<PAGE>   1
===============================================================================

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                ----------------

                                   FORM 10-Q

                                ----------------
(Mark One)

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

      For the quarterly period ended June 30, 1997

      OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 
      For the transition period from ___________ to ___________

                         Commission file number: 1-9988

                               REXENE CORPORATION
             (Exact name of Registrant as Specified in its Charter)


          DELAWARE                                    75-2104131
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                     Identification No.)

         5005 LBJ FREEWAY
          DALLAS, TEXAS                                   75244
(Address of principal executive offices)                (Zip code)

                                 (972) 450-9000
              (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
                                              ---    ---

             APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
 Yes  X   No
     ---     ---

At August 14, 1997, 18,850,865 shares of common stock, par value $0.01 per
share, of Rexene Corporation were outstanding.


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



<PAGE>   2

                      REXENE CORPORATION AND SUBSIDIARIES


                                                                         Page
                                                                         ----

PART I -- FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Condensed Consolidated Statements of Income for 
             the Three and Six Months Ended June 30, 1997 and 1996........1

         Condensed Consolidated Balance Sheets as of 
             June 30, 1997 and December 31, 1996..........................2

         Condensed Consolidated Statements of Cash Flows 
             for the Six Months Ended June 30, 1997 and 1996..............3

         Notes to Condensed Consolidated Financial Statements.............4

Item 2.  Management's Discussion and Analysis of Financial 
             Condition and Results of Operations..........................7

PART II -- OTHER INFORMATION




<PAGE>   3

PART I -- FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS.

                      REXENE CORPORATION AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        Three Months Ended              Six Months Ended
                                                              June 30,                      June 30,
                                                         1997           1996           1997           1996
                                                      ---------      ---------      ---------      ---------
<S>                                                   <C>            <C>            <C>            <C>      
Net sales .......................................     $ 151,936      $ 146,462      $ 315,652      $ 286,149

Operating expenses:
  Cost of sales .................................       117,474        117,313        261,897        230,518
  Marketing, general and administrative .........        10,317         11,369         20,473         21,783
  Research and development ......................         2,169          2,134          4,126          4,174
  Reversal of environmental accrual .............            --             --         (9,000)            --
                                                      ---------      ---------      ---------      ---------

                                                        129,960        130,816        277,496        256,475
                                                      ---------      ---------      ---------      ---------

Operating income ................................        21,976         15,646         38,156         29,674
                                                      ---------      ---------      ---------      ---------

Interest expense ................................        (6,506)        (4,183)       (11,970)        (8,550)
Interest income .................................           610            351            891          1,120
Other, net ......................................        (1,697)            30         (2,832)             4
                                                      ---------      ---------      ---------      ---------

Income before income taxes and extraordinary loss        14,383         11,844         24,245         22,248

Income tax expense ..............................         5,468          4,352          9,216          8,286
                                                      ---------      ---------      ---------      ---------

Income before extraordinary loss ................         8,915          7,492         15,029         13,962
Extraordinary loss, net of income taxes of $425 .          (694)            --           (694)            --
                                                      ---------      ---------      ---------      ---------

Net income ......................................     $   8,221      $   7,492      $  14,335      $  13,962
                                                      =========      =========      =========      =========

Weighted average shares outstanding .............        19,303         19,139         19,289         19,132
                                                      =========      =========      =========      =========

Income per share before extraordinary item ......     $    0.46      $    0.39      $    0.78      $    0.73
Extraordinary loss per share, net of tax of $0.02         (0.04)            --          (0.04)            --
                                                      ---------      ---------      ---------      ---------

Net income per share ............................     $    0.42      $    0.39      $    0.74      $    0.73
                                                      =========      =========      =========      =========
</TABLE>



           See notes to condensed consolidated financial statements.

                                       1

<PAGE>   4

                      REXENE CORPORATION AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                  June 30,    December 31,
                                                                                    1997           1996
                                                                                 ---------    ------------
                                    ASSETS
<S>                                                                              <C>            <C>     
Cash and cash equivalents ..................................................     $  37,731      $    714
Accounts receivable, net ...................................................        84,441        85,340
Inventories ................................................................        80,504        81,026
Deferred income taxes ......................................................         2,973         2,816
Prepaid expenses and other .................................................           265           301
                                                                                 ---------      --------

  Total current assets .....................................................       205,914       170,197

Property, plant and equipment, net .........................................       418,016       383,700
Intangible assets, net .....................................................        16,767        15,570
Other noncurrent assets ....................................................        30,151        28,075
                                                                                 ---------      --------

                                                                                 $ 670,848      $597,542
                                                                                 =========      ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ...........................................................     $  31,608      $ 55,030
Accrued liabilities ........................................................        12,116        13,772
Accrued interest ...........................................................         2,225         1,889
Income taxes payable .......................................................         2,461           594
Employee benefits payable ..................................................         5,845         6,823
                                                                                 ---------      --------

  Total current liabilities ................................................        54,255        78,108

Long-term debt .............................................................       324,750       235,000
Other noncurrent liabilities ...............................................        51,438        62,459
Deferred income taxes ......................................................        59,027        52,924
Commitments and contingencies ..............................................            --            --

Stockholders' equity:
  Preferred stock, par value $.01 per share; 1 million shares authorized;
    none issued and outstanding ............................................            --            --
  Common stock, par value $.01 per share; 100 million shares authorized;
    18.9 and 18.8 million shares issued and outstanding, respectively ......           189           188
  Paid-in capital ..........................................................       111,751       111,553
  Retained earnings ........................................................        68,149        55,320
  Less common stock held in treasury, at cost ..............................          (166)           --
  Foreign currency translation adjustment ..................................         1,455         1,990
                                                                                 ---------      --------

  Total stockholders' equity ...............................................       181,378       169,051
                                                                                 ---------      --------

                                                                                 $ 670,848      $597,542
                                                                                 =========      ========
</TABLE>


           See notes to condensed consolidated financial statements.



                                       2

<PAGE>   5

                      REXENE CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,
                                                                                1997          1996
                                                                              --------      --------
<S>                                                                           <C>           <C>     
Cash flows from operating activities:
Net income ..............................................................     $ 14,335      $ 13,962
                                                                              --------      --------
Adjustments to reconcile net income to net cash provided by (used for)
  operating activities:
  Depreciation and amortization .........................................       14,490        11,528
  Deferred income taxes .................................................        5,946           276
  Amortization of debt issuance costs ...................................          903           575
  Extraordinary loss, net of income taxes ...............................          694            --
  Change in:
     Deposit held in trust ..............................................           --         3,547
     Accounts receivable ................................................          808        (8,964)
     Inventories ........................................................          479        (1,638)
     Prepaid expenses and other current assets ..........................           40           102
     Income taxes .......................................................        2,292       (29,192)
     Accounts payable ...................................................      (23,408)        3,987
     Accrued interest ...................................................          336             9
     Employee benefits payable and accrued liabilities ..................       (2,623)       (3,267)
     Other noncurrent liabilities .......................................       (9,221)        1,007
  Other .................................................................       (2,201)         (248)
                                                                              --------      --------

  Total adjustments .....................................................      (11,465)      (22,278)
                                                                              --------      --------

Net cash provided by (used for) operating activities ....................        2,870        (8,316)
                                                                              --------      --------

Cash flows from investing activities:
  Capital expenditures ..................................................      (48,491)      (41,547)
  Purchase of intangible assets .........................................         (750)       (1,833)
                                                                              --------      --------

Net cash used for investing activities ..................................      (49,241)      (43,380)
                                                                              --------      --------

Cash flows from financing activities:
  Bank borrowings .......................................................       89,750        15,000
  Debt issuance costs ...................................................       (3,090)       (4,598)
  Repayment of advance payment from customer ............................       (1,800)       (1,800)
  Cash dividends paid ...................................................       (1,505)       (1,502)
  Repurchase of common stock ............................................         (166)           --
  Proceeds from issuance of common stock, net ...........................          199           152
                                                                              --------      --------

Net cash provided by financing activities ...............................       83,388         7,252
                                                                              --------      --------

Net increase (decrease) in cash and cash equivalents ....................       37,017       (44,444)
Cash and cash equivalents at beginning of period ........................          714        47,258
                                                                              --------      --------

Cash and cash equivalents at end of period ..............................     $ 37,731      $  2,814
                                                                              ========      ========

Supplemental cash flow information:
  Cash paid for interest ................................................     $ 14,118      $ 10,545
  Cash paid for income taxes ............................................     $    991      $ 37,486

</TABLE>

           See notes to condensed consolidated financial statements.

                                       3

<PAGE>   6


                      REXENE CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
1.       GENERAL

Rexene Corporation manufactures and markets a wide variety of products through
two operating divisions, Rexene Products Company division ("Rexene Products")
and Consolidated Thermoplastics Company division ("CT Film"). The products
range from value added specialty products, such as customized plastic films, to
commodity petrochemicals, such as styrene. These products are used in a wide
variety of industrial and consumer-related applications. The Company's
principal products are plastic film, polyethylene, polypropylene, Rextac(R)
amorphous polyalphaolefins ("Rextac"), REXflex(R) FPO and styrene. Rexene
Corporation and its subsidiaries are hereinafter sometimes collectively or
separately referred to as the "Company."

The accompanying condensed consolidated financial statements are unaudited;
however, in management's opinion, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the results of
operations, financial position and cash flows for the periods shown, have been
made. Results for interim periods are not necessarily indicative of those to be
expected for the full year. The interim condensed consolidated financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the 1996 Annual Report on Form 10-K.

2.       NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share", which establishes new standards for computing and
presenting earnings per share. SFAS No. 128 is effective for the periods ending
after December 15, 1997 and requires upon adoption restatement of all
prior-period earnings per share amounts presented. If the Company had computed
net earnings per share in accordance with the provisions of SFAS No. 128, basic
earnings per share for the three months ended June 30, 1997 and 1996 would have
been $0.43 and $0.40, respectively. Basic earnings per share for the six months
ended June 30, 1997 and 1996 would have been $0.76 and $0.74, respectively.
Diluted earnings per share for the three and six months ended June 30, 1997 and
1996 would have been no different from the reported primary and fully diluted
earnings per share.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components. SFAS No. 130 is effective
for the Company for fiscal years beginning after December 15, 1997 and requires
classification of financial statements in earlier periods for comparative
purposes. If the Company had calculated comprehensive income in accordance with
SFAS No. 130, comprehensive income for the three months ended June 30, 1997 and
1996 would have been $8,572,000 and $7,686,000, respectively. Comprehensive
income for the six months ended June 30, 1997 and 1996 would have been
$13,800,000 and $13,865,000, respectively.

In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which establishes standards for the way
that public business enterprises report information about operating segments in
interim and annual financial statements. SFAS No. 131 is effective for the
Company for fiscal years beginning after December 15, 1997 and requires
comparative information for earlier years to be restated. Upon adoption of SFAS
No. 131, the Company will provide segment information related to the Rexene
Products and CT Film divisions and related disclosures.




                                       4

<PAGE>   7

3.       INCOME TAXES

Income tax expense consists of the following (in thousands):

<TABLE>
<CAPTION>

                        Three Months Ended     Six Months Ended
                              June 30,              June 30,
                           1997       1996       1997       1996
                         ------     ------     ------     ------
<S>                      <C>        <C>        <C>        <C>   
Current:
  Federal ..........     $3,814     $3,499     $2,661     $6,919
  State ............        374        570        610      1,091
Deferred ...........      1,280        283      5,945        276
                         ------     ------     ------     ------

                         $5,468     $4,352     $9,216     $8,286
                         ======     ======     ======     ======
</TABLE>

4.       INVENTORIES
Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                               June 30,   December 31
                                 1997        1996
                               -------     -------
<S>                            <C>         <C>    
Raw materials ............     $34,178     $30,145
Work in progress .........       7,924       8,561
Finished goods ...........      38,402      42,320
                               -------     -------

                               $80,504     $81,026
                               =======     =======
</TABLE>

5.       PROPERTY, PLANT AND EQUIPMENT

The cost and accumulated depreciation of property, plant and equipment are as
follows (in thousands):

<TABLE>
<CAPTION>
                                            June 30,      December 31,
                                              1997           1996
                                            ---------      ---------
<S>                                         <C>            <C>      
Property, plant and equipment .........     $ 509,449      $ 461,469
Less accumulated depreciation .........       (91,433)       (77,769)
                                            ---------      ---------

                                            $ 418,016      $ 383,700
                                            =========      =========
</TABLE>

6.       INTANGIBLE ASSETS

The cost and accumulated amortization of intangible assets are as follows (in
thousands):

<TABLE>
<CAPTION>
                                             June 30,    December 31,
                                              1997          1996
                                            --------      --------
<S>                                         <C>           <C>     
Debt issuance costs ...................     $ 13,171      $ 14,333
Less accumulated amortization .........       (2,062)       (4,288)
                                            --------      --------

                                              11,109        10,045
                                            --------      --------
</TABLE>



                                       5

<PAGE>   8
<TABLE>

<S>                                                                                   <C>           <C>  
Reorganization value in excess of amounts allocable to identifiable assets ...        4,298         4,298
Less accumulated amortization ................................................       (1,570)       (1,437)
                                                                                   --------      --------

                                                                                      2,728         2,861
                                                                                   --------      --------

Other intangible assets ......................................................        8,197         7,377
Less accumulated amortization ................................................       (5,267)       (4,713)
                                                                                   --------      --------

                                                                                      2,930         2,664
                                                                                   --------      --------

                                                                                   $ 16,767      $ 15,570
                                                                                   ========      ========
</TABLE>

7.       CONTINGENCIES

The Company, and the industry in which it competes, is subject to extensive
environmental laws and regulations concerning, for example, emissions to the
air, discharges to surface and subsurface waters and the generation, handling,
storage, transportation, treatment and disposal of waste and other materials.
The Company believes that, in light of its historical expenditures, it will
have adequate resources to conduct its operations in compliance with currently
applicable environmental and health and safety laws and regulations. However,
in order to comply with changing facility permitting and regulatory standards,
the Company may be required to make additional significant site or operational
modifications. Further, the Company has incurred and may in the future incur
liability to investigate and clean up waste or contamination at its current or
former facilities, or which it may have disposed of at facilities operated by
third parties. On the basis of its investigation and analysis, management
believes that the approximately $9.1 million accrued in the June 30, 1997
balance sheet is adequate for the total potential environmental liability with
respect to contaminated sites. Extensive environmental investigation of the
groundwater, soils and solid waste management has been conducted at the Odessa
facility. Risk assessments have been completed for a number of these facilities
and corrective measures have been defined and conducted. Approval of these
waste management unit closures required a public notice period that expired at
the end of February 1997. The Company received approval to allow closure of
five solid waste management units, which permitted a reduction in the accrual
for potential environmental liability of $9.0 million in the first quarter of
1997. The Company currently disposes of wastewater from the Odessa Facility
through injection wells operated under permits from the Texas Natural Resources
Conservation Commission ("TNRCC"). TNRCC has stated that it does not intend to
renew the permits after they expire in December 1997. The Company has entered
into an agreement with the City of Odessa and the Gulf Coast Waste Disposal
Authority pursuant to which that latter will acquire, modify and operate a
publicly-owned treatment works ("POTW") to dispose of the Company's and a
portion of the City of Odessa's wastewater. Construction to modify the existing
municipal facility is in progress with a view to having the POTW operational by
September 1997. Although no assurances can be given, the Company believes that
it will be able to use its existing wells until it develops this alternative
wastewater disposal system. However, if the Company is forced to cease using
its injection wells before the POTW is operational, such loss of capacity could
have a material adverse effect on the Company's financial condition, results of
operations or cash flows. The Company continually reviews its estimates of
potential environmental liabilities. However, no assurance can be given that
all potential liabilities arising out of the Company's present or past
operations have been identified or fully assessed or that the amounts that
might be required to investigate and remediate such sites will not be
significant to the Company.

The Company is a party to various litigation arising in the ordinary course of
business and to certain other litigation which are set forth in Note 18 to the
Consolidated Financial Statements included in the Company's 1996 Annual Report
on Form 10-K. There have been no material changes to the litigation described
in the aforementioned Note 18, except as described in Part II below.

Although there can be no assurance of the final resolution of such litigation,
the Company believes that, based upon its current knowledge of the facts of
each case, it has meritorious defenses to the various claims made and intends
to defend each lawsuit vigorously, and the Company does not believe that the
outcome of any of these lawsuits will have a material adverse effect on the
Company's financial position, results of operations or cash flows.


                                       6

<PAGE>   9




ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
          RESULTS OF OPERATIONS

OVERVIEW

The Company conducts its business through two operating divisions: the Rexene
Products division, which manufactures and sells polyethylene, polypropylene,
REXtac(R) APAO, REXflex(R) FPO and styrene, and the CT Film division, which
manufactures and sells plastic film. The polyethylene, polypropylene and
styrene markets in which the Company competes are cyclical markets that are
sensitive to relative changes in supply and demand as well as general economic
conditions. Historically, these products have experienced alternating periods
of tight supply, rising prices and increased profits followed by periods of
large capacity additions resulting in oversupply, lower selling prices and
lower gross profits. The Company's plastic film and REXtac(R) APAO businesses
are generally less sensitive to economic cycles.

Principal raw materials purchased by the Company consist of ethane and propane
extracted from natural gas liquids ("NGL"), propylene and benzene (all four of
which are referred to as "feedstocks") for the polymer and styrene businesses
and polyethylene resins for the film business. The feedstock supplies available
in Odessa, Texas are currently adequate for the Company's requirements. The
percentage of feedstock costs compared to the Company's total cost of sales
decreased from 30% in 1996 to 28% for the first half of 1997. The Company's
inability in 1996 and the first quarter of 1997 to pass on the full amount of
the increases in feedstock costs to customers had a significant impact on
operating results. Lower industry inventory levels of crude oil, natural gas
and NGL feedstocks and unexpected supply disruptions caused feedstock prices to
increase during 1996 and early 1997. Ethane and propane prices decreased midway
in the first quarter of 1997 to levels comparable to the first quarter of 1996
and have generally remained stable.

NEW DEVELOPMENTS

On June 9, 1997, the Company executed an Agreement and Plan of Merger ("Merger
Agreement") by and among Huntsman Corporation ("Huntsman"), Huntsman Centennial
Corporation ("HC Subsidiary"), a wholly owned subsidiary of Huntsman, and the
Company. Under the Merger Agreement, HC Subsidiary will be merged with and into
the Company, and all stockholders of the Company, except those who properly
exercise their dissenters' rights under Delaware law, will receive in exchange
for each outstanding share of Common Stock of the Company $16.00 in cash (the
"Merger"). The consummation of this Merger is subject to the approval of the
holders of a majority of the outstanding shares of common stock of the Company
at a special meeting of stockholders to be held on August 26, 1997 (the
"Special Meeting"), and the satisfaction of certain conditions set out in the
Merger Agreement.

On or about July 28, 1997, the Company mailed to stockholders of record of the
Company as of July 25, 1997, proxy statement and form of proxy soliciting the
votes of stockholders of the Company to approve and adopt the Merger Agreement
at the Special Meeting.


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO 
THE THREE MONTHS ENDED JUNE 30, 1996

The Company's overall sales and profitability were higher in the second quarter
of 1997 as compared to the second quarter of 1996. The petrochemical and
polymer markets in which the Company participates were stronger in the second
quarter of 1997 as compared to the second quarter of 1996. Net sales increased
$5.5 million (or 4 percent) from the second quarter of 1996 to the second
quarter of 1997 principally due to higher average sales prices for polyethylene
and plastic film. The effect of price increases were partially offset by
decreases in sales volumes for all major product lines. Plastic film sales
increased $1.7 million (or 4 percent) principally due to an increase in average
sales price of 5 cents per pound. Polyethylene sales increased $2.5 million (or
6 percent) principally due to an increase in average sales price of 6 cents per
pound, partially



                                       7

<PAGE>   10

offset by a decrease in sales volumes of 5.5 million pounds. Other sales
increased $4.8 million principally due to an increase in excess feedstock
sales.

The Company's gross profit percentage increased from 20 percent for the three
months ended June 30, 1996 to 23 percent for the three months ended June 30,
1997 principally due to the increase in sales prices discussed above.
Marketing, general and administrative expenses decreased $1.1 million (or 9
percent) principally due to insurance reimbursements for previously incurred
legal fees. Research and development expenses remained relatively stable for
the second quarter of 1997 as compared to the second quarter of 1996.

Due primarily to the factors discussed above, operating income increased $6.3
million (or 40 percent) for the three months ended June 30, 1997 as compared to
the corresponding period in 1996. Net interest expense increased $2.3 million
(or 55 percent) in the second quarter of 1997 as compared to the second quarter
of 1996 principally due to higher bank debt arising from the funding for the
capital expenditure program in the second quarter of 1997, as compared to the
second quarter of 1996. Income tax expense increased $1.1 million (or 26
percent) in the second quarter of 1997 as compared to the second quarter of
1996 principally due to the increase in operating income discussed above. Due
primarily to the factors discussed above, the Company's net income increased
$0.7 million (or 10 percent) in the second quarter of 1997 as compared to the
second quarter of 1996.


RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE 
SIX MONTHS ENDED JUNE 30, 1996

Net sales increased $29.5 million (or 10 percent) from the six months ended
June 30, 1996 to the six months ended June 30, 1997 principally due to higher
average sales prices for polyethylene and an increase in excess feedstock
sales. The effect of price increases were partially offset by decreases in
sales volumes for polyethylene and styrene. Polyethylene sales increased $9.1
million (or 12 percent) principally due to an increase in average sales price
of 7 cents per pound, partially offset by a decrease in sales volumes of 9.8
million pounds. Excess feedstock sales increased $15.6 million.

The Company's gross profit percentage decreased from 19 percent for the six
months ended June 30, 1996 to 17 percent for the six months ended June 30, 1997
principally due to the lower gross margin received on the increase in excess
feedstock sales discussed above. Marketing, general and administrative expenses
decreased $1.3 million (or 6 percent) principally due to insurance
reimbursements for previously incurred legal fees offset by a severance accrual
in the first quarter of 1997. Research and development expenses remained stable
for the first half of 1997 as compared to the first half of 1996. An
environmental accrual established in prior years was reduced by $9.0 million as
a result of modifications to the Company's remedial action plans at the Odessa
facility that were approved by the TNRCC.

Due primarily to the factors discussed above, operating income increased $8.5
million (or 29 percent) for the six months ended June 30, 1997 as compared to
the corresponding period in 1996. Net interest expense increased $3.4 million
(or 40 percent) in the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996 principally due to higher bank debt arising from the
funding for the capital expenditure program in 1997, as compared to 1996.
Income tax expense increased $0.9 million (or 11 percent) in the six months
ended June 30, 1997 as compared to the six months ended June 30, 1996
principally due to the increase in operating income discussed above. Due
primarily to the factors discussed above, the Company's net income increased
$0.4 million (or 3 percent) in the six months ended June 30, 1997 as compared
to the six months ended June 30, 1996.




                                       8

<PAGE>   11
LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 1997 net cash provided by operating
activities increased $11.2 million as compared to the same period in 1996. This
increase was principally due to higher net income and changes in working
capital.

On May 8, 1997, the Company executed an amendment to its Credit Agreement with
a group of lenders led by the Bank of Nova Scotia (the "Amended Credit
Agreement"). The Amended Credit Agreement increases the borrowing availability
under the Credit Agreement from $150 million to $225 million. The primary use
of the increased available borrowings was to provide funds to repurchase
approximately $35 million of the Company's Common Stock pursuant to a
previously contemplated but subsequently abandoned share repurchase program and
to finance portions of the Company's capital expenditure program at its Odessa,
Texas plant, including the modernization and expansion of its olefins plant and
the construction of a new linear low density polyethylene plant. On August 5,
1996 the Company executed an agreement with a financial institution for a $10
million uncommitted unsecured line of credit (the "Unsecured Note") for day to
day cash flow requirements. As of August 14, 1997, there were no amounts
outstanding under the Unsecured Note.

The Amended Credit Agreement contains covenants which limit, among other
things, the incurrence of additional indebtedness by the Company, the creation
of liens on the Company's assets, the making of certain investments by the
Company, certain mergers, sales of certain fixed assets and the prepayment of
the Company's 11 3/4% Senior Notes due 2004 (the "Senior Notes"). As a result
of the Amended Credit Agreement, the Company recorded a non-cash charge of
$694,000 (after tax) to write-off certain deferred debt issuance costs. The
Amended Credit Agreement also contains certain financial covenants relating to
the financial condition of the Company, including covenants relating to minimum
net worth, the ratio of its earnings to debt and interest to earnings. As of
August 14, 1997, the Company had borrowed $150 million under the Amended and
Restated Credit Agreement.

Huntsman has advised the Company that, on the date of the Merger, $100 million
of borrowings under the Amended Credit Agreement will be repaid and that it
will arrange for alternate financing for the Company's operations. The Company
believes that, if the Merger were not to occur, based on current levels of
operation and anticipated growth, its cash flow from operations, together with
other available sources of liquidity, including the proceeds from the New
Credit Agreement, would be adequate to make scheduled payments of interest on
the Senior Notes, to permit anticipated capital expenditures and to fund
working capital requirements. However, the ability of the Company to satisfy
these obligations depends on a number of significant assumptions, including but
not limited to, the demand for the Company's products, raw material costs and
other factors.

The indenture governing the Senior Notes (the "Indenture") contains certain
covenants that, among other things, limit the ability of the Company to incur
additional indebtedness and to repurchase subordinated indebtedness, incur or
suffer to exist certain liens, pay dividends, make certain investments, sell
significant fixed assets and engage in mergers and consolidations. Pursuant to
the Indenture, the Company is not permitted to consolidate or merge with or
into another person (whether or not the Company is the surviving corporation)
unless certain financial covenants are met. Upon consummation of the Merger,
Huntsman has advised the Company that it will meet such financial tests and,
accordingly, is permitted to consummate the Merger pursuant to the terms of the
Indenture. In addition, pursuant to the Indenture, within ten days after the
merger, the Company is obligated to make an offer to repurchase all of the
outstanding Senior Notes at 101% of the principal amount of the Senior Notes
plus accrued interest.

A number of potential environmental liabilities exist which relate to certain
contaminated property. In addition, a number of potential environmental costs
relate to pending or proposed environmental regulations. No assurance can be
given that all of the potential liabilities arising out of the Company's
present or past operations have been identified or that the amounts that might
be required to investigate and remediate such sites or comply with pending or
proposed environmental regulations can be accurately estimated. The Company has
approximately $9.1 million accrued in the June 30, 1997 balance sheet as an
estimate of its total potential environmental liability with respect to
investigating and remediating known and assessed site contamination. Extensive
environmental investigation of the groundwater, soils and solid waste
management has been




                                       9

<PAGE>   12

conducted at the Odessa Facility. Risk assessments have been completed for a
number of these facilities and corrective measures have been defined and
conducted. Approval of certain waste management unit closures required a public
notice period that expired at the end of February 1997. The Company received
approval to close five solid waste management units, which permitted a
reduction in the accrual for potential environmental liability by $9.0 million
during the first quarter of 1997. If, however, additional liabilities with
respect to environmental contamination are identified, there is no assurance
that additional amounts that might be required to investigate and remediate
such potential sites would not have a material adverse effect on the financial
position, results of operations or cash flows of the Company. In addition,
future regulatory developments could restrict or possibly prohibit existing
methods of environmental compliance. At this time, the Company is unable to
determine the potential consequences such possible future regulatory
developments would have on its financial condition. Management continually
reviews its estimates of potential environmental liabilities. The Company does
not currently carry environmental impairment liability insurance to protect it
against such contingencies because the Company has found such coverage is
available only at great cost and with broad exclusions.

The Company currently disposes of wastewater from the Odessa Facility through
injection wells operated under permits from the TNRCC. TNRCC has stated that it
does not intend to renew the permits after they expire in December 1997. The
Company has entered into an agreement with the City of Odessa and the Gulf
Coast Waste Disposal Authority pursuant to which that latter will acquire,
modify and operate a publicly-owned treatment works ("POTW") to dispose of the
Company's and a portion of the City of Odessa's wastewater. Construction to
modify the existing municipal facility is in progress with a view to having the
POTW operational by September 1997. Although no assurances can be given, the
Company believes that it will be able to use its existing wells until it
develops this alternative wastewater disposal system. However, if the Company
is forced to cease using its injection wells before the POTW is operational,
such loss of capacity could have a material adverse effect on the Company's
financial condition, results of operations or cash flows.


OTHER MATTERS

The Company is including the following cautionary statement in this Form 10-Q
to make applicable and take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements which
are other than statements of historical facts. From time to time, the Company
may publish or otherwise make available forward-looking statements of this
nature. All such subsequent forward-looking statements, whether written or oral
and whether made by or on behalf of the Company, are also expressly qualified
by these cautionary statements. Certain statements contained herein are
forward-looking statements and accordingly involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The forward-looking statements
contained herein are based on various assumptions, many of which are based, in
turn, upon further assumptions. The Company's expectations, beliefs and
projections are expressed by good faith and are believed by the Company to have
a reasonable basis, including without limitation, management's examination of
historical operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result or be achieved or
accomplished. In addition to the other factors and matters discussed elsewhere
herein, the following are important factors that, in the view of the Company,
could cause actual results to differ materially from those discussed in the
forward-looking statement:

1.       Changes in economic conditions and weather conditions

2.       Changes in the availability and/or price of feedstocks

3.       Changes in management ownership or control of the Company

4.       Inability to obtain new customers or retain existing ones



                                       10

<PAGE>   13

5.       Significant changes in competitive factors affecting the Company

6.       Governmental/regulatory actions and initiatives, including those 
         affecting financings, and environmental/safety requirements

7.       Significant changes from expectations in actual capital expenditures
         and operating expenses and unanticipated project delays

8.       Occurrences affecting the Company's ability to obtain funds from
         operations, debt or equity to finance needed capital expenditures and
         other investments

9.       The cyclical nature of the Company's business.

10.      Regarding foreign operations -- changes in foreign trade and monetary
         policies, laws and regulations related to foreign operations,
         political and governmental changes, inflation and exchange rates,
         taxes and operating conditions

11.      Significant changes in tax rates or policies or in rates of inflation
         or interest

12.      Significant changes in the Company's relationship with its employees
         and the potential adverse effects if labor disputes or grievances were
         to occur

13.      Changes in accounting principles and/or the application of such
         principles to the Company.

The Company disclaims any obligation to update any forward-looking statements
to reflect events or circumstances after the date hereof.


PART II -- OTHER INFORMATION

ITEM 6.            (a)      EXHIBITS

                            27 - Financial Data Schedule

                   (b)      CURRENT REPORTS

                            The Company filed a current report on form
                            8K dated June 18, 1997, reporting the
                            execution of an Agreement and Plan of
                            Merger.


                                   SIGNATURE

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

                                               REXENE CORPORATION
                                               Registrant


Date:    August 14, 1997                       By: /s/ Geff Perera
                                                   ---------------------------
                                                   Geff  Perera
                                                   Executive Vice President and
                                                   Chief Financial Officer




                                       11

<PAGE>   14



                               INDEX TO EXHIBITS


     EXHIBIT
      NUMBER                 EXHIBIT
      ------                 -------

       27                 Financial Data Schedule