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     September 30, 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    X          No        
                                 -------          -------


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

                Class                    Outstanding at October 31, 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 September 30, 1997 and
      December 31, 1996                                             1

    Consolidated Statements of Income for the three 
      and nine months ended September 30, 1997 and 1996             2

    Consolidated Statements of Cash Flows for the 
      nine months ended September 30, 1997 and 1996                 3

    Notes to Consolidated Financial Statements                      4

    Management's Discussion and Analysis of Financial 
      Condition and Results of Operations                         5-6



Part II - Other Information

    Item 6 - Exhibits and Reports on Form 8-K                       7

    Signatures                                                      8
    
    Index to Exhibits                                               9

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                       PART I - FINANCIAL INFORMATION

                          KENAN TRANSPORT COMPANY
                        CONSOLIDATED BALANCE SHEETS
                           (Dollars in thousands)

<TABLE>
<CAPTION>
                                         September 30,   December 31,
                                              1997          1996    
ASSETS                                    (Unaudited)      (Note 1)  
---------------------------------------------------------------------
<S>                                           <C>            <C>
Current Assets
   Cash and cash equivalents                  $12,098        $11,181 
   Short-term investments                         500            -  
   Accounts receivable                          4,684          4,988 
   Operating supplies and parts                   514            413 
   Prepayments -      
    Tires                                       1,018          1,033 
    Insurance, licenses and other               1,022            698 
   Deferred income taxes                        1,856          1,741 
---------------------------------------------------------------------
       Total Current Assets                    21,692         20,054 

Operating Property
   Land                                         3,464          3,531 
   Buildings and leasehold improvements        10,670          9,279 
   Revenue equipment                           57,892         56,015 
   Other equipment                              4,204          3,923 
---------------------------------------------------------------------
                                               76,230         72,748 
   Accumulated depreciation                   (31,172)       (28,615)
---------------------------------------------------------------------
       Net Operating Property                  45,058         44,133 

Other Assets                                    1,151            857 
---------------------------------------------------------------------
                                              $67,901        $65,044 
=====================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------------------------------
Current Liabilities
   Accounts payable                           $ 1,258        $ 1,257 
   Wages and employee benefits payable          5,678          5,136 
   Claims payable                               3,595          3,409 
   Other accrued expenses                         185            166 
   Income taxes payable                           --              52 
---------------------------------------------------------------------
       Total Current Liabilities               10,716         10,020 

Deferred Income Taxes                           9,119          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                           44,970         42,847 
---------------------------------------------------------------------
                                               48,066         45,843 
---------------------------------------------------------------------
                                              $67,901        $65,044 
=====================================================================

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

</TABLE>
                                   Page 1<PAGE>
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                                   KENAN TRANSPORT COMPANY
                              CONSOLIDATED STATEMENTS OF INCOME
                (Unaudited and dollars in thousands except per share amounts)

<TABLE>
                                             Three Months Ended      Nine Months Ended
                                                 September 30,         September 30,    
                                            --------------------   ---------------------
                                              1997        1996        1997        1996  
----------------------------------------------------------------------------------------
<S>                                         <C>         <C>         <C>         <C>     
Operating Revenue                           $17,450     $16,638     $52,429     $50,862 

Operating Expenses  
   Wages and employee benefits                8,857       8,408      26,613      25,940 
   Fuel, parts, tires and other               3,459       3,190      10,435       9,610 
   Taxes and licenses                         1,063       1,020       3,219       3,190 
   Claims and insurance                         689         699       1,996       1,896 
   Communications, utilities and rent           354         346       1,065       1,132 
   Depreciation                               1,714       1,704       5,016       4,954 
----------------------------------------------------------------------------------------
                                             16,136      15,367      48,344      46,722 
----------------------------------------------------------------------------------------
Operating Income                              1,314       1,271       4,085       4,140 
   Interest income and other expenses, net       51         (97)        168           6 
----------------------------------------------------------------------------------------
Income before Provision for Income Taxes      1,365       1,174       4,253       4,146 
   Provision for income taxes                   531         458       1,633       1,627 
----------------------------------------------------------------------------------------
Net Income                                  $   834     $   716     $ 2,620     $ 2,519 
========================================================================================


Weighted average number of shares
   outstanding (in thousands)                 2,395       2,389       2,393       2,389 

Earnings per share                          $   .35     $   .30     $  1.10     $  1.05 

Operating ratio                               92.5%       92.4%       92.2%       91.9% 

Dividends paid per share                    $ .0700     $ .0675     $ .2050     $ .1975 



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

</TABLE>
                                          Page 2
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                      KENAN TRANSPORT COMPANY
                CONSOLIDATED STATEMENTS OF CASH FLOWS
          For the Nine Months Ended September 30, 1997 and 1996
                (Unaudited and dollars in thousands)

<TABLE>
<CAPTION>
                                                1997           1996  
----------------------------------------------------------------------
<S>                                           <C>            <C>
Cash Provided by (Applied to):
   Operations                                 $ 7,855        $ 8,438 
   Purchases of operating property, net        (5,941)        (8,526)
   Short-term investments, net                   (500)         6,886 
   Dividends                                     (497)          (478)
----------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents         917          6,320 
Beginning Cash and Cash Equivalents            11,181          3,220 
----------------------------------------------------------------------
Ending Cash and Cash Equivalents              $12,098        $ 9,540 
======================================================================



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



                                 Page 3
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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 and nine months ended
    September 30, 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.



3.  Subsequent Events

          On October 31, 1997, the Company entered into agreements to
    purchase a majority of the transportation assets of Transport South,
    Inc. of Smyrna, Georgia in a cash transaction and to provide contract
    transportation services to its affiliate, RaceTrac Petroleum, Inc.
    Transport South transports petroleum products in the southeastern
    United States and Texas. The equipment to be purchased includes 170
    tractors and 210 tank trailers. It is anticipated that annual
    revenues of Kenan Transport Company will increase by approximately
    $27,000,000 as a result of the transaction, which is expected to be
    closed in November.



                                    Page 4
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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 third quarter of 1997 was $17,450,000, an increase of
$812,000 and 5% over the third quarter of 1996. Net income was $834,000,
an increase of $118,000 and 16% over the third quarter of 1996. Earnings
per share were $.35 compared to $.30 in 1996. Miles operated increased 8%
in comparison to the third quarter of 1996.
  
    Revenue for the first nine months of 1997 was $52,429,000, an
increase of $1,567,000 and 3% over the first nine months of 1996. Net
income was $2,620,000, an increase of $101,000 and 4% over 1996. Earnings
per share were $1.10 compared to $1.05 in 1996. Miles operated increased
3% in comparison to 1996 levels.
    
    Operating expenses for the third quarter of 1997 totaled $16,136,000,
an increase of $769,000 and 5% over the third quarter of 1996. Operating
expenses increased due to the increase in the volume of business and
increased driver pay to our more experienced drivers. The operating ratio
for the quarter was 92.5% compared to 92.4% in 1996.
    
    Operating expenses for the first nine months of 1997 totaled
$48,344,000, an increase of $1,622,000 and 3% over the first nine months
of 1996. The operating ratio increased to 92.2% from 91.9% in 1996.

    On October 31, 1997, the Company entered into agreements to purchase
a majority of the transportation assets of Transport South, Inc. of
Smyrna, Georgia in a cash transaction and to provide contract
transportation services to its affiliate, RaceTrac Petroleum, Inc.
Transport South transports petroleum products in the southeastern United
States and Texas. The equipment to be purchased includes 170 tractors and
210 tank trailers. It is anticipated that annual revenues of Kenan
Transport Company will increase by approximately $27,000,000 as a result
of the transaction, which is expected to be closed in November.


Liquidity and Capital Resources
-------------------------------
    The Company's liquidity and capital resources are adequate. At
September 30, 1997, working capital was $10,976,000 compared to
$10,034,000 at December 31, 1996, and the current ratios were 2.02 and
2.00, respectively. Cash and cash equivalents totaled $12,098,000 at
September 30, 1997, and the Company had no debt outstanding under its
$7,000,000 bank line of credit. Management believes that cash flows from
operations and access to capital from the Company's bank will be
sufficient to fund 1997 capital expenditures, 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 



                                  Page 5<PAGE>
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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 6<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
          September 30, 1997.


                                    Page 7
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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:     November 14, 1997             BY:   /s/  William L. Boone
                                              ----------------------------
                                              Vice President-Finance and
                                              Chief Financial Officer


                                   Page 8
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                             INDEX TO EXHIBITS


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


 Exhibit
  Number                         Description
---------       ---------------------------------------------------------- 
   2             Asset Purchase Agreement

  27             Financial Data Schedule for the 3rd Quarter 10-Q.





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