<PAGE> 1

        UNITED STATES SECURITIES AND EXCHANGE COMMISSSION
                     Washington, D.C. 20549
                                
                            FORM 10-Q
(Mark One)

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

For the quarterly period ended         March 31, 1999
                              ------------------------------
                               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                  1-6446
                      -------------------------------------------

                              K N ENERGY, INC.
-----------------------------------------------------------------
     (Exact name of registrant as specified in its charter)

                Kansas                        48-0290000
----------------------------------------------------------------
          (State or other Jurisdiction of   (I.R.S. Employer
          incorporation or organization)    Identification No.)

          370 Van Gordon Street
          P.O. Box 281304, Lakewood, Colorado      80228-8304
-----------------------------------------------------------------
     (Address of principal executive offices)       (Zip Code)

                          (303) 989-1740
----------------------------------------------------------------
      (Registrant's telephone number, including area code)


----------------------------------------------------------------
(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.

Common stock, $5 par value; authorized 150,000,000 shares;
-----------------------------------------------------------------
outstanding 70,840,522 shares as of April 30, 1999.
-----------------------------------------------------------------

<PAGE> 2                                                 Form 10-Q

                K N ENERGY, INC. AND SUBSIDIARIES
                            FORM 10-Q
                  QUARTER ENDED MARCH 31, 1999
                            Contents
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION

 <S>                                                                 <C>
 Item 1. Financial Statements (Unaudited)                             Page Number
                                                                      -----------

           Consolidated Balance Sheets.....................              3 & 4
           Consolidated Statements of Income...............                  5
           Consolidated Statements of Cash Flows...........                  6
           Notes to Consolidated Financial Statements......             7 - 13

 Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations.............            14 - 22

 Item 3. Quantitative and Qualitative Disclosures About
           Market Risk.....................................                 22

PART II    OTHER INFORMATION

 Item 1. Legal Proceedings.................................                 23
 Item 6. Exhibits and Reports on Form 8-K..................                 23

SIGNATURE..................................................                 24
</TABLE>

<PAGE> 3                                                             Form 10-Q

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

CONSOLIDATED BALANCE SHEETS (Unaudited)
K N Energy, Inc. and Subsidiaries
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                         March 31           December 31
                                                            1999                1998
                                                       -------------        -------------
                                                                  
<S>                                                    <C>                  <C>
                                                                  
ASSETS:                                                           
Current Assets:                                                   
Cash and Cash Equivalents                              $   21,404           $   21,955
Restricted Deposits                                         7,431                9,096
U.S. Government Securities                                      -            1,092,415
Accounts Receivable                                       598,400              693,044
Inventories                                               105,905              144,831
Gas Imbalances                                             90,403               85,349
Other                                                      46,444               46,812
                                                       ----------           ----------
                                                          869,987            2,093,502
                                                       ----------           ----------
                                                                  
Investments                                               268,634              252,543
                                                       ----------           ----------
                                                                  
Property, Plant and Equipment                           7,781,145            7,767,332
Less Accumulated Depreciation and                                 
  Amortization                                            786,610              744,156
                                                       ----------           ----------
                                                        6,994,535            7,023,176
                                                       ----------           ----------
                                                                  
Deferred Charges and Other Assets                         239,169              242,991
                                                       ----------           ----------
Total Assets                                           $8,372,325           $9,612,212
                                                       ==========           ==========
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 4                                                             Form 10-Q

CONSOLIDATED BALANCE SHEETS (Unaudited)
K N Energy, Inc. and Subsidiaries
(Dollars in Thousands)

<TABLE>
<CAPTION>
                                                          March 31           December 31
                                                            1999                1998
                                                       -------------        -------------
                                                                  
<S>                                                    <C>                  <C>
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY:                             
Current Liabilities:                                              
Current Maturities of Long-Term Debt                   $    7,167           $   10,167
Notes Payable                                             622,236              297,000
Substitute Note                                                 -            1,394,846
Accounts Payable                                          407,108              489,414
Accrued Taxes                                              23,762               18,914
Gas Imbalances                                             68,760               74,857
Payable for Purchase of Thermo Companies                   54,556               86,799
Other                                                     212,263              247,465
                                                       ----------           ----------
                                                        1,395,852            2,619,462
                                                       ----------           ----------
Other Liabilities and Deferred Credits:                           
Deferred Income Taxes                                   1,701,734            1,699,072
Other                                                     394,361              431,565
                                                       ----------           ----------
                                                        2,096,095            2,130,637
                                                       ----------           ----------
                                                                  
Long-Term Debt                                          3,300,017            3,300,025
                                                       ----------           ----------
                                                                  
K N-Obligated Mandatorily Redeemable                              
Preferred Capital Trust Securities of
  Subsidiary Trusts Holding Solely                                
   Debentures of K N                                      275,000              275,000
                                                       ----------           ----------
                                                                  
Minority Interests in Equity of Subsidiaries               63,056               63,267
                                                       ----------           ----------
                                                                  
Stockholders' Equity:                                             
Preferred Stock-                                                  
  Authorized - Class A, 200,000 Shares:                           
    Class B, 2,000,000 Shares,
    Without Par Value                                             
  Redeemable Solely at Option of Company at                       
    $105 Per Share - Class A,
    $5.00 Cumulative Series; 70,000 Shares                        
    Outstanding                                             7,000                7,000
                                                       ----------           ----------
Common Stock-                                                     
  Authorized - 150,000,000 Shares, Par Value                      
    $5 Per Share 
  Outstanding - 69,660,801 and 67,037,735 Shares, 
    Respectively, After Deducting 
    55,485 and 27,008 Shares Held in Treasury             348,304              343,230
Additional Paid-in Capital                                712,620              694,223
Retained Earnings                                         187,040              193,925
Other                                                     (12,659)             (14,557)
                                                       ----------           ----------
Total Common Stockholders' Equity                       1,235,305            1,216,821
                                                       ----------           ----------
Total Stockholders' Equity                              1,242,305            1,223,821
                                                       ----------           ----------
Total Liabilities and Stockholders' Equity             $8,372,325           $9,612,212
                                                       ==========           ==========
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 5                                                             Form 10-Q

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
K N Energy, Inc. and Subsidiaries
(In Thousands Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                   March 31
                                                       --------------------------------
                                                                       
                                                            1999               1998
                                                            ----                ----
<S>                                                    <C>                 <C>   
                                                                 
Operating Revenues:                                              
Upstream Gathering and Processing                      $  131,595          $  139,099
Midstream Sales, Transportation and Storage               357,426             285,898
Downstream Retail and Marketing                           695,838             828,539
Intersegment Eliminations                                (130,890)            (87,014)
                                                       ----------          ----------
Total Operating Revenues                                1,053,969           1,166,522
                                                       ----------          ----------
                                                                 
Operating Costs and Expenses:                                    
Gas Purchases and Other Costs of Sales                    797,833             934,635
Operations and Maintenance                                100,681              95,780
Depreciation and Amortization                              53,520              41,820
Taxes, Other Than Income Taxes                             14,183              12,148
Merger-related Costs                                        2,916               4,353
                                                       ----------          ----------
Total Operating Costs and Expenses                        969,133           1,088,736
                                                       ----------          ----------
                                                                 
Operating Income                                           84,836              77,786
                                                       ----------          ----------
                                                                 
Other Income and (Deductions):                                   
Interest Expense, Net                                     (70,450)            (50,342)
Minority Interests                                         (5,267)             (2,381)
Other, Net                                                  2,556              10,694
                                                       ----------          ----------
Total Other Income and (Deductions)                       (73,161)            (42,029)
                                                       ----------          ----------
                                                                 
Income Before Income Taxes                                 11,675              35,757
Income Taxes                                                4,553              13,249
                                                       ----------          ----------
                                                                 
Net Income                                                  7,122              22,508
Less - Preferred Stock Dividends                               88                  88
                                                       ----------          ----------
                                                                 
Earnings Available For Common Stock                    $    7,034          $   22,420
                                                       ==========          ==========
                                                                 
Number of Shares Used in Computing                               
  Basic Earnings Per Common Share                          69,486              52,635
                                                       ==========          ==========
                                                                 
Basic Earnings Per Common Share                        $     0.10          $     0.43
                                                       ==========          ==========
                                                                 
Number of Shares Used in Computing                               
  Diluted Earnings Per Common Share                        69,578              53,429
                                                       ==========          ==========
                                                                 
Diluted Earnings Per Common Share                      $     0.10          $     0.42
                                                       ==========          ==========
                                                                 
Dividends Per Common Share                             $     0.20          $     0.19
                                                       ==========          ==========
</TABLE>

The accompanying notes are an integral part of these statements.

<PAGE> 6                                                             Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
K N Energy, Inc. and Subsidiaries
Increase (Decrease) in Cash and Cash Equivalents
(In Thousands)

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31
                                                            ------------------------------
                                                                                    
                                                                1999              1998
                                                                ----              ----
<S>                                                         <C>               <C> 
                                                                              
CASH FLOWS FROM OPERATING ACTIVITIES:                                         
Net Income                                                  $    7,122        $   22,508
Adjustments to Reconcile Net Income to Net Cash Flows from                    
  Operating Activities:
Depreciation and Amortization, Excluding Amortization                         
  of Gas Plant Acquisition Adjustment                           25,887            21,645
Deferred Income Taxes                                            1,790             7,213
Deferred Purchased Gas Costs                                     3,296            17,414
Gain on Sale of Facilities                                        (258)           (8,252)
Proceeds from Buyout of Contractual Gas Obligations                  -            27,500
Change in Gas in Underground Storage                            47,532             2,214
Changes in Other Working Capital Items (Note 4)                (22,752)            7,951
Changes in Deferred Revenues                                    (4,394)           (1,466)
Other, Net                                                     (19,990)           (5,704)
                                                            ----------        ----------
NET CASH FLOWS FROM OPERATING ACTIVITIES                        38,233            91,023
                                                            ----------        ----------
                                                                              
CASH FLOWS FROM INVESTING ACTIVITIES:                                         
Capital Expenditures                                           (30,455)          (81,163)
Cash Paid for Acquisition of MidCon, Net of Cash Acquired            -        (2,139,752)
Other Acquisitions                                             (18,514)           (9,137)
Investments                                                     (2,056)           (2,526)
Sale of U.S. Government Securities                           1,092,415                 -
Purchase of U.S. Government Securities                               -          (884,223)
Proceeds from Sales of Assets                                      853            25,152
                                                            ----------        ----------
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES    1,042,243        (3,091,649)
                                                            ----------        ----------
                                                                              
CASH FLOWS FROM FINANCING ACTIVITIES:                                         
Short-Term Debt, Net                                        (1,069,610)           55,800
Long-Term Debt - Issued                                              -         2,362,000
Long-Term Debt - Retired                                        (3,317)          (20,662)
Common Stock Issued in Public Offering                               -           650,000
Other Common Stock Issued                                        5,925             4,070
Treasury Stock, Issued                                              25               409
Treasury Stock , Acquired                                          (43)                -
Cash Dividends, Common                                         (13,919)          (12,496)
Cash Dividends, Preferred                                          (88)              (88)
Minority Interests, Contributions                                    -            13,311
Securities Issuance Costs                                            -           (45,891)
                                                            ----------        ----------
NET CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES   (1,081,027)        3,006,453
                                                            ==========        ==========

Net Increase (Decrease) in Cash and Cash Equivalents              (551)            5,827
Cash and Cash Equivalents at Beginning of Period                21,955            22,471
                                                            ----------        ----------
Cash and Cash Equivalents at End of Period                  $   21,404        $   28,298
                                                            ==========        ==========
</TABLE>

For supplemental cash flow information, see Note 4.
The accompanying notes are an integral part of these statements.

<PAGE> 7                                                             Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   General

As used herein, "K N" or "the Company" refers to K N Energy, Inc.
and its consolidated subsidiaries unless the context otherwise
requires.  In the opinion of Management, all adjustments
necessary for a fair presentation of the results for the
unaudited interim periods have been made.  Except as explicitly
noted, these adjustments consist solely of normal recurring
accruals.  Certain prior period amounts have been reclassified to
conform with the current presentation.

2.   Sempra Merger

On February 22, 1999, Sempra Energy ("Sempra") and the Company
announced that their respective boards of directors had
unanimously approved a definitive agreement (the "Agreement")
under which Sempra and the Company would combine in a stock-and-
cash transaction valued in the aggregate at $6.0 billion.  Sempra
is an energy services holding company based in San Diego,
California, serving 21 million customers through natural gas and
electric distribution, as well as a broad range of energy-related
products and services throughout the United States, Canada,
Mexico and other countries in Latin America.  This merger is
conditioned, among other things, upon the approvals of
shareholders of both companies, the Federal Energy Regulatory
Commission and the state commissions of Colorado and Wyoming and
clearance under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act").  Effective March 30, 1999, the Federal
Trade Commission granted the Company's request for early
termination of the waiting period under the HSR Act with respect
to the merger.

3.   Acquisitions, Investments and Sale

(A)  MidCon Corp.
On January 30, 1998, pursuant to a definitive stock purchase
agreement (the "MidCon Agreement"), the Company acquired all of
the outstanding shares of capital stock of MidCon Corp.
("MidCon") from Occidental Petroleum Corporation ("Occidental")
for $2.1 billion in cash and the assumption of a $1.4 billion
note (the "Substitute Note"), at which time MidCon became a
wholly owned subsidiary of K N Energy, Inc. (the "Acquisition").
The Substitute Note bore interest at 5.798% and was required to
be collateralized by U.S. government securities, letters of
credit or a combination thereof.  The Substitute Note was paid in
full on January 4, 1999.  In conjunction with the Acquisition,
K N also assumed MidCon's obligation to lease the MidCon Texas
intrastate pipeline system under a 30-year operating lease,
requiring average annual lease payments of approximately $30
million.  The Acquisition was initially financed through a
combination of credit agreements (see Note 6).

The Acquisition was accounted for as a purchase for accounting
purposes and, accordingly, the MidCon assets acquired and
liabilities assumed have been recorded at their respective
estimated fair market values as of the acquisition date.  The
allocation of purchase price has resulted in the recognition of a
gas plant acquisition adjustment of approximately $3.9 billion,
principally representing the excess of the assigned fair market
value of the assets of Natural Gas Pipeline Company of America
("NGPL"), a wholly owned subsidiary of MidCon, over the
historical cost for ratemaking purposes.  This gas plant
acquisition adjustment, none of which is currently being
recognized for rate-making purposes, is being amortized over 36
years, approximately the estimated remaining useful life of
NGPL's interstate pipeline system.  For the quarters ended March
31, 1999 and 1998, approximately $27.2 million and $19.8 million
of such amortization, respectively, was charged to expense.  The
assets, liabilities and results of operations of MidCon are
included with those of the Company beginning with

<PAGE> 8                                                             Form 10-Q

the January 30, 1998 acquisition date.  Historical information
for periods prior to January 30, 1998 does not reflect any impact
associated with the MidCon acquisition.

(B)  Sale of Kansas Distribution Properties
In March 1998, K N completed the sale of its Kansas retail
natural gas distribution properties, located in 58 Kansas
communities and serving approximately 30,000 residential,
commercial and industrial customers, to Midwest Energy, Inc., a
customer-owned cooperative based in Hays, Kansas.  K N received
approximately $24 million in cash in conjunction with the sale
and recorded a pre-tax gain of approximately $8.5 million
(approximately $5.2 million after tax or $0.08 per diluted
share).  Concurrently with the sale, K N received $27.5 million
in cash in exchange for the release of the purchaser from certain
contractual gas purchase obligations, which amount will be
amortized as an offset to expense over a period of years as the
associated volumes are sold.

(C)  Thermo Companies
During the third quarter of 1998, K N completed its acquisition
of interests in four independent power plants in Colorado from
the Denver-based Thermo Companies ("Thermo"), representing
approximately 380 megawatts of electric generation capacity and
access to approximately 130 Bcf of natural gas reserves.  These
generating facilities are located in Ft. Lupton, Colorado (272
megawatts) and Greeley, Colorado (108 megawatts) and sell their
power output to Public Service Company of Colorado under long-
term agreements.  Payments for these interests are being made over
a two-year period, with the initial payment of 689,810 shares
(1,034,715 shares adjusted for the December 1998 three-for-two
stock split) of K N common stock having been made on October 21,
1998.  Additional payments were made on January 4, 1999,
consisting of 833,623 shares of K N common stock and $15 million
in cash, and on April 20, 1999, consisting of 1,232,286 shares of
K N common stock and $20 million in cash.  The remaining payment
in 2000 is expected to be made in a combination of cash and
common stock as agreed to by K N and Thermo, with the default mix
being 50% stock and 50% cash.  This transaction has been
accounted for as a purchase.

(D)  TransColorado Pipeline
On March 31, 1999, the TransColorado Gas Transmission Company
("TransColorado"), an enterprise jointly owned by K N and Questar
Corp., placed in service a 280-mile-long natural gas pipeline,
which includes two compressor stations and extends from near
Rangely, Colorado, to its southern terminus at the Blanco Hub
near Aztec, New Mexico.  The pipeline has a design transmission
capacity of approximately 300 million cubic feet of natural gas
per day.  On October 14, 1998, TransColorado entered into a $200
million revolving credit agreement with a group of commercial
banks.  K N provides a corporate guarantee for one-half of all
amounts borrowed under the agreement.

(E)  Thunder Creek Gathering System
In March 1999, Thunder Creek Gas Services, LLC, a joint venture
of K N and Devon Energy Corporation, began construction of a 126-
mile-long-trunkline natural gas gathering system which will
include carbon dioxide removal facilities and will extend from
Glenrock, Wyoming to approximately 12 miles north of Gillette,
Wyoming.  The trunkline will have an initial capacity of 450
million cubic feet of natural gas per day.  The gathering system
is located in the Powder River Basin of northeast Wyoming and is
expected to be operational by fall 1999. The expected total cost
of the system is approximately $100 million.

(F)  Horizon Pipeline
In May 1999, the Company announced plans to build the Horizon
Pipeline, a 129-mile-long natural gas pipeline from Joliet,
Illinois, to Hales Corners, Wisconsin.  Construction is expected
to start in spring 2001 and be completed by the fall of 2001. The
estimated cost of the project is $150 million to $250 million,
depending on shipper response and design capacity, expected to be
from 630 million cubic feet up to 1.2 billion cubic feet per

<PAGE> 9                                                             Form 10-Q

day.  The Company plans to jointly own the pipeline with one or
more other partners.  An open season will begin in May 1999,
which will allow potential shippers to express their interest in
obtaining capacity on the pipeline.

4.   Supplemental Cash Flow Information

Changes in Other Working Capital Items Summary and Supplemental
Disclosures of Cash Flow Information are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                       March 31
                                             ----------------------------
                                                                    
                                                1999              1998
                                                ----              ----
<S>                                           <C>              <C>   
                                                              
CHANGES IN OTHER WORKING CAPITAL ITEMS:                       
  (Net of Effects of Acquisitions and Sales)                  
Accounts Receivable                          $   93,913       $   72,952
Materials and Supplies Inventory                  1,297           (7,514)
Other Current Assets                             (3,022)         (11,796)
Accounts Payable                                (82,306)         (60,688)
Other Current Liabilities                       (32,634)          14,997
                                             ----------       ----------
                                             $  (22,752)      $    7,951
                                             ==========       ==========
SUPPLEMENTAL CASH FLOW INFORMATION:                           
                                                              
Cash Paid for:                                                
 Interest (Net of Amount Capitalized)        $  120,097       $   31,120
                                             ==========       ==========
 Income Taxes                                $      349       $     (228)
                                             ==========       ==========
</TABLE>

The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.  "Other, Net", presented as a component of "Net Cash
Flows from Operating Activities" in the accompanying interim
Consolidated Statements of Cash Flows includes, among other
things, the amortization of the gas plant acquisition adjustment
recorded in conjunction with the acquisition of MidCon,
undistributed equity in earnings of unconsolidated subsidiaries
and joint ventures and other non-cash charges and credits to
income.

In the third quarter of 1998, K N purchased interests in four
independent power plants in Colorado from the Thermo Companies.
Payments for this purchase were made in October 1998 with K N
common stock and in January and April 1999 with a combination of
cash and K N common stock.  The remaining payment is expected to
be made with a combination of cash and K N common stock.  A
portion of K N's January 1998 acquisition of MidCon was made
through the assumption of a note.  For additional information on
these transactions, see Notes 3(A) and 3(C).

5.   Business Segments

K N Energy, Inc. has adopted a strategy of extracting profit from
the energy value stream, which extends from the purchase or
production of the fuel through the sale of the energy to the end-
user.  Consistent with this strategy, K N manages its business
and has segregated its activities into three business segments,
"Upstream", "Midstream" and "Downstream", based on where in the
value stream such activities are conducted.  In general, these
segments are also differentiated by the nature of their
processes, their principal suppliers, and their target markets
and customers.  The Company's Upstream operations consist of (i)
natural gas gathering, (ii) natural gas processing and (iii)
natural gas liquids ("NGLs") extraction and marketing;  Midstream
operations consist of transportation, storage and bundled sales
transactions for K N's interstate and intrastate pipelines;
Downstream operations principally consist of energy marketing,
regulated natural gas distribution and electric power generation
and sales.

<PAGE> 10                                                            Form 10-Q

The accounting policies applied in the generation of segment
information are generally the same as those described in the
summary of significant accounting policies in the Company's 1998
Report on Form 10-K.  In general, items below the
"Operating Income" line are either not allocated to business
segments or are not considered by Management in its evaluation of
business unit performance.  In addition, certain items included
in operating income (such as the merger-related costs incurred)
are not allocated to individual business segments.  With
adjustment for these items, the Company currently evaluates
business segment performance primarily based on operating income
in relation to the level of capital employed.  In general,
intersegment sales are accounted for at market prices, while
asset transfers are made at either market value or, in some
instances, book value.

<TABLE>
<CAPTION>
                                                 Three Months Ended March 31, 1999
                                  --------------------------------------------------------------
                                    Upstream    Midstream  Downstream     Other       Consolidated
                                    --------    ---------   ---------     -----       -----------
                                                       (dollars in millions)
<S>                                <C>          <C>         <C>         <C>            <C>
Revenues from External Customers   $  101.6     $  298.7    $  653.7                   $1,054.0
Intersegment Revenues              $   30.0     $   58.7    $   42.2                   $  130.9
                                                                                      
Operating Income (Loss)            $   (3.4)    $   87.7    $    3.4    $   (2.9) (1)  $   84.8
Other Income and (Deductions)                                                             (73.1)
                                                                                       --------
Income Before Income Taxes                                                             $   11.7
                                                                                       ========
                                                                                    
Total Assets at March 31, 1999     $  702.0     $6,535.3    $1,106.2   $    28.8 (3)   $8,372.3
                                                                                    
                                                 Three Months Ended March 31, 1998
                                  --------------------------------------------------------------
                                    Upstream    Midstream  Downstream     Other       Consolidated
                                    --------    ---------  ----------     -----       -----------
                                                       (dollars in millions)
Revenues from External Customers   $  120.7     $  212.6    $  833.2                   $1,166.5
Intersegment Revenues              $   18.4     $   73.3    $   (4.7)                  $   87.0
                                                                                    
Operating Income (Loss)            $   (4.1)    $   77.8    $    8.5    $   (4.4) (2)  $   77.8
Other Income and (Deductions)                                                             (42.0)
                                                                                       --------
Income Before Income Taxes                                                             $   35.8
                                                                                       ========
                                                                                    
(1) Represents costs related to the pending merger with Sempra (see Note 2).
(2) Represents costs related to the MidCon Acquisition (see Note 3(A)).
(3) Corporate assets represent cash and restricted deposits.
</TABLE>

6.   Financing

The total amount of funds required by the Company to complete the
acquisition of MidCon, pay related fees and expenses and to repay
borrowings under the Company's existing credit facility was
approximately $2.5 billion, financed through borrowings under
credit agreements dated January 30, 1998 (the "Bank Facility")
among K N, Morgan Guaranty Trust Company of New York and a
syndicate of other lenders.  A working capital facility replaced
the revolving credit agreement previously in place (the "Pre-
Acquisition Facility").  An acquisition facility was also part of
the overall Bank Facility structure.  See Note 7(A) of Notes to
Consolidated Financial Statements on pages 42-43 of the Company's
1998 Annual Report on Form 10-K for additional information
regarding the Bank Facility and the Pre-Acquisition Facility.  In
addition to the working capital and acquisition components of the
Bank Facility described preceding, the Company assumed a short-
term note for $1.4 billion due January 1999 (the "Substitute
Note") which, pursuant to the MidCon Agreement, was initially
collateralized by letters of credit issued under a commitment for
that purpose within the Bank Facility.  The acquisition facility
was repaid in its entirety and cancelled on March 10, 1998. The
Substitute Note was repaid on January 4, 1999.  On January 5,
1999, K N cancelled the remaining letters of credit used to
collateralize the Substitute Note.

<PAGE> 11                                                            Form 10-Q

In March 1998, the Company received net proceeds of approximately
$624.6 million from a public offering of 12.5 million shares
(18.75 million shares after adjustment for the December 1998
three-for-two stock split) of K N common stock and approximately
$2.34 billion from the concurrent public offerings of senior debt
securities of varying maturities with principal totaling $2.35
billion.  The net proceeds from these offerings were used to
refinance borrowings under the Bank Facility and to purchase U.S.
government securities to replace a portion of the letters of
credit that collateralized the Substitute Note.


In April 1998, the Company sold $175 million of 7.63% Capital
Trust Securities (the "Capital Securities") maturing on April 15,
2028, in an underwritten public offering.  The sale was effected
through a wholly owned business trust, K N Capital Trust III.
The Company used the net proceeds from the offering to
purchase U.S. government securities to replace a portion of the
letters of credit that collateralized the Substitute Note.

In November 1998, the Company completed an underwritten public
offering of $400 million of three-year senior notes (the "Senior
Notes") bearing an interest rate of 6.45 percent.  The net
proceeds of approximately $397.4 million were used to retire a
portion of K N's then-outstanding short-term borrowings.
Concurrently with the Senior Notes offering, the Company sold
$460 million principal amount of premium equity participating
security units ("PEPS") in an underwritten public offering.  The
PEPS essentially are contracts (i) requiring the holders to
purchase K N common stock at the end of a three-year period
coinciding with the maturity of the Senior Notes and (ii)
providing for payment of a contract fee of 2.375 percent to the
PEPS holders by the Company during the three-year period.  The
net cash proceeds from the sale of the PEPS, together with
additional funds provided by the Company, were used to purchase
U.S. treasury securities on behalf of the PEPS owners.

7.   Preferred Stock

On April 13, 1999, the Company sent notice to holders of its
Class A $5.00 Cumulative Preferred Stock, of its intent to
redeem these shares on May 14, 1999.  Holders of 70,000 preferred
shares were advised that on April 13, 1999, funds were deposited
with the First National Bank of Chicago to pay the redemption
price of $105 per share plus accrued but unpaid dividends.  Under
the terms of the Company's Articles of Incorporation, upon
deposit of funds to pay the redemption price, all rights of the
preferred stockholders cease and terminate except the right to
receive the redemption price upon surrender of their stock
certificates.

8.   Common Stock Split and Dividend Action

On November 9, 1998, the Board of Directors of  K N Energy, Inc.
approved a 7.1 percent increase in the quarterly dividend and a
three-for-two split of the Company's common stock.  The quarterly
dividend was declared at $0.30 per common share, an increase from
$0.28 per common share.  Giving effect to the stock split, the
quarterly dividend is $0.20 per common share.  The stock split
was distributed and the increase in dividend was paid
concurrently on December 31, 1998, to shareholders of record at
the close of business on December 15, 1998.  The par value of the
stock did not change. Weighted-average shares outstanding and all
per share amounts (except as otherwise noted) in the accompanying
interim consolidated financial statements and these notes have
been restated to reflect the stock split.

<PAGE> 12                                                            Form 10-Q

9.   Regulatory Matters

On January 23, 1998, K N Interstate Gas Transmission Co. ("KNI"),
a wholly owned subsidiary of K N Energy, Inc., filed a general 
rate case with the Federal Energy Regulatory Commission ("FERC") 
requesting a $30.2 million increase in annual revenues.  
As a result of the FERC action, KNI was allowed to place its rates 
into effect on August 1, 1998, subject to refund, and  provisions 
for refund have been recorded based on its expectation of ultimate 
resolution.  By a subsequent order, the FERC required KNI to remove 
costs associated with the Pony Express project and to refund the 
associated dollars.  The refund of approximately $11 million will 
be made during the third quarter of 1999.  KNI has filed for rehearing 
of the FERC's order.  A hearing on its proposed rates is currently 
anticipated to commence in December, 1999.

On December 29, 1998, Rocky Mountain Natural Gas Company
("RMNG"), a wholly owned subsidiary of K N Energy, Inc., received
a "show cause" order from the Colorado Public Utilities
Commission (the "Commission").  The Commission has concluded that
there is reason to believe that RMNG's rates may be excessive and
may require further investigation.  RMNG has entered into a
Stipulation and Agreement with the Staff of the Commission and
the Office of Consumer Counsel providing for an annual revenue
reduction of approximately $0.9 million.  The Stipulation and
Agreement is awaiting Commission approval.

10.  Comprehensive Income

Statement of Financial Accounting Standards No. 130, Reporting of
Comprehensive Income, effective for fiscal years beginning after
December 15, 1997, requires that enterprises report a total for
comprehensive income.  Currently, the only difference between
"net income" and "comprehensive income" for K N is the unrealized
gain or loss on its investment in available-for-sale securities
which is recorded directly to stockholders' equity.  For the
quarters ended March 31, 1999 and 1998, the respective unrealized
after-tax investment gain was $1.1 million and $1.8 million,
resulting in comprehensive income of $8.2 million and $24.3
million, respectively.

11.  Accounting for Derivative Instruments and Hedging Activities

In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities (the
"Statement").  The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability
measured at its fair value.  The Statement requires that changes
in the derivatives' fair value be recognized currently in
earnings unless specific hedge accounting criteria are met.  If
the derivatives meet these criteria, the Statement allows a
derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company
formally designate a derivative as a hedge and document and
assess the effectiveness of derivatives associated with
transactions that receive hedge accounting.

The Statement is effective for fiscal years beginning after June
15, 1999.  A company may also implement the Statement as of the
beginning of any fiscal quarter after issuance (that is, fiscal
quarters beginning June 16, 1998 and thereafter).  The Statement
cannot be applied retroactively.  The Statement must be applied
to (i) derivative instruments and (ii) certain derivative
instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997,
(and, at the company's election, before January 1, 1998).  K N
has not yet quantified the impacts of adopting the Statement on
its financial position or results of operations and has not
determined the timing of or method of adoption of the Statement.

<PAGE> 13                                                            Form 10-Q

12.  Interest Expense, Net

"Interest Expense, Net" as presented in the accompanying interim
Consolidated Statements of Income is net of (i) the debt
component of the allowance for funds used during construction
("AFUDC - Interest") and (ii) interest income related to 
government securities ("Interest Income"), as shown in the 
following table.

<TABLE>
<CAPTION>
                           Three Months Ended
                                March 31
                         -----------------------
                          (Dollars in Millions)
   <S>                     <C>          <C>
                                           
                            1999         1998
                             ----        ----
   AFUDC - Interest        $ 0.3        $ 0.4
   Interest Income         $ 0.5        $ 2.6
</TABLE>

As discussed in Note 3(A), in conjunction with the January 30,
1998, acquisition of MidCon Corp., the Company was required by
the MidCon Agreement to assume the Substitute Note for $1.4
billion and to collateralize the Substitute Note with bank
letters of credit, a portfolio of U.S. government securities or a
combination of the two.  As a result, the Company has interest
income associated with the issuance of the Substitute Note,
which has been reported together with the related interest
expense as described preceding.

13.  Equity in Earnings of Equity Method Investments

Equity in earnings of investments accounted for under the equity
method totaling $5.3 million and $3.3 million for the three
months ended March 31, 1999 and 1998, respectively, are included
in operating revenues (within the appropriate business segment)
in the accompanying interim Consolidated Statements of Income.

14.  Accounts Receivable

The caption "Accounts Receivable" in the accompanying Consolidated
Balance Sheets is presented net of allowances for doubtful accounts of 
$11.3 million at March 31, 1999, and $10.8 million at December 31,
1998.

<PAGE> 14                                                            Form 10-Q

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

General

The following discussion should be read in conjunction with the
accompanying consolidated financial statements and related notes.
As discussed in Note 3 to the accompanying consolidated financial
statements, the Company has engaged in acquisition and
divestiture transactions which may affect the comparison of
results of operations between periods.  All per share amounts
following reflect the impact of the December 31, 1998, three-for-
two common stock split as discussed in Note 8 to the accompanying
consolidated financial statements.

On February 22, 1999, Sempra Energy ("Sempra"), an energy services
holding company based in San Diego, California, and the Company
announced that their respective boards of directors had approved
a definitive agreement under which Sempra and the Company would
combine in a stock and cash transaction.  This merger is
conditioned, among other things, upon the approvals of
shareholders of both companies as well as certain regulatory
approvals, including approvals of the Federal Energy Regulatory
Commission.  For additional information, see Note 2 to the
accompanying consolidated financial statements.

Consolidated Financial Results

<TABLE>
<CAPTION>
                                   For the Three Months Ended March 31
                                   -----------------------------------
                             (Dollars in Millions Except Per Share Amounts)
                                                                  
                                     1999                       1998
                                     ----                        ----
<S>                               <C>                         <C>
Operating Revenues                $ 1,054.0                   $ 1,166.5
Gross Margin                          256.1                       231.9
Operating Income                       84.8                        77.8
Net Income                              7.1                        22.5
Diluted Earnings Per Share        $    0.10                   $    0.42
</TABLE>

In comparison to the corresponding period of 1998, the Company's
results for the three months ended March 31, 1999 reflect (i) a
decrease of 9.6 percent in operating revenues and (ii) increases
of 10.4 percent in gross margin and 9.0 percent in operating
income.  Operating revenues, gross margin and operating income
were positively impacted in 1999, relative to 1998, by (i) the
fact that 1999 results include the operations of MidCon Corp.
("MidCon") for three months, while 1998 results include only two
months, beginning with the January 30, 1998, MidCon acquisition
date (see Note 3(A) to the accompanying consolidated financial
statements), (ii) cost savings realized subsequent to the MidCon
acquisition and (iii) the inclusion of $4.4 million of expense
related to the acquisition of MidCon in 1998 results, compared to
$2.9 million of expense in 1999 related to the pending merger
with Sempra.  The operating revenues, gross margin and operating
income associated with each of the Company's business segments
were negatively affected in 1999, relative to 1998, by (i) low
natural gas liquids ("NGLs") prices and associated reduced
processing margins and (ii) reduced pipeline basis differentials
reflecting, in part, weather-related reduction in demand as
further described within the individual segment discussions which
follow.

There was a significant increase in interest expense in 1999
largely resulting from the additional month's financing of
MidCon, a decrease in other income and an increase in the
effective tax rate - see "Other Income and (Deductions)" and
"Income Taxes" elsewhere herein.  Earnings per diluted share for
1999 declined by 76.2 percent from 1998 reflecting, in addition
to the decline in 1999 net income, an increase of 30.2 percent in
the number of diluted shares used to calculate earnings per
share. This increase in shares was largely due to the

<PAGE> 15                                                            Form 10-Q

March 1998 common stock issuance associated with the acquisition
of MidCon (see Note 6 to the accompanying consolidated financial
statements).

Results of Operations

Reflecting the Company's strategy of extracting margins from the
various segments of the energy value stream, the Company has
segregated its results of operations into "Upstream," "Midstream"
and "Downstream" components.  The Company's Upstream operations
consist of (i) natural gas gathering, (ii) natural gas processing
and (iii) NGLs extraction and marketing activities.  Midstream
operations consist of transportation, storage and bundled sales
transactions for K N's interstate and intrastate pipelines.
Downstream activities principally consist of energy marketing,
regulated natural gas distribution and electric power generation
and sales.  The following segment data are before intersegment
eliminations, and exclude expenses of the Sempra merger and
MidCon acquisition.

<TABLE>
<CAPTION>
                                                     Three Months Ended March 31
                                          -------------------------------------------------
                                           (Dollars in Millions Except Per Gallon Amounts)
                                                                               Increase
Upstream Gathering and Processing             1999             1998           (Decrease)
                                              ----             ----           ----------
<S>                                        <C>              <C>               <C> 
Operating Revenues                                                         
  Gas Sales                                $  52.5          $  50.3           $   2.2
  Natural Gas Liquids Sales                   44.9             55.8             (10.9)
  Gathering, Transportation and Other         34.2             33.0               1.2
                                           -------          -------           -------
                                             131.6            139.1              (7.5)
                                           -------          -------           -------
Operating Costs and Expenses                                               
  Gas Purchases and Other Costs of Sales      98.9            103.3              (4.4)
  Operations and Maintenance                  26.7             30.3              (3.6)
  Depreciation and Amortization                6.8              6.3               0.5
  Taxes, Other Than Income Taxes               2.6              3.3              (0.7)
                                           -------          -------           -------
                                             135.0            143.2              (8.2)
                                           -------          -------           -------
                                                                           
Operating Loss                             $  (3.4)         $  (4.1)          $   0.7
                                           =======          =======           =======
                                                                           
System Throughput (Trillion Btus):                                         
  Gas Sales                                   32.6             24.8               7.8
  Gathering and Transportation                84.4             85.9              (1.5)
                                           -------          -------           -------
                                             117.0            110.7               6.3
                                           -------          -------           -------
                                                                           
Natural Gas Liquids:                                                       
    Sales (Million Gallons)                  194.0            180.1              13.9
                                           =======          =======           =======
    Average Sales Price/Gallon             $  0.23          $  0.31           $ (0.08)
                                           =======          =======           =======
</TABLE>

Upstream's operating loss declined by $0.7 million from $4.1
million in the first quarter of 1998 to $3.4 million in the
corresponding period of 1999.  The Upstream segment was
negatively impacted in 1999, relative to 1998, by approximately
$10 million due to lower NGLs prices.  The negative impact of
NGLs prices was more than offset by a combination of positive
factors, including (i) approximately $4.6 million of positive
impact from lower natural gas prices, (ii) approximately $3.3 of
positive impact from higher gathering rates, (iii) positive
results from the 1998 expansion of the Red Cedar gathering
assets, (iv) the fact that 1998 results included operating losses
associated with certain gas processing facilities that were sold
in the fourth quarter of 1998 and (v) reduced 1999 operating
expenses.

<PAGE> 16                                                            Form 10-Q

<TABLE>
<CAPTION>
                                                 Three Months Ended March 31
                                             -----------------------------------
                                                    (Dollars in Millions)
                                                                       Increase
Midstream Sales, Transportation and Storage    1999         1998      (Decrease)
                                               ----         ----      ----------
<S>                                          <C>          <C>           <C> 
Operating Revenues                                                    
  Transportation and Storage                 $ 179.7      $ 136.5       $  43.2
  Gas Sales                                    178.5        145.2          33.3
  Other                                         (0.8)         4.2          (5.0)
                                             -------      -------       -------
                                               357.4        285.9          71.5
                                             -------      -------       -------
                                                                      
Operating Costs and Expenses                                          
  Gas Purchases and Other Costs of Sales       159.6        126.4          33.2
  Operations and Maintenance                    57.0         43.1          13.9
  Depreciation and Amortization                 43.2         31.9          11.3
  Taxes, Other Than Income Taxes                 9.9          6.7           3.2
                                             -------      -------       -------
                                               269.7        208.1          61.6
                                             -------      -------       -------
                                                                      
Operating Income                             $  87.7      $  77.8       $   9.9
                                             =======      =======       =======
Systems Throughput (Trillion Btus)             669.6        468.3         201.3
                                             =======      =======       =======
</TABLE>

Midstream operating income increased from $77.8 million in the
first quarter of 1998 to $87.7 million in the corresponding
period of 1999, an increase of $9.9 million (12.7%).  This
increase in operating income, as well as the increases in
operating revenues, operating expenses and throughput shown in
the preceding table, was largely attributable to the inclusion of
three months of operations of MidCon in 1999, while 1998 results
include only two months.  The Midstream segment was, however,
negatively impacted in 1999, relative to 1998, by a 13.3 percent
reduction in margin per unit of throughput, principally
attributable to weather-related demand factors.  These negative
margin impacts were partially offset by expense savings realized
subsequent to the acquisition of MidCon.

<TABLE>
<CAPTION>
                                                Three Months Ended March 31
                                            -----------------------------------
                                                   (Dollars in Millions)
                                                                      Increase
Downstream Retail and Marketing               1999          1998     (Decrease)
                                              ----          ----     ----------
<S>                                         <C>           <C>         <C>
Operating Revenues                                                   
  Gas Sales                                 $ 672.3       $ 819.9     $ (147.6)
  Transportation and Other                     23.5           8.6         14.9
                                            -------       -------     --------
                                              695.8         828.5       (132.7)
                                            -------       -------     --------
Operating Costs and Expenses                                         
  Gas Purchases and Other Costs of Sales      667.7         791.2       (123.5)
  Operations and Maintenance                   19.5          23.1         (3.6)
  Depreciation and Amortization                 3.5           3.6         (0.1)
  Taxes, Other Than Income Taxes                1.7           2.1         (0.4)
                                            -------       -------     --------
                                              692.4         820.0       (127.6)
                                            -------       -------     --------
                                                                     
Operating Income                            $   3.4       $   8.5     $   (5.1)
                                            =======       =======     ========
                                                                     
Gas Sales (Trillion Btus)                     361.4         337.5         23.9
                                            =======       =======     ========
</TABLE>

Downstream operating income decreased from $8.5 million in the 
first quarter of 1998 to $3.4 million in the corresponding period
of 1999, a decline of $5.1 million (60.0%).  Downstream results
were negatively impacted by (i) 1998 earnings contributions that
included (a) approximately $3.4 million in margins from sales of
storage gas, (b) approximately $2.1 million related to the
favorable resolution of certain "above market" gas purchase
contracts and (c) approximately $1.2 million of operating income
from the Company's

<PAGE> 17                                                            Form 10-Q

Kansas gas distribution properties, which were sold on March 31,
1998, (ii) a reduction of approximately $2.2 million in 1999
commodity marketing gas sales margins, largely due to weather-
related reductions in per-unit margins and (iii) weather-related
reductions in 1999 sales volumes for retail natural gas
distribution.  These negative factors were partially offset by
(i) approximately $2.4 million of 1999 operating income from
Thermo, which was acquired in the third quarter of 1998 (see Note
3(C) to the accompanying consolidated financial statements) and
(ii) reduced 1999 operating expenses.

<TABLE>
<CAPTION>
                                          Three Months Ended March 31
                                    ---------------------------------------
                                                 (In Millions)
                                                                  Earnings
                                                                  Increase
Other Income and (Deductions)          1999           1998       (Decrease)
                                       ----           ----       -----------
<S>                                 <C>             <C>           <C>
Interest Expense, Net               $ (70.5)        $ (50.3)      $ (20.2)
Minority Interests                     (5.3)           (2.4)         (2.9)
Other, Net                              2.6            10.7          (8.1)
                                    -------         -------       -------
                                    $ (73.2)        $ (42.0)      $ (31.2)
                                    =======         =======       =======
</TABLE>

The increase of $20.2 million in "Interest Expense, Net" from
1998 to 1999 was principally due to incremental debt associated
with the MidCon acquisition (see Note 6 to the accompanying
consolidated financial statements).  The increase in net expense
associated with "Minority Interests" in 1999, relative to 1998,
was principally due to the dividend requirements associated with
the $175 million of Capital Trust Securities issued in April 1998
(see Note 6 to the accompanying consolidated financial
statements).  The decrease in "Other, Net" from 1998 to 1999 was
principally due to the fact that 1998 results included an $8.5
million gain from the sale of the Company's Kansas natural gas
distribution properties (see Note 3(B) to the accompanying
consolidated financial statements).

<TABLE>
<CAPTION>
                                          Three Months Ended March 31
                                    ---------------------------------------
                                             (Dollars In Millions)
                                                                   Increase
Income Taxes                            1999           1998       (Decrease)
                                       -----          -----       ----------
   <S>                                <C>              <C>           <C>
   Provision                          $  4.6           $ 13.2        $ (8.6)
                                      ======           ======        ======
   Effective Tax Rate                   39.0%            37.1%          1.9%
                                      ======           ======        ======
</TABLE>

The $8.6 million net decrease in income tax expense from 1998 to
1999 reflected a decrease of approximately $8.9 million
attributable to a decrease in 1999 pre-tax income and an increase
of approximately $0.3 million attributable to an increase in the
1999 effective tax rate.  This increased 1999 effective tax rate
was principally due to an increase in 1999 effective state tax
provisions attributable to the addition of the results of
operations of MidCon.

<PAGE> 18                                                            Form 10-Q

Liquidity and Capital Resources

The following table illustrates the sources of the Company's
invested capital.  The balances at December 31, 1998, reflect the
incremental capital associated with the acquisition of MidCon,
including the post-acquisition refinancings completed in 1998
(see Notes 3(A) and 6 to the accompanying consolidated financial
statements).

<TABLE>
<CAPTION>
                                       March 31                          December 31
                              --------------------------   ---------------------------------------
                                                     (Dollars in Thousands)
                                  1999         1998            1998          1997          1996
<S>                           <C>          <C>             <C>             <C>           <C> 
Long-Term Debt                $3,300,017   $ 2,894,864     $ 3,300,025     $   553,816   $   423,676
Common Equity                  1,235,305     1,249,018       1,216,821         606,132       519,794
Preferred Stock                    7,000         7,000           7,000           7,000         7,000
Capital Trust Securities         275,000       100,000         275,000         100,000             -
                              ----------   -----------     -----------     -----------   -----------
  Capitalization               4,817,322     4,250,882       4,798,846       1,266,948       950,470
Short-Term Debt                  629,403     1,798,901 (1)   1,702,013 (1)     359,951       156,271
                              ----------   -----------     -----------     -----------   -----------
  Invested Capital            $5,446,725   $ 6,049,783     $ 6,500,859     $ 1,626,899   $ 1,106,741
                              ==========   ===========     ===========     ===========   ===========
                                                                                       
Capitalization:                                                                        
  Long-Term Debt                   68.5%         68.1%           68.8%           43.7%         44.6%
  Common Equity                    25.6%         29.4%           25.4%           47.8%         54.7%
  Preferred Stock                   0.2%          0.2%            0.1%            0.6%          0.7%
  Capital Trust Securities          5.7%          2.3%            5.7%            7.9%            -
                                                                                       
Invested Capital:                                                                      
  Total Debt                       72.1%         77.6%           76.9%           56.2%         52.4%
  Equity, Including Capital                                                            
   Trust Securities                27.9%         22.4%           23.1%           43.8%         47.6%

(1) Includes the $1,394,846 Substitute Note assumed in
    conjunction with the acquisition of MidCon, which was repaid in
    January 1999.
</TABLE>

The following discussion of cash flows should be read in
conjunction with the accompanying Consolidated Statements of Cash
Flows and related supplemental disclosures.

Net Cash Flows From Operating Activities

"Net Cash Flows From Operating Activities" decreased from $91.0
million in the first quarter of 1998 to $38.2 million in the
corresponding period of 1999, a decrease of $52.8 million or 58.0
percent.  This decrease was principally attributable to the net
impact of (i) a  decrease in 1999 earnings before non-cash
charges and credits, (ii) the fact that 1998 results included
$27.5 million of proceeds from the buyout of certain contractual
gas purchase obligations, (iii) an increase in cash used in 1999
to make interest payments, reflecting the increased average debt
balance outstanding and (iv) increased 1999 cash from changes in
gas in underground storage.

Net Cash Flows From Investing Activities

The net cash inflow from investing activities in the first
quarter of 1999 consisted principally of (i) $1.1 billion of
proceeds from the sale of  U.S. government securities, which
proceeds were used, together with additional short-term
borrowings, to repay the Substitute Note (see "Net Cash Flows
From Financing Activities" following) and (ii) $49.0 million of
capital expenditures and acquisitions.  The net cash outflow from
investing activities in the first quarter of 1998 consisted
principally of (i) $2.1 billion in cash paid to Occidental for
the purchase of MidCon, (ii) the purchase of $0.9 billion of U.S.
government securities as collateral for the Substitute Note, also
in conjunction with the acquisition of MidCon and (iii) capital
expenditures and other acquisitions of $90.3 million.

<PAGE> 19                                                            Form 10-Q

Net Cash Flows From Financing Activities

"Net Cash Flows From Financing Activities" was a net inflow of
$3.0 billion in the first quarter of 1998 and a net outflow of
$1.1 billion in the first quarter of 1999.  The net cash outflow
in 1999 was principally attributable to the January 4, 1999
repayment of the Substitute Note (see Notes 3(A) and 6 to the
accompanying consolidated financial statements).  The note was
repaid using the proceeds of approximately $1.1 billion from the
sale of U.S. government securities which had been held as
collateral, with the balance of the funds provided by an increase
in short-term borrowings.  In addition, first quarter 1999 cash
flows include the payment of $14.0 million of common and
preferred dividends.

The net cash inflow of $3.0 billion in the first quarter of 1998
was principally the result of financing activities in conjunction
with the purchase of MidCon (see Notes 3(A) and 6 to the
accompanying consolidated financial statements).  In March 1998,
K N issued 12.5 million shares (18.75 million shares after
adjustment for the December 1998 three-for-two stock split) of
common stock in an underwritten public offering, receiving net
proceeds of approximately $624.6 million.  Also in March 1998,
K N issued $2.35 billion principal amount of debt securities of
varying maturities and interest rates in an underwritten public
offering, receiving net proceeds of approximately $2.34 billion.
The net proceeds from these two offerings were used to refinance
borrowings under the MidCon acquisition financing arrangements
and to purchase U.S. government securities to collateralize a
portion of the Substitute Note.  In addition, 1998 results
include the payment of $12.6 million of common and preferred
dividends and $13.3 million of minority interest contributions.

The Company's principal sources of short-term liquidity are its
$1 billion revolving bank facilities.  At March 31, 1999, the
Company had $622.2 million of commercial paper issued and
outstanding (which is backed by the bank facilities).  As
described in the Company's 1998 report on Form 10-K, the
Company's bank facilities and certain of its operating lease
arrangements contain covenants related to the Company's ratio of
debt to total capitalization, consolidated net worth and debt
ratings.

Regulation

On January 23, 1998, K N Interstate Gas Transmission Co. ("KNI"),
a wholly owned subsidiary of K N Energy, Inc., filed a general 
rate case with the Federal Energy Regulatory Commission 
("FERC") requesting a $30.2 million increase in annual
revenues.  As a result of the FERC action, KNI was allowed to
place its rates into effect on August 1, 1998, subject to refund,
and  provisions for refund have been recorded based on its
expectation of ultimate resolution.  By a subsequent order, the
FERC required KNI to remove costs associated with the Pony
Express project and to refund the associated dollars.  The refund
of approximately $11 million will be made during the third
quarter of 1999.  KNI has filed for rehearing of the FERC's
order.  A hearing on its proposed rates is currently anticipated
to commence in December, 1999.

On December 29, 1998, Rocky Mountain Natural Gas Company
("RMNG"), a wholly owned subsidiary of K N Energy, Inc., received
a "show cause" order from the Colorado Public Utilities
Commission (the "Commission").  The Commission has concluded that
there is reason to believe that RMNG's rates may be excessive and
may require further investigation.  RMNG has entered into a
Stipulation and Agreement with the Staff of the Commission and
the Office of Consumer Counsel providing for an annual revenue
reduction of approximately $0.9 million.  The Stipulation and
Agreement is awaiting Commission approval.

<PAGE> 20                                                            Form 10-Q

Readiness for Year 2000

The following is a discussion of the Year 2000 problem and its
potential impact on the Company.  The Securities and Exchange
Commission ("SEC") has issued specific guidelines for public
companies regarding their disclosure of the Year 2000 problem.
The guidelines require more detailed disclosure of each company's
analysis of and approach to the Year 2000 problem.  As a result,
the Company is providing the following disclosure; however, the
length and detail contained in this disclosure, relative to the
other disclosures contained herein, is not an indication of the
Company's view of the relative risk of the Year 2000 problem to
the Company.

Some computers and programs, and some devices containing computer
chips ("embedded chips") store or process dates containing the
Year 2000 as "00."  This can result in inaccurate date-related
calculations.  It is expected that once the Year 2000 arrives,
computers, computer programs and devices with embedded chips that
have not been modified to correct this problem will not function
normally.  The Company relies on a number of automated systems to
conduct its operations and to transact its business, as is common
among large diversified energy companies.  In addition, certain
of the Company's pipelines and processing equipment and related
systems contain electric controls or other devices containing
embedded chips.  These controls may also be adversely affected by
this problem.

In 1997, the Audit Committee of the Company's Board of Directors
(the "Audit Committee") established a Year 2000 project to
address the Year 2000 problem.  In that year, the Company
established a Year 2000 Executive Steering Committee (the "Year
2000 Committee") and a Year 2000 Project Management Office (the
"Year 2000 Project Management Office").  The Year 2000 project is
an ongoing effort monitored by the Audit Committee.

The Audit Committee has adopted a Year 2000 Plan (the "Plan") and
will oversee its implementation by receiving periodic reports
from the Year 2000 Committee and directly from management.  The
Audit Committee is prepared to require management to make
additional efforts, including amending the Plan as necessary, to
fulfill the Audit Committee's goal of taking reasonable steps to
minimize injury to people, damage to property, disruption to the
Company's delivery of products and services, supporting systems
and business operations, and other risks associated with the Year
2000 problem.

The Year 2000 Committee is charged with directing the
implementation of the Plan in accordance with resolutions of the
Audit Committee and under the direction of the Company's
designated senior executives.  The Year 2000 Committee oversees
the Year 2000 Project Management Office, headed by the Year 2000
Project Coordinator.  The Year 2000 Committee keeps the Audit
Committee informed of the Company's progress in implementing the
Plan and of significant updates that are made to the Plan.  The
Year 2000 Committee communicates the Audit Committee's directives
concerning the Plan to management and executives, and oversees
the implementation of those directives.

The Year 2000 Project Management Office works closely with the
Company's Readiness Teams comprised of members of the Company's
operating units.  The teams have been organized to further
implement the Plan throughout the Company.  The Project
Management Office, among other things, promotes exchange of
information about Year 2000 problems and solutions, assists in
disseminating information about the Company's policies governing
communications concerning Year 2000 issues and serves as a
conduit between the various Readiness Teams and the Year 2000
Committee.

<PAGE> 21                                                            Form 10-Q

The aim of the Plan is to take reasonable steps to prevent the
Company's mission critical functions from being impaired due to
the Year 2000 problem.  "Mission critical" describes those
systems, devices, functions and external entities that are of
material importance to maintaining the Company's capacity to
deliver and account for products and services without
interruption, and to maintain the Company's supporting business
operations with no material disruption or diminution in quality.

Each of the Company's operating units is in various stages of
implementing the Plan to address the Year 2000 problem.  These
efforts include:

     an assessment of potential problems;
     an inventory of systems and areas which may need to be
       corrected;
     remediation and implementation, with priority given to mission
       critical items;
     the testing of such systems and devices; and
     developing contingency plans in case the Company cannot correct
       the problem in time, or in the event certain facets of the Year
       2000 problem go undetected or do not manifest themselves until
       after January 1, 2000.

Specifically, the Company is in the process of correcting
programmable code, replacing non-Year 2000-ready embedded chips,
installing Year 2000-ready releases of certain vendor-supplied
computer systems and, in some cases, replacing existing systems
with new internally or externally developed software in advance
of December 31, 1999.

The Company has completed an inventory of affected items in the
non-information technology area and is assessing the results.
The Company has begun testing and currently has found very few
items that are likely to suffer adverse effects from the Year
2000 problem.  The Company expects testing and remediation of
mission critical items to be substantially completed by mid-1999.

For the Company's Plan to be successful, the Company must rely
for some purposes on outside contractors.  There is a risk that
those contractors will not complete their work prior to the Year
2000.  The Company is developing alternative ways to conduct its
business if such deadlines are not met.  However, any alternative
may involve additional expense and may not be implemented in time
to avoid the Year 2000 problem.  Ultimately, these alternatives
may not be successful.

The Company also relies on suppliers, business partners and other
external entities which may or may not be addressing their own
problems associated with the Year 2000 problem.  The Company has
sent out questionnaires to external entities to determine what
steps they have taken to correct any Year 2000 problems they may
have.  The Company has no control over such external entities'
efforts, so the Company has developed contingency plans in case
such external entities do not complete their efforts before the
Year 2000.

The Company estimates that the direct costs the Company has
incurred or will incur in 1998, 1999 and 2000 associated with
assessing, inventorying, remediating and testing internally
developed computer applications, hardware and equipment,
including embedded chip systems and third-party developed
software, to be between $5 million and $7 million.  In addition,
as part of the integration of the Company's systems with the
systems of MidCon, the Company has begun modifying certain of its
computer systems for the combined company or purchasing computer
systems from third parties.  These computer systems will address
the Year 2000 problem and are expected to be operational prior to
December 31, 1999.  The costs for these computer systems are
expected to be between $23 million and $25 million, the majority
of which will be capitalized.

<PAGE> 22                                                            Form 10-Q

The SEC's guidelines also require the Company to address the most
reasonably likely worst case scenarios resulting from the Year
2000 problem.  As a result of the Year 2000 problem, the Company
may be faced with: failure of electrical, gas and similar
services and supplies from utilities, disruption of
telecommunications facilities, interruptions in the nation's
transportation systems and failure of a substantial number of the
Company's mission critical hardware and software systems.  In
addition, the Company's key suppliers or customers may experience
their own Year 2000 problems in a way that materially adversely
affects the Company's ability to do business without interruption
or disruption.  As a result of the cumulative impact of these
events, the Company's business may be materially adversely
affected.  The adverse impact of these events occurring can not
be quantified at this time.

The Company is in the process of developing contingency plans to
address issues associated with the reasonably likely worst case
scenarios.  The Company expects to have such contingency plans
substantially completed by the end of June 1999.  The Company
will then refine and update its contingency plans for the
remainder of 1999.

The Company does not believe that the direct costs associated
with the Year 2000 problem will be material to its business,
financial position or results of operations.

Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk

There have been no material changes in market risk exposures that
would affect the quantitative and qualitative disclosures
presented as of December 31, 1998, in the "Risk Management"
section of Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 25 of the Company's
1998 Annual Report on Form 10-K.

<PAGE> 23                                                            Form 10-Q

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

On July 26, 1996, the Company and RMNG, along with over 70 other
natural gas companies, were served by Jack J. Grynberg, acting on
behalf of the Government of the United States, with a Civil False
Claims Act lawsuit alleging mismeasurement of the heating content
and volume of natural gas resulting in underpayment of royalties
to the federal government.  The Company and the other named
companies filed a motion to dismiss the lawsuit on grounds of
improper joinder and lack of jurisdiction.  The motion was
granted in 1997, but the court gave Mr. Grynberg leave to refile
this action in a court with proper jurisdiction.  Mr. Grynberg
appealed the dismissal of the action based on improper joinder,
and the D.C. Court of Appeals affirmed the joinder decision in
October 1998.  Mr. Grynberg has filed a new case, modified
somewhat from his original action, in Federal District Court,
District of Colorado. The Department of Justice decided to not
intervene in these cases in support of Grynberg's complaint.  The
Company has not yet been served in this action.  The Company
believes it has a meritorious position in this matter, and does
not expect this lawsuit to have a material adverse effect on the
Company's business, financial position or results of operations.

On April 16, 1999, Consumer Services Association, Inc. and
Midwest United Energy, L.L.C. filed suit in the U.S. District
Court for the District of Colorado, claiming that the Company has
violated Section 1 and Section 2 of the Sherman Act federal
antitrust laws.  These allegations assert various claims
regarding  the operation of the Company's "Choice" programs in
Nebraska.  Service of process has only recently occurred and no
further activity has taken place in the lawsuit.  The Company's
potential liability and the amount of such damages, if any, are
subject to dispute; however, the Company believes it has a
meritorious position in this matter and does not expect this
lawsuit to have a material adverse effect on the Company's
business, financial position or results of operations.

The Company believes it has meritorious defenses to all lawsuits
and legal proceedings in which it is a defendant and will
vigorously defend against them.  Based on its evaluation of the
above matters, and after consideration of reserves established,
the Company believes that the resolution of such matters will not
have a material adverse effect on the Company's business,
financial position or results of operations.

Item 6.  Exhibits

(A) Exhibits

          3 - By-Laws of the Company, as amended on March 9, 1999
          27- Financial Data Schedule
          
(B) Reports on Form 8-K

Current Report on Form 8-K dated February 23, 1999, to report the
entering into an Agreement and Plan of Merger with Sempra Energy,
whereby K N will be merged with and into Cardinal Acquisition
Corp., a wholly owned subsidiary of Sempra Energy.


<PAGE> 24                                                            Form 10-Q

                            SIGNATURE
                                
                                
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.


                                        K N ENERGY, INC.
                                        (Registrant)


May 17, 1999                  /s/ Clyde E. McKenzie
                              -------------------------
                              Clyde E. McKenzie
                              Vice President and Chief Financial Officer
                              (On Behalf of the Registrant and as
                              Principal Financial and Accounting Officer)