PENNSYLVANIA ENTERPRISES, INC.

                             TABLE OF CONTENTS


                                                                         PAGE

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

            Consolidated Statements of Income for the three and six
              months ended June 30, 1997 and 1996 . . . . . . . . . . .    2

            Consolidated Balance Sheets as of June 30, 1997,
              and December 31, 1996 . . . . . . . . . . . . . . . . . .    3

            Consolidated Statements of Cash Flows for
              the six months ended June 30, 1997 and 1996 . . . . . . .    5

            Notes to Consolidated Financial Statements. . . . . . . . .    6

  Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations. . . . . . . . . . . .    9


PART II. OTHER INFORMATION

  Item 4.  Submission of Matters to a Vote of Security Holders. . . . .   17

  Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .   18




























                                      -1-
<PAGE>

                               PART I.  FINANCIAL INFORMATION

                       PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                              Consolidated Statements of Income
<TABLE>
<CAPTION>
                                                 Three Months Ended        Six Months Ended
                                                      June 30,                 June 30,      
                                                  1997        1996        1997        1996   
                                                           (Thousands of Dollars)
<S>                                            <C>         <C>         <C>         <C>
OPERATING REVENUES:
  Regulated                                    $   33,210  $   25,457  $  113,149  $   94,872
  Nonregulated -
    Gas sales and services                          5,991       2,140      13,366       4,876
    Pipeline construction and services              2,627       2,641       4,780       4,539
    Other                                              36          19          60          57
      Total operating revenues                     41,864      30,257     131,355     104,344

OPERATING EXPENSES:
  Cost of gas                                      22,726      13,786      79,434      55,707
  Operation and maintenance                        10,976      10,835      21,308      21,039
  Depreciation                                      2,379       2,088       4,678       4,106
  Income taxes                                         83        (992)      5,682       4,913
  Taxes other than income taxes                     3,338       2,929       7,664       6,745
    Total other operating expenses                 39,502      28,646     118,766      92,510

OPERATING INCOME                                    2,362       1,611      12,589      11,834

OTHER INCOME, NET                                     339         829         728       1,620

INCOME BEFORE INTEREST CHARGES                      2,701       2,440      13,317      13,454

INTEREST CHARGES:
  Interest on long-term debt                        2,099       2,323       4,141       5,191
  Other interest                                      166         239         401         457
  Allowance for borrowed funds used during
    construction                                      (33)        (50)        (99)        (96)
      Total interest charges                        2,232       2,512       4,443       5,552

INCOME (LOSS) FROM CONTINUING OPERATIONS              469         (72)      8,874       7,902

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS            -         (21)          -        (386)

INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
  STOCK DIVIDENDS                                     469         (93)      8,874       7,516

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS                318         383         671       1,020

NET INCOME (LOSS)                              $      151  $     (476) $    8,203  $    6,496

COMMON STOCK (Note 3):
  Earnings (Loss) Per Share of Common Stock:
    Continuing operations                      $      .02  $     (.05) $      .85  $      .64
    Discontinued operations                             -           -           -        (.04)
    Income (loss) before discount (premium) on
      repurchase/redemption of subsidiary's
      preferred stock                                 .02        (.05)        .85         .60
    Discount (premium) on repurchase/redemption
      of subsidiary's preferred stock                 .08        (.13)        .09        (.12)
    Earnings (loss) per share of common stock  $      .10  $     (.18) $      .94  $      .48

  Weighted average number of shares outstanding 9,643,642  10,088,268   9,629,606  10,825,160

  Cash dividends per share                     $      .30  $     .275  $      .59  $      .55





The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>
                                                -2-




<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS


                                                     June 30,     December 31,
                                                      1997            1996    
                                                      (Thousands of Dollars)
<TABLE>
<CAPTION>

ASSETS
<S>                                               <C>             <C>
UTILITY PLANT:
  At original cost                                $     336,020   $    319,205
  Accumulated depreciation                              (85,080)       (79,783)
                                                        250,940        239,422

OTHER PROPERTY AND INVESTMENTS:
  Nonutility property and equipment                      13,443         12,502
  Accumulated depreciation                               (4,631)        (4,674)
  Other                                                   1,920          1,720
                                                         10,732          9,548

CURRENT ASSETS:
  Cash and cash equivalents                                 764          1,126
  Accounts receivable -
    Customers                                            22,770         22,464
    Others                                                1,208            565
    Reserve for uncollectible accounts                   (1,827)        (1,233)
  Unbilled revenues                                       3,081         12,966
  Materials and supplies, at average cost                 3,187          2,865
  Gas held by suppliers, at average cost                 12,024         20,265
  Natural gas transition costs collectible                1,633          2,525
  Deferred cost of gas and supplier refunds, net          4,983         19,316
  Prepaid expenses and other                              2,055          1,438
                                                         49,878         82,297

DEFERRED CHARGES:
  Regulatory assets -
    Deferred taxes collectible                           30,460         29,771
    Other                                                 4,654          4,274
  Unamortized debt expense                                1,338          1,498
  Other                                                     505              -
                                                         36,957         35,543







TOTAL ASSETS                                      $     348,507   $    366,810




The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>

                                      -3-
<PAGE>

                     PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                               CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                     June 30,      December 31,
                                                      1997            1996     
                                                      (Thousands of Dollars)

CAPITALIZATION AND LIABILITIES
<S>                                               <C>             <C>
CAPITALIZATION:
  Common shareholders' investment                 $     122,205   $     117,651
  Preferred stock of PGE -
    Not subject to mandatory redemption, net             15,877          18,851
    Subject to mandatory redemption                         640             739
  Long-term debt                                        103,266          75,000
                                                        241,988         212,241
CURRENT LIABILITIES:
  Current portion of long-term debt                       9,087          38,721
  Preferred stock subject to repurchase or
    mandatory redemption                                     80             115
  Notes payable                                           3,500          10,000
  Accounts payable                                       17,019          19,945
  Accrued general business and realty taxes               1,428           2,350
  Accrued income taxes                                    5,479          14,525
  Accrued interest                                        1,294           1,243
  Accrued natural gas transition costs                    1,184           2,095
  Other                                                   3,648           3,904
                                                         42,719          92,898

DEFERRED CREDITS:
  Deferred income taxes                                  50,673          49,270
  Unamortized investment tax credits                      4,682           4,767
  Operating reserves                                      2,892           3,086
  Other                                                   5,553           4,548
                                                         63,800          61,671






COMMITMENTS AND CONTINGENCIES (Note 5)






TOTAL CAPITALIZATION AND LIABILITIES              $     348,507   $     366,810




The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                      -4-
<PAGE>

                   PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                           Six Months Ended    
                                                               June 30,        
                                                          1997         1996    
                                                        (Thousands of Dollars)
<S>                                                     <C>          <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Income from continuing operations, net of
    subsidiary's preferred stock dividends              $   8,203    $   6,882
  Effects of noncash charges to income -
    Depreciation                                            4,711        4,145
    Deferred income taxes, net                                389          173
    Provisions for self insurance                             406          591
    Other, net                                                895          993
  Changes in working capital, exclusive of cash 
   and current portion of long-term debt -
    Receivables and unbilled revenues                      10,220       14,915
    Gas held by suppliers                                   8,241        3,030
    Accounts payable                                       (5,802)      (2,770)
    Deferred cost of gas and supplier refunds, net         14,602       (9,680)
    Other current assets and liabilities, net             (11,307)       3,148
  Other operating items, net                                 (924)      (4,024)
      Net cash provided by continuing operations           29,634       17,403
  Net cash used by discontinued operations                      -      (24,175)
      Net cash provided by (used for) operating
        activities                                         29,634       (6,772)

CASH FLOW FROM INVESTING ACTIVITIES:
  Additions to utility plant                              (13,923)      (8,823)
  Proceeds from sale of discontinued operations                 -      261,752
  Acquisition of regulated business                        (2,009)           -
  Other, net                                               (1,108)          69
      Net cash provided by (used for) investing 
        activities                                        (17,040)     252,998

CASH FLOW FROM FINANCING ACTIVITIES:
  Issuance of common stock                                  1,211          148
  Repurchase of common stock                                    -      (37,999)
  Repurchase/redemption of subsidiary's preferred stock    (3,108)     (14,968)
  Dividends on common stock                                (5,682)      (5,890)
  Repayment of long-term debt                                (446)     (53,262)
  Net decrease in bank borrowings                          (5,753)     (60,123)
  Other, net                                                  822       (1,286)
      Net cash used for financing activities              (12,956)    (173,380)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (362)      72,846
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD            1,126          629
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $     764    $  73,475

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amount capitalized)                $   3,963    $   6,414 
    Income taxes                                        $  14,674    $  22,533 

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                      -5-
<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of the Business.  Pennsylvania Enterprises, Inc. ("the Company") is a
holding company which, through  its  subsidiaries,  is engaged in both regulated
and nonregulated activities.   The  Company's regulated activities are conducted
by its principal subsidiary, PG Energy Inc. ("PGE"), a regulated public utility,
and PGE's wholly-owned subsidiary,  Honesdale  Gas Company ("Honesdale"), also a
regulated public utility which was acquired  on February 14, 1997.  Together PGE
and Honesdale distribute natural  gas  to  a  twelve-county area in northeastern
Pennsylvania, a territory that includes  129  municipalities, in addition to the
cities of Scranton, Wilkes-Barre and Williamsport.  

    The  Company,  through  its  other  subsidiaries,  PG  Energy  Services Inc.
("Energy Services"),  formerly  known  as  Pennsylvania  Energy Resources, Inc.,
Theta Land Corporation  and  Keystone  Pipeline  Services,  Inc. ("Keystone"), a
wholly-owned subsidiary of Energy  Services,  is engaged in various nonregulated
activities, including the marketing  and  sale  of  natural  gas and propane and
other energy-related services,  as  well  as  the  construction, maintenance and
rehabilitation of natural gas  distribution  pipelines.   Additionally, Theta is
presently initiating several residential  and commercial real estate development
projects on Company-owned land for  which  construction is currently expected to
commence in late 1997.  

    Principles of Consolidation.   The consolidated financial statements include
the  accounts  of  the  Company  and  its  subsidiaries,  PGE,  Energy  Services
(including Keystone) and  Theta.    The  consolidated  financial statements also
include  the  accounts  of  Honesdale  beginning  February  14,  1997,  the date
Honesdale was acquired by  PGE.    All  material intercompany accounts have been
eliminated in consolidation.

    Both PGE and Honesdale are  subject  to the jurisdiction of the Pennsylvania
Public Utility  Commission  ("PPUC")  for  rate  and  accounting  purposes.  The
financial statements  of  PGE  and  Honesdale  that  are  incorporated  in these
consolidated  financial  statements  have   been  prepared  in  accordance  with
generally accepted accounting principles,  including the provisions of Financial
Accounting Standards Board ("FASB") Statement 71, "Accounting for the Effects of
Certain Types of Regulation," which give  recognition to the rate and accounting
practices of regulatory agencies such as the PPUC.

    Interim Financial Statements.  The interim consolidated financial statements
included herein have been prepared by the Company without audit, pursuant to the
rules and  regulations  of  the  Securities  and  Exchange  Commission.  Certain
information and footnote 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.

    The results for the interim periods are  not indicative of the results to be
expected for the year, primarily  due  to  the  effect of seasonal variations in
weather on the sale of natural gas.   However, in the opinion of management, all
adjustments, consisting of only normal  recurring accruals, necessary to present



                                      -6-
<PAGE>

fairly  the  results  for  the  interim  periods  have  been  reflected  in  the
consolidated financial statements.    It  is  suggested  that these consolidated
financial statements be  read  in  conjunction  with  the consolidated financial
statements and the notes thereto included  in the Company's latest annual report
on Form 10-K.

    Use of Accounting Estimates.    The  preparation  of financial statements in
conformity with generally accepted  accounting principles requires management to
make estimates and assumptions that  affect  the  reported amounts of assets and
liabilities and disclosure of contingent  assets  and liabilities at the date of
the financial statements  and  the  reported  amounts  of  revenues and expenses
during the reporting period.  These estimates involve judgments with respect to,
among other things, various future economic factors and regulatory matters which
are difficult to predict and are beyond  the control of the Company.  Therefore,
actual amounts could differ from these estimates.

(2)  RATE MATTERS

    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers, which totaled $2.4 million through June 30, 1997,
was deferred, without carrying charges, until July, 1997.  

    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs  of  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs. 

    In accordance with  these  procedures  PGE  has  been  permitted to make the
following changes since January 1, 1996,  to  the gas costs contained in its gas
tariff rates:
[CAPTION]
                                    Change in
             Effective             Rate per MCF        Calculated Increase
                Date              From     To           in Annual Revenue 
           [S]                    [C]     [C]              [C]
           March 1, 1997          $4.18   $4.49            $ 8,300,000
           December 1, 1996        3.01    4.18             32,400,000
           September 1, 1996       2.88    3.01              3,600,000
           June 1, 1996            2.75    2.88              3,400,000

    The changes in gas rates on account of purchased gas costs have no effect on
earnings since the change in revenue is  offset by a corresponding change in the
cost of gas.

(3)  COMMON STOCK

    Common Stock Split.  Pursuant to  resolutions adopted by the Company's Board
of Directors on February 19, 1997, a Certificate of Amendment was filed with the
Secretary of State  of  the  Commonwealth  of  Pennsylvania  on  March 20, 1997,
amending the Company's Restated  Articles  of  Incorporation to (i) increase the



                                      -7-
<PAGE>

number of authorized shares of  its  common  stock  from 15 million shares to 30
million shares and (ii) reduce the  stated  value of such shares from $10.00 per
share to $5.00 per share.  This amendment had no effect on the Company's capital
accounts.  On February 19, 1997, the Board of Directors also declared a two-for-
one split of the Company's common stock effective March 20, 1997.  The number of
shares of common stock reflected  in these consolidated financial statements and
the earnings per share of common stock  for both the three and six-month periods
ended June 30, 1996,  were  restated  to  give  retroactive effect to this stock
split.

(4)  ACCOUNTING CHANGES

    Earnings Per Share.  In  February,  1997,  FASB Statement 128, "Earnings per
Share"  was  issued.    The  provisions  of  this  statement,  which  supersedes
Accounting Principles Board Opinion No.  15,  "Earnings per Share", simplify the
computation of earnings per share.    FASB  Statement  128 will be effective for
financial statements for both interim  and  annual periods ending after December
15, 1997.  The Company does  not  expect  the  adoption of FASB Statement 128 to
have a material effect on its calculation of earnings per share.

    Reporting  Comprehensive  Income.    In   June,  1997,  FASB  Statement  130
"Reporting Comprehensive Income", was issued.  The provisions of this statement,
which  are  effective  for  fiscal  years  beginning  after  December  15, 1997,
establish standards for reporting  and  display  of comprehensive income and its
components in financial statements.   The reporting provisions of FASB Statement
130, which the Company will adopt in  1998,  are not expected to have a material
impact on the reported results of operations of the Company.

    Disclosures about Segments of  an  Enterprise  and  Related Information.  In
June, 1997, FASB Statement 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued.   The  provisions  of this statement, which are
effective  for  fiscal  years  beginning  after  December  15,  1997,  establish
standards for reporting information about operating segments in annual financial
statements and selected segment information  in interim financial reports issued
to shareholders.  The Company expects  to adopt the reporting provisions of FASB
Statement 131 in 1998.

(5)  COMMITMENTS AND CONTINGENCIES

    Environmental Matters.   PGE,  like  many  gas  distribution companies, once
utilized manufactured gas plants in connection with providing gas service to its
customers.  None of these plants  has  been in operation since 1960, and several
of the plant sites are no  longer  owned  by PGE.  Pursuant to the Comprehensive
Environmental Response, Compensation and  Liability  Act of 1980 ("CERCLA"), PGE
filed notices with the United States Environmental Protection Agency (the "EPA")
with respect to the former plant sites.  None of the sites is or was formerly on
the proposed or final  National  Priorities  List.    The EPA has conducted site
inspections and made preliminary assessments of each site and has concluded that
no  further  remedial  action  is  planned.    While  this  conclusion  does not
constitute a legal prohibition against further regulatory action under CERCLA or
other applicable  federal  or  state  law,  the  Company  does  not believe that
additional costs, if any, related to these manufactured gas plant sites would be
material to its financial position  or results of operations since environmental
remediation costs generally are recoverable through rates over a period of time.





                                      -8-
<PAGE>

                PENNSYLVANIA ENTERPRISES, INC. AND SUBSIDIARIES

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

STOCK SPLIT

    On February 19, 1997,  the  Board  of Directors of Pennsylvania Enterprises,
Inc. (the "Company") declared a two-for-one  split of the Company's Common Stock
effective March 20, 1997, as more fully  discussed in Note 3 of the accompanying
Notes to Consolidated Financial Statements.  All per share data included in this
Form 10-Q has been restated to reflect this two-for-one split.

RESULTS OF CONTINUING OPERATIONS

    The following table expresses  certain  items  in the Company's consolidated
statements of income as percentages of  operating revenues for each of the three
and six-month periods ended June 30, 1997 and 1996:
<TABLE>
<CAPTION>
                                                  Percentage of Operating Revenues  
                                               Three Months Ended   Six Months Ended
                                                     June 30,           June 30,    
                                                1997        1996    1997       1996 
<S>                                             <C>         <C>     <C>        <C>
OPERATING REVENUES:
  Regulated..................................    79.3%       84.1%   86.1%      90.9%
  Nonregulated -
    Gas sales and services...................    14.3         7.1    10.2        4.7
    Pipeline construction and services.......     6.3         8.7     3.6        4.3
    Other....................................     0.1         0.1     0.1        0.1
      Total operating revenues...............   100.0       100.0   100.0      100.0

OPERATING EXPENSES:
  Cost of gas................................    54.3        45.6    60.5       53.4
  Operation and maintenance..................    26.2        35.8    16.2       20.2
  Depreciation...............................     5.7         6.9     3.6        3.9
  Income taxes...............................     0.2        (3.3)    4.3        4.7
  Taxes other than income taxes..............     8.0         9.7     5.8        6.4
    Total operating expenses.................    94.4        94.7    90.4       88.6

OPERATING INCOME.............................     5.6         5.3     9.6       11.4

OTHER INCOME, NET............................     0.8         2.7     0.5        1.5

INTEREST CHARGES (1).........................    (5.3)       (8.3)   (3.4)      (5.3)

INCOME (LOSS) FROM CONTINUING OPERATIONS.....     1.1        (0.3)    6.7        7.6

LOSS WITH RESPECT TO DISCONTINUED OPERATIONS.       -        (0.1)      -       (0.4)

INCOME (LOSS) BEFORE SUBSIDIARY'S PREFERRED
  STOCK DIVIDENDS............................     1.1        (0.4)    6.7        7.2

SUBSIDIARY'S PREFERRED STOCK DIVIDENDS (1)...    (0.7)       (1.2)   (0.5)      (1.0)

NET INCOME (LOSS) ...........................     0.4        (1.6)    6.2        6.2
</TABLE>
                    
(1)  None of  the  Company's  interest  expense  and  none  of  the subsidiary's
     preferred stock dividends was allocated to the discontinued operations.

                                      -9-
<PAGE>

o   Three Months Ended June 30, 1997,  Compared With Three Months Ended June 30,
    1996

    Operating Revenues.  Operating revenues increased $11.6 million (38.4%) from
$30.3 million for the quarter  ended  June  30,  1996,  to $41.9 million for the
quarter ended June 30,  1997,  largely  as  a  result  of a $7.8 million (30.5%)
increase in regulated operating revenues and a $3.9 million (180.0%) increase in
gas sales  and  services  by  PG  Energy  Services  Inc.  ("Energy  Services") a
nonregulated affiliate of  the  Company  formerly  known  as Pennsylvania Energy
Resources, Inc.  

    The $7.8 million (30.5%) increase in regulated operating revenues from $25.5
million for the quarter ended June  30,  1996,  to $33.2 million for the quarter
ended June 30, 1997, was primarily the result of a 186 million cubic feet (5.7%)
increase in sales to residential  and  commercial heating customers of PG Energy
Inc. ("PGE") that was  largely  attributable  to  cooler  weather.  There was an
increase of 92 (10.6%) heating  degree  days  from 872 (114.0% of normal) during
the second quarter of 1996 to  964  (126.0% of normal) during the second quarter
of 1997.  Also contributing to the increase were higher levels in PGE's gas cost
rate and the effect of the rate  increase granted PGE by the Pennsylvania Public
Utility Commission (the "PPUC") which became  effective on January 15, 1997 (see
"Rate Matters"), as well  as  the  operating  revenues  of Honesdale Gas Company
("Honesdale"), which was acquired by the  Company on February 14, 1997, totaling
$760,000.

    The $3.9 million increase in  nonregulated  gas sales and services from $2.1
million for the quarter ended  June  30,  1996,  to $6.0 million for the quarter
ended June 30, 1997,  was  primarily  the  result  of  a  1.1 million cubic feet
(255.8%) increase in sales of natural gas by Energy Services during the quarter.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, increased $10.9 million (37.9%) from $28.6 million for the second quarter
of 1996 to $39.5 million for  the  second  quarter  of 1997.  As a percentage of
operating revenues,  total  operating  expenses  decreased  slightly  from 94.7%
during the second quarter of 1996  to  94.4%  during the second quarter of 1997,
largely as a result of a proportionally greater increase in revenues.

    Cost of gas increased $8.9 million (64.8%) from $13.8 million for the second
quarter of 1996 to  $22.7  million  for  the  second  quarter of 1997, primarily
because of the aforementioned increase in sales by both PGE and Energy Services,
the higher levels in PGE's gas  cost  rate (see "-Rate Matters") and $527,000 of
gas costs related to Honesdale.

    Other than the cost of gas and income taxes, operating expenses increased by
$841,000 (5.3%) from $15.9  million  for  the  second  quarter  of 1996 to $16.7
million  for  the  second  quarter  of   1997.    This  increase  was  partially
attributable to a $409,000  (14.0%)  increase  in  taxes other than income taxes
resulting from a higher level  of  gross  receipts  tax because of the increased
sales by PGE and  the  sales  of  Honesdale.   Operation and maintenance expense
increased $141,000 (1.3%) largely  as  a  result  of increased payroll and other
costs attributable to the  expansion  of  the Company's nonregulated activities.
Also contributing  to  the  higher  operating  expenses  was  a $291,000 (13.9%)
increase in depreciation expense, primarily as  a result of additions to utility
plant.





                                     -10-
<PAGE>

    Income taxes for the three-month  period  ended  June 30, 1997, increased by
$1.1 million from a credit of $992,000 in  1996 to an expense of $83,000 in 1997
due to a higher level of income before income taxes (for this purpose, operating
income net of interest charges).

    Operating Income.  As a result  of  the above, operating income increased by
$751,000 (46.6%) from $1.6  million  for  the  three-month period ended June 30,
1996, to $2.4  million  for  the  three-month  period  ended  June 30, 1997, and
increased as a percentage of total operating revenues for such periods from 5.3%
in the three-month period ended June 30, 1996, to 5.6% in the three-month period
ended June 30, 1997.

    Other Income, Net.  Other  income,  net decreased $490,000 from $829,000 for
the three-month period ended  June  30,  1996,  to  $339,000 for the three-month
period ended June 30, 1997, largely  because the second quarter of 1996 included
income from the temporary investment of  certain proceeds from the sale of PGE's
regulated water utility operations in February, 1996.  

    Interest Charges.   Interest  charges  decreased  $280,000 (11.1%) from $2.5
million for the second quarter of 1996 to $2.2 million for the second quarter of
1997.  This decrease was largely attributable to the the Company's defeasance of
its 10.125% Senior Notes on September 30, 1996.

    Income (Loss) From Continuing Operations.  Income from continuing operations
increased $541,000 from a loss of  $72,000 for the three-month period ended June
30, 1996, to income of $469,000 for  the three-month period ended June 30, 1997.
This increase was largely the result of the matters discussed above, principally
the increase in operating revenues, the  effect of which was partially offset by
increased operating expenses.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased $65,000 (17.0%) from  $383,000  for  the three-month period ended June
30, 1996, to $318,000 for the  three-month period ended June 30, 1997, primarily
as a result of  the  repurchase  by  PGE  in  1996  of  134,359 shares of its 9%
cumulative preferred stock, 9,408 shares of its 5.75% cumulative preferred stock
and 20,330 shares of its  4.10%  cumulative  preferred stock, largely during the
second quarter of that year, as  well  as its repurchase of an additional 30,090
shares of the 4.10% cumulative preferred stock in 1997. 

    Net Income (Loss).  The increase  in  net  income of $627,000 from a loss of
$476,000 for the second quarter  of  1996  to  income of $151,000 for the second
quarter of 1997, as well as the  increase  in earnings per share of common stock
of $.28 from a loss of  $.18  per  share  for  the second quarter of 1996 (after
reflecting a  $.13  per  share  premium  on  redemption  of  preferred stock) to
earnings of $.10 per share for  the  second quarter of 1997 (after reflecting an
$.08 per share discount on the repurchase of preferred stock) were the result of
the higher  income  from  continuing  operations  and  the  reduced dividends on
subsidiary's preferred stock, as discussed above.  The $.13 per share charge for
the premium on the  repurchase  of  subsidiary's  preferred  stock in the second
quarter of 1996 acted to increase  the  loss  per  share of common stock for the
quarter ended June 30, 1996, to $.18  per  share.  The discount on redemption of
preferred stock in the second quarter of 1997 acted to increase the earnings per
share for the quarter by $.08 per share  to $.10 per share.  While discounts and
premiums on the repurchase of preferred stock are reflected in retained earnings
and are not a determinant of  net  income, the discounts and premiums associated
with repurchases must be taken  into  account in calculating the earnings (loss)
per share of common stock.


                                     -11-
<PAGE>

o   Six Months Ended June 30, 1997, Compared With Six Months Ended June 30, 1996

    Operating Revenues.  Operating revenues increased $27.0 million (25.9%) from
$104.3 million for the six months ended June 30, 1996, to $131.4 million for the
six months ended June 30, 1997, largely  as a result of an $18.3 million (19.3%)
increase in regulated operating revenues  and  an $8.5 million (174.1%) increase
in nonregulated gas sales and services by Energy Services.

    The $18.3 million  (19.3%)  increase  in  regulated  operating revenues from
$94.9 million for the six months ended  June 30, 1996, to $113.1 million for the
six months ended June 30,  1997,  was  primarily  the result of higher levels in
PGE's gas cost rate and the effect of  the rate increase granted PGE by the PPUC
which became effective on January 15, 1997  (see "Rate Matters").  The effect of
the increases in rates was partially  offset  by a 1.0 billion cubic feet (6.9%)
decrease in sales to PGE's residential  and commercial heating customers.  There
was a decrease of 238 (5.7%) heating  degree days from 4,192 (106.0 % of normal)
during the first six months of 1996 to 3,954 (100.0% of normal) during the first
six months of 1997.  Operating  revenues of Honesdale totaling $1.6 million from
its February 14, 1997, acquisition  date through June 30, 1997, also contributed
to the increased regulated operating revenues.

    The $8.5 million increase in  nonregulated  gas sales and services from $4.9
million for the six months ended  June  30,  1996,  to $13.4 million for the six
months ended June 30, 1997, was primarily the result of a 2.6 million cubic feet
(255.6%) increase in sales of natural gas by Energy Services during the period.

    Operating Expenses.  Operating  expenses,  including depreciation and income
taxes, increased $26.3 million  (28.4%)  from  $92.5  million  for the first six
months of 1996 to $118.8 million for the six months of 1997.  As a percentage of
operating revenues, total  operating  expenses  increased  from 88.6% during the
first six months of 1996 to 90.4%  during  the first six months of 1997, largely
as a result of an increase in the cost of gas.

    Cost of gas increased $23.7 million (42.6%) from $55.7 million for the first
six months of 1996 to $79.4 million  for the first six months of 1997, primarily
because of higher levels  in  PGE's  gas  cost  rate  (see "-Rate Matters"), the
aforementioned increase in sales by Energy  Services and the higher level of gas
costs that Energy Services incurred  as  a  result  of market prices in January,
1997.  Also contributing to the  increase  was $1.1 million of gas costs related
to Honesdale from its February 14, 1997, acquisition date through June 30, 1997.

    Other than the cost of gas and income taxes, operating expenses increased by
$1.8 million (5.5%) from $31.9 million for the first six months of 1996 to $33.6
million for  the  first  six  months  of  1997.    This  increase  was partially
attributable to a $919,000  (13.6%)  increase  in  taxes other than income taxes
resulting from a higher level  of  gross  receipts  tax because of the increased
sales by PGE and the sales  of  Honesdale  from its acquisition date.  Operation
and maintenance  expense  increased  $269,000  (1.3%)  largely  as  a  result of
increased payroll and other costs attributable to the expansion of the Company's
nonregulated activities.  Also contributing to the higher operating expenses was
a $572,000 (13.9%) increase in depreciation  expense, primarily as a result of a
$608,000 (15.7%) increase  in  depreciation  attributable  to additions to PGE's
utility plant.

    Income taxes increased $769,000 (15.7%)  from  $4.9 million in the first six
months of 1996 to  $5.7  million  in  the  first  six  months  of 1997 due to an
increase in income before income  taxes  (for this purpose, operating income net
of interest charges).

                                     -12-
<PAGE>

    Operating Income.  As a result  of  the above, operating income increased by
$755,000 (6.4%) from $11.8 million for the six-month period ended June 30, 1996,
to $12.6 million for the six-month  period ended June 30, 1997, and decreased as
a percentage of total operating revenues for such periods from 11.4% in the six-
month period ended June 30, 1996, to 9.6% in the six-month period ended June 30,
1997, largely as a result of the  proportionately higher ratio of cost of gas to
operating revenues.

    Other Income, Net.  Other  income,  net decreased $892,000 from $1.6 million
for the six-month period  ended  June  30,  1996,  to $728,000 for the six-month
period ended June  30,  1997,  largely  because  the  first  six  months of 1996
included income from the temporary investment  of certain proceeds from the sale
of PGE's regulated water utility operations in February, 1996.

    Interest Charges.  Interest charges decreased $1.1 million (20.0%) from $5.6
million for the first six months of  1996  to $4.4 million for the first quarter
of 1997.  This decrease was largely attributable to the the Company's defeasance
of its 10.125% Senior Notes on September 30, 1996.

    Income  From  Continuing  Operations.    Income  from  continuing operations
increased $972,000 (12.3%) from $7.9 million for the six-month period ended June
30, 1996, to $8.9 million for  the  six-month  period ended June 30, 1997.  This
increase was largely the result of  the matters discussed above, principally the
increase in operating revenues and decrease  in interest charges, the effects of
which were partially offset by increased operating expenses.

    Subsidiary's  Preferred  Stock  Dividends.    Dividends  on  preferred stock
decreased $349,000 (34.2%) from $1.0 million for the six-month period ended June
30, 1996, to $671,000 for the six-month period ended June 30, 1997, primarily as
a result of the repurchase by PGE in 1996 of 134,359 shares of its 9% cumulative
preferred stock, 9,408 shares of its 5.75% cumulative preferred stock and 20,330
shares of  its  4.10%  cumulative  preferred  stock,  largely  during the second
quarter of that year, as well  as  its repurchase of an additional 30,090 shares
of the 4.10% cumulative preferred stock in 1997.

    Net Income.  The increase in  net  income  of $1.7 million from $6.5 million
for the first six months of  1996  to  $8.2  million for the first six months of
1997, as well as the increase in earnings per share of common stock of $.46 from
$.48 per share for the first  six  months  of  1996 (after reflecting a $.12 per
share premium on redemption of preferred stock)  to $.94 per share for the first
six months of 1997 (after reflecting a  $.09 per share discount on redemption of
preferred stock) were the result of the higher income from continuing operations
and the reduced dividends on  subsidiary's  preferred stock, as discussed above,
and the absence of  any  loss  with  respect  to  discontinued operations.  Also
contributing to the increase  in  earnings  per  share  of  common stock was the
reduction in the weighted average  number  of  shares outstanding as a result of
the repurchase of  shares,  largely  during  the  second  quarter  of 1996, with
proceeds from the sale of PGE's water utility operations in February, 1996.

RATE MATTERS

    Rate Increase.  By Order  adopted  December  19,  1996, the PPUC approved an
overall 5.3% increase in PGE's base  gas rates, designed to produce $7.5 million
of additional annual revenue, effective  January  15,  1997.  Under the terms of
the Order, the billing for  the  impact  of  the rate increase relative to PGE's
residential heating customers, which totaled $2.4 million through June 30, 1997,
was deferred, without carrying charges, until July, 1997.  


                                     -13-
<PAGE>

    Gas Cost Adjustments.   The  provisions  of  the Pennsylvania Public Utility
Code require that the tariffs  of  local  gas distribution companies ("LDCs") be
adjusted on an annual basis, and, in the  case of larger LDCs such as PGE, on an
interim basis when circumstances dictate,  to reflect changes in their purchased
gas costs.  The procedure  includes  a  process for the reconciliation of actual
gas costs incurred and actual revenues received and also provides for the refund
of  any  overcollections,  plus  interest  thereon,  or  the  recoupment  of any
undercollections of gas costs.  

    In accordance with these  procedures,  PGE  has  been  permitted to make the
following changes since January 1, 1996,  to  the gas costs contained in its gas
tariff rates:
[CAPTION]
                                    Change in
             Effective             Rate per MCF        Calculated Increase
                Date              From     To           in Annual Revenue 
           [S]                    [C]     [C]              [C]
           March 1, 1997          $4.18   $4.49            $ 8,300,000
           December 1, 1996        3.01    4.18             32,400,000
           September 1, 1996       2.88    3.01              3,600,000
           June 1, 1996            2.75    2.88              3,400,000

    The changes in gas rates on account of purchased gas costs have no effect on
earnings since the change in revenue is  offset by a corresponding change in the
cost of gas.

    Recovery of FERC Order 636 Transition  Costs.   By Order of the PPUC entered
August 26, 1994, PGE  began  recovering  the  Non-Gas Transition Costs (i.e. Gas
Supply Realignment and Stranded Costs)  that  it estimates it will ultimately be
billed pursuant to Federal Energy  Regulatory  Commission Order 636, through the
billing of a surcharge to  its  customers  effective  September 12, 1994.  It is
currently estimated that  $10.8  million  of  Non-Gas  Transition  Costs will be
billed to PGE, generally  over  a  six-year  period extending through January 1,
1999, of which $9.0  million  had  been  billed  to  PGE  and recovered from its
customers as  of  June  30,  1997.    PGE  has  recorded  the  estimated Non-Gas
Transition Costs that remain to be billed  to it and the amounts remaining to be
recovered from its customers.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

    The primary capital needs of the Company continue to be the funding of PGE's
construction program  and  the  seasonal  funding  of  PGE's  gas  purchases and
increases in  its  customer  accounts  receivable.    PGE's  revenues are highly
seasonal and weather-sensitive, with approximately  75% of its revenues normally
being realized in the first and  fourth  quarters  of the calendar year when the
temperatures in its service area are the coldest.

    Additionally, as  the  Company's  nonregulated  activities expand, increased
capital will be required  for  those  activities, especially the residential and
commercial  real  estate  development  projects  that  are  planned  for certain
Company-owned land.  The projects that  are currently planned by the Company are
in the initial planning and design  phases,  and  the amount and type of funding
that those projects will require  has  not  yet  been finalized.  However, it is
currently anticipated that such expenditures will  be funded by a combination of
capital provided by the Company, bank borrowings and other debt financing.


                                     -14-
<PAGE>

    The cash flow  from  PGE's  operations  is  generally  sufficient  to fund a
portion of its  construction  expenditures.    However,  to  the extent external
financing is required, it is the practice  of PGE to use bank borrowings to fund
such expenditures, pending the  periodic  issuance  of stock and long-term debt.
Bank borrowings are  also  used  by  PGE  for  the  seasonal  funding of its gas
purchases and increases in customer accounts receivable.

    In order to temporarily  finance  construction  expenditures and to meet its
seasonal borrowing requirements, PGE has made  arrangements for a total of $83.5
million of unsecured revolving  bank  credit,  which  is deemed adequate for its
ongoing needs.  Specifically, PGE currently  has eight bank lines of credit with
an aggregate borrowing capacity of $83.5 million which provide for borrowings at
interest rates generally less than  prime,  which mature at various times during
1997 and 1998 and which PGE intends to  renew  or replace as they expire.  As of
August 1, 1997, PGE had $46.3 million of borrowings outstanding under these bank
lines of credit.

    The Company believes that PGE, as  well  as Honesdale, will be able to raise
in a timely manner  such  funds  as  are  required for their future construction
expenditures, refinancings and  other  working  capital requirements.  Likewise,
the Company believes that its  nonregulated  subsidiaries  will be able to raise
such funds as are  required  for  their  needs,  including that required for the
residential and commercial real estate development which is planned.

Long-Term Debt and Capital Stock Financings

    Both the Company and its subsidiaries, most notably PGE, periodically engage
in long-term debt and capital stock financings in order to obtain funds required
for construction expenditures,  the  refinancing  of  existing  debt and various
working capital purposes.  No  long-term  debt  or capital stock financings were
consummated by either the Company or  PGE during the six-month period ended June
30, 1997.  However, PGE  plans  to  issue  $50.0 million of unsecured term notes
during the third quarter of 1997,  of  which  $25.0  million will be issued to a
syndicate of banks  and  $25.0  million  will  be  issued  to accredited private
placement investors.  The proceeds from  these long-term debt financings will be
used to repay a portion of PGE's bank borrowings.

    The Company also  obtains  external  funds  from  the  sale  of common stock
through its Dividend Reinvestment and Stock  Purchase Plan (the "DRP"), its 1992
Stock Option Plan and its Employees'  Savings Plan.  During the six-month period
ended June 30, 1997, the  Company  realized  $848,000, $27,000 and $380,000 from
the issuance  of  common  stock  under  the  DRP,  1992  Stock  Option  Plan and
Employees' Savings Plan, respectively.

Capital Expenditures and Related Financings

    Capital expenditures totaled $15.5  million  during  the first six months of
1997, including $13.9 million  of  expenditures  for the construction of utility
plant.  

    The Company estimates that its capital expenditures will total $26.7 million
for the remainder of the year,  consisting  of $19.8 million relative to utility
plant and $6.9 million  with  respect  to the Company's nonregulated activities,
including $4.9 million for  residential  and commercial real estate development.
It  is  anticipated  that  such  capital  expenditures  will  be  financed  with
internally generated funds and bank  borrowings,  and to the extent necessary by
the issuance of stock and long-term debt.


                                     -15-
<PAGE>

Current Maturities of Long-Term Debt and Preferred Stock

    As of June 30, 1997, $9.1 million of PGE's long-term debt and $80,000 of its
preferred stock was required to be repaid within twelve months.

Forward-Looking Statements

    Certain statements made above relating  to plans, conditions, objectives and
economic  performance  go  beyond  historical  information  and  may  provide an
indication  of  future  results.    To  that  extent,  they  are forward-looking
statements within the meaning of Section  21E  of the Securities Exchange Act of
1934, and each is subject to  factors  that could cause actual results to differ
from those in the forward-looking statement,  such as the nature of Pennsylvania
legislation  restructuring  the  natural   gas  industry  and  general  economic
conditions and uncertainties relating to  new  projects like the residential and
commercial development projects on Company-owned land.











































                                     -16-
<PAGE>

                          PART II.  OTHER INFORMATION

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

(a)  The Annual Meeting of Shareholders of the Company was held on May 14, 1997.

(b)  The following persons were elected directors of the Company with the voting
     as indicated:
[CAPTION]
                                       No. of Shares          No. of Shares
                 Name                  Voted in Favor           Withheld   
         [S]                             [C]                     [C]
         Kenneth L. Pollock              4,152,009               54,854

         William D. Davis                4,156,840               50,023

         Thomas F. Karam                 4,159,248               47,615

         Robert J. Keating               4,153,246               53,617

         James A. Ross                   4,156,854               50,009

         John D. McCarthy                4,155,216               51,647

         Ronald W. Simms                 4,157,829               49,034

         Kenneth M. Pollock              4,154,395               52,468

         Paul R. Freeman                 4,159,690               47,173

         John D. McCarthy, Jr.           4,154,766               52,097

         Richard A. Rose, Jr.            4,158,121               48,742

(c)  The Company's shareholders also approved the Company's Stock Incentive Plan
     (the "Plan") as set forth in Exhibit  A to the Proxy Statement (dated March
     26, 1997) for the  Annual  Meeting.    The  Plan authorizes the granting of
     awards to employees (including officers) of the Company and certain related
     companies in the form of any  combination of (1) options to purchase shares
     of Common Stock, (2) shares  of  restricted  Common Stock, (3) bonus stock,
     and (4)  dividend  equivalent  units.    The  Plan  also  provides  for the
     discretionary grant of stock options to  directors who are not employees or
     officers of the Company or certain related companies.  The aggregate number
     of shares of Common Stock which  may  be  issued under the Plan is 460,000.
     There were 3,521,456 votes for  the  Plan, 517,404 votes against it, 87,705
     abstentions, and 80,298 broker non-votes.













                                     -17-
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     10-1  Director Deferred Compensation Plan  dated  as  of  April 23, 1997 --
           filed herewith.

     11-1  Statement Re Computation of Per Share Earnings -- filed herewith.

     27-1  Financial Data Schedule -- filed herewith.

(b)  Reports on Form 8-K

     The Company filed a report on Form 8-K dated May 28, 1997, pursuant to Item
     4. Changes in Registrant's Certifying Accountant, reporting the appointment
     of the accounting firm of Price Waterhouse LLP as independent accountants.











































                                     -18-
<PAGE>

                        PENNSYLVANIA ENTERPRISES, INC.

                                  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.






                                              PENNSYLVANIA ENTERPRISES, INC.   
                                                       (Registrant)



Date:     August 6, 1997             By:           /s/ Thomas J. Ward          
                                                       Thomas J. Ward
                                                         Secretary



Date:     August 6, 1997             By:         /s/ John F. Kell, Jr.         
                                                     John F. Kell, Jr.
                                            Vice President, Financial Services
                                             (Principal Financial Officer and
                                               Principal Accounting Officer)




























                                     -19-
<PAGE>