
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549


                                 FORM 10-Q


           X     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                    For the quarterly period ended December 31, 1994


                                    OR


                  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                        Commission File Number 1-2918

                                 ASHLAND INC.
                         (Formerly Ashland Oil, Inc.)
          (Exact name of registrant as specified in its charter)



           Kentucky                                          61-0122250
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                          Identification No.)

1000 Ashland Drive, Russell, Kentucky                          41169
(Address of principal executive offices                      (Zip Code)

  P.O. Box 391, Ashland, Kentucky                              41114
         (Mailing Address)                                   (Zip Code)


              Registrant's telephone number, including area code (606) 329-3333

              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
                                                                 ----   ----

              At  January  31,  1995,  there  were  60,766,604   shares  of
              Registrant's Common Stock outstanding.  One-half of one Right
              to  purchase  one-tenth  of a share of  Cumulative  Preferred
              Stock,  Series of 1987 accompanies each outstanding  share of
              Registrant's Common Stock.

<PAGE>


                      PART I - FINANCIAL INFORMATION


<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
- -----------------------------------------------------------------------------------------------

                                                                      Three months ended
                                                                          December 31
                                                                    ----------------------
(In millions except per share data)                                   1994           1993
- -----------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>
REVENUES
    Sales and operating revenues (including excise taxes)        $   2,768      $   2,572
    Other                                                               10              6
                                                                 ---------      ---------
                                                                     2,778          2,578
COSTS AND EXPENSES
    Cost of sales and operating expenses                             2,095          1,914
    Excise taxes on products and merchandise                           244            206
    Selling, general and administrative expenses                       267            247
    Depreciation, depletion and amortization                            76             72
    General corporate expenses                                          25             19
                                                                 ---------      ---------
                                                                     2,707          2,458
                                                                 ---------      ---------
OPERATING INCOME                                                        71            120

OTHER INCOME (EXPENSE)
    Interest expense (net of interest income)                          (32)           (29)
    Equity income (loss)                                                11             (6)
                                                                 ---------      ---------

INCOME BEFORE INCOME TAXES                                              50             85
    Income taxes                                                        15             27
                                                                 ---------      ---------

NET INCOME                                                       $      35      $      58
                                                                 =========      =========

EARNINGS PER SHARE - Note E
    Primary                                                      $     .50      $     .90
    Assuming full dilution                                       $     .50      $     .83


DIVIDENDS PAID PER COMMON SHARE                                  $    .275      $     .25


</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                               2

<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------
                                                                  December 31           September 30      December 31
(In millions)                                                            1994                   1994             1993
- -----------------------------------------------------------------------------------------------------------------------

                           ASSETS
<S>                                                                  <C>                  <C>                 <C>
CURRENT ASSETS
    Cash and cash equivalents                                        $      56            $      40           $      63
    Accounts receivable                                                  1,359                1,346               1,124
    Allowance for doubtful accounts                                        (21)                 (23)                (21)
    Construction completed and in progress                                  31                   55                  27
    Inventories - Note B                                                   698                  601                 561
    Deferred income taxes                                                   64                   71                  72
    Other current assets                                                    72                   81                  68
                                                                     ---------            ---------           ---------
                                                                         2,259                2,171               1,894
INVESTMENTS AND OTHER ASSETS
    Investments in and advances to unconsolidated affiliates               297                  291                 271
    Investments of captive insurance companies                             182                  181                 190
    Cost in excess of net assets of companies acquired                      81                   80                  64
    Other noncurrent assets                                                290                  276                 288
                                                                     ---------            ---------           ---------
                                                                           850                  828                 813
PROPERTY, PLANT AND EQUIPMENT
    Cost                                                                 5,951                5,898               5,757
    Accumulated depreciation, depletion and amortization                (3,109)              (3,082)             (2,994)
                                                                     ---------            ---------           ---------
                                                                         2,842                2,816               2,763
                                                                     ---------            ---------           ---------

                                                                     $   5,951            $   5,815           $   5,470
                                                                     =========            =========           =========
            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Debt due within one year                                         $     199            $     133           $     127
    Trade and other payables                                             1,510                1,520               1,315
    Income taxes                                                            44                   35                  38
                                                                     ---------            ---------           ---------
                                                                         1,753                1,688               1,480
NONCURRENT LIABILITIES
    Long-term debt (less current portion)                                1,439                1,391               1,384
    Accrued pension and other postretirement benefits                      520                  515                 515
    Reserves of captive insurance companies                                179                  173                 186
    Deferred income taxes                                                   34                   30                  44
    Other long-term liabilities and deferred credits                       407                  423                 366
    Commitments and contingencies - Note C                           _________            _________           _________
                                                                         2,579                2,532               2,495
STOCKHOLDERS' EQUITY
    Convertible preferred stock                                            293                  293                 293
    Common stockholders' equity                                          1,326                1,302               1,202
                                                                     ---------            ---------           ---------
                                                                         1,619                1,595               1,495
                                                                     ---------            ---------           ---------

                                                                     $   5,951            $   5,815           $   5,470
                                                                     =========            =========           =========

</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
                                                                   3

<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED COMMON STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                     Loan to
                                                                                    leveraged
                                                                                     employee    Prepaid
                                                                                        stock    contri-
                                                                                    ownership     bution
                                                   Common    Paid-in   Retained          plan         to
(In millions)                                       stock    capital   earnings       (LESOP)      LESOP        Other      Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>        <C>       <C>         <C>           <C>           <C>      <C>
BALANCE  AT OCTOBER 1, 1993                       $    60    $   143   $  1,008    $      (33)   $    (6)      $  (10)  $  1,162
  Net income                                                                 58                                               58
  Dividends
     Preferred stock                                                         (4)                                              (4)
     Common stock                                                           (15)                                             (15)
  Issued common stock under stock
     incentive plans                                               2                                                           2
  Other changes                                                                                                    (1)        (1)
                                                  -------    -------   --------    -----------   --------      -------  ---------
BALANCE AT DECEMBER 31, 1993                      $    60    $   145   $  1,047    $      (33)   $    (6)      $  (11)  $  1,202
                                                  =======    =======   ========    ===========   ========      =======  =========


BALANCE AT OCTOBER 1, 1994                        $    61    $   159   $  1,126    $      (33)   $     -       $  (11)  $  1,302
  Net income                                                                 35                                               35
  Dividends
     Preferred stock                                                         (4)                                              (4)
     Common stock                                                           (17)                                             (17)
  Issued common stock under stock
     incentive plans                                               3                                                           3
  LESOP loan repayment                                                                      8                                  8
  Other changes                                                                                                    (1)        (1)
                                                  -------    -------   --------    -----------   --------      -------  ---------
BALANCE AT DECEMBER 31, 1994                      $    61    $   162   $  1,140    $      (25)   $     -       $  (12)  $  1,326
                                                  =======    =======   ========    ===========   ========      =======  =========


</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                                                        4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
- ----------------------------------------------------------------------------------------------------
                                                                            Three months ended
                                                                                December 31
                                                                      ------------------------------
(In millions)                                                              1994                 1993
- ----------------------------------------------------------------------------------------------------
<S>                                                                    <C>                  <C>
CASH FLOWS FROM OPERATIONS
    Net income                                                         $     35             $     58
    Expense (income) not affecting cash
      Depreciation, depletion and amortization (1)                           79                   75
      Deferred income taxes                                                  11                    7
      Undistributed earnings of unconsolidated affiliates                    (7)                   9
      Loss (gain) on sale of operations - net of current income taxes         -                    3
      Other noncash items                                                    (9)                  25
    Change in operating assets and liabilities (2)                          (32)                 (14)
                                                                       ---------            ---------
                                                                             77                  163

CASH FLOWS FROM FINANCING
    Proceeds from issuance of long-term debt                                 63                    -
    Proceeds from issuance of capital stock                                   -                    2
    Repayment of long-term debt                                             (11)                 (36)
    Increase (decrease) in short-term debt                                   61                  (12)
    Dividends paid                                                          (21)                 (19)
                                                                       ---------            ---------
                                                                             92                  (65)

CASH FLOWS FROM INVESTMENT
    Additions to property, plant and equipment                             (102)                 (74)
    Purchase of operations - net of cash acquired                           (55)                  (5)
    Proceeds from sale of operations                                          2                    5
    Disposals of property, plant and equipment                                3                    3
    Investment purchases (3)                                                (63)                 (73)
    Investment sales and maturities (3)                                      62                   68
                                                                       ---------            ---------
                                                                           (153)                 (76)
                                                                       ---------            ---------

INCREASE IN CASH AND CASH EQUIVALENTS                                        16                   22

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                              40                   41
                                                                       ---------            ---------

CASH AND CASH EQUIVALENTS - END OF PERIOD                              $     56             $     63
                                                                       =========            =========
- ----------------------------------------------------------------------------------------------------
(1)   Includes amounts charged to general corporate expenses.
(2)   Excludes changes resulting from operations acquired or sold.
(3)   Represents primarily investment transactions of captive insurance companies.


</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
                                                    5

<PAGE>
- ----------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------

NOTE A - GENERAL

         The  accompanying   unaudited  condensed   consolidated  financial
         statements   have  been  prepared  in  accordance  with  generally
         accepted accounting principles for interim financial reporting and
         Securities and Exchange Commission regulations, but are subject to
         any year-end  audit  adjustments  which may be  necessary.  In the
         opinion  of  management,  all  adjustments  (consisting  of normal
         recurring accruals)  considered  necessary for a fair presentation
         have been included.  These financial  statements should be read in
         conjunction  with  Ashland's  Annual  Report  on Form 10-K for the
         fiscal year ended  September 30, 1994.  Results of operations  for
         the period ended December 31, 1994, are not necessarily indicative
         of results to be expected for the year ending September 30, 1995.

<TABLE>
<CAPTION>
NOTE B - INVENTORIES
- ---------------------------------------------------------------------------------------------------------------------------
                                                                      December 31         September 30         December 31
       (In millions)                                                         1994                 1994                1993
- ---------------------------------------------------------------------------------------------------------------------------
       <S>                                                                 <C>                 <C>                 <C>
       Crude oil                                                           $   254             $   243             $   229
       Petroleum products                                                      299                 286                 241
       Chemicals and other products                                            476                 421                 349
       Materials and supplies                                                   46                  46                  44
       Excess of replacement costs over LIFO carrying values                  (377)               (395)               (302)
                                                                           --------            --------            --------
                                                                           $   698             $   601             $   561
                                                                           ========            ========            ========
</TABLE>

NOTE C - LITIGATION, CLAIMS AND CONTINGENCIES

         Federal,  state and local statutes and regulations relating to the
         protection of the  environment  have a  significant  impact on the
         conduct  of  Ashland's   businesses.   For  information  regarding
         environmental  expenditures and reserves, see the "Miscellaneous -
         Governmental  Regulation  and Action -  Environmental  Protection"
         section of Ashland's
         Form 10-K.

         Environmental  reserves are subject to considerable  uncertainties
         which  affect  Ashland's  ability  to  estimate  its  share of the
         ultimate costs of required remediation efforts. Such uncertainties
         involve the nature and extent of  contamination  at each site, the
         extent of required  cleanup  efforts under existing  environmental
         regulations,  widely varying costs of alternate  cleanup  methods,
         changes in  environmental  regulations,  the  potential  effect of
         continuing improvements in remediation technology,  and the number
         and financial strength of other potentially responsible parties at
         multiparty sites. As a result, charges to income for environmental
         liabilities  could have a material effect on results of operations
         in  a  particular  quarter  or  fiscal  year  as  assessments  and
         remediation  efforts  proceed  or as  new  remediation  sites  are
         identified.  However,  such  charges  are not  expected  to have a
         material  adverse  effect  on  Ashland's   consolidated  financial
         position.

         Ashland has numerous  insurance  policies that provide coverage at
         various  levels for  environmental  costs.  Ashland  is  currently
         involved  in  negotiations  concerning  the  amount  of  insurance
         coverage for environmental costs under some of these policies.  In
         addition,   various  costs  of  remediation   efforts  related  to
         underground  storage  tanks are  eligible for  reimbursement  from
         state administered  funds.  Probable recoveries related to certain
         costs  incurred or  expected  to be  incurred in future  years are
         included in other noncurrent assets.

         In addition,  Ashland and its subsidiaries are parties to numerous
         claims and lawsuits  (some of which are for  substantial  amounts)
         with  respect  to  product  liability  and  commercial  and  other
         matters.  While these claims and actions are being contested,  the
         outcome of individual  matters is not predictable  with assurance.
         Although any actual  liability is not  determinable as of December
         31, 1994, Ashland believes that any liability resulting from these
         matters involving Ashland and its subsidiaries,  after taking into
         consideration  Ashland's  insurance  coverages and amounts already
         provided  for,  should  not  have a  material  adverse  effect  on
         Ashland's consolidated financial position.

                                        6
<PAGE>
- -------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

NOTE D - ACQUISITIONS

         During the quarter ended December 31, 1994,  Ashland  acquired the
         Zerex(R) antifreeze product line, a marine chemical business and a
         construction   materials   operation.   These   acquisitions  were
         accounted for as purchases  and did not have a significant  effect
         on Ashland's consolidated financial statements.

         Ashland   recently   exercised   an   option  to   purchase   from
         Saarbergwerke  AG all of Ashland  Coal's Class B Preferred  Stock,
         representing  about 15  percent of Ashland  Coal's  voting  stock.
         Expected  to close  on or about  February  8, the  purchase  will
         increase Ashland's ownership of Ashland Coal from 39 percent to 54
         percent.  The  closing  of this  transaction  will  result  in the
         consolidation of Ashland Coal into Ashland's financial  statements
         beginning with the March quarter and  retroactive to the beginning
         of fiscal 1995.
<TABLE>
<CAPTION>
NOTE E - COMPUTATION OF EARNINGS PER SHARE
- --------------------------------------------------------------------------------------
                                                                 Three months ended
                                                                    December 31
                                                             -------------------------
(In millions except per share data)                            1994               1993
- --------------------------------------------------------------------------------------
<S>                                                           <C>             <C>
PRIMARY EARNINGS PER SHARE
Income available to common shares
   Net income                                                 $     35        $     58
   Dividends on convertible preferred stock                         (4)             (4)
                                                              ---------       ---------
                                                              $     31        $     54
                                                              =========       =========
Average common shares and equivalents outstanding
   Average common shares outstanding                                61              60
   Common shares issuable upon exercise of stock options             -               1
   Share adjustment for LESOP                                        -              (1)
                                                              ---------       ---------
                                                                    61              60
                                                              =========       =========

Earnings per share                                            $   .50         $    .90
                                                              =========       =========
- ---------------------------------------------------------------------------------------


EARNINGS PER SHARE
   ASSUMING FULL DILUTION
Income available to common shares
   Net income                                                 $     35        $     58
   Dividends on convertible preferred stock                         (4)              -
   Interest on convertible debentures (net of income taxes)          -               2
                                                              ---------       ---------
                                                              $     31        $     60
                                                              =========       =========

Average common shares and equivalents outstanding
   Average common shares outstanding                                61              60
   Common shares issuable upon
     Exercise of stock options                                       -               1
     Conversion of debentures                                        -               3
     Conversion of preferred stock                                   -               9
   Share adjustment for LESOP                                        -              (1)
                                                              ---------       ---------
                                                                    61              72
                                                              =========       =========

Earnings per share                                            $    .50        $    .83
                                                              =========       =========

</TABLE>

                                                  7

<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
INFORMATION BY INDUSTRY SEGMENT
- ------------------------------------------------------------------------------------------------------
                                                                               Three months ended
                                                                                  December 31
                                                                               -----------------------
(Dollars in millions except as noted)                                          1994             1993
- ------------------------------------------------------------------------------------------------------
<S>                                                                       <C>             <C>
SALES AND OPERATING REVENUES
   Petroleum                                                              $   1,229       $    1,166
   SuperAmerica                                                                 442              424
   Valvoline                                                                    268              272
   Chemical                                                                     818              643
   Construction                                                                 274              316
   Exploration                                                                   48               52
   Intersegment sales                                                          (311)            (301)
                                                                          ----------      -----------
                                                                          $   2,768       $    2,572
                                                                          ==========      ===========
OPERATING INCOME
   Petroleum                                                              $       2       $       45
   SuperAmerica                                                                  18               21
   Valvoline                                                                      9               15
                                                                          ----------      -----------
      Total Refining and Marketing Group                                         29               81
   Chemical                                                                      47               28
   Construction                                                                  20               20
   Exploration                                                                    -               10
   General corporate expenses                                                   (25)             (19)
                                                                          ----------      -----------
                                                                          $      71       $      120
                                                                          ==========      ===========
EQUITY INCOME (LOSS)
   Arch Mineral Corporation                                               $       3       $       (7)
   Ashland Coal, Inc.                                                             5               (1)
   Other                                                                          3                2
                                                                          ----------      -----------
                                                                          $      11       $       (6)
                                                                          ==========      ===========
OPERATING INFORMATION
   Petroleum
     Product sales (thousand barrels per day) (1)                             360.0            377.0
     Refining inputs (thousand barrels per day) (2)                           321.9            359.5
     Value of products manufactured per barrel                            $   21.41       $    20.79
     Input cost per barrel                                                    17.73            15.79
                                                                          ----------      -----------
     Refining margin per barrel                                           $    3.68       $     5.00
   SuperAmerica
     Product sales (thousand barrels per day)                                  72.5             71.9
     Merchandise sales                                                    $     132       $      123
   Valvoline lubricant sales (thousand barrels per day) (1)                    17.6             16.5
   Construction backlog (3)
     At end of period                                                     $     523       $      447
     Decrease during period                                               $     (31)      $      (48)
   Exploration
     Net daily production
       Natural gas (million cubic feet) (1)                                    88.9            100.2
       Nigerian crude oil (thousand barrels)                                   19.4             19.5
     Sales price
       Natural gas (per thousand cubic feet)                              $    1.86       $     2.56
       Nigerian crude oil (per barrel)                                    $   15.85       $    15.14
   Arch Mineral Corporation (4)
     Tons sold (millions)                                                       7.4              3.8
     Sales price per ton                                                  $   26.84       $    24.08
   Ashland Coal, Inc. (4)
     Tons sold (millions)                                                       5.5              3.4
     Sales price per ton                                                  $   28.46       $    31.89
- -----------------------------------------------------------------------------------------------------
(1)  Includes intersegment sales.
(2)  Includes crude oil and other purchased feedstocks.
(3)  Amounts have been restated to exclude APAC's Arizona  operations which
     were sold in February 1994.
(4)  Amounts are  reported on a 100% basis for these  affiliated  companies
     accounted for on the equity method.

</TABLE>

                                                      8
<PAGE>

- --------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------


RESULTS OF OPERATIONS

         Ashland  recorded net income of $35 million for the first  quarter
         of fiscal 1995,  compared to $58 million for the first  quarter of
         fiscal 1994.  Operating income for the current quarter totaled $71
         million,  compared  to  $120  million  for  last  year's  December
         quarter. The decrease in earnings was due to a substantial decline
         in  operating  income  from  Petroleum.   However,  earnings  from
         Ashland's related energy and chemical  businesses improved 21%, as
         Chemical reported record quarterly earnings and equity income from
         Ashland's coal investments improved $16 million.  Construction had
         a good quarter, equaling the year-ago results, despite the sale of
         Arizona  operations in 1994.  Partially  offsetting these positive
         comparisons, profits from SuperAmerica,  Valvoline and Exploration
         declined when compared to last year's first quarter.


         Petroleum

         Operating income for Ashland  Petroleum totaled $2 million for the
         three months ended December 31, 1994,  compared to $45 million for
         the same period last year. A decrease in the  refining  margin and
         lower sales  volumes  were the primary  factors for the decline in
         earnings.  The refining  margin was $3.68 per barrel for the first
         quarter  of fiscal  1995,  compared  to $5.00  per  barrel in last
         year's first quarter. This decline paralleled the decrease in U.S.
         refining margins,  which steadily  deteriorated during the quarter
         as a result of  industry  overproduction  of  gasoline,  confusion
         surrounding  the   introduction   of  reformulated   gasoline  and
         unseasonably warm weather. In addition,  Ashland's refining margin
         for  the  first  quarter  of  fiscal  1994  was  enhanced  by  the
         introduction  of  low-sulfur  diesel  fuel.  Crude oil  throughput
         volumes were negatively affected by maintenance turnarounds during
         the current quarter at the Canton, Ohio and Catlettsburg, Kentucky
         refineries.  Major  turnarounds have been completed for all of the
         refineries  within the last twelve months.  Earnings from Scurlock
         Permian increased,  reflecting the streamlining and combination of
         operations, in addition to improved margins.


         SuperAmerica

         Although  down from a record  quarter of $21 million for the three
         months ended December 31, 1993,  SuperAmerica's  operating  income
         for the current quarter of $18 million represented one of its best
         quarters  ever.  The decline in  earnings  reflected a decrease in
         gasoline and merchandise margins,  partially offset by an increase
         in volumes.  Retail  gasoline  margins  remained strong during the
         current  quarter,  but were down slightly from the very  favorable
         levels of last year's first quarter.  An increase in the number of
         stores in operation this year  contributed to higher  gasoline and
         merchandise volumes. At December 31, 1994, 605 SuperAmerica stores
         were  operating,  compared  to 591 stores at  December  31,  1993.
         SuperAmerica plans to open 30 new stores during the current fiscal
         year, of which nine opened during the first quarter.


         Valvoline

         For  the  three  months  ended  December  31,  1994,   Valvoline's
         operating  income  totaled $9  million,  compared  to last  year's
         record  first  quarter of $15  million.  The  decline in  earnings
         reflected  reduced  branded  motor  oil  and  automotive  chemical
         volumes, combined with lower gross margins on all products, due to
         higher  component  costs.   These  unfavorable   comparisons  were
         partially   offset  by   improved   results   from   international
         operations,    reflecting    the    acquisition    of    Valvoline
         distributorships  in six  European  countries  during  the  second
         quarter  of fiscal  1994,  and  earnings  from the newly  acquired
         Zerex(R) antifreeze product line.

                                           9
<PAGE>
- --------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------


         Chemical

         For the  first  three  months  of fiscal  1995,  Ashland  Chemical
         reported record quarterly  operating  income of $47 million,  or a
         67%  improvement  when compared to earnings of $28 million for the
         same period  last year.  Record  profits of $22  million  from the
         petrochemical  group  reflected   substantially   higher  methanol
         margins.  The  distribution  and specialty  groups reported record
         first quarter results,  due to an increase in distribution margins
         and higher specialty sales volumes.


         Construction

         Operating  income from the APAC  construction  operations  for the
         three months ended  December 31,  amounted to $20 million for both
         the current and prior year,  despite last year's results including
         earnings  from the Arizona  operations  that were sold in February
         1994. Earnings from continuing operations increased 16%,  
         reflecting   favorable  operating  conditions  and  improved
         margins.  Backlog at December  31,  1994,  totaled  $523  million,
         compared to $447 million at December 31, 1993. With a strong first
         quarter  and a  17%  increase  in  backlog  at  December  31,  the
         construction operations are positioned to have a good year.


         Exploration

         For the first quarter of fiscal 1995, Ashland Exploration reported
         break-even results, compared to income of $10 million for the same
         period  last year.  Industry-wide  deterioration  in  natural  gas
         prices and reduced production were the principal factors resulting
         in an $8 million  decrease in  domestic  operating  income.  Also,
         earnings  from foreign  operations  declined,  reflecting  reduced
         profitability from the existing  producing  properties in Nigeria.
         During the  quarter,  Ashland  Exploration  announced  an offshore
         Louisiana  commercial  gas  discovery  in  which  Ashland  is  the
         operator with a 50 percent working interest.  Four wells have been
         successful,  with a production zone from the first well testing up
         to 5 million cubic feet a day.  Ashland  Exploration has agreed to
         acquire  the  northern  West  Virginia  assets of two  natural gas
         companies,  Waco Oil & Gas, a  Glenville,  W.Va.,  firm and United
         Meridian Corporation,  a Houston-based  company. The completion of
         these  acquisitions would add 1,265 gas wells producing 13 million
         cubic feet of natural gas to Ashland's holdings.


         General Corporate Expenses

         For the first quarter of fiscal 1995,  general corporate  expenses
         totaled $25  million,  compared to expenses of $19 million for the
         first  quarter of fiscal 1994.  The increase in expenses  included
         higher accruals this year for performance  based  compensation and
         the  effect  of   positive   adjustments   related  to   estimated
         liabilities and reserves on last year's results.


         Other Income (Expense)

         Interest   expense  for  the  quarter  ended  December  31,  1994,
         increased  when compared to the same period last year,  reflecting
         higher  interest  rates on  floating-rate  debt and higher average
         outstanding balances for both short-term and long-term debt.

         Ashland recorded equity income of $3 million from Arch Mineral for
         the current quarter,  compared to an equity loss of $7 million for
         the three  months ended  December 31, 1993.  Results for the prior
         year  were  adversely  impacted  by the  UMW  strike  which  ended
         December 14, 1993. The current quarter included favorable results,
         including  1.1  million  tons of coal  sales,  from  the  AgipCoal
         properties which were acquired January 31, 1994.

         Equity  income from  Ashland  Coal  amounted to $5 million for the
         quarter ended December 31, 1994,  compared to an equity loss of $1
         million for the same period last year.  Ashland Coal's results for
         the current

                                         10
<PAGE>
- --------------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------

         Other Income (Expense) (continued)

         year included quarterly records for pre-tax income, production and
         sales tons.  The negative  effect of the UMW strike,  coupled with
         damage  to a coal  silo  at  Mingo  Logan  Coal  Company,  reduced
         earnings  for  last  year's  December  quarter.  Ashland  recently
         exercised  an  option  to  purchase  from  Saabergwerke  AG all of
         Ashland  Coal's  Class B Preferred  Stock,  representing  about 15
         percent of Ashland  Coal's voting  stock.  Expected to close on or
         about February 8, the purchase will increase  Ashland's  ownership
         of Ashland Coal from 39 percent to 54 percent. The closing of this
         transaction will result in the  consolidation of Ashland Coal into
         Ashland's  financial  statements  beginning with the March quarter
         and retroactive to the beginning of fiscal 1995.


FINANCIAL POSITION

         Liquidity

         Ashland's  financial position has enabled it to obtain capital for
         its financing needs and maintain  investment  grade ratings on its
         senior debt of Baa1 from  Moody's and BBB from  Standard & Poor's.
         Ashland has revolving credit  agreements  providing for up to $350
         million in  borrowings,  none of which were in use at December 31,
         1994. At that date, Ashland could issue an additional $164 million
         in  medium-term   notes  under  a  shelf   registration  with  the
         Securities   and   Exchange   Commission   (SEC)   should   future
         opportunities or needs arise. During the current quarter,  Ashland
         filed a universal  shelf  registration  statement  with the SEC to
         allow for  offerings  from time to time of up to $600  million  in
         debt and/or equity securities.  Ashland also has access to various
         uncommitted lines of credit and commercial paper markets,  and had
         short-term notes and commercial paper of $132 million  outstanding
         at December  31,  1994.  While  certain  debt  agreements  contain
         covenants restricting the amount by which Ashland can increase its
         indebtedness, such indebtedness could have been increased by up to
         $641 million at December 31, 1994.

         Cash and cash  equivalents at December 31, 1994, were $56 million,
         compared to $40 million at  September  30,  1994.  Cash flows from
         operations, a major source of Ashland's liquidity, amounted to $77
         million for the three months ended December 31, 1994,  compared to
         $163 million for the three months  ended  December 31, 1993.  This
         decrease was attributed  primarily to lower earnings this year and
         an increase in working capital requirements.

         Working  capital at December 31, 1994, was $506 million,  compared
         to $483 million at September 30, 1994.  Liquid assets (cash,  cash
         equivalents  and  accounts  receivable)  as a percent  of  current
         liabilities  amounted to 80% at December 31, 1994, compared to 81%
         at September 30, 1994.  Ashland's working capital is significantly
         affected  by its use of the LIFO  method of  inventory  valuation,
         which  valued  such   inventories  at  $377  million  below  their
         replacement costs at December 31, 1994.

         Capital Resources

         For the three months ended December 31, 1994,  property  additions
         amounted  to $102  million,  compared  to $74 million for the same
         period last year. Property additions (including  exploration costs
         and geophysical  expenses) and cash dividends for the remainder of
         fiscal  1995  are  estimated  at $362  million  and  $64  million,
         respectively.  Ashland  anticipates  meeting  its  remaining  1995
         capital requirements for property additions and dividends principally
         from internally generated funds. External financing will likely be
         necessary to provide funds for the remainder of such requirements,
         for remaining contractual maturities of $51 million for  long-term
         debt or for acquisitions.

         Ashland's  capitalization  at December 31, 1994,  consists of debt
         due within one year (6%),  long-term debt (44%),  deferred  income
         taxes  (1%),   convertible   preferred   stock  (9%),  and  common
         stockholders'  equity  (40%).  Total  debt as a  percent  of total
         capitalization  was 50% at December 31,  1994,  compared to 48% at
         September 30, 1994. As a result of the purchase of the Saabergwerke
         AG shares and the  consolidation of Ashland Coal,  Ashland's total
         debt  as  a  percent  of  total   capitalization   will  increase
         approximately  2%. At December 31, 1994,  long-term  debt included
         $78 million of floating-rate debt, and the interest rates on an

                                              11
<PAGE>

- --------------------------------------------------------------------------
ASHLAND INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------

         Capital Resources (continued)

         additional  $430  million of  fixed-rate  debt were  converted  to
         floating rates through  interest rate swaps.  As a result,  future
         interest costs will fluctuate  with  short-term  interest rates in
         1995 on 34% of Ashland's long-term debt.


ENVIRONMENTAL MATTERS

         Federal,  state and local statutes and regulations relating to the
         protection of the  environment  have resulted in higher  operating
         costs and capital  investments  by the industries in which Ashland
         operates.   Because  of  the   continuing   trend  toward  greater
         environmental  awareness and increasingly stringent  environmental
         regulations,  Ashland believes that expenditures for environmental
         compliance  will  continue  to have a  significant  effect  on the
         conduct of its businesses.  Although it cannot accurately  predict
         how these developments will affect future operations and earnings,
         Ashland does not believe the nature and  significance of its costs
         will  vary  significantly  from  those of its  competitors  in the
         petroleum  and  chemical  industries.  For  information  regarding
         environmental  expenditures and reserves, see the "Miscellaneous -
         Governmental  Regulation  and Action -  Environmental  Protection"
         section of Ashland's Form 10-K.

         Environmental  reserves are subject to considerable  uncertainties
         which  affect  Ashland's  ability  to  estimate  its  share of the
         ultimate costs of required remediation efforts. Such uncertainties
         involve the nature and extent of  contamination  at each site, the
         extent of required  cleanup  efforts under existing  environmental
         regulations,  widely varying costs of alternate  cleanup  methods,
         changes in  environmental  regulations,  the  potential  effect of
         continuing improvements in remedial technology, and the number and
         financial  strength of other  potentially  responsible  parties at
         multiparty sites. As a result, charges to income for environmental
         liabilities  could have a material effect on results of operations
         in  a  particular  quarter  or  fiscal  year  as  assessments  and
         remediation  efforts  proceed  or as  new  remediation  sites  are
         identified.  However,  such  charges  are not  expected  to have a
         material  adverse  effect  on  Ashland's   consolidated  financial
         position, cash flow or liquidity.


                                          12


                                PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------

ITEM 1.       LEGAL PROCEEDINGS

              Environmental  Proceedings  - (1) As of  December  31,  1994,
              Ashland  was  subject to 71 notices  received  from the USEPA
              identifying  Ashland  as a  "potentially  responsible  party"
              ("PRP")  under  CERCLA  and  the   Superfund   Amendment  and
              Reauthorization  Act ("SARA") for potential joint and several
              liability  for  cleanup  costs  in  connection  with  alleged
              releases of hazardous substances from various waste treatment
              or  disposal  sites.  These  sites are  currently  subject to
              ongoing  investigation and remedial  activities,  overseen by
              the USEPA in accordance  with  procedures  established  under
              CERCLA  and  SARA  regulations,   in  which  Ashland  may  be
              participating  as a member of various PRP groups.  Generally,
              the type of relief sought by the USEPA  includes  remediation
              of contaminated  soil and/or  groundwater,  reimbursement for
              the costs of site cleanup or oversight expended by the USEPA,
              and/or long-term  monitoring of  environmental  conditions at
              the  sites.   Ashland  also   receives   notices  from  state
              environmental agencies pursuant to similar state legislation.
              Ashland  carefully  monitors the  investigatory  and remedial
              activity at many of these sites. Based on its experience with
              site remediation,  its familiarity with current environmental
              laws and regulations,  its analysis of the specific hazardous
              substances  at  issue,  the  existence  of other  financially
              viable  PRPs  and its  current  estimates  of  investigatory,
              clean-up and monitoring costs at each site,  Ashland believes
              that its liability at these sites,  either individually or in
              the   aggregate,   after  taking  into  account   established
              reserves,   will  not  have  a  material  adverse  effect  on
              Ashland's  consolidated  financial  position,  cash  flow  or
              liquidity but could have a material adverse effect on results
              of  operations  in  a  particular  quarter  or  fiscal  year.
              Estimated   costs  for  these   matters  are   recognized  in
              accordance  with  generally  accepted  accounting  principles
              governing  probability and the ability to reasonably estimate
              future costs.

              (2) Ashland received a Notice of Potential Liability from the
              Commonwealth  of  Pennsylvania  regarding  a crude  oil spill
              incident in the Delaware River in July 1994 involving the M/V
              Kentucky,  which Ashland charters under a long-term  bareboat
              charter.

              (3) On  December  19,  1994,  Ashland  received  a demand for
              penalty for alleged  violations from the Minnesota  Pollution
              Control Agency  ("MPCA").  The demand  alleges  violations of
              various  Minnesota  statutes and rules relating to discharges
              to the environment and above ground storage tank  safeguards,
              with  respect to a leak of gasoline  from a tank at Ashland's
              St.  Paul  Park  refinery.  In its  response  to the  demand,
              Ashland stated it believes it has complied with the requisite
              provisions  of Minnesota  law.  Ashland  anticipates  further
              discussions with the MPCA.

              El Paso Dispute - On March 11, 1993, a complaint was filed by
              El Paso Refinery,  L.P., against Scurlock Permian Corporation
              ("SPC"), a


<PAGE>



              wholly owned subsidiary of Ashland,  in the District Court of
              El Paso County,  Texas. El Paso Refinery,  L.P., is currently
              in  Chapter  7   bankruptcy.   Plaintiff   alleges  that  SPC
              wrongfully breached certain duties under a contract to supply
              crude oil.  Plaintiff  further  alleges  violations  of Texas
              usury law, common law fraud and duress and seeks  substantial
              damages.  In an apparent companion case filed the same day by
              individual  plaintiffs  (two  officers  of El Paso  Refining,
              Inc., the general partner of El Paso Refinery, L.P.), damages
              are sought against SPC and others based upon the execution by
              plaintiffs  of  promissory   notes  in  connection  with  the
              financing  of the  refinery.  Ashland and SPC  believe  these
              complaints  to be  without  merit and  intend to defend  them
              vigorously.  SPC is a  creditor  in the  El  Paso  bankruptcy
              proceeding  and had filed a proof of claim for  approximately
              $39 million  against the bankrupt  estate.  As of January 23,
              1995,  SPC had  received  approximately  $20 million from the
              liquidation  of  collateral.  Ashland  believes  its  current
              reserves  are adequate to cover any  shortfall  that could be
              sustained in the bankruptcy proceeding.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              (a)   Ashland's  Annual Meeting of  Shareholders  was held on
                    January 26, 1995,  at the Ashland  Petroleum  Executive
                    Office Building,  Ashland Drive,  Russell,  Kentucky at
                    10:30 a.m.

              (b)   Ashland's shareholders at said meeting elected 6 directors:

                                                    Votes

                                        Affirmative            Withheld
                                        -----------            ---------
              Jack S. Blanton           52,509,682              507,104
              Samuel C. Butler          52,468,740              517,292
              Edmund B. Fitzgerald      52,487,935              496,817
              John R. Hall              52,481,275              521,239
              Mannie L. Jackson         52,476,829              516,584
              James W. Vandeveer        52,496,865              512,100

              Directors who continued in office:  Thomas E. Bolger, Frank C.
              Carlucci, Paul W. Chellgren, James B. Farley, Ralph E. Gomory,
              Patrick F. Noonan, Jane C. Pfeiffer, James R. Rinehart, Michael D.
              Rose, William L. Rouse, and Dr. Robert B. Stobaugh.

              (c)       Ashland's shareholders at said meeting ratified the
                        appointment   of  Ernst  &  Young  as   independent
                        auditors   for  fiscal  year  1995  by  a  vote  of
                        52,334,711  affirmative  to  471,923  negative  and
                        176,387 abstention votes.

              (d)       Ashland's shareholders at said meeting approved the
                        amendment to Ashland's Second Restated Articles of
                        Incorporation to change Ashland's name to Ashland Inc.
                        by a vote of 51,239,239 affirmative to 1,370,949
                        negative and 372,833 abstention votes.  The amendment
                        was effective January 27, 1995.  A copy of the
                        Articles are attached as Exhibit 3.1


<PAGE>



              (e)       Ashland's shareholders at said meeting approved the
                        Ashland Inc. 1995 Performance Unit Plan by a vote of
                        38,300,729 affirmative to 13,747,717 negative and
                        932,073 abstention votes.  A copy of the Plan is
                        attached as Exhibit B.

              (f)       Ashland's shareholders at said meeting approved the
                        Ashland Inc.  Incentive  Compensation  Plan for Key
                        Executives by a vote of 37,804,958  affirmative  to
                        14,101,375 negative and 1,076,688 abstention votes.
                        A copy of the Plan is attached as Exhibit C.

              (g)       Ashland's shareholders at said meeting approved the
                        Ashland Inc.  Deferred  Compensation Plan by a vote
                        of 41,212,632  affirmative  to 10,663,573  negative
                        and 1,106,816  abstention votes. A copy of the Plan
                        is attached as Exhibit D.

              (h)       The results of voting on a shareholder proposal for
                        the Board of Directors  to take steps  necessary to
                        require that at future  elections of directors  all
                        directors  be  elected   annually  were  29,659,014
                        negative to  18,432,619  affirmative  and 1,251,949
                        abstention and 3,639,439 broker non-votes.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

              (a)       Exhibits

                        3.1      Second Restated Articles of Incorporation of
                                 Ashland, as amended to January 27, 1995.

                        3.2      By-laws of Ashland, as amended to January 27,
                                 1995.

                        10.18    Ashland Inc. 1995 Performance Unit Plan

                        10.19    Ashland Inc. Incentive Compensation Plan for
                                 Key Executives

                        10.20    Ashland Inc. Deferred Compensation Plan

                        27       Financial Data Schedule

              (b)       Reports on Form 8-K

                        None


<PAGE>


                                    SIGNATURES

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


                                                        Ashland Inc.
                                            --------------------------------
                                                        (Registrant)

          Date   February 8, 1995                  /s/  Kenneth L. Aulen
                                            -----------------------------
                                            Kenneth L. Aulen
                                            Administrative Vice President
                                            and Controller
                                            (Chief Accounting Officer)

          Date   February 8, 1995                 /s/  Thomas L. Feazell
                                            ---------------------------------
                                            Thomas L. Feazell
                                            Senior Vice President,
                                            General Counsel and Secretary

