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    June 30, 2000
                                              ----------------------
                                       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 July 31, 2000
          --------------------------- --------------------------------
         Common stock, no par value                  2,421,562


<PAGE>


                             KENAN TRANSPORT COMPANY
                                      INDEX

                                                                         Page

                                                                        ------
Part I - Financial Information

        Consolidated Balance Sheets as of June 30,
           2000 and December 31, 1999                                         1

        Consolidated Statements of Income for the
           three and six months ended June 30, 2000 and 1999                  2

        Condensed Consolidated Statements of Cash Flows for
           the six months ended June 30, 2000 and 1999                        3

        Notes to Condensed Consolidated Financial Statements              4 - 6

        Management's Discussion and Analysis of Financial
           Condition and Results of Operations                            7 - 9


Part II - Other Information

        Item 4 - Submission of Matters to a Vote of
           Security Holders                                                  10

        Item 5 - Exhibits and Reports on Form 8-K                            10

        Signatures                                                           11

        Index to Exhibits                                                    12


<PAGE>

                         PART I - FINANCIAL INFORMATION

                                   KENAN TRANSPORT COMPANY
                                CONSOLIDATED BALANCE SHEETS
                                   (Dollars in thousands)

                                                 June 30,          December 31,
                                                   2000                1999
ASSETS                                          (Unaudited)          (Note 1)
-------------------------------------------------------------------------------
Current Assets

    Cash and cash equivalents                    $     4,243        $    7,466
    Accounts receivable, net                          10,152            10,966
    Operating supplies and parts                         680               676
    Prepayments:
        Tires                                          2,543             2,257
        Insurance, licenses and other                  1,677             1,484
        Deferred income taxes                          1,511             1,861
                                               --------------------------------
           Total Current Assets                       20,806            24,710
                                               --------------------------------
Operating Property

    Land                                               3,464             3,464
    Buildings and leasehold improvements              11,551            11,496
    Revenue equipment                                 87,059            79,888
    Other equipment                                    7,343             6,859
                                               --------------------------------
                                                     109,417           101,707
    Accumulated depreciation                         (42,392)          (40,625)
                                               --------------------------------
        Net Operating Property                        67,025            61,082
                                               --------------------------------

Intangible Assets, net                                10,080            10,368
                                               --------------------------------
Other Assets                                           2,442             2,131
                                               --------------------------------
                                                 $   100,353        $   98,291
                                               ===============================

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------------------------------------------
Current Liabilities

    Capital lease obligations                    $       846        $      867
    Accounts payable                                   5,689             4,214
    Wages and employee benefits payable                8,500             9,008
    Claims payable                                     3,495             4,156
                                               --------------------------------
        Total Current Liabilities                     18,530            18,245
                                               --------------------------------

Long-Term Debt                                         6,000             6,000
                                               --------------------------------
Capital Lease Obligations                              2,801             3,261
                                               --------------------------------
Deferred Income Taxes                                 12,570            12,434
                                               --------------------------------
Shareholders' Equity

    Common stock; no par; 20,000,000 shares
        authorized; 2,421,562 shares issued
        and outstanding                                4,400             4,400
    Retained earnings                                 56,665            54,678
    Deferred incentive compensation                     (613)             (727)
                                               --------------------------------
        Total Shareholders' Equity                    60,452            58,351
                                               --------------------------------
                                                 $   100,353        $   98,291
                                               ================================

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

                                     Page 1


<PAGE>



                                KENAN TRANSPORT COMPANY
                           CONSOLIDATED STATEMENTS OF INCOME
               (Unaudited and in thousands except per share amounts)

<TABLE>
<CAPTION>

                                                 Three Months Ended             Six Months Ended
                                                      June 30,                      June 30,
                                                --------------------          --------------------
                                               2000              1999          2000            1999
------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>            <C>            <C>

Operating Revenue                           $    39,327       $   34,016    $   77,606     $    67,977

Operating Expenses

    Wages and employee benefits                  20,075           17,776        40,183          35,326
    Fuel and other operating expenses             8,866            7,136        17,813          14,191
    Depreciation and amortization                 3,086            2,678         5,957           5,347
    Taxes and licenses                            1,934            1,835         3,928           3,709
    Claims and insurance                          1,469            1,404         2,840           2,782
    Equipment rents                               1,462            1,359         2,844           2,764
------------------------------------------------------------------------------------------------------
                                                 36,892           32,188        73,565          64,119
------------------------------------------------------------------------------------------------------
Operating Income                                  2,435            1,828         4,041           3,858

Interest Expense                                   (162)            (241)         (333)           (442)
Interest Income and Other Expenses, Net              59              171           184             481
------------------------------------------------------------------------------------------------------
Income before Provision for Income Taxes          2,332            1,758         3,892           3,897
Provision for Income Taxes                          920              692         1,536           1,526
------------------------------------------------------------------------------------------------------
Net Income                                  $     1,412       $    1,066    $    2,356      $    2,371

======================================================================================================


Basic and diluted earnings per share        $       .58       $      .44    $      .97      $      .98

Operating ratio                                   93.8%            94.6%         94.8%            94.3%

Dividends paid per share                    $     .0750       $    .0725    $    .1500      $    .1450

</TABLE>

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

                                                               Page 2


<PAGE>


                                KENAN TRANSPORT COMPANY
                   CONDENSED CONSOLIDATED  STATEMENTS  OF CASH  FLOWS
                     For the Six Months Ended June 30, 2000 and 1999
                         (Unaudited and dollars in thousands)


                                                        2000            1999
------------------------------------------------------------------------------

Cash Provided by (Used in):
    Operations                                     $     9,239       $   8,084
    Purchases of operating property, net               (11,612)         (2,288)
    Debt and capital lease obligations, net               (481)           (777)
    Dividends                                             (369)           (357)
------------------------------------------------------------------------------
Net (Decrease) Increase in Cash
    and Cash Equivalents                                (3,223)          4,662
Beginning Cash and Cash Equivalents                      7,466           8,023
------------------------------------------------------------------------------
Ending Cash and Cash Equivalents                   $     4,243       $  12,685
==============================================================================



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

                                     Page 3


<PAGE>


                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.      Basis of Presentation
------------------------------
        The  accompanying   condensed   consolidated  financial  statements  are
prepared in conformity with generally accepted accounting principles and include
the  accounts  of Kenan  Transport  Company  and its  wholly  owned  subsidiary,
Petro-Chemical   Transport,  Inc.  All  significant  intercompany  accounts  and
transactions have been eliminated.

        The condensed  consolidated  financial  statements  included herein have
been  prepared  by Kenan  Transport  Company  (the  "Company"),  without  audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The  Consolidated  Balance Sheet as of December 31, 1999 has been taken from the
audited  financial  statements  as of that date.  Certain  information  and note
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and  regulations,  although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
condensed  consolidated  financial statements should be read in conjunction with
the  consolidated  financial  statements  and  notes  thereto  included  in  the
Company's  latest  annual  report on Form 10-K for the year ended  December  31,
1999.

        The condensed  consolidated financial statements included herein reflect
all adjustments  (none of which are other than normal  recurring  accruals) that
are, in the opinion of  management,  necessary  for a fair  presentation  of the
information included.

        The results of  operations  for the three and six months  ended June 30,
2000 and 1999 are not  necessarily  indicative of the results to be expected for
the full year.

2.       Recent Accounting Pronouncements
-----------------------------------------
        In June 1998, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments  and Hedging  Activities,"  which  requires  that upon  adoption all
derivative instruments be recognized in the balance sheet at fair value and that
changes in such fair values be recognized in earnings  unless  specific  hedging
criteria are met.  Changes in the values of derivatives  that meet these hedging
criteria will ultimately  offset related  earnings  effects of the hedged items;
effects of certain  changes in fair value are  recorded  in other  comprehensive
income pending recognition in earnings.  SFAS No. 137 subsequently  deferred the
effective  date of SFAS No. 133 for the Company to January 1, 2001.  The Company
will adopt SFAS No. 133 at that time.  The  application  of Statement 133 is not
expected to have a  significant  impact on the Company's  financial  position or
results of operations.

                                     Page 4


<PAGE>

                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

3.      Earnings Per Share
--------------------------
        A reconciliation of net income and the weighted average number of shares
outstanding  used in  calculating  basic  and  diluted  earnings  per  share  is
presented in the table below (in thousands, except per share amounts):

                                   Three Months Ended         Six Months Ended
                                         June 30                   June 30
                                  -------------------        -----------------
                                     2000          1999        2000        1999
                                -----------------------------------------------

        Net Income                $   1,412    $   1,066   $  2,356    $  2,371
                                 ==============================================

        Weighted Average Shares:

          Basic shares                2,422        2,422      2,422       2,422

          Dilutive effect of
            stock options                --           --         --          --
                                 ----------------------------------------------
          Diluted shares              2,422        2,422      2,422       2,422
                                 ==============================================
        Basic and diluted
          earnings per share      $    0.58    $    0.44   $    .97    $    .98

During the quarters ended June 30, 2000 and June 30, 1999, the weighted  average
stock  options   outstanding   of  395,567  and  328,900,   respectively,   were
antidilutive  and not  included  in the  calculation  of diluted  net income per
share.  For the  six-month  periods  ended June 30, 2000 and June 30, 1999,  the
weighted average stock options outstanding of 362,233 and 328,900, respectively,
were  antidilutive and not included in the calculation of diluted net income per
share.

4.      Long-Term Debt
----------------------
On February 13, 1998, the Company negotiated an unsecured  $20,000,000  Reducing
Line-of-Credit  Facility (the facility) with a bank.  Funds  available under the
line reduce  $500,000  per quarter  beginning  July 1, 1998 to a minimum line of
$10,000,000.  The facility  matures in March 2003.  Interest on borrowings under
the facility is variable based on LIBOR plus an applicable  margin.  The Company
had $6,000,000  outstanding under the facility at June 30, 2000 and December 31,
1999.  As of June 30,  2000,  the  Company  had an  unused  line of  $10,000,000
available  under the  facility.  The credit  agreement  contains  the  following
financial  covenants:  (1) Funds from  Operations to Funded Debt Ratio,  and (2)
Funded Debt to  Capitalization  Ratio.  The Company was in  compliance  with the
covenants as of June 30, 2000 and December 31, 1999.

The Company has entered  into a simple  interest  rate swap  agreement to manage
costs and risks  associated with changing  interest rates.  Under the agreement,
the Company exchanges at specific intervals the difference between the fixed and
variable rate interest  amounts  calculated by reference to the notional  amount
with any  differential  recorded  as an  adjustment  to  interest  expense.  The
agreement  effectively changes a portion of the Company's interest rate exposure
on the  line-of-credit  from a floating  rate to a fixed rate. At June 30, 2000,
the  notional  principal  amount  of  this  agreement  totaled  $5,000,000.  The
agreement matures in March 2003. The average variable rates during the first six
months of 2000 and 1999 were 6.1% and 5.0%,  respectively,  compared  to a fixed
rate of 6.5% for these periods.

The Company does not hold or issue derivative instruments for trading purposes.

                                     Page 5
<PAGE>

                             KENAN TRANSPORT COMPANY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

5.      Nonqualified Stock Options
----------------------------------

On May 1, 2000, 100,000 nonqualified stock options were awarded to key employees
under the Company's 1998 Long-Term  Incentive Plan. The options have an exercise
price of  $21.00,  which is equal to the fair  value at the date of  grant.  The
options have a ten-year term with vesting periods of one to three years from the
date of grant.

The Company  applies  Accounting  Principles  Board Opinion No. 25 (APB No.25),
"Accounting for stock Issued to Employees," in accounting for stock option
awards.  In  accordance  with APB No. 25, the  Company  properly  did not record
compensation expense for the 100,000 stock options granted on May 1, 2000.















                                     Page 6


<PAGE>


                             KENAN TRANSPORT COMPANY
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

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

Results of Operations

        Revenue  for the second  quarter  of 2000 was  $39,327,000  compared  to
$34,016,000  for the second  quarter of 1999, a 16% increase  from year to year.
Net income was  $1,412,000  compared to $1,066,000  in 1999.  Earnings per share
were $.58 compared to $.44 during the periods for each year.

       Miles operated increased 10% from the second quarter of 1999.
The increase in miles operated was due to adding new customers and growth within
the existing,  targeted customer base. Price adjustments to offset the increased
costs of higher  fuel  prices and driver pay and  benefits  contributed  to a 5%
increase in revenue for the second quarter of 2000 compared to 1999.

        Operating  expenses for the second quarter of 2000 increased  $4,704,000
(15%) over the second  quarter of 1999.  The increase in operating  expenses was
primarily due to increases in miles operated,  higher fuel prices, and increases
in driver pay rates and benefit costs. Fuel expense increased  $1,390,000 due to
70% higher fuel prices and the  increase in miles  operated.  Wages and employee
benefits  increased  $2,299,000  due to the  increase  in volume and the Company
increasing  driver  wages and  providing  higher  benefits  in order to continue
attracting  and retaining  professional  drivers.  The Company's  second quarter
operating ratio improved to 93.8% from 94.6% in 1999 due to continued growth.

        Interest expense was $162,000 for the second quarter of 2000 compared to
$241,000 in 1999.  The average  balances of  outstanding  debt and capital lease
obligations  during  the  second  quarter  of 2000 and 1999  were  approximately
$9,800,000 and $14,800,000, respectively.

        Revenue  for the first six months of 2000 was  $77,606,000  compared  to
$67,977,000  for  1999,  a 14%  increase  from  year to  year.  Net  income  was
$2,356,000 compared to $2,371,000 in 1999. Earnings per share were $.97 compared
to $.98 during the same period last year.

        Miles operated increased 9% from the first six months of 1999.
Operating  expenses  for the first six months of 2000  totaled  $73,565,000,  an
increase of $9,446,000 (15%) due primarily to the higher volume and increases in
wages and employee benefits and fuel costs.  Wages and employee benefits expense
increased 14% and  $4,857,000,  and fuel expense  increased 108% and $3,135,000.
Price adjustments to offset the increased costs of higher fuel prices and driver
pay and  benefits  contributed  to a 5%  increase  in revenue  for the first six
months of 2000 compared to 1999.

                                     Page 7


<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF Financial
                       CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Liquidity and Capital Resources

        At June 30,  2000,  cash  and cash  equivalents  totaled  $4,243,000,  a
decrease of  $3,223,000  from  December 31, 1999.  The decrease in cash and cash
equivalents  was primarily  due to the purchase of tractors and trailers  during
the first six  months  under a  replacement  program  designed  to  maintain  an
efficient,  highly  productive  fleet.  The additional  cash used to pay for the
tractors and trailers was generated  from cash provided by  operations.  Working
capital of $2,276,000 was down  $4,189,000 from year-end 1999. At June 30, 2000,
the  Company  had  outstanding  debt  and  capital  lease  obligations  totaling
$9,647,000 compared to $10,128,000 at December 31, 1999.

        The  Company  has  third  quarter  cash   commitments  of  approximately
$4,000,000 for tractor and trailer  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  2000  working   capital
requirements, expansion opportunities and other corporate needs.

Inflation

        The Company's condensed  consolidated  financial statements are prepared
based on historical dollars and are not intended to show the impact of inflation
or  changing  prices.  With the  exception  of  driver  wages  and fuel  prices,
inflation  and changing  prices have not had a material  effect on the Company's
financial position and results of operations.

Environmental Matters

        The Company stores fuel in underground and aboveground  tanks for use in
certain of its  terminal  facilities.  The Company has a program to maintain its
fuel storage facilities in compliance with environmental regulations.  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.

Year 2000

        The Company has not  experienced  any disruption in its operations as of
the date of this report as a result of Year 2000.

        The total cost  incurred  during 1999 related to the Year 2000 issue was
approximately  $250,000. The Company did not incur in the first half of 2000 nor
does it expect to subsequently  incur significant  expenditures  related to Year
2000.

                                     Page 8


<PAGE>



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF Financial
                       CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Market Risk

        Market risk is the potential loss arising from adverse changes in market
rates and prices,  such as currency  exchange  rates and other  relevant  market
rates or price  changes.  In the  ordinary  course of  business,  the Company is
exposed to interest rate risks and the Company regularly  evaluates its exposure
to this risk.  The Company  does not hold or issue  derivative  instruments  for
trading purposes.

        The estimated fair value of the interest rate swap agreement  represents
the  estimated  receipts  or  payments  that  would  be  made to  terminate  the
agreement.  At June 30,  2000,  the Company  would have  received  approximately
$110,000 to terminate the agreement. Assuming a 100 basis point reduction in the
LIBOR  interest rate curve,  the fair value of the interest rate swap  agreement
would have decreased by approximately $121,000.

Forward-Looking Statements

        Statements  in this document  that are not  historical  facts are hereby
identified  as  forward-looking  statements  for the  purpose of the safe harbor
provided by Section 21E of the  Securities  Exchange Act of 1934 and Section 27A
of  the  Securities  Act  of  1933.  The  Company  cautions  readers  that  such
forward-looking statements,  including without limitation, those relating to the
Company's  future business  prospects,  revenues,  working  capital,  liquidity,
capital needs,  interest costs and income,  wherever they occur in this document
or in other statements attributable to the Company, are estimates reflecting the
best judgement of the Company's senior  management and involve a number of risks
and  uncertainties  that could cause actual  results to differ  materially  from
those suggested by the forward-looking statements.

        The Company's  future  operating  results may be affected by a number of
factors that include but are not limited to: general economic conditions such as
inflation  and  interest  rates;  competitive  conditions  within the  Company's
markets,  including  adverse  changes in demand for trucking  services,  pricing
pressure, availability of drivers and fuel prices; the Company's ability to sell
its services  profitably,  increase market share and manage expenses relative to
revenue  growth;  changes in governmental  regulation;  changes in the trucking,
transportation  and  logistic  industries;  and changes in the  Company's  labor
relations or other unforeseeable circumstances.

                                     Page 9

<PAGE>


                           PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders
------- ---------------------------------------------------
               The  Registrant's  Annual Meeting of Shareholders was held on May
               1, 2000 for the  purpose  of  electing a board of  directors  and
               conducting  such other  business  that  properly  came before the
               meeting.  Proxies  for the  meeting  were  solicited  pursuant to
               Section  14(a) of the  Securities  Act of 1934 and  there  was no
               solicitation  in opposition to  management's  solicitations.  The
               proposals voted upon and the results of voting were as follows:

               Nominees  for  directors  as listed in the proxy  statement  were
               elected for a one-year term with the following vote:

                                              Votes            Votes
                                               For           Withheld
                                           ----------       ----------
               Thomas S. Kenan, III           2,066,275            3,620
               Owen G. Kenan                  2,066,275            3,620
               Lee P. Shaffer                 2,066,275            3,620
               William C. Friday              2,066,175            3,720
               William O. McCoy               2,062,275            7,620
               Paul J. Rizzo                  2,065,975            3,920
               Braxton Schell                 2,066,175            3,720
               Kenneth G. Younger             2,062,475            7,420


Item 5. Exhibits and Reports on Form 8-K
------- ---------------------------------
  (a)   The Exhibits to this Form 10-Q are listed on the accompanying index to
Exhibits.

  (b) The following reports on Form 8-K have been filed during the quarter ended
June 30, 2000:

               None.


                                     Page 10


<PAGE>

                                   SIGNATURES

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

                                         KENAN TRANSPORT COMPANY
                                              (Registrant)



DATE:      August 10, 2000                   BY:/s/  William L. Boone
                                             ----------------------------
                                             Vice President-Finance and
                                             Chief Financial Officer

                                     Page 11
<PAGE>


                                INDEX TO EXHIBITS

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

Exhibit

Number                            Description

--------       -------------------------------------------------------
27             Financial Data Schedule for the six months ending
               June 30, 2000.

                                     Page 12