
covenants limit the ability to make dividend payments and incur debt, require
maintenance of certain financial ratios and limit the activities of Aquila
Southwest in other ways.  Failure to maintain the required ratios may
ultimately result in an acceleration of payments due.  The Company was in
compliance with such covenants at September 30, 1996.

   The Company believes that cash generated from operations and borrowings
under the Revolvers will be adequate to fund working capital requirements, debt
service payments and planned capital expenditures.  Future acquisitions or
large capital expenditures in excess of current plans would require additional
financing that the Company expects would be available through additional debt
facilities.










                                       11
<PAGE>   12
                          PART II - OTHER INFORMATION


Item 1.  Legal Proceedings.

   None.  Also, see Note 3 to the Condensed Consolidated Financial Statements
for a description of legal proceedings.

Item 2.  Changes in Securities.

   None.

Item 3.  Defaults upon Senior Securities.

   None.

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

   None.

Item 5.  Other Information.

   None.

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

   (a)   List of Exhibits.

         Incorporated herein by reference to Index to Exhibits.

   (b)   Reports on Form 8-K.

         The Company did not file any reports on Form 8-K during the three
months ended September 30, 1996.





                                                            12
<PAGE>   13
                                  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.




                                       AQUILA GAS PIPELINE
                                       CORPORATION
                                       (Registrant)
                                      
                                      
                                      
                                      
                                        /s/   Craig F. Strehl
                                        -------------------------
     Date:   November 14, 1996          By:   Craig F. Strehl
                                              President and Chief
                                              Operating Officer
                                       
                                       
                                       
                                        /s/   Damon C. Button
                                        -----------------------
     Date:   November 14, 1996          By:   Damon C. Button
                                              Vice President, Treasurer     
                                              and Chief Financial Officer   





                                      13
<PAGE>   14
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
                                                                        Sequentially
   Exhibit                                                                 Number  
   Numbered                   Description                                   Page  
   --------                   ------------                              -------------                                          
<S>                   <C>                                               <C>
   10.1               Acquisition Agreement for Oasis Pipe Line 
                      Company dated August 28, 1996 between
                      Dow Hydrocarbons and Resources Inc. and AQP
                      Holdings L.P.

   10.2               Note Agreement dated July 1, 1996
                      between Aquila Energy Corporation
                      and AQP Holdings L.P.

   27                 Financial Data Schedule
</TABLE>