Form 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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

For the quarterly period ended           September 30, 1996
                              ---------------------------------------

                                       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 1-2297


                              EASTERN ENTERPRISES
    -----------------------------------------------------------------
             (Exact name of registrant as specified in its charter)



              MASSACHUSETTS                             04-1270730
    -----------------------------                    ----------------
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                 Identification No.)



                 9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
    -----------------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)


                                  617-647-2300
    -----------------------------------------------------------------
              (Registrant's telephone number, including area code)

    -----------------------------------------------------------------
              Former name, former address and former fiscal year,
                         if changed since last report.


   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
   ----    ----

The number of shares of Common Stock  outstanding  of Eastern  Enterprises as of
October 25, 1996 was 20,304,041.


                                                                Form 10-Q
                                                                Page 2.

PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS

Company or group of companies for which report is filed:
  EASTERN ENTERPRISES AND SUBSIDIARIES ("Eastern")



Consolidated Statement of Operations
- ------------------------------------
(In thousands, except per share amounts)

                                                              Three months ended                  Nine months ended
                                                                 September 30,                      September 30,
                                                            1996              1995              1996             1995
- ----------------------------------------------------------------------------------------------------------------------
                                                                                                      
Revenues                                                $133,950          $133,444          $766,690         $699,288
Operating costs and expenses:
  Operating costs                                         96,345            96,336           553,105          494,164
  Selling, general & adminis-
      trative expenses                                    22,102            23,306            78,202           77,784
  Depreciation & amortization                             10,577            10,587            48,688           46,120
                                                        --------           -------           -------          -------
                                                         129,024           130,229           679,995          618,068
                                                        --------           -------           -------          -------

Operating earnings                                         4,926             3,215            86,695           81,220

Other income (expense):
  Interest income                                          2,413             1,489             7,270            3,558
  Interest expense                                        (8,325)           (9,168)          (25,828)         (28,422)
  Other, net                                               1,524               312               783              447
                                                        --------           -------           -------          -------

Earnings (loss) before
    income taxes                                             538            (4,152)           68,920           56,803

Provision (credit) for
   income taxes                                             (161)           (1,593)           25,415           21,648
                                                        --------           -------           -------          -------

Net earnings (loss)                                     $    699          $ (2,559)         $ 43,505         $ 35,155
                                                        ========          ========          ========         ========

Earnings (loss) per share                               $    .03          $   (.13)         $   2.13         $   1.73
                                                        ========          ========          ========         ========

Dividends per share                                     $    .37          $    .35          $   1.11         $   1.05
                                                        ========          ========          ========         ========



The accompanying notes are an integral part of these financial statements.




                                                                Form 10-Q
                                                                Page 3.

Eastern Enterprises and Subsidiaries
- ------------------------------------



Consolidated Balance Sheet
- --------------------------
(In thousands)

                                                                     Sept. 30,           Dec. 31,            Sept. 30,
                                                                          1996               1995                 1995
- ----------------------------------------------------------------------------------------------------------------------
                                                                                                   
ASSETS

Current assets:
  Cash and short-term investments                                   $  171,035         $  191,211           $  115,183
  Receivables, less allowances                                          55,888            104,735               57,858
  Inventories                                                           61,427             47,883               57,489
  Deferred gas costs                                                    44,773             71,940               64,632
  Investment in U.S. Filter                                                  -                  -               72,986
  Other current assets                                                  12,679              9,117                9,077
                                                                    ----------         ----------           ----------
     Total current assets                                              345,802            424,886              377,225

Property and equipment, at cost                                      1,423,020          1,356,097            1,328,477
   Less--Accumulated depreciation                                      603,043            563,337              551,961
                                                                    ----------         ----------           ----------
      Net property and equipment                                       819,977            792,760              776,516

Other assets:
  Deferred post-retirement health care
    costs                                                               89,808             93,830               94,340
  Investments                                                           29,871             13,821               14,540
  Deferred charges and other costs,
    less amortization                                                   53,358             52,045               46,226
                                                                    ----------         ----------           ----------
     Total other assets                                                173,037            159,696              155,106
                                                                    ----------         ----------           ----------
     Total assets                                                   $1,338,816         $1,377,342           $1,308,847
                                                                    ==========         ==========           ==========



The accompanying notes are an integral part of these financial statements.




                                                                Form 10-Q
                                                                Page 4.

Eastern Enterprises and Subsidiaries
- ------------------------------------




Consolidated Balance Sheet
- --------------------------
(In thousands)

                                                                       Sept. 30,            Dec. 31,            Sept. 30,
                                                                            1996                1995                 1995
- -------------------------------------------------------------------------------------------------------------------------
                                                                                                      
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current debt                                                        $   18,604          $   57,193           $    9,193
  Accounts payable                                                        52,241              64,960               42,156
  Accrued expenses                                                        31,153              26,795               31,339
  Other current liabilities                                               67,142              75,913               75,040
                                                                      ----------          ----------           ----------
     Total current liabilities                                           169,140             224,861              157,728

Gas inventory financing                                                   49,159              45,600               43,982

Long-term debt                                                           350,118             357,675              358,874

Reserves and other liabilities:
  Deferred income taxes                                                   90,752              89,102               93,829
  Post-retirement health care                                             97,401              98,717              101,482
  Coal miners retiree health care                                         62,169              65,025               55,453
  Preferred stock of subsidiary                                           29,284              29,262               29,254
  Other reserves                                                          71,489              71,336               56,789
                                                                      ----------          ----------           ----------
      Total reserves and other
         liabilities                                                     351,095             353,442              336,807

Shareholders' equity:
  Common stock, $1.00 par value
   Authorized shares -- 50,000,000
   Issued shares - 20,441,907 at
   September 30, 1996; 20,385,587 at
   December 31, 1995 and 20,674,865 at
   September 30, 1995                                                     20,442              20,386               20,675
Capital in excess of par value                                            33,043              31,488               38,591
Retained earnings                                                        369,368             348,821              365,080
Treasury stock at cost - 137,866
   shares at September 30, 1996;
   191,547 shares at December 31,
   1995 and 500,749 shares at
   September 30, 1995                                                     (3,549)             (4,931)             (12,890)
                                                                      ----------          ----------           ----------
     Total shareholders' equity                                          419,304             395,764              411,456
                                                                      ----------          ----------           ----------
   Total liabilities and
      shareholders' equity                                            $1,338,816          $1,377,342           $1,308,847
                                                                      ==========          ==========           ==========




The accompanying notes are an integral part of these financial statements.




                                                                Form 10-Q
                                                                Page 5.

Eastern Enterprises and Subsidiaries
- ------------------------------------




Consolidated Statement of Cash Flows
- ------------------------------------
(In thousands)


Nine months ended September 30,                                                            1996                 1995
- ---------------------------------------------------------------------------------------------------------------------
                                                                                                     
Cash flows from operating activities:
 Net earnings                                                                         $  43,505            $  35,155

Adjustments to reconcile net earnings to net
  cash provided by operating activities:
Depreciation and amortization                                                            48,688               46,120
Income taxes and tax credits                                                             (1,087)               1,256
Other changes in assets and liabilities:
   Receivables                                                                           48,846               43,035
   Inventories                                                                          (13,545)               2,718
   Deferred gas costs                                                                    27,167               25,071
   Accounts payable                                                                     (12,719)              (7,817)
   Other                                                                                 (7,925)               6,923
                                                                                      ---------            ---------
    Net cash provided by operating activities                                           132,930              152,461

Cash flows from investing activities:
  Capital expenditures                                                                  (76,492)             (48,155)
  Investments                                                                           (21,146)                 965
  Proceeds on sale of WaterPro                                                                -               52,864
  Proceeds on sale of investments                                                         3,090                    -
  Other                                                                                  (1,695)                (673)
                                                                                      ---------             --------
   Net cash provided (used) by investing activities                                     (96,243)               5,001

Cash flows from financing activities:
  Dividends paid                                                                        (22,462)             (21,309)
  Changes in notes payable                                                              (38,300)             (58,430)
  Repayment of long-term debt                                                            (6,445)              (5,503)
  Changes in gas inventory financing                                                      3,559               (9,596)
  Purchase of treasury shares                                                                 -               (8,357)
  Other                                                                                   2,805                2,233
                                                                                      ---------            ---------
     Net cash used by financing activities                                              (60,843)            (100,962)

Net increase (decrease) in cash and cash equivalents                                    (24,156)              56,500
Cash and cash equivalents at beginning of year                                          185,137               51,674
                                                                                      ---------            ---------
Cash and cash equivalents at end of period                                              160,981              108,174
Short-term investments                                                                   10,054                7,009
                                                                                      ---------            ---------

Cash and short-term investments                                                       $ 171,035            $ 115,183
                                                                                      =========            =========



The accompanying notes are an integral part of these financial statements.




                                                                Form 10-Q
                                                                Page 6.

                      EASTERN ENTERPRISES AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                               September 30, 1996



1.  Accounting policies

It is Eastern's opinion that the financial  information contained in this report
reflects all  adjustments  necessary to present a fair  statement of results for
the periods reported. All of these adjustments are of a normal recurring nature.
Results for the periods are not necessarily indicative of results to be expected
for the year, due to the seasonal nature of Eastern's operations. Such financial
information is subject to year-end  adjustments  and annual audit by independent
public  accountants.  All  accounting  policies  have been  applied  in a manner
consistent with prior periods.  However,  due to the  immateriality of AllEnergy
Marketing Company,  Inc.  ("AllEnergy  Inc."), its results have been restated on
the equity method to provide comparability with Eastern's continuing involvement
in the marketing of retail energy  services  through a joint venture,  AllEnergy
Marketing Company, L.L.C. ("AllEnergy LLC").

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,  the  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.
Actual results could differ from those estimates.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or  omitted  in this Form 10-Q.  Therefore  these  interim
financial  statements  should be read in conjunction  with Eastern's 1995 Annual
Report filed on Form 10-K with the Securities and Exchange Commission.


    Earnings per share

Per share amounts are based on the weighted  average number of common and common
equivalent shares  outstanding.  Quarter and year-to-date  shares are 20,457,000
and   20,428,000,   respectively,   in  1996  and   20,277,000   and  20,270,000
respectively, in 1995.




                                                                Form 10-Q
                                                                Page 7.

2.  Inventories


The components of inventories were as follows:
  (In thousands)

                                                                      Sept. 30,          Dec. 31,        Sept. 30,
                                                                           1996              1995             1995
- ------------------------------------------------------------------------------------------------------------------
                                                                                                 

Supplemental gas supplies                                              $ 48,728          $ 35,136         $ 44,443
Other materials, supplies and marine
  fuels                                                                  12,699            12,747           13,046
                                                                       --------          --------         --------
                                                                       $ 61,427          $ 47,883         $ 57,489
                                                                       ========          ========         ========



3.  Supplemental cash flow information



The following are supplemental disclosures of cash flow information:
(In thousands)


Nine months ended September 30,                                                             1996             1995
- -----------------------------------------------------------------------------------------------------------------
                                                                                                    
Cash paid during the year for:
  Interest, net of amounts capitalized                                                   $17,645          $19,190
  Income taxes                                                                           $28,023          $20,842





4. Contingencies

In  September   1996  Eastern   received   notices  from  the  Social   Security
Administration  ("SSA")  claiming that Eastern is responsible for health benefit
premiums for an additional group of retired coal miners and their  beneficiaries
under the federal Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act").
In 1993 and 1995 Eastern recorded  reserves  aggregating  $80,000,000 to provide
for its estimated  undiscounted  obligations  under the Coal Act with respect to
the miners and beneficiaries  assigned to Eastern.  These amounts were reflected
as extraordinary items totaling $52,000,000, net of tax. As more fully discussed
in Note 12 of Notes to Financial Statements in Eastern's 1995 Annual Report, its
obligation  could  range from zero to more than $115  million.  Due to a lack of
information  about the  recent  assignment  of the  additional  group of retired
miners  and their  beneficiaries  and  other  issues,  it is not known  what the
ultimate cost of such assignment,  if any, will be to Eastern, and no additional
provision has been made at this time.



                                                                Form 10-Q
                                                                Page 8.


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


RESULTS OF OPERATIONS

 Revenues:
(In thousands)

Three months ended September 30,                                1996              1995            Change
- --------------------------------------------------------------------------------------------------------
                                                                                         
Boston Gas                                                  $ 59,453          $ 56,958             4 %
Midland                                                       74,497            76,486            (3)%
                                                            --------          --------
  Total                                                     $133,950          $133,444             -
                                                            ========          ========




Nine months ended September 30,                                 1996              1995            Change
- --------------------------------------------------------------------------------------------------------
                                                                                         
Boston Gas                                                  $539,314          $480,814            12 %
Midland                                                      227,376           218,474             4 %
                                                            --------          --------
  Total                                                     $766,690          $699,288            10 %
                                                            ========          ========




Boston Gas

Third quarter revenues  increased by $2.5 million,  primarily  reflecting higher
sales to non-firm customers.

For the first nine months of 1996,  higher  customer  usage,  due principally to
colder  billing  temperatures,  and  increased  sales to  non-firm  and new firm
customers contributed to the $58.5 million increase in revenues. Weather for the
first nine  months of 1996 was 3% colder  than  normal,  in contrast to slightly
warmer than normal weather for the first nine months of 1995.



Midland Enterprises

Revenues  for the third  quarter of 1996 were 3% below  1995,  reflecting  an 8%
decline in ton miles.  Weak foreign demand for coal and the lack of stored grain
combined with a late harvest  lowered  demand for the  transportation  of export
coal and grain during the quarter.  Year-to-date revenues increased 4% over last
year on 1% fewer ton miles, as improved market rates,  particularly for non-coal
commodities, more than offset the impact of lower volume.

Lower export coal  shipments  resulted in a 2% decline in third quarter coal ton
miles. Coal tonnage increased 7%, as long haul export movements were replaced by
shorter haul spot shipments.  Year-to-date  coal ton miles and tonnage increased
4% and 2%,  respectively,  reflecting  slightly  longer  average hauls and a new
Midland  record for tons of coal  transported.  Third  quarter and  year-to-date
non-coal tonnage declined 9% and 5%, respectively,  mainly due to reduced export
activity  coupled with reduced towing  services for others.  Reductions in grain
and aggregate tonnage were largely offset by increased  shipments of coke, scrap
and steel products.



                                                                Form 10-Q
                                                                Page 9.



 Operating Earnings:
(In thousands)

Three months ended September 30,                               1996              1995             Change
- ---------------------------------------------------------------------------------------------------------
                                                                                        
Boston Gas                                                  $(8,749)         $(10,800)           19 %
Midland                                                      14,663            15,726            (7)%
Headquarters                                                   (988)           (1,711)           42 %
                                                            -------          --------
  Total                                                     $ 4,926          $  3,215            53 %
                                                            =======          ========




Nine months ended September 30,                                1996              1995             Change
- ---------------------------------------------------------------------------------------------------------
                                                                                        
Boston Gas                                                  $45,856           $42,005             9 %
Midland                                                      44,286            43,569             2 %
Headquarters                                                 (3,447)           (4,354)           21 %
                                                            -------           -------
  Total                                                     $86,695           $81,220             7 %
                                                            =======           =======



Boston Gas

The $2 million increase in operating earnings for the third quarter reflects the
lack of  severance  costs  incurred in 1995 and the margin  impact of  increased
demand and load growth, partially offset by higher operating expenses.

Operating  earnings  for the first  nine  months of 1996  increased  by about $4
million, as compared to 1995,  primarily  reflecting the margin impact of colder
weather,  increased demand and sales to new customers.  The absence of severance
costs  and  lower  consulting  expenses  also  contributed  to the  increase  in
operating earnings. Higher charges for depreciation,  lower capitalized expenses
and higher property taxes were partially offsetting.



Midland Enterprises

Although  Midland's third quarter operating earnings declined 7% from the record
third quarter in 1995,  they are the second  highest  third quarter  earnings on
record.  The decrease  reflected lower ton miles,  higher operating costs due to
traffic  pattern  inefficiencies  resulting from the reduction in export tonnage
and higher fuel prices.

Year-to-date  operating  earnings increased 2% over 1995, setting a new earnings
record.  Increased  volume and rates for iron, scrap and steel and strong second
quarter export coal demand contributed to the improved year-to-date results. The
16% increase in diesel prices was partially offset by fuel adjustment clauses in
Midland's long-term contracts.



                                                                Form 10-Q
                                                                Page 10.


Interest Income and Expense and Other, Net:

Interest  income  increased  $0.9 million for the third quarter and $3.7 million
for the  first  nine  months  of 1996,  reflecting  higher  cash and  investment
balances resulting from the sale of WaterPro Supplies in April 1995 and the sale
of Eastern's  investment in U. S. Filter Corp in November 1995. Interest expense
decreased  9% for both the  third  quarter  and the first  nine  months of 1996,
reflecting lower average rates principally due to the refinancing of $60 million
of Boston Gas  debentures  in  December  1995 and lower  balances  of short term
obligations.

For the third quarter of 1996,  Other, net includes gains of $1.1 million on the
disposition of Eastern's equity interest in the Maritimes and Northeast Pipeline
and $0.9  million on the sale of U.S.  Filter  stock,  partially  offset by $0.8
million equity in the losses of AllEnergy  Inc.  Year-to-date  results  included
$1.8 million equity in the loss of AllEnergy Inc.,  partially offset by gains on
the sale of U.S. Filter stock and other securities.

Forward Looking Information:

This report and other company reports and statements issued or made from time to
time contain certain "forward looking  statements"  concerning  projected future
financial performance or concerning expected plans or future operations. Eastern
cautions that actual results and  developments  may differ  materially from such
projections or expectations.

Investors  should be aware of important  factors that could cause actual results
to differ materially from the forward-looking projections or expectations. These
factors include,  but are not limited to:  temperatures above or below normal in
Boston  Gas'  service  territory,  adverse  operating  conditions  on the inland
waterways,  uncertainties  regarding  the start-up of AllEnergy  LLC,  including
expense levels and customer  acceptance,  changes in interest rates,  regulatory
decisions,  and  developments  with  respect to  Eastern's  previously-disclosed
environmental  and Coal Act  liabilities,  all of which are difficult to predict
and are generally beyond Eastern's control.



LIQUIDITY AND CAPITAL RESOURCES

Management  believes that  projected cash flow from  operations,  in combination
with currently  available  capital  resources,  is more than  sufficient to meet
Eastern's 1996 capital expenditure and working capital  requirements,  potential
funding of its Coal Act and  environmental  liabilities,  normal debt repayments
and anticipated dividend payments to shareholders.

Consolidated  capital expenditures for 1996 are estimated to total approximately
$108 million, of which $76 million have already been expended.  About 55% of the
projected total are for Boston Gas and the balance primarily for Midland.

On May  17,  1996,  Boston  Gas  filed  a  restructuring  and  performance-based
regulation  ("PBR")  proposal  with  the  Massachusetts   Department  of  Public
Utilities. As part of this proposal, Boston Gas has requested a $30 million rate
increase to become effective December 1, 1996.



                                                                Form 10-Q
                                                                Page 11.


In the restructuring proposal,  Boston Gas has proposed to unbundle its services
through the opening of its distribution  system to competition.  Under the plan,
all customers,  on a phased basis, would be allowed a choice among alternate gas
suppliers.  Boston Gas has proposed to cease the purchasing and reselling of gas
(commonly  referred to as the "merchant  function") by the year 2000 and thus to
become a  "distribution-only"  company.  In general,  PBR would set future rates
according  to a  pre-determined  formula.  Any  savings  or  productivity  gains
achieved  by Boston  Gas in excess of target  levels  would  increase  operating
earnings,  while any shortfalls  would result in lower earnings.  Boston Gas has
proposed that the PBR plan last for five years.

On September 18, 1996,  Eastern and New England  Electric System ("NEES") formed
AllEnergy LLC, an unregulated  retail energy marketing  company that is intended
to provide a comprehensive  array of energy commodities and related products and
services to customers in the  Northeast.  AllEnergy  LLC combines  Eastern's and
NEES' existing unregulated retail energy marketing subsidiaries,  AllEnergy Inc.
and NEES Energy, Inc., respectively, and is owned equally by both companies. The
participation  of NEES and NEES Energy,  Inc. in the joint venture is subject to
approval by the Securities and Exchange Commission.

In  September   1996  Eastern   received   notices  from  the  Social   Security
Administration  claiming that Eastern is responsible for health benefit premiums
for an additional group of retired coal miners and their beneficiaries under the
federal Coal Industry Retiree Health Benefit Act of 1992. As described in Note 4
of Notes to Financial  Statements,  the liability for these additional  premiums
could result in an addition to Eastern's reserve for such Coal Act liability and
would be recorded as an  extraordinary  item. No provision has been made at this
time because the amount of the additional  reserve, if any, cannot be reasonably
estimated.

On October 24, 1996, Eastern's Board of Trustees voted to increase the quarterly
cash dividend from $.37 per share to $.40 per share,  payable on January 3, 1997
to shareholders of record as of December 2, 1996.



                                                                Form 10-Q
                                                                Page 12.

                           PART II. OTHER INFORMATION






  Item 6.  Exhibits and Reports on Form 8-K

                  (a)  List of Exhibits

                           None.


                  (b)  Reports on Form 8-K

                       There  were no reports on Form 8-K filed in the third
                       quarter of 1996.



                                                                Form 10-Q
                                                                Page 13.










                                                  SIGNATURES


         It is Eastern's  opinion that the  financial  information  contained in
this report  reflects all  adjustments  necessary to present a fair statement of
results  for the  period  reported.  All of  these  adjustments  are of a normal
recurring  nature.  Results  for the period are not  necessarily  indicative  of
results to be expected  for the year,  due to the  seasonal  nature of Eastern's
operations.  All  accounting  policies have been applied in a manner  consistent
with  prior  periods  other  than  changes   disclosed  in  Notes  to  Financial
Statements.  Such financial  information is subject to year-end  adjustments and
annual audit by independent public accountants.

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







                                          EASTERN ENTERPRISES



                                          By      JAMES J. HARPER
                                            -----------------------------
                                                  James J. Harper
                                            Vice President and Controller
                                              (Chief Accounting Officer)


                                          By     WALTER J. FLAHERTY
                                            -----------------------------
                                                 Walter J. Flaherty
                                              Senior Vice President and
                                               Chief Financial Officer






October 25, 1996