FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549


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

           For the quarterly period ended         March 31, 1997
                                            -------------------------
                                   OR

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

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

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


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


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


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


    Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                             Yes               No   X    
                                 -------          -------

    Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

                 Class                   Outstanding at April 30, 1997
      --------------------------         -----------------------------
      Common stock, no par value                    2,394,780
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                         KENAN TRANSPORT COMPANY

                                 INDEX


                                                                     Page
                                                                     ----
Part I - Financial Information

    Consolidated Balance Sheets as of March 31, 1997 and
    December 31, 1996                                                  1

    Consolidated Statements of Income for the three months 
    ended March 31, 1997 and 1996                                      2

    Consolidated Statements of Cash Flows for the three 
    months ended March 31, 1997 and 1996                               3

    Notes to Consolidated Financial Statements                         4

    Management's Discussion and Analysis of Financial 
    Condition and Results of Operations                                5



Part II - Other Information

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

    Signatures                                                         7

    Index to Exhibits                                                  8


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                     PART I - FINANCIAL INFORMATION

                         KENAN TRANSPORT COMPANY
                       CONSOLIDATED BALANCE SHEETS
                         (Dollars in thousands)



                                                March 31,    December 31,
                                                  1997          1996
ASSETS                                        (Unaudited)      (Note 1)
-------------------------------------------------------------------------
Current Assets
   Cash and cash equivalents                      $12,838        $11,181 
   Accounts receivable                              4,265          4,988 
   Operating supplies and parts                       551            413 
   Prepayments       
     Tires                                            880          1,033 
     Insurance, licenses and other                  1,223            698 
     Deferred income taxes                          1,563          1,741 
                                                 ------------------------
        Total Current Assets                       21,320         20,054 

Operating Property
   Land                                             3,531          3,531 
   Buildings and leasehold improvements             9,643          9,279 
   Revenue equipment                               55,437         56,015 
   Other equipment                                  3,996          3,923 
                                                 ------------------------
                                                   72,607         72,748 
   Accumulated depreciation                       (29,926)       (28,615)
                                                 ------------------------
        Net Operating Property                     42,681         44,133 

Other Assets                                        1,139            857 
                                                 ------------------------
                                                  $65,140        $65,044 
                                                 ========================

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------
Current Liabilities
   Accounts payable                               $ 1,063        $ 1,257 
   Wages and employee benefits payable              4,440          5,136 
   Claims payable                                   3,180          3,409 
   Other accrued expenses                             116            166 
   Income taxes payable                               564             52  
                                                ------------------------
        Total Current Liabilities                   9,363         10,020 

Deferred Income Taxes                               9,020          9,181 

Stockholders' Equity
   Common stock; no par; 20,000,000 shares 
     authorized; 2,394,780 and 2,389,497 
     shares issued and outstanding                  3,096          2,996 
   Retained earnings                               43,661         42,847 
                                                 ------------------------
                                                   46,757         45,843 
                                                 ------------------------
                                                  $65,140        $65,044 
                                                 ========================

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


                                  Page 1<PAGE>
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                         KENAN TRANSPORT COMPANY
                   CONSOLIDATED STATEMENTS OF INCOME
             For the Three Months Ended March 31, 1997 and 1996
       (Unaudited and dollars in thousands except per share amounts)



                                                   1997           1996   
------------------------------------------------------------------------
Operating Revenue                                 $17,746        $17,587 

Operating Expenses  
   Wages and employee benefits                      8,950          8,926 
   Fuel, parts, tires and other                     3,499          3,298 
   Taxes and licenses                               1,094          1,124 
   Claims and insurance                               644            601 
   Communications, utilities and rent                 363            429 
   Depreciation                                     1,655          1,561 
                                                 ------------------------
                                                   16,205         15,939 
                                                 ------------------------
Operating Income                                    1,541          1,648 
   Interest income and other expenses, net             46             70 
                                                 ------------------------
Income before Provision for Income Taxes            1,587          1,718 
   Provision for income taxes                         611            678 
                                                 ------------------------
Net Income                                        $   976        $ 1,040 
                                                 ========================



Weighted average number of shares
   outstanding (in thousands)                       2,390          2,389 



Earnings per share                                $   .41        $   .44 

Operating ratio                                      91.3%          90.6%

Dividends paid per share                          $ .0675        $ .0650 



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


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                         KENAN TRANSPORT COMPANY
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Three Months Ended March 31, 1997 and 1996
                   (Unaudited and dollars in thousands)



                                                    1997          1996  
------------------------------------------------------------------------
Cash Provided by (Applied to):
   Operations                                     $ 2,022        $ 2,782 
   Purchases of operating property, net              (203)        (2,508)
   Sales of short-term investments, net               --           6,076
   Dividends                                         (162)          (155)
                                                 ------------------------
Net Increase in Cash and Cash Equivalents           1,657          6,195 
Beginning Cash and Cash Equivalents                11,181          3,220 
                                                 ------------------------

Ending Cash and Cash Equivalents                  $12,838        $ 9,415 
                                                 ========================


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


                                  Page 3<PAGE>
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                         KENAN TRANSPORT COMPANY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)


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

    The balance sheet at December 31, 1996 has been taken from the
audited financial statements at that date.

    The results of operations for the three months ended March 31, 1997
and 1996 are not necessarily indicative of the results to be expected for
the full year.


2.   Effects of Recent Accounting Pronouncements
------------------------------------------------
    The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", in
February 1997. The Company is required to adopt SFAS No. 128 for the year
ended December 31, 1997. This statement establishes standards for
computing and presenting earnings per share (EPS) and makes them
comparable to international EPS standards. The statement requires dual
presentation of basic and diluted EPS on the face of the income statement
and requires a reconciliation of the numerator and denominator of the
basic EPS calculation to the numerator and denominator of the diluted EPS
calculation. Basic and diluted EPS will not be materially different from
previously reported EPS.




                                  Page 4<PAGE>
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                         KENAN TRANSPORT COMPANY

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


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

Results of Operations
-------------------------------
    Revenue for the first quarter of 1997 was $17,746,000 compared to
$17,587,000 for the first quarter of 1996. Net income was $976,000
compared to $1,040,000 in 1996. Earnings per share were $.41 compared to
$.44 during the same period last year. Miles operated decreased 1% from
the first quarter of 1996. 

    First quarter revenue and earnings were impacted by unusually warm
winter weather which was significantly warmer than the first quarter last
year. Demand for heating fuels that the Company transports was affected
negatively by the warmer weather.

    Operating expenses for the first quarter of 1997 increased $266,000
or 2% over 1996 levels, due primarily to higher fuel prices and
depreciation expense. Although fuel prices for the quarter were higher,
we were able to obtain substantial relief from fuel surcharges that are
included in revenue. The increase in depreciation expense was largely due
to new terminal facilities and computer equipment placed in service
during the past twelve months. Our operating ratio for the quarter was
91.3% compared to 90.6% in 1996. 


Liquidity and Capital Resources
-------------------------------
    The Company's liquidity and capital resources are adequate. At March
31, 1997, working capital was $11,957,000 compared to $10,034,000 at
December 31, 1996, and the current ratios were 2.28 and 2.00,
respectively. Cash and cash equivalents totaled $12,838,000 at March 31,
1997, and the Company had no debt outstanding under its $7,000,000 bank
line of credit.

    The Company has second quarter cash commitments of approximately
$5,000,000 for tractor replacements. Management believes that cash flows
from operations and the Company's bank line of credit will be sufficient
to fund these planned expenditures as well as 1997 working capital
requirements, expansion opportunities and other corporate needs.

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


                                  Page 5<PAGE>
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                         PART II - OTHER INFORMATION


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

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

  (b)     No reports on Form 8-K have been filed during the quarter ended
          March 31, 1997.


                                  Page 6<PAGE>
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                                SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


                                         KENAN TRANSPORT COMPANY
                                              (Registrant)



DATE:      May 9, 1997                       BY:/s/  William L. Boone
                                             ----------------------------
                                             Vice President-Finance and
                                             Chief Financial Officer    


                                  Page 7<PAGE>
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                            INDEX TO EXHIBITS


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


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

      27        Financial Data Schedule for the quarter ending March 31,
                1997.


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