UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                         ---------------
                            FORM 10-Q


(Mark One)

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

For the quarterly period ended       June 30, 2002
                               ----------------------------------

                               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             1-720
                       ------------------------------------------


                   PHILLIPS PETROLEUM COMPANY
     (Exact name of registrant as specified in its charter)


           Delaware                                73-0400345
-------------------------------               -------------------
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)                Identification No.)


         Phillips Building, Bartlesville, Oklahoma 74004
      (Address of principal executive offices)  (Zip Code)


                          918-661-6600
      (Registrant's telephone number, including area code)
                         ---------------

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                          Yes   X     No
                              -----      -----

The registrant had 383,314,042 shares of common stock, $1.25 par
value, outstanding at July 31, 2002.


<PAGE>


                      PART I. FINANCIAL INFORMATION


-----------------------------------------------------------------------------
Consolidated Statement of Income                   Phillips Petroleum Company

                                                   Millions of Dollars
                                             --------------------------------
                                               Three Months       Six Months
                                                  Ended             Ended
                                                 June 30           June 30
                                             --------------------------------
                                                2002    2001     2002    2001
                                             --------------------------------
Revenues
Sales and other operating revenues*          $11,558   5,312   20,930  10,593
Equity in earnings of affiliated companies        29      94       49     121
Other revenues                                    27      22       33      31
-----------------------------------------------------------------------------
    Total Revenues                            11,614   5,428   21,012  10,745
-----------------------------------------------------------------------------

Costs and Expenses
Purchased crude oil and products               7,590   2,378   13,621   4,887
Production and operating expenses                889     563    1,810   1,162
Exploration expenses                              67      64      230     131
Selling, general and administrative expenses     423     151      895     286
Depreciation, depletion and amortization         419     329      834     651
Property impairments                               8      23       18      23
Taxes other than income taxes*                 1,364     613    2,579   1,180
Accretion on discounted liabilities                6       4       11       4
Interest expense                                 106      82      213     166
Foreign currency transaction losses (gains)       (6)      1       (5)      8
Preferred dividend requirements of
  capital trusts                                  11      13       24      26
-----------------------------------------------------------------------------
    Total Costs and Expenses                  10,877   4,221   20,230   8,524
-----------------------------------------------------------------------------
Income before income taxes, extraordinary
  item and cumulative effect of change in
  accounting principle                           737   1,207      782   2,221
Provision for income taxes                       371     588      518   1,114
-----------------------------------------------------------------------------
Income Before Extraordinary Item and
  Cumulative Effect of Change in Accounting
  Principle                                      366     619      264   1,107
Extraordinary item                               (15)      -      (15)      -
Cumulative effect of change in accounting
  principle                                        -       -        -      28
-----------------------------------------------------------------------------
Net Income                                   $   351     619      249   1,135
=============================================================================

Net Income Per Share of Common Stock
Basic
  Before extraordinary item and cumulative
    effect of change in accounting principle $   .95    2.42      .69    4.33
  Extraordinary item                            (.04)      -     (.04)      -
  Cumulative effect of change in accounting
    principle                                      -       -        -     .11
-----------------------------------------------------------------------------
Net Income                                   $   .91    2.42      .65    4.44
=============================================================================
Diluted
  Before extraordinary item and cumulative
    effect of change in accounting principle $   .95    2.40      .69    4.30
  Extraordinary item                            (.04)      -     (.04)      -
  Cumulative effect of change in accounting
    principle                                      -       -        -     .11
-----------------------------------------------------------------------------
Net Income                                   $   .91    2.40      .65    4.41
=============================================================================

Dividends Paid                               $   .36     .34      .72     .68
-----------------------------------------------------------------------------

Average Common Shares Outstanding
  (in thousands)
    Basic                                    383,913 255,809  383,130 255,683
    Diluted                                  386,711 257,682  385,927 257,337
-----------------------------------------------------------------------------
*Includes excise taxes on petroleum
 products sales                             $  1,191     463    2,239     876
See Notes to Financial Statements.


                                       1

<PAGE>


----------------------------------------------------------------------
Consolidated Balance Sheet                  Phillips Petroleum Company

                                                  Millions of Dollars
                                                 ---------------------
                                                 June 30   December 31
                                                    2002          2001
                                                 ---------------------
Assets
Cash and cash equivalents                        $   145           142
Accounts and notes receivable (less
  allowances of $16 million in 2002
  and $33 million in 2001)                         1,826         1,189
Accounts and notes receivable--related parties       113           105
Inventories                                        2,580         2,618
Deferred income taxes                                 96            47
Prepaid expenses and other current assets            299           262
----------------------------------------------------------------------
    Total Current Assets                           5,059         4,363
Investments and long-term receivables              3,530         3,317
Properties, plants and equipment (net)            24,399        23,796
Goodwill                                           2,360         2,281
Intangibles                                        1,270         1,313
Deferred income taxes                                  8             9
Deferred charges                                     197           138
----------------------------------------------------------------------
Total                                            $36,823        35,217
======================================================================

Liabilities
Accounts payable                                 $ 3,125         2,669
Accounts payable--related parties                     89            91
Notes payable and long-term debt due
  within one year                                  1,059            44
Accrued income and other taxes                     1,004           941
Other accruals                                       628           797
----------------------------------------------------------------------
    Total Current Liabilities                      5,905         4,542
Long-term debt                                     8,576         8,645
Accrued dismantlement, removal and
  environmental costs                              1,263         1,142
Deferred income taxes                              4,205         4,015
Employee benefit obligations                         967           953
Other liabilities and deferred credits             1,101           930
----------------------------------------------------------------------
Total Liabilities                                 22,017        20,227
----------------------------------------------------------------------

Company-Obligated Mandatorily
  Redeemable Preferred Securities of
  Phillips 66 Capital Trusts I and II                350           650
----------------------------------------------------------------------

Common Stockholders' Equity
Common stock--1,000,000,000 shares
  authorized at $1.25 par value
    Issued (2002 and 2001--430,439,743 shares)
      Par value                                      538           538
      Capital in excess of par                     9,156         9,069
    Treasury stock (at cost:
      2002--19,987,691 shares;
      2001--20,725,114 shares)                    (1,006)       (1,038)
    Compensation and Benefits Trust (CBT)
      (at cost: 2002--27,256,573 shares; and
      2001--27,556,573 shares)                      (923)         (934)
Accumulated other comprehensive loss                (219)         (255)
Unearned employee compensation--Long-
  Term Stock Savings Plan (LTSSP)                   (228)         (237)
Retained earnings                                  7,138         7,197
----------------------------------------------------------------------
Total Common Stockholders' Equity                 14,456        14,340
----------------------------------------------------------------------
Total                                            $36,823        35,217
======================================================================
See Notes to Financial Statements.


                                       2

<PAGE>


----------------------------------------------------------------------
Consolidated Statement of Cash Flows        Phillips Petroleum Company

                                                   Millions of Dollars
                                                   -------------------
                                                    Six Months Ended
                                                         June 30
                                                   -------------------
                                                    2002          2001
                                                   -------------------
Cash Flows from Operating Activities
Net income                                         $ 249         1,135
Adjustments to reconcile net income to net
  cash provided by operating activities
    Non-working capital adjustments
      Depreciation, depletion and
        amortization                                 834           651
      Property impairments                            18            23
      Dry hole costs and leasehold impairment        142            41
      Accretion on discounted liabilities             11             4
      Deferred taxes                                  80           262
      Extraordinary loss on early retirement
        of debt                                       15             -
      Cumulative effect of accounting change           -           (28)
      Other                                          108           (51)
    Working capital adjustments*
      Decrease in aggregate balance of
        accounts receivable sold                     (51)            -
      Decrease (increase) in other
        accounts and notes receivable               (588)          515
      Decrease (increase) in inventories              40          (172)
      Increase in prepaid expenses and
        other current assets                         (20)          (65)
      Increase (decrease) in accounts payable        431          (243)
      Decrease in taxes and other accruals          (160)         (124)
----------------------------------------------------------------------
Net Cash Provided by Operating Activities          1,109         1,948
----------------------------------------------------------------------

Cash Flows from Investing Activities
Acquisitions, net of cash acquired                     -             8
Capital expenditures and investments,
  including dry hole costs                        (1,543)       (1,414)
Proceeds from asset dispositions                      89           240
Long-term advances to affiliates and
  other investments                                   (6)          (24)
----------------------------------------------------------------------
Net Cash Used for Investing Activities            (1,460)       (1,190)
----------------------------------------------------------------------

Cash Flows from Financing Activities
Issuance of debt                                   1,240             -
Repayment of debt                                   (311)         (633)
Issuance of company common stock                      33            11
Redemption of preferred stock of subsidiaries       (300)            -
Purchase of company common stock                      (1)            -
Dividends paid on common stock                      (275)         (174)
Other                                                (32)          (24)
----------------------------------------------------------------------
Net Cash Provided by (Used for) Financing
  Activities                                         354          (820)
----------------------------------------------------------------------

Net Change in Cash and Cash Equivalents                3           (62)
Cash and cash equivalents at beginning of period     142           149
----------------------------------------------------------------------
Cash and Cash Equivalents at End of Period       $   145            87
======================================================================
*Net of acquisition and disposition of businesses.
See Notes to Financial Statements.


                                       3

<PAGE>


-----------------------------------------------------------------
Notes to Financial Statements          Phillips Petroleum Company


Note 1--Interim Financial Information

The financial information for the interim periods presented in
the financial statements included in this report is unaudited and
includes all known accruals and adjustments which Phillips
Petroleum Company (hereinafter referred to as "Phillips" or the
"company") considers necessary for a fair presentation of the
consolidated financial position of the company and its results of
operations and cash flows for such periods.  All such adjustments
are of a normal and recurring nature.  Certain amounts in the
2001 financial statements have been reclassified to conform with
the 2002 presentation.

In the third quarter of 2001, Phillips changed its method of
accounting for the costs of major maintenance turnarounds from
the accrue-in-advance method to the expense-as-incurred method to
reflect the impact of turnarounds in the periods that they occur.
Also, the company began including excise taxes on the sale of
petroleum products in operating revenues, with the corresponding
expense included in taxes other than income taxes.  Both changes
were effective January 1, 2001, so the financial information
relating to the second quarter and six-month period of 2001 has
been restated to reflect these changes.


Note 2--Extraordinary Item

In the second quarter of 2002, Phillips incurred an extraordinary
loss of $15 million (after reduction for income taxes of
$6 million) attributable to the call premium on early retirement
of its $250 million 8.86% Notes due May 15, 2022, at
104.43 percent and the redemption of all of its outstanding 8.24%
Junior Subordinated Deferrable Interest Debentures due 2036,
which triggered the redemption of $300 million of 8.24% Trust
Originated Preferred Securities of Phillips 66 Capital Trust I.
The company funded these redemptions by issuing commercial paper
which carried a substantially lower interest rate than the
interest and dividend rates of the securities redeemed.  See
Note 9--Debt and Note 10--Company-Obligated Mandatorily
Redeemable Preferred Securities of Phillips 66 Capital Trusts for
additional information about the early debt retirement and
debenture redemption, respectively.


                                 4

<PAGE>


Note 3--Acquisition of Tosco Corporation

On September 14, 2001, Phillips closed on the $7 billion
acquisition of Tosco Corporation (Tosco).  Tosco's operating
results have been included in Phillips' consolidated financial
statements since that date.  The transaction was accounted for
using the purchase method of accounting.  The allocation of the
purchase price to specific assets and liabilities is based, in
part, upon an outside appraisal of Tosco's long-lived assets.
The allocation is still preliminary at this time.  The outside
appraisal of the long-lived assets and the determination of the
fair value of all other Tosco assets and liabilities will be
completed in the third quarter of 2002.  Deferred tax liabilities
will also be finalized after the final allocation of the purchase
price and the final tax basis of the assets and liabilities has
been determined.

Pursuant to the terms of the Tosco merger agreement, the company
converted outstanding Tosco Long-Term Incentive Plan performance
units into equivalent Phillips performance units and will
continue the program over the remaining terms of the units.  At
June 30, 2002, there were 2.4 million units outstanding, held by
six former senior executives of Tosco, none of whom are now
employees of Phillips.  These units represent three separate grants--
0.5 million that expire on June 30, 2003; 0.5 million that expire
on March 31, 2004; and 1.4 million that expire on January 4,
2006.  Cash payouts occur on the anniversary dates of the grants
if Phillips' 15-day rolling average stock price during the
preceding 365 days, on a maximum look-back basis, exceeds a
stipulated strike price.  If a payout occurs, the payout price
becomes the strike price for future measurement dates.  Between
the acquisition of Tosco on September 14, 2001, and June 30,
2002, the strike price was $62.92 per unit and no payouts were
required.  The units are considered to be derivative financial
instruments tied to Phillips' stock price and are marked-to-
market each reporting period.  The resulting gains or losses from
these mark-to-market adjustments are reported in other revenues
in the consolidated statement of income and discussed as part of
Corporate in Management's Discussion and Analysis.  The company
estimated the fair value of these units to be $70 million at
September 14, 2001, and March 31, 2002.  This amount was recorded
in other liabilities and deferred credits in the consolidated
balance sheet, with an offsetting increase in goodwill.  The
company estimated the fair value of these units to be $51 million
at June 30, 2002, resulting in an increase in other revenues of
$19 million in the second quarter of 2002.

In addition to the above Tosco Long-Term Incentive Plan
adjustment, other adjustments to the preliminary purchase price
allocation were made during the first half of 2002, primarily to


                                 5

<PAGE>


pre-acquisition contingent liabilities, which increased goodwill
by $79 million.  Deferred tax liabilities were reduced by
$59 million related to the other adjustments to the preliminary
purchase price allocation, which had the effect of reducing
goodwill by the same amount.  Also, tax benefits accruing to the
company from the exercise of stock options by former Tosco
employees reduced goodwill by $11 million during the first half
of 2002.

The company has tentatively allocated $1,251 million to
identifiable intangible assets, which consist primarily of
marketing trade names ($655 million) and refinery air emission
and operating permits ($562 million).  The preliminary appraisal
methodology used to value refinery air emission permits is
presently under review and, depending on the outcome of that
review, could result in a re-allocation of purchase price between
identifiable intangible assets and goodwill.  Of the
$1,251 million, $1,240 million has been preliminarily allocated
to intangible assets not subject to amortization, while
$11 million has been preliminarily allocated to intangible assets
with a weighted-average amortization period of seven years.

Because the Tosco purchase price allocation has not been
finalized, the company has not yet finalized the assignment of
Tosco goodwill to specific reporting units, as defined by
Financial Accounting Standards Board (FASB) Statement No. 142,
"Goodwill and Other Intangible Assets," but expects to complete
that determination during the third quarter of 2002.  Currently,
all Tosco goodwill is being reported as part of the Refining,
Marketing and Transportation (RM&T) reporting segment.  Based on
preliminary allocations of the Tosco goodwill and preliminary
valuations of all RM&T operations, including RM&T operations not
purchased as part of the Tosco acquisition, the Tosco goodwill
was not impaired as of January 1, 2002.


Note 4--Inventories

Inventories consisted of the following:

                                             Millions of Dollars
                                            ---------------------
                                            June 30   December 31
                                               2002          2001
                                            ---------------------

Crude oil and petroleum products             $2,186         2,241
Merchandise                                     151           144
Materials, supplies and other                   243           233
-----------------------------------------------------------------
                                             $2,580         2,618
=================================================================


                                 6

<PAGE>


Included were inventories valued on a LIFO basis totaling
$2,137 million and $2,194 million at June 30, 2002, and
December 31, 2001, respectively.  The excess of current
replacement cost over LIFO cost of inventories amounted to
$660 million and $2 million at June 30, 2002, and December 31,
2001, respectively.


Note 5--Summarized Financial Data of Significant Equity
          Affiliates

Duke Energy Field Services, LLC

Phillips owns 30.3 percent of Duke Energy Field Services, LLC
(DEFS).  Phillips' consolidated results of operations include its
30.3 percent share of DEFS' earnings, which are recorded in a single
line item on the statement of income: equity in earnings of
affiliated companies, and included in Phillips' Gas Gathering,
Processing and Marketing (GPM) segment.  Included in the GPM
segment's operating results in the second quarter and first six
months of both 2002 and 2001 were after-tax benefits of $9 million
and $18 million, respectively, representing the amortization of the
$814 million basis difference between the book value of Phillips'
contribution to DEFS and its 30.3 percent equity interest in DEFS.
This difference is being amortized over 15 years, consistent with
the remaining estimated useful lives of the properties, plants and
equipment contributed to DEFS.

Summarized financial information for DEFS (100 percent) follows:

                                              Millions of Dollars
                                              -------------------
                                                Six Months Ended
                                                    June 30
                                              -------------------
                                                2002         2001
                                              -------------------

Revenues                                      $3,342        5,916
Income (loss) before income taxes and
  cumulative effect of change in
  accounting principle                           (33)         259
Net income (loss)                                (38)         258
-----------------------------------------------------------------


Phillips and Duke Energy Corporation are generally taxable on
their respective shares of income for U.S. and state income tax
purposes.  Phillips' share of income taxes incurred directly by
DEFS is reported in equity in earnings, not included in income
taxes in Phillips' consolidated financial statements.


                                 7

<PAGE>


Chevron Phillips Chemical Company LLC

Phillips and ChevronTexaco Corporation each own 50 percent of the
voting and economic interests in Chevron Phillips Chemical
Company LLC (CPChem).  Phillips' consolidated results of
operations include its 50 percent share of CPChem's earnings,
which are recorded in a single line item on the statement of
income: equity in earnings of affiliated companies, and
included in Phillips' Chemicals segment.  Also included in the
second quarter and first six months of both 2002 and 2001
operating results were after-tax reductions of $1 million and
$2 million, respectively, representing the amortization of the
$116 million basis difference between the book value of Phillips'
contribution to CPChem and its 50 percent interest in the equity
of CPChem.  This basis difference is being amortized over
20 years, the remaining estimated useful life of the properties,
plants and equipment contributed.

During the second quarter of 2002, CPChem's Board of Directors
authorized the issuance of $250 million of Preferred LLC
Interests.  On July 1, 2002, Phillips purchased $125 million of
these securities.  Preferred distributions are cumulative at
9 percent per annum and will be payable, upon declaration by
CPChem's Board of Directors, quarterly from CPChem's cash
earnings.  The securities have no stated maturity date and are
redeemable quarterly, in increments of $25 million, when CPChem's
ratio of debt to total capitalization falls below a stated level.
The Preferred LLC Interests are also redeemable at CPChem's sole
option at any time.

Summarized financial information for CPChem (100 percent)
follows:

                                              Millions of Dollars
                                              -------------------
                                                Six Months Ended
                                                     June 30
                                              -------------------
                                                2002         2001
                                              -------------------

Revenues                                      $2,569        3,519
Loss before income taxes                          (7)         (85)
Net loss                                         (11)         (88)
-----------------------------------------------------------------


Phillips and ChevronTexaco are generally taxable on their
respective shares of income for U.S. and state income tax
purposes.  Phillips' share of income taxes incurred directly by
CPChem is reported in equity in earnings, not included in income
taxes in Phillips' consolidated financial statements.


                                 8

<PAGE>


Note 6--Properties, Plants and Equipment

Properties, plants and equipment included the following:

                                             Millions of Dollars
                                            ---------------------
                                            June 30   December 31
                                               2002          2001
                                            ---------------------

Properties, plants and equipment (at cost)  $35,575        35,429
Less accumulated depreciation, depletion
  and amortization                           11,176        11,633
-----------------------------------------------------------------
                                            $24,399        23,796
=================================================================


Note 7--Impairments

In the second quarter of 2002, the company closed on the sale of
its 24.4 percent interest in the Janice field in block 30/17a in
the U.K. North Sea.  A property impairment of $10 million before
tax, $7 million after tax, was recorded by the Exploration and
Production (E&P) segment in the first quarter, with an additional
$4 million before-tax, $2 million after-tax, impairment recorded
in the second quarter.  Also in the E&P segment, the company
committed to a plan in the second quarter of 2002 to sell a non-
producing field in Alaska.  A property impairment of $4 million
before-tax, $3 million after-tax, was recorded in the second
quarter of 2002.

Exploration expenses in the first quarter and June year-to-date
period of 2002 included $77 million for the substantial
impairment of the company's investment in deepwater block 34,
offshore Angola.  Initial results released in early May 2002
indicated that the first exploratory well drilled in block 34 was
a dry hole, resulting in Phillips' re-assessment of the fair
value of the remainder of the block.


Note 8--Goodwill and Other Intangible Assets

The company adopted FASB Statement No. 142, "Goodwill and Other
Intangible Assets," on January 1, 2002.  Almost all of the
company's recorded goodwill and other intangible assets resulted
from the acquisition of Tosco in September 2001.  The Tosco
transaction was subject to the provisions of Statement No. 142
in 2001 under the special transitional effective dates of the
Statement.  See Note 3--Acquisition of Tosco Corporation for
additional information about the Tosco acquisition, including
the preliminary purchase price allocation, goodwill, and other
categories of intangible assets.


                                 9

<PAGE>


Other than the goodwill related to Tosco, the company had only
$16 million of recorded goodwill, which related to the
acquisition of Petroz NL in early 2001, of which $1 million was
amortized to expense during 2001.  Under Statement No. 142, the
Petroz goodwill amortization ceased on January 1, 2002.  In
accordance with the transition provisions of FASB Statement
No. 142, the company conducted initial impairment tests of the
Petroz goodwill, which proved not to be impaired.  See Note 3--
Acquisition of Tosco Corporation for the status of the
impairment review of the Tosco goodwill as of January 1, 2002.

Other than assets related to Tosco, the company has no recorded
intangible assets with indefinite useful lives.  Adoption of
Statement No. 142 did not result in any adjustments of estimated
useful lives for other intangible assets that are being
amortized, the aggregate value of which is immaterial.


Note 9--Debt

At June 30, 2002, Phillips had two bank credit facilities in
place, totaling $3 billion, available for use either as direct
bank borrowings or as support for the issuance of commercial
paper.  The facilities included a $1.5 billion revolving facility
expiring in October 2006, and a $1.5 billion 364-day credit
agreement, which expires on October 15, 2002.  At June 30, 2002,
the company had no debt outstanding under these credit
facilities, but had $2,301 million in commercial paper
outstanding, which is supported 100 percent by the credit
facilities.  This amount approximates fair value.

On May 15, 2002, the company redeemed its $250 million 8.86%
Notes due May 15, 2022, at 104.43 percent.  An extraordinary loss
of $13 million before-tax, $9 million after-tax, was incurred
during the second quarter of 2002 as a result of this early debt
retirement.


Note 10--Company-Obligated Mandatorily Redeemable Preferred
          Securities of Phillips 66 Capital Trusts

On May 31, 2002, the company redeemed all of its outstanding
8.24% Junior Subordinated Deferrable Interest Debentures due 2036
held by the Phillips 66 Capital Trust I.  This triggered the
redemption of $300 million of 8.24% Trust Originated Preferred
Securities at par value, $25 per share.  An extraordinary loss of
$8 million before-tax, $6 million after-tax, was incurred during
the second quarter of 2002 as a result of the redemption.


                                10

<PAGE>


Note 11--Comprehensive Income

Phillips' comprehensive income was as follows:

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30             June 30
                            ------------------   ----------------
                            2002          2001    2002       2001
                            ------------------   ----------------

Net income                  $351           619     249      1,135
After-tax changes in:
  Foreign currency
    translation adjustments   51            (5)     50        (27)
  Unrealized gain (loss)
    on securities             (2)            1      (2)        (1)
  Equity affiliates
    Foreign currency
      translation             16            (4)     12         (3)
    Derivatives related       (1)            1     (24)         3
-----------------------------------------------------------------
Comprehensive income        $415           612     285      1,107
=================================================================


Accumulated other comprehensive loss in the equity section of the
balance sheet included:

                                             Millions of Dollars
                                            ---------------------
                                            June 30   December 31
                                               2002          2001
                                            ---------------------

Minimum pension liability adjustment          $(143)         (143)
Foreign currency translation adjustments        (34)          (84)
Unrealized gain on securities                     2             4
Deferred net hedging loss                        (4)           (4)
Equity affiliates
  Foreign currency translation                  (27)          (39)
  Derivatives related                           (13)           11
-----------------------------------------------------------------
                                              $(219)         (255)
=================================================================


Note 12--Contingencies

In the case of all known contingencies, the company accrues an
undiscounted liability when the loss is probable and the amount
is reasonably estimable.  These liabilities are not reduced for
potential insurance recoveries.  If applicable, undiscounted
receivables are accrued for probable insurance or other third-
party recoveries.  Based on currently available information, the
company believes that it is remote that future costs related to
known contingent liability exposures will exceed current accruals


                                11

<PAGE>


by an amount that would have a material adverse impact on the
company's financial statements.

As facts concerning contingencies become known to the company,
the company reassesses its position both with respect to accrued
liabilities and other potential exposures.  Estimates that are
particularly sensitive to future change include contingent
liabilities recorded for environmental remediation, tax and legal
matters.  Estimated future environmental remediation costs are
subject to change due to such factors as the unknown magnitude of
cleanup costs, the unknown time and extent of such remedial
actions that may be required, and the determination of the
company's liability in proportion to that of other responsible
parties.  Estimated future costs related to tax and legal matters
are subject to change as events evolve and as additional
information becomes available during the administrative and
litigation processes.

Environmental--The company is subject to federal, state and local
environmental laws and regulations.  These may result in
obligations to remove or mitigate the effects on the environment
of the placement, storage, disposal or release of certain
chemical, mineral and petroleum substances at various sites.
When the company prepares its financial statements, accruals for
environmental liabilities are recorded based on Management's best
estimate using all information that is available at the time.
Loss estimates are measured and liabilities are based on
currently available facts, existing technology, and presently
enacted laws and regulations, taking into consideration the
likely effects of inflation and other societal and economic
factors.  Also considered when measuring environmental liability
are the company's prior experience in remediation of contaminated
sites, other companies' cleanup experience and data released by
the Environmental Protection Agency (EPA) or other organizations.
Unasserted claims are reflected in Phillips' determination of
environmental liabilities and are accrued in the period that they
are both probable and reasonably estimable.

Although liability of those potentially responsible is generally
joint and several for federal sites and frequently so for state
sites, the company is usually but one of many companies cited at
a particular site.  Due to the joint and several liabilities, the
company could be responsible for all of the cleanup costs at any
site which it has been designated as a potentially responsible
party.  If Phillips was solely responsible, the costs, in some
cases, could be material to its or one of its segments'
operations, capital resources or liquidity.  However, settlements
and costs incurred in matters that previously have been resolved
have not been materially significant to the company's results of
operations or financial condition.  The company has, to date,
been successful in sharing cleanup costs with other financially


                                12

<PAGE>


sound companies.  Many of the sites at which the company is
potentially responsible are still under investigation by the EPA
or the state agencies concerned.  Prior to actual cleanup, those
potentially responsible normally assess the site conditions,
apportion responsibility and determine the appropriate
remediation.  In some instances, Phillips may have no liability
or attain a settlement of liability.  Where it appears that other
potentially responsible parties may be financially unable to bear
their proportional share, this inability has been considered in
estimating Phillips' potential liability and accruals have been
adjusted accordingly.

Upon Phillips' acquisition of Tosco on September 14, 2001, the
assumed environmental obligations of Tosco, some of which are
mitigated by indemnification agreements, became contingencies
reportable on a consolidated basis by Phillips.  Beginning with
the acquisition of the Bayway refinery in 1993, but excluding the
Alliance refinery acquisition, Tosco negotiated, as part of its
acquisitions, environmental indemnification from the former
owners for remediating contamination that occurred prior to the
respective acquisition dates.  Some of the environmental
indemnifications are subject to caps and time limits.  No
accruals have been recorded for any potential contingent
liabilities that will be funded by the prior owners under these
indemnifications.

As part of Tosco's acquisition of Unocal's West Coast petroleum
refining, marketing, and related supply and transportation assets
in March 1997, Tosco agreed to pay the first $7 million per year
of any environmental remediation liabilities at the acquired
sites arising out of, or relating to, the period prior to the
transaction's closing, plus 40 percent of any amount in excess of
$7 million per year, with Unocal paying the remaining 60 percent
per year.  The indemnification agreement with Unocal has a
25-year term from inception, and, at June 30, 2002, had a maximum
cap of $138 million for environmental remediation costs that
Phillips has to fund during the remainder of the agreement
period.  This maximum has been adjusted for amounts paid through
June 30, 2002.

The company is currently participating in environmental
assessments and cleanups at federal Superfund and comparable
state sites.  After an assessment of environmental exposures
for cleanup and other costs, the company makes accruals on
an undiscounted basis (except, if assumed in a purchase
business combination, such costs are recorded on a discounted
basis) for planned investigation and remediation activities for
sites where it is probable that future costs will be incurred and
these costs can be reasonably estimated.  At June 30, 2002,
contingent liability accruals of $1 million had been made for the
company's Potentially Responsible Party (PRP) sites, and


                                13

<PAGE>


$3 million for other environmental contingent liabilities.
Accrued environmental liabilities will be paid over periods
extending as far as 30 years in the future.  These accruals have
not been reduced for possible insurance recoveries.  In the
future, the company may be involved in additional environmental
assessments, cleanups and proceedings.

Other Legal Proceedings--The company is a party to a number of
other legal proceedings pending in various courts or agencies for
which, in some instances, no provision has been made.

Other Contingencies--The company has contingent liabilities
resulting from throughput agreements with pipeline and processing
companies in which it holds stock interests.  Under these
agreements, Phillips may be required to provide any such company
with additional funds through advances and penalties for fees
related to throughput capacity not utilized by Phillips.


Note 13--Income Taxes

The company's effective tax rates for the second quarter and first
six months of 2002 were 50 percent and 66 percent, respectively,
compared with 49 percent and 50 percent for each of the same periods
a year ago.  The increase in the effective tax rate for the first
six months of 2002 reflects a higher proportion of income in
higher-tax-rate jurisdictions, due in part to first-quarter 2002
losses in lower-tax-rate jurisdictions worldwide.


Note 14--Foreign Currency

The following table summarizes the foreign currency transaction
gains (losses) included in the company's reported net income:

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30            June 30
                            -------------------------------------
                            2002          2001   2002        2001
                            -------------------------------------
After-Tax
E&P                         $ (7)            2     (5)          4
RM&T                           2             -      5           3
Corporate and Other           12            (2)     8         (14)
-----------------------------------------------------------------
Total                          7             -      8          (7)
=================================================================

Before-Tax
E&P                           (8)            1     (8)          3
RM&T                           2             1      5           3
Corporate and Other           12            (3)     8         (14)
-----------------------------------------------------------------
Total                       $  6            (1)     5          (8)
=================================================================


                                14

<PAGE>


Note 15--Supplemental Cash Flow Information

Non-cash investing and financing activities and cash payments for
the six-month periods ended June 30 were as follows:

                                              Millions of Dollars
                                              -------------------
                                              2002           2001
                                              -------------------
Non-Cash Investing and Financing Activities
Investment in properties, plants and
  equipment of Alaska businesses
  through the assumption of net non-cash
  liabilities of these businesses             $  -            121
Investment in equity affiliate through
  direct guarantee of debt                      13             13
Notes payable to purchase properties,
  plants and equipment                           -              8
Non-cash awards issued under compensation
  and benefit plans                             60             18
Assets contributed to charities                  -              5
Change in fair value of securities              (8)            (5)
-----------------------------------------------------------------
Cash payments
Interest
  Debt                                        $207            139
  Taxes and other                                5             14
-----------------------------------------------------------------
                                              $212            153
=================================================================
Income taxes                                  $438            846
-----------------------------------------------------------------


Note 16--Sales of Receivables

At June 30, 2002, Phillips had sold certain credit card and trade
receivables under revolving sales agreements with five unrelated
bank-sponsored entities.  These agreements provide for Phillips
to sell up to $1.2 billion of senior, undivided interests in
pools of the credit card or trade receivables to the bank-
sponsored entities.  Phillips retained interests in the pools of
receivables, which are subordinate to the interests sold to the
bank-sponsored entities.  At June 30, 2002, and December 31,
2001, respectively, Phillips' retained interests were
$718 million and $450 million, reported on the balance sheet in
accounts and notes receivable.


                                15

<PAGE>


Total cash flows received from and paid to the bank-sponsored
entities in the first six months of 2002 and 2001 were as
follows:

                                              Millions of Dollars
                                              -------------------
                                                  2002       2001
                                              -------------------

Receivables sold at beginning of year         $    940        500
New receivables sold                            10,718      3,505
Cash collections remitted                      (10,769)    (3,505)
-----------------------------------------------------------------
Receivables sold at June 30                   $    889        500
=================================================================
Discounts and other fees paid on
  revolving balances                          $     10         12
-----------------------------------------------------------------


Note 17--Related Party Transactions

Significant transactions with related parties were:

                                    Millions of Dollars
                          ---------------------------------------
                          Three Months Ended     Six Months Ended
                               June 30               June 30
                          ---------------------------------------
                          2002          2001     2002        2001
                          ---------------------------------------

Operating revenues (a)    $194           264      349         567
Purchases (b)              197           280      354         609
Operating expenses (c)      18            80       53         160
Selling, general and
  administrative
  expenses (d)              50            17      104          32
Interest expense (e)         2             2        5           4
-----------------------------------------------------------------


(a)  Phillips' E&P segment sells natural gas to DEFS for
     processing and marketing.  The company sells natural gas
     liquids, solvents and petrochemical feedstocks to CPChem
     and charges CPChem for the use of common facilities, such
     as steam generators, waste and water treaters, and
     warehouse facilities at its refining operations.

(b)  Phillips purchases natural gas and natural gas liquids from
     DEFS and CPChem for use in its refinery processes and other
     feedstocks from various affiliates.

(c)  Phillips pays processing fees to various affiliates.


                                16

<PAGE>


(d)  Phillips charges both DEFS and CPChem for corporate
     services provided to the two equity companies under
     transition service agreements.  Effective July 1, 2002,
     charges to CPChem  for corporate services provided to the
     equity company will be provided under an ongoing service
     agreement.  Phillips pays fees to its pipeline equity
     companies for transporting finished products.  Phillips
     pays common facility fees to its affiliates.

(e)  Phillips pays interest to Merey Sweeny, L.P. for a loan
     related to improvements at the Sweeny refinery.

Elimination of the company's equity percentage share of profit or
loss on the above transactions was not material.


Note 18--Segment Disclosures and Related Information

Phillips has organized its reporting structure based on the
grouping of similar products and services, resulting in four
operating segments:

(1)  Exploration and Production (E&P)--This segment explores for
     and produces crude oil, natural gas and natural gas liquids
     on a worldwide basis.  At June 30, 2002, E&P was producing
     in the United States; the Norwegian and U.K. sectors of the
     North Sea; Canada; Nigeria; Venezuela; the Timor Sea; and
     offshore Australia and China.

(2)  Gas Gathering, Processing and Marketing (GPM)--This segment
     gathers and processes natural gas produced by Phillips and
     others.  Phillips' GPM segment consists primarily of its
     30.3 percent equity investment in DEFS.

(3)  Refining, Marketing and Transportation (RM&T)--This segment
     refines, markets and transports crude oil and petroleum
     products, primarily in the United States.  The company has
     10 U.S. refineries and one in Ireland.  Phillips markets
     petroleum products nationwide.  Phillips' acquisition of
     Tosco Corporation significantly increased the RM&T segment's
     assets and operations.

(4)  Chemicals--This segment manufactures and markets
     petrochemicals and plastics on a worldwide basis.  Phillips'
     Chemicals segment consists primarily of its 50 percent
     equity investment in CPChem.


                                17

<PAGE>


Corporate and Other includes general corporate overhead; all
interest revenue and expense; preferred dividend requirements of
capital trusts; certain eliminations; and various other corporate
activities, such as a captive insurance subsidiary and tax items
not directly attributable to the operating segments.  Corporate
assets include all cash and cash equivalents and the company's
owned office buildings and research and development facilities in
Bartlesville, Oklahoma.

The company evaluates performance and allocates resources based
on, among other items, net income.  Intersegment sales are
recorded at prices that approximate market value.  There have
been no material changes in the basis of segmentation or in the
basis of measurement of segment net income since the 2001 annual
report.

<TABLE>
<CAPTION>

Analysis of Results by Operating Segment


                                                            Millions of Dollars
                                    -----------------------------------------------------------
                                            Operating Segments
                                    ---------------------------------   Corporate
                                        E&P   GPM     RM&T  Chemicals   and Other  Consolidated
                                    -----------------------------------------------------------
<S>                                 <C>      <C>    <C>     <C>         <C>        <C>
Three Months Ended June 30, 2002
Sales and Other Operating Revenues
  External customers                $ 1,504     -   10,051          3           -        11,558
  Intersegment (eliminations)           309     -        2          -        (311)            -
-----------------------------------------------------------------------------------------------
    Segment sales                   $ 1,813     -   10,053          3        (311)       11,558
===============================================================================================

Net income (loss)                   $   339     7      109          7        (111)*         351
===============================================================================================

Three Months Ended June 30, 2001
Sales and Other Operating Revenues
  External customers                $ 2,162     -    3,150          -           -         5,312
  Intersegment (eliminations)           100     -        1          -        (101)            -
-----------------------------------------------------------------------------------------------
    Segment sales                   $ 2,262     -    3,151          -        (101)        5,312
===============================================================================================

Net income (loss)                   $   503    29      197          5        (115)          619
===============================================================================================


Six Months Ended June 30, 2002
Sales and Other Operating Revenues
  External customers                $ 2,797     -   18,125          6           2        20,930
  Intersegment (eliminations)           530     -        4          -        (534)            -
-----------------------------------------------------------------------------------------------
    Segment sales                   $ 3,327     -   18,129          6        (532)       20,930
===============================================================================================

Net income (loss)                   $   481    12       20         (4)       (260)*         249
===============================================================================================

Six Months Ended June 30, 2001
Sales and Other Operating Revenues
  External customers                $ 4,470     -    6,122          -           1        10,593
  Intersegment (eliminations)           240     -        3          -        (243)            -
-----------------------------------------------------------------------------------------------
    Segment sales                   $ 4,710     -    6,125          -        (242)       10,593
===============================================================================================

Net income (loss)                   $ 1,084    64      269**      (39)       (243)        1,135
===============================================================================================

Total Assets
  At June 30, 2002                  $15,751   155   17,820      1,935       1,162        36,823
-----------------------------------------------------------------------------------------------
  At December 31, 2001              $14,796   178   17,138      1,934       1,171        35,217
-----------------------------------------------------------------------------------------------
 *Includes an extraordinary loss of $15 million.
**Includes a favorable $28 million cumulative effect of accounting change.

</TABLE>


                                              18

<PAGE>


Note 19--Merger with Conoco Inc.

The Boards of Directors and stockholders of Phillips and Conoco
Inc. (Conoco) have approved a merger of the two companies to
form a new company, ConocoPhillips.  At inception, Phillips
stockholders will own approximately 57 percent of the new
company and Conoco stockholders will own approximately
43 percent.  Phillips and Conoco continue to work closely with
the U.S. Federal Trade Commission (FTC) to secure regulatory
clearance.  The transaction is expected to close the second half
of 2002, after clearance is received from the FTC.  Both
companies continue to finalize plans for the integration.


Note 20--New Accounting Standards

In June 2001, the FASB issued Statement No. 143, "Accounting for
Asset Retirement Obligations."  Statement No. 143 is required to
be adopted by the company no later than January 1, 2003, and will
require major changes in the accounting for asset retirement
obligations, such as required decommissioning of oil and gas
production platforms, facilities and pipelines.  Statement
No. 143 requires entities to record the fair value of a liability
for an asset retirement obligation in the period when it is
incurred (typically when the asset is installed at the production
location).  When the liability is initially recorded, the entity
capitalizes a cost by increasing the carrying amount of the
related property, plant and equipment.  Over time, the liability
is accreted for the change in its present value each period, and
the initial capitalized cost is depreciated over the useful life
of the related asset.  Upon adoption of Statement No. 143, the
company will adjust its recorded asset retirement obligations to
the new requirements using a cumulative-effect approach.  All
transition amounts are to be measured using the company's current
information, assumptions, and credit-adjusted, risk-free interest
rates.  The company is still studying the impact of Statement
No. 143 to quantify the potentially significant impact of the new
standard.

In April 2002, the FASB issued Statement No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections."  The rescission of FASB
Statement No. 4 will require that gains and losses on
extinguishments of debt no longer be presented as extraordinary
items in the income statement.  The company plans to adopt the
provisions of Statement No. 145 in the first quarter of 2003.


                                19

<PAGE>


-----------------------------------------------------------------
Management's Discussion and            Phillips Petroleum Company
Analysis of Financial Condition
and Results of Operations


Management's Discussion and Analysis contains forward-looking
statements including, without limitation, statements relating to
the company's plans, strategies, objectives, expectations,
intentions, and resources, that are made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform
Act of 1995.  The words "intends," "believes," "expects,"
"plans," "scheduled," "anticipates," "estimates," and similar
expressions identify forward-looking statements.  The company
does not undertake to update, revise or correct any of the
forward-looking information.  Readers are cautioned that such
forward-looking statements should be read in conjunction with the
company's disclosures under the heading: "CAUTIONARY STATEMENT
FOR THE PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995" beginning on page 46.


RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three-
and six-month periods ending June 30, 2002, are based on a
comparison with the corresponding periods of 2001.  The
acquisition of Tosco Corporation on September 14, 2001, impacts
the comparability of the 2002 periods with the corresponding 2001
periods.


                                20

<PAGE>


Consolidated Results

A summary of the company's net income (loss) by business segment
follows:

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                             2002         2001    2002       2001
                            ------------------   ----------------
Exploration and Production
  (E&P)                     $ 339          503     481      1,084
Gas Gathering, Processing
  and Marketing (GPM)           7           29      12         64
Refining, Marketing and
  Transportation (RM&T)       109          197      20        269*
Chemicals                       7            5      (4)       (39)
Corporate and Other          (111)        (115)   (260)      (243)
-----------------------------------------------------------------
Net income                  $ 351          619     249      1,135
=================================================================
*Includes a favorable $28 million cumulative effect of accounting
 change.


Net income is affected by transactions, defined by Management and
termed "special items," which are not representative of the
company's ongoing operations.  These special items can obscure
the underlying operating results for a period and affect
comparability of operating results between periods.  The
following table summarizes the gains (losses), on an after-tax
basis, from special items included in the company's net income:

                                      Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                  June 30              June 30
                            ------------------   ----------------
                            2002          2001   2002        2001
                            ------------------   ----------------

Impairments*                $ (5)          (23)   (89)        (23)
Net gains on asset sales       -             6      -           3
Cumulative effect of
  accounting change            -             -      -          28
Extraordinary item           (15)            -    (15)          -
Pending claims and
  settlements                  4             2     (9)         (3)
Costs related to Conoco
  merger                      (2)            -     (4)          -
Equity companies' special
  items                        4            32      6          27
Other items                   (4)            -     (2)         (1)
-----------------------------------------------------------------
Total special items         $(18)           17   (113)         31
=================================================================
*See Note 7--Impairments in the Notes to Financial Statements for
 additional information.


                                21

<PAGE>


Excluding the special items listed above, the company's net
operating income (loss) by business segment was:

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                            2002          2001    2002       2001
                            ------------------   ----------------

E&P                         $347           504     570      1,089
GPM                            7            29      12         64
RM&T                         111           197      23        243
Chemicals                      3           (23)     (5)       (62)
Corporate and Other          (99)         (105)   (238)      (230)
-----------------------------------------------------------------
Net operating income        $369           602     362      1,104
=================================================================


Phillips' net income in the second quarter of 2002 was
$351 million, compared with net income of $619 million in the
second quarter of 2001.  Special items decreased net income by
$18 million in the second quarter of 2002, while benefiting net
income $17 million in the second quarter of 2001.  After
excluding special items, net operating income in the second
quarter of 2002 was $369 million, compared with $602 million in
the second quarter of 2001.

The decline in net operating income in the second quarter was
primarily attributable to E&P and RM&T operations.  E&P
experienced lower natural gas and crude oil prices relative to a
year ago, along with decreased crude oil production and sales
volumes.  In RM&T, the benefit of the Tosco Corporation (Tosco)
acquisition and lower controllable costs at the Sweeny and
Borger, Texas, refineries were more than offset by lower gasoline
and distillates margins.  The GPM segment's results declined on
lower natural gas liquids prices, while Chemicals' results
remained depressed due to weak economic and market conditions.

Phillips' net income in the first six months of 2002 was
$249 million, compared with net income of $1,135 million in the
first six months of 2001.  Special items decreased net income by
$113 million in the first six months of 2002, while benefiting
net income $31 million in the first six months of 2001.  After
excluding special items, net operating income in the June year-
to-date 2002 period was $362 million, compared with
$1,104 million in the corresponding period of 2001.  As in the
quarter-to-quarter analysis, lower upstream commodity prices and
decreased downstream refining and marketing margins were
primarily responsible for the lower results.


                                22

<PAGE>


Income Statement Analysis

On September 14, 2001, Phillips closed on the $7 billion
acquisition of Tosco.  This transaction significantly increased
operating revenues, purchase costs, operating expenses and other
income statement line items.  See Note 3--Acquisition of Tosco
Corporation in the Notes to Financial Statements for additional
information.

Sales and other operating revenues increased 118 percent in the
second quarter of 2002 and 98 percent in the six-month period
ended June 30, 2002.  The increase in both periods reflects the
significant impact of the Tosco acquisition.  This was partially
offset by lower crude oil, natural gas, and remaining petroleum
products revenues, mainly due to lower sales prices.

Equity in earnings of affiliated companies decreased 69 percent
in the second quarter of 2002 and 60 percent in the six-month
period.  While results from Chevron Phillips Chemical Company LLC
improved in the six-month period, this was more than offset by
lower equity earnings from Duke Energy Field Services, LLC (DEFS)
and Merey Sweeny, L.P. (MSLP) in both the second quarter and six-
month period of 2002.  DEFS' earnings declined primarily on lower
natural gas liquids prices, while MSLP results decreased on lower
crude oil heavy-light price differentials.  Other revenues
increased 23 percent in the second quarter of 2002 and 6 percent
in the six-month period.  The increase in both periods reflects a
favorable revaluation of long-term incentive performance units
held by six former senior Tosco executives.  See Note 3--
Acquisition of Tosco Corporation in the Notes to Financial
Statements for additional information.

Purchased crude oil and products increased 219 percent in the
second quarter of 2002 and 179 percent in the first six months.
As with revenues, the Tosco acquisition accounted for the sharp
increase in purchase costs.  This was partially offset by lower
crude oil, natural gas, and remaining petroleum products purchase
costs, mainly resulting from lower product prices.

Management defines controllable costs as production and operating
expenses; selling, general and administrative expenses; and the
general administrative, geological, geophysical and lease rentals
component (G&G) of exploration expenses.  Controllable costs,
adjusted to exclude G&G, increased 84 percent in the second
quarter of 2002 and 87 percent in the six-month period.  The
increase in both periods was the result of the Tosco acquisition.


                                23

<PAGE>


Exploration expenses increased 5 percent in the second quarter of
2002 and 76 percent in the six-month period.  The second quarter
increase was due to increased foreign dry hole charges, while the
six-month increase was primarily the result of a $77 million
leasehold impairment of deepwater block 34, offshore Angola,
recorded in the first quarter of 2002.

Depreciation, depletion and amortization (DD&A) increased
27 percent in the second quarter of 2002 and 28 percent in the
first six months.  The increase in both periods was primarily the
result of the Tosco acquisition.  The company increased its
impairment of the Janice field in the U.K. North Sea by
$4 million in the second quarter, bringing its total before-tax
impairment to $14 million in the six-month period.  The company
also recorded a $4 million impairment on a non-producing field in
Alaska.  The property impairment in the prior year second quarter
and six-month period related to the Siri field, offshore Denmark.
See Note 7--Impairments in the Notes to Financial Statements for
additional information on property impairments.

Taxes other than income taxes increased 123 percent in the second
quarter of 2002 and 119 percent in the six-month period.  The
increase in both periods reflects the impact of the Tosco
acquisition and the corresponding increase in excise taxes due to
higher petroleum products sales, as well as increased property
and payroll taxes.  These items were partially offset by a
decrease in production taxes resulting from lower crude oil and
natural gas prices.

Accretion on discounted liabilities increased 50 percent in the
second quarter of 2002 and 175 percent in the first six months.
These amounts relate to discounted environmental liabilities
acquired in acquisitions.  The increase in both periods reflects
in the impact of the Tosco acquisition.

Interest expense increased 29 percent in the second quarter of
2002 and 28 percent in the six-month period.  The increase in
both periods is primarily attributable to higher debt levels
subsequent to the Tosco acquisition, as well as lower levels of
interest being capitalized.

Foreign currency gains were recorded in the second quarter and
first six months of 2002, compared with losses in the
corresponding periods of 2001.  The favorable results in 2002 are
primarily due to the strengthening of the U.K. pound against the
U.S. dollar.  Preferred dividend requirements decreased in both
the second quarter and six-month period of 2002, reflecting the
redemption of $300 million of preferred securities in late-May
2002.


                                24

<PAGE>


Segment Results

E&P

                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                              2002        2001    2002       2001
                            ------------------   ----------------
                                     Millions of Dollars
                            -------------------------------------
Operating Results
Net income                  $  339         503     481      1,084
Less special items              (8)         (1)    (89)        (5)
-----------------------------------------------------------------
Net operating income        $  347         504     570      1,089
=================================================================

                                      Dollars Per Unit
                            -------------------------------------
Average Sales Prices
Crude oil (per barrel)
    United States
      Alaska                $24.40       25.21   21.55      25.57
      Lower 48               24.53       24.15   21.64      25.60
      Total                  24.41       25.11   21.55      25.57
    Foreign                  24.60       27.22   22.75      26.37
    Total consolidated       24.47       25.84   21.94      25.84
    Equity affiliate in
      Venezuela              16.51           -   15.03          -
    Worldwide                24.40       25.84   21.87      25.84
Natural gas--lease (per
  thousand cubic feet)
    United States
      Alaska                  1.80        1.54    1.94       1.67
      Lower 48                2.56        3.91    2.26       5.14
      Total                   2.51        3.77    2.25       4.93
    Foreign                   2.20        2.48    2.31       2.66
    Worldwide                 2.40        3.31    2.27       4.11
-----------------------------------------------------------------

                                     Millions of Dollars
                            -------------------------------------
Worldwide Exploration
  Expenses
General administrative;
  geological and
  geophysical; and lease
  rentals                   $   34          40      88         90
Leasehold impairment            16          15     109         26
Dry holes                       17           9      33         15
-----------------------------------------------------------------
                            $   67          64     230        131
=================================================================


                                25

<PAGE>


                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                              2002        2001    2002       2001
                            ------------------   ----------------
                                 Thousands of Barrels Daily
                            -------------------------------------
Operating Statistics
Crude oil produced
  United States
    Alaska                     339         340     346        344
    Lower 48                    31          34      32         34
-----------------------------------------------------------------
                               370         374     378        378
  Norway                       119         122     118        122
  United Kingdom                18          17      18         19
  Nigeria                       23          32      25         31
  China                         11          11      12         12
  Timor Sea                      4           7       4          8
  Canada                         1           1       1          -
  Denmark                        -           4       -          4
  Venezuela                      -           2       -          2
-----------------------------------------------------------------
  Total consolidated           546         570     556        576
  Equity affiliate in
    Venezuela                    5           -       5          -
-----------------------------------------------------------------
                               551         570     561        576
=================================================================

Natural gas liquids produced
  United States
    Alaska*                     25          25      26         26
    Lower 48                     1           1       1          1
-----------------------------------------------------------------
                                26          26      27         27
  Norway                         4           5       5          5
  Other areas                    4           4       3          4
-----------------------------------------------------------------
                                34          35      35         36
=================================================================
*Includes 14,000 and 15,000 barrels per day in the second quarter
 and six-month period of 2002, respectively, that were sold from
 the Prudhoe Bay lease to the Kuparuk lease for reinjection to
 enhance crude oil production.  The corresponding periods of 2001
 included 14,000 and 15,000 barrels per day, respectively.

                                Millions of Cubic Feet Daily
                            -------------------------------------
Natural gas produced*
  United States
    Alaska                     160         156     164        169
    Lower 48                   689         728     711        725
-----------------------------------------------------------------
                               849         884     875        894
  Norway                       131         142     133        140
  United Kingdom               189         165     181        183
  Canada                        22          15      21         18
  Nigeria                       40          39      39         41
  Australia                     55          61      68         51
-----------------------------------------------------------------
                             1,286       1,306   1,317      1,327
=================================================================
*Represents quantities available for sale.  Excludes gas
 equivalent of natural gas liquids shown above.

Liquefied natural gas sales    114         115     116        116
-----------------------------------------------------------------


                                26

<PAGE>


Net operating income from Phillips' E&P segment declined
31 percent in the second quarter of 2002 and 48 percent in the
six-month period.  The lower result in both periods was mainly
due to a decrease in crude oil and natural gas prices, as well as
lower crude oil production and sales volumes.  E&P had foreign
currency losses in the second quarter and six-month period of
2002 of $7 million and $5 million, respectively, compared with
gains of $2 million and $4 million in the corresponding periods
of 2001.


U.S. E&P
--------

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                            2002          2001   2002        2001
                            ------------------   ----------------
Operating Results
Net income                  $283           385    441         857
Less special items            (5)            9     (5)          7
-----------------------------------------------------------------
Net operating income        $288           376    446         850
=================================================================

Alaska                      $229           240    354         485
Lower 48                      59           136     92         365
-----------------------------------------------------------------
                            $288           376    446         850
=================================================================


Net operating income from Phillips' U.S. E&P operations decreased
23 percent in the second quarter of 2002 and 48 percent in the
six-month period.  The decline in both periods was primarily the
result of lower crude oil and natural gas prices, with this
impact being more significant in the six-month period.  In
addition, the second quarter was negatively impacted by lower
crude oil and natural gas sales volumes.  Both periods benefited
from decreased production taxes due to lower product prices.

U.S. crude oil production decreased slightly in the second
quarter of 2002, compared with the second quarter of 2001, and
decreased 4 percent compared with the first quarter of 2002.  The
decrease from the first quarter was primarily due to normal
seasonal declines in Alaska North Slope production, as well as
maintenance work and normal field declines there.  Natural gas
production was 4 percent lower in the second quarter of 2002 than
the second quarter of the prior year, and 6 percent lower than
the first quarter of 2002.  The decrease in the second quarter
was primarily the result of normal field declines and maintenance
work at certain gas processing facilities.


                                27

<PAGE>


Special items in the second quarter and first six months of 2002
included a property impairment and merger-related costs.  Special
items in the second quarter of 2001 consisted of a net favorable
result from claims and settlements.  In addition, the six-month
2001 period also included a net loss on an asset disposition.


Foreign E&P
-----------

                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                            2002          2001   2002        2001
                            ------------------   ----------------
Operating Results
Net income                  $ 56           118     40         227
Less special items            (3)          (10)   (84)        (12)
-----------------------------------------------------------------
Net operating income        $ 59           128    124         239
=================================================================


Net operating income from the company's foreign E&P operations
declined 54 percent in the second quarter of 2002 and 48 percent
in the six-month period.  The decline in both periods was
primarily the result of lower crude oil sales volumes and sales
prices, higher dry hole expenses, and foreign currency losses in
the 2002 periods versus gains in the 2001 periods.

Foreign crude oil production in the second quarter of 2002
declined 8 percent, compared with the second quarter of 2001, and
3 percent, compared with the first quarter of 2002.  Nigeria
production declined in both periods as a result of Organization
of Petroleum Exporting Countries (OPEC) related, government-
imposed curtailments.  Foreign natural gas production
declined slightly when compared with the first quarter of 2002,
but increased 4 percent compared with the second quarter of 2001.
The increase over the prior year was primarily due to the startup
of the Jade field in the U.K. North Sea in February 2002.

Special items in the second quarter of 2002 consisted of an
additional property impairment of the Janice field in the U.K.
North Sea in connection with its sale.  In addition, the six-
month period of 2002 also included a $77 million leasehold
impairment of deepwater block 34, offshore Angola, due to an
unsuccessful initial exploratory well in this block.  Special
items in the second quarter and six-month period of 2001
primarily consisted of the impairment of the Siri field, offshore
Denmark, totaling $23 million after-tax, partially offset by a
net gain on asset dispositions.


                                28

<PAGE>


GPM

                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                              2002        2001    2002       2001
                            ------------------   ----------------
                                     Millions of Dollars
                            -------------------------------------
Operating Results
Net income                  $    7          29      12         64
Less special items               -           -       -          -
-----------------------------------------------------------------
Net operating income        $    7          29      12         64
=================================================================

                                     Dollars Per Barrel
                            -------------------------------------
Average Sales Prices
U.S. natural gas liquids*   $15.59       20.24   14.21      22.81
-----------------------------------------------------------------

                                 Millions of Cubic Feet Daily
                            -------------------------------------
Operating Statistics**
Raw gas throughput           2,242       2,333   2,242      2,303
-----------------------------------------------------------------

                                  Thousands of Barrels Daily
                            -------------------------------------
Natural gas liquids
  production                   119         123     118        118
-----------------------------------------------------------------
 *Prices are based on index prices from the Mont Belvieu and
  Conway market hubs that are weighted by DEFS' natural gas
  liquids component and location mix.
**Volumes represent Phillips' 30.3 percent of DEFS' throughput
  and production.


The GPM segment consists primarily of Phillips' 30.3 percent
interest in Duke Energy Field Services, LLC (DEFS).  Net
operating income from the GPM segment decreased 76 percent in the
second quarter of 2002 and 81 percent in the six-month period.
The decrease in both periods was mainly the result of lower
margins, reflecting sharply lower natural gas liquids prices, gas
imbalance accrual adjustments, and natural gas cavern storage
losses.  Results in both periods also reflect increased operating
expenses due to acquisitions.

Included in the GPM segment's earnings in both the second
quarters of 2002 and 2001 was a benefit of $9 million,
representing the amortization of the basis difference between the
book value of Phillips' contribution to DEFS and its 30.3 percent
equity interest in DEFS.  The six-month periods of both years
included $18 million for the basis difference.

There were no special items during the first six months of 2002
or 2001.


                                29

<PAGE>


RM&T
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                             2002         2001   2002        2001
                            ------------------   ----------------
                                     Millions of Dollars
                            -------------------------------------
Operating Results
Net income                  $ 109          197     20         269
Less special items             (2)           -     (3)         26
-----------------------------------------------------------------
Net operating income        $ 111          197     23         243
=================================================================

                                      Dollars Per Gallon
                            -------------------------------------
U.S. Average Sales Prices
Automotive gasoline
  Wholesale                 $ .87         1.04    .77         .97
  Retail                     1.00         1.22    .91        1.13
Distillates                   .69          .87    .64         .85
-----------------------------------------------------------------

                                 Thousands of Barrels Daily
                            -------------------------------------
Operating Statistics
Refining operations
  United States
    Rated crude oil
      capacity              1,685          368  1,676         368
    Crude oil runs          1,597          364  1,518         355
    Capacity utilization
      (percent)                95%          99     91          96
    Refinery and natural
      gas liquids
      production            1,818          532  1,740         518
  Foreign
    Rated crude oil
      capacity                 72            -     72           -
    Crude oil runs             66            -     65           -
    Capacity utilization
      (percent)                92%           -     90           -
    Refinery production        64            -     63           -
-----------------------------------------------------------------

Petroleum products outside
  sales
    United States
      Automotive gasoline
        Branded               717          262    682         252
        Unbranded and spot    473           63    462          61
      Aviation fuels          187           47    175          45
      Distillates
        Wholesale and retail  121          111    119         109
        Spot                  309           14    319          21
      Natural gas liquids     112           84    126          92
      Other products          318           58    345          56
-----------------------------------------------------------------
                            2,237          639  2,228         636
    Foreign                    50            -     52           -
-----------------------------------------------------------------
                            2,287          639  2,280         636
=================================================================


                                30

<PAGE>


Net operating income from the RM&T segment decreased 44 percent
in the second quarter of 2002 and 91 percent in the six-month
period.  The benefit of the Tosco acquisition was more than
offset in both periods by lower refining and marketing margins,
particularly in the six-month period.  Although lower than the
exceptionally strong margins experienced during the second
quarter of 2001, refining margins improved during the second
quarter of 2002 relative to the first quarter of 2002, as did
marketing margins.  Margins in the first quarter of 2002 were
well below historical averages and resulted in a net operating
loss for the quarter, which negatively impacted the six-month
period.  Results in both the second quarter and six-month period
of 2002 were negatively impacted by lower equity earnings from
Merey Sweeny, L.P. (MSLP), which experienced lower crude oil
heavy-light price differentials in 2002.  Benefiting earnings in
both 2002 periods were lower operating expenses.

The company's U.S. refineries ran at 95 percent of capacity in
the second quarter of 2002, up from 85 percent in the first
quarter of 2002.  The first quarter of 2002 included two major
scheduled maintenance turnarounds, along with production
reductions instituted as a result of low refining margins.

Special items in the second quarter and first six months of 2002
consisted of work force reduction charges.  There were no special
items in the second quarter of 2001.  The six-month period of
2001 included a cumulative effect of accounting change that
increased RM&T net income by $28 million, partially offset by a
property impairment recorded by an equity-affiliate pipeline
company.


                                31

<PAGE>


Chemicals

                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                            2002          2001    2002       2001
                            ------------------   ----------------
                                     Millions of Dollars
                            -------------------------------------
Operating Results
Net income (loss)           $  7             5      (4)       (39)
Less special items             4            28       1         23
-----------------------------------------------------------------
Net operating income (loss) $  3           (23)     (5)       (62)
=================================================================

                                      Millions of Pounds
                            -------------------------------------
Operating Statistics
Production
  Ethylene*                  786           828   1,591      1,656
  Polyethylene**             508           498   1,033        977
  Styrene                    248            84     451        193
  Normal alpha olefins       147           125     305        255
-----------------------------------------------------------------
 *Phillips' 50 percent share of Chevron Phillips Chemical Company
  LLC.
**Domestic production only.


The company's Chemicals segment consists primarily of its
50 percent interest in Chevron Phillips Chemical Company LLC
(CPChem).  The Chemicals segment reported net operating income of
$3 million in the second quarter of 2002, compared with a net
operating loss of $23 million in the second quarter of the prior
year.  In the first six months of 2002, the Chemicals segment
posted a net operating loss of $5 million, compared with a net
operating loss of $62 million in the corresponding period of
2001.

Although the 2002 periods were improved over 2001, this business
remains depressed due to weak economic and market conditions,
which has resulted in low margins across most product lines, as
well as production cutbacks.  The improvement in the 2002 periods
was primarily the result of improved performance in the
aromatics, styrenics and polyethylene business lines.  These
improvements were partially offset by lower ethylene margins
resulting from a decrease in sales prices.  Capacity utilization
rates in the second quarter of 2002 for CPChem's two largest
business lines--ethylene and polyethylene-were 83 percent and
88 percent, respectively.

Special items in the second quarter of 2002 consisted of a
partial reversal of a previous lower-of-cost-or-market (LCM)
inventory writedown.  The six-month period of 2002 also included
an additional LCM partial reversal, as well as contingency
accruals and severance charges.  Special items in the second
quarter and six-month period of 2001 primarily consisted of


                                32

<PAGE>


business interruption insurance settlements related to the March
2000 incident at the K-Resin facilities at the Houston Chemical
Complex.


Corporate and Other
                                     Millions of Dollars
                            -------------------------------------
                            Three Months Ended   Six Months Ended
                                 June 30              June 30
                            ------------------   ----------------
                             2002         2001    2002       2001
                            ------------------   ----------------
Operating Results
Corporate and Other         $(111)        (115)   (260)      (243)
Less special items            (12)         (10)    (22)       (13)
-----------------------------------------------------------------
Adjusted Corporate and
  Other                     $ (99)        (105)   (238)      (230)
=================================================================


Adjusted Corporate and Other includes:

Net interest                $ (76)         (62)   (154)      (130)
Corporate general and
  administrative expenses     (27)         (24)    (74)       (55)
Preferred dividend
  requirements                 (8)         (10)    (16)       (20)
Other                          12           (9)      6        (25)
-----------------------------------------------------------------
Adjusted Corporate and
  Other                     $ (99)        (105)   (238)      (230)
=================================================================


Net interest represents interest expense, net of interest income
and capitalized interest.  Net interest costs increased
23 percent in the second quarter of 2002 and 18 percent in the
six-month period.  The increase in both periods was primarily
attributable to higher debt levels subsequent to the Tosco
acquisition, as well as lower levels of interest being
capitalized.

Corporate general and administrative expenses increased
13 percent in the second quarter of 2002 and 35 percent in the
first six months.  The increase in both periods was primarily the
result of higher benefit-related expenses, mainly from the
accelerated vesting of certain long-term compensation plans due
to stockholder approval of the planned merger with Conoco.

Preferred dividend requirements represent dividends on the
preferred securities of the Phillips 66 Capital Trusts I and II.
In May 2002, the preferred securities of Capital Trust I were
redeemed, lowering the preferred dividend requirements in the
second quarter and future periods.


                                33

<PAGE>


The category "Other" consists primarily of a captive insurance
subsidiary, certain foreign currency transaction gains and
losses, and income tax and other items that are not directly
associated with the operating segments on a stand-alone basis.
Results from Other were improved in the second quarter and first
six months of 2002 primarily due to foreign currency gains in
2002, versus losses in 2001, and a favorable mark-to-market
revaluation of certain former Tosco long-term incentive units
that were converted into Phillips performance units and are held
by former senior executives of Tosco, none of whom are now
employed by Phillips.  See Note 3--Acquisition of Tosco
Corporation for additional information on these performance
units.

Special items in the second quarter of 2002 included an
extraordinary loss of $15 million after-tax related to the early
redemption of long-term debt and preferred securities.  Special
items in the six-month period of 2002 also included contingency
accruals and external transition costs related to the pending
merger with Conoco.  Special items in the second quarter and
first six months of 2001 included environmental contingency
accruals, as well a loss on the disposition of assets.


                                34




<PAGE>


CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators
                                        Millions of Dollars
                                   ------------------------------
                                        At           At        At
                                   June 30  December 31   June 30
                                      2002         2001      2001
                                   ------------------------------

Current ratio                           .9          1.0        .8
Notes payable and long-term debt
  due within one year              $ 1,059           44         4
Total debt                         $ 9,635        8,689     6,272
Company-obligated mandatorily
  redeemable preferred securities  $   350          650       650
Common stockholders' equity        $14,456       14,340     7,052
Percent of total debt to capital*       39%          37        45
Percent of floating-rate debt
  to total debt                         31%          20        13
-----------------------------------------------------------------
*Capital includes total debt, company-obligated mandatorily
 redeemable preferred securities and common stockholders' equity.


During the first six months of 2002, funds of $1,109 million were
provided by operating activities, a decrease of $839 million from
the same period of 2001, primarily the result of an $886 million
decrease in net income due to lower prices and margins.
Partially offsetting this decrease in net income were increases
in non-cash net income components including depreciation,
depletion and amortization and increased dry hole and lease
impairment costs, due principally to the acquisition of Tosco and
impairment of the company's investment in the offshore Angola
exploratory block 34, respectively.  Commodity price changes also
affected non-cash working capital items, including receivables,
payables, and inventories, which contributed to the decrease in
cash from operating activities.  Reduced levels of revolving
sales of accounts receivable under the company's receivables
sales programs decreased cash from operations $51 million.  The
company used the cash provided by operations and borrowings to
pay dividends and fund $1,543 million of its 2002 capital
program.  Cash and cash equivalents increased $3 million since
December 31, 2001.

During the first quarter of 2002, Merey Sweeny L.P. (MSLP), the
limited partnership which owns and operates the coker facilities
located at Phillips' Sweeny Complex, issued $25 million of tax-
exempt bonds due 2022.  This issuance, combined with similar
bonds issued by MSLP in 1998, 2000, and 2001 bring the total
outstanding to $100 million.  As a result of the company's


                                35

<PAGE>


support as a primary obligor of a 50 percent share of MSLP
financings, equal to its partnership interest, $50 million and
$38 million of long-term debt is included in Phillips' balance
sheet at June 30, 2002, and December 31, 2001, respectively.

Phillips' debt-to-capital ratio was 39 percent at June 30, 2002,
up from December 31, 2001, but improved from 45 percent at
June 30, 2001, primarily as a result of the company's issuing
124.1 million shares of common stock in the acquisition of Tosco
Corporation (Tosco).

On May 15, 2002, the company redeemed its $250 million 8.86%
Notes due May 15, 2022, at 104.43 percent.  On May 31, 2002,
Phillips also redeemed all of its outstanding 8.24% Junior
Subordinated Deferrable Interest Debentures due 2036 held by the
Phillips 66 Capital Trust I.  This triggered the redemption of
$300 million of 8.24% Trust Originated Preferred Securities at
par value, $25 per share.  Phillips funded both redemptions by
issuing commercial paper.  Together, these redemptions are
estimated to reduce pretax costs by approximately $30 million per
year.  Notes payable and long-term debt due within one year
increased significantly due to the company's redemption of the
above debt and preferred securities, and to the increased
issuance of commercial paper supported by the company's 364-day
credit facility.

To meet its liquidity requirements, including funding its capital
program, paying dividends and repaying debt, the company looks to
a variety of funding sources, primarily cash generated from
operating activities.  Over the next two years, however, the
company anticipates also raising funds from the sale of
approximately $1 billion of assets from its RM&T segment.

While the stability of the company's cash flows from operating
activities benefits from geographic diversity and the effects of
upstream and downstream integration, the company's operating cash
flows remain exposed to the volatility of commodity crude oil and
natural gas prices and downstream margins, as well as periodic
cash needs to fund tax payments and purchase crude oil, natural
gas and petroleum products.  The company's primary swing funding
source for short-term working capital needs is its commercial
paper program supported by $3 billion in revolving bank credit
facilities.

At June 30, 2002, Phillips had two revolving bank credit
facilities: a five-year credit agreement providing for
commitments not to exceed $1.5 billion; and a $1.5 billion
364-day credit agreement, which expires on October 15, 2002.  The
$3 billion of credit facilities are available either as direct


                                36

<PAGE>


bank borrowings or as support for the issuance of commercial
paper.  Discussions have begun with a group of banks for a
replacement of the current 364-day facility.  The company does
not anticipate any difficulties in securing the facility.  At
June 30, 2002, Phillips had $2,301 million of commercial paper
outstanding supported by the credit facilities, compared with
$1,081 million outstanding at December 31, 2001, while Phillips'
Norwegian subsidiary had $20 million outstanding under its two
$300 million revolving credit facilities that expire in
June 2004.  The increase in commercial paper outstanding was
primarily due to the redemption of the 8.24% preferred
securities, oil and gas property acquisitions in Kazakhstan and
the Timor Sea, and the timing of tax payments.  The early
retirement of the 8.86% notes also contributed to the increased
use of commercial paper.

At June 30, 2002, Phillips had $3.5 billion of various types of
debt and equity securities, and securities convertible into
either, available to issue and sell, under a universal shelf
registration filed with the U.S. Securities and Exchange
Commission and declared effective on April 27, 2000.

In addition to the bank credit facilities, Phillips sells certain
credit card and trade receivables under revolving sales
agreements with five unrelated bank-sponsored entities.  These
agreements provide for Phillips to sell up to $1.2 billion of
senior, undivided interests in pools of the credit card or trade
receivables to the bank-sponsored entities.  In April 2002,
Tosco, the seller, and the sponsoring bank agreed to terminate an
agreement that provided for the sale of $100 million of Tosco
credit card receivables.  In June 2002, Phillips replaced its
existing receivables facilities with a new $1.1 billion
receivables facility.  This new facility, combined with a
continuing previous facility, keeps the overall capacity at
$1.2 billion.

At June 30, 2002, and December 31, 2001, the company had sold
undivided interests in pools of receivables of $889 million and
$940 million, respectively.  Phillips retained interests in the
pools of receivables, which are subordinate to the interests sold
to the bank-sponsored entities.  At June 30, 2002, and
December 31, 2001, Phillips' retained interests were $718 million
and $450 million, respectively, reported on the balance sheet in
accounts and notes receivable.  See Note 16--Sales of Receivables
in the Notes to Financial Statements for additional information.


                                37

<PAGE>


Capital Expenditures and Investments

                                              Millions of Dollars
                                              -------------------
                                                Six Months Ended
                                                    June 30
                                              -------------------
                                                2002         2001
                                              -------------------
E&P
  Alaska                                      $  387          478
  Lower 48                                       139          201
  Foreign                                        692          563
-----------------------------------------------------------------
                                               1,218        1,242
GPM                                                -            -
RM&T                                             258          143
Chemicals                                         19            -
Corporate and Other                               48           29
-----------------------------------------------------------------
                                              $1,543        1,414
=================================================================
United States                                 $  839          851
Foreign                                          704          563
-----------------------------------------------------------------
                                              $1,543        1,414
=================================================================


On May 30, 2002, the Polar Resolution, the second of five double-
hulled Endeavour Class tankers which Phillips is having built for
use in transporting Alaskan crude oil to the U.S. West Coast,
completed sea trials and entered service.  The third tanker, the
Polar Discovery, was christened on April 13, 2002, and is
expected to enter service in 2003.  Phillips expects to add a new
Endeavour Class tanker to its fleet each year through 2005.

On June 28, 2002, Phillips and its co-venturers, in conjunction
with the government of the Republic of Kazakhstan, declared the
Kashagan field on the Kazakhstan shelf in the north Caspian Sea
to be commercial.  This declaration of commerciality enables
preparation of a development plan for the Kashagan field.
Drilling and testing of appraisal wells by Phillips and its co-
venturers continued during the first half of 2002.  Evaluation of
test results continues on the second, and drilling continues on
the third, of five planned appraisal wells.  On May 23, 2002, the
acquisition of proportionate interests of other co-venturers
rights was completed through a pre-emptive rights agreement,
which increased Phillips' ownership interest from 7.14 percent to
8.33 percent.


                                38

<PAGE>


In the U.K. sector of the North Sea, Phillips' Jade field began
production in late February 2002.  A second production well was
successfully drilled and began producing during the second
quarter of 2002.  Phillips is the operator and holds a
32.5 percent interest in Jade.

In the first half of 2002, Phillips continued pursuing the goal
of increasing its presence in high-potential deepwater areas.  On
June 14, 2002, the company signed the Nigeria block 318
production sharing contract with the Nigerian Petroleum
Development Company, the exploration and production unit of the
state-run Nigerian National Petroleum Corporation.  Phillips is
operator of the deepwater block with a 50 percent interest.
Phillips was the high bidder in the Central Gulf of Mexico sale
for the Lorien prospect located in Green Canyon block 199.  The
company was officially awarded the block during the second
quarter of 2002.  In early May 2002, initial results showed that
the first exploratory well drilled in block 34, offshore Angola,
was a dry hole.  In view of this information, the company re-
assessed the fair value of the remainder of the block and
determined that the company's investment in the block was
impaired by $77 million, both before- and after-tax.  Further
technical analysis of the results of this first well continues.
The second of three commitment wells in this block is scheduled
for drilling in 2003.

On July 1, 2002, Phillips purchased 50 percent, or $125 million,
of Preferred LLC Interests securities issued by CPChem, the
company's 50 percent-owned joint venture which comprises
Phillips' chemicals segment.

As a result of the current uncertain economic environment and
lower than anticipated upstream commodity prices and downstream
margins, the company anticipates capital expenditures of
approximately $3.2 billion to $3.3 billion for 2002, compared
with its original budget of $3.5 billion for the year.


Contingencies

Legal and Tax Matters

Phillips accrues for contingencies when a loss is probable and
the amounts can be reasonably estimated.  Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.


                                39

<PAGE>


On June 23, 1999, a flash fire occurred in a reactor vessel at
the K-Resin styrene-butadiene copolymer (SBC) plant at the
Houston Chemical Complex.  Two individuals employed by a
subcontractor, Zachry Construction Corporation (Zachry), were
killed and other workers were injured.  Ten lawsuits were filed
in Texas in connection with the incident, including two actions
for wrongful death.  All of the significant litigation arising
from this incident has now been resolved.

On March 27, 2000, an explosion and fire occurred at Phillips'
K-Resin SBC plant at the Houston Chemical Complex due to the
overpressurization of an out-of-service butadiene storage tank.
One employee was killed and several individuals, including
employees of both Phillips and its contractors, were injured.
Additionally, individuals who were allegedly in the area of the
Houston Chemical Complex at the time of the incident have claimed
they suffered various personal injuries due to exposure to the
event.  The wrongful death claim and the claims of the most
seriously injured workers have been resolved.  Currently, there
are 13 lawsuits pending on behalf of 174 primary plaintiffs.  A
trial is scheduled for the fall of 2002.  Under the
indemnification provisions of subcontracting agreements with
Zachry and Brock Maintenance, Inc., Phillips has sought
indemnification from these subcontractors with respect to claims
made by their employees.  The Contribution Agreement, pursuant to
which CPChem was formed, does not require CPChem to indemnify
Phillips for liability arising out of this litigation.


Environmental

Phillips is subject to the same numerous federal, state, local
and foreign environmental laws and regulations as are other
companies in the oil and gas exploration and production; and
refining, marketing and transportation of crude oil and refined
products businesses.  The most significant of those laws, and the
regulations issued thereunder, affecting Phillips' operations
are:

o  The Clean Air Act, as amended.
o  The Federal Water Pollution Control Act.
o  Safe Drinking Water Act.
o  Regulations of the United States Department of the Interior
   governing offshore oil and gas operations.

These acts, along with their associated regulations, set limits
on emissions and, in the case of discharges to water, establish
water quality limits.  They also, in most cases, require permits
in association with new or modified operations.  These permits


                                40

<PAGE>


can require an applicant to obtain substantial information in
connection with the application process, which can be expensive
and time-consuming.  In addition, there can be delays associated
with notice and comment periods and the agency's processing of
the application.  Many of the delays associated with the
permitting process are beyond the control of the applicant.

Many states also have similar statutes and regulations governing
air and water.  While similar, in some cases these regulations
impose additional, or more stringent, requirements that can add
to the cost and difficulty of marketing or transporting products
across state lines.

Phillips is also subject to certain acts and regulations
primarily governing remediation of wastes or oil spills.  Most of
the expenditures to fulfill these obligations relate to
facilities and sites where past operations followed practices and
procedures that were considered appropriate under regulations, if
any, existing at the time, but that may now require investigatory
or remedial work to adequately protect the environment or to
address new regulatory requirements.  The applicable acts are:

o  The Comprehensive Environmental Response, Compensation and
   Liability Act of 1980, as amended (CERCLA), commonly referred
   to as Superfund, and comparable state statutes.  CERCLA
   primarily addresses historic contamination and imposes joint
   and several liability for cleanup of contaminated sites on
   owners and operators of the contaminated sites, or on those
   who have contributed wastes to a site.  Many states have their
   own statutes and regulatory requirements that are similar to
   CERCLA.  Phillips is involved in a number of Superfund sites--
   see the discussion below.  CERCLA also requires reporting of
   releases to the environment of substances defined as
   hazardous.  These requirements add cost and complexity to
   Phillips' operations.

o  The Resource Conservation and Recovery Act of 1976, as
   amended, and comparable state statutes, govern the management
   and disposal of wastes, with the most stringent regulations
   applicable to treatment, storage or disposal of hazardous
   wastes at the owner's property.

o  The Oil Pollution Act of 1990, as amended, under which owners
   and operators of tankers, owners and operators of onshore
   facilities and pipelines, and lessees or permittees of an area
   in which an offshore facility is located are liable for
   removal and cleanup costs of oil discharges into navigable
   waters of the United States.


                                41

<PAGE>


Pursuant to the authority of the Clean Air Act (CAA), the
Environmental Protection Agency (EPA) has issued several
standards applicable to the formulation of motor fuels, which are
designed to reduce emissions of certain air pollutants when the
fuel enters commerce or is used.  Pursuant to state laws
corresponding to the CAA, several states have passed similar or
more stringent regulations governing the formulation of motor
fuels.  Where these regulations are currently applicable,
Phillips has already incurred the operational or capital costs of
control or manufacturing limitations, but will continue to incur
the costs of compliance such as ongoing operational requirements
and recordkeeping.

The EPA has also promulgated specific rules governing the sulfur
content of gasoline, known generically as the "Tier II Sulfur
Rules," which become applicable to Phillips' gasoline production
as early as 2004.  The company is implementing a compliance
strategy for meeting the requirements, including the use of
Phillips' proprietary technology known as S Zorb Sulfur Removal
Technology (S Zorb).  Phillips expects to use a combination of
technologies to achieve compliance with the rules.  Phillips has
made preliminary estimates of its cost of compliance with this
rule and will include these costs in future budgeting for
refinery compliance.  The EPA has also promulgated sulfur content
rules for highway diesel fuel that become applicable in 2006.
Phillips is currently developing and testing an S Zorb system for
removing sulfur from diesel fuel.  It is anticipated that S Zorb
will be used as part of Phillips' strategy for complying with
these rules.  Because the company is still evaluating and
developing capital strategies for compliance with the rule,
Phillips cannot provide precise estimates for compliance at this
time, but will do so and report these compliance costs as
required by law.

In 1997, an international conference on global warming concluded
an agreement known as the Kyoto Protocol, which called for the
reduction of certain emissions that may contribute to increases
in atmospheric greenhouse gas concentrations.  The United States
has not ratified the treaty codifying the Kyoto Protocol and it
is not clear whether it will do so in the future.  If the
protocol is ratified by the United States, the cost of complying
with regulations implementing the protocol could be substantial.
It is not, however, possible to accurately estimate the costs
that could be incurred by Phillips to comply with such
regulations.

Because of the nature of Phillips' businesses, it is likely that
environmental laws and regulations will continue to have an
effect on its operations in the future.  Phillips does not,


                                42

<PAGE>


however, currently expect any material adverse effect on its
operations or financial position as a result of compliance with
such laws and regulations.

At year-end 2001, Phillips reported 29 sites where it had
information indicating that it might have been identified as a
Potentially Responsible Party (PRP) under the federal Superfund
law.  Since then, one of these PRP sites has been resolved and
two new sites were added.  Of the 30 sites remaining at June 30,
2002, the company believes it has a legal defense or its records
indicate no involvement for six sites.  At 15 other sites,
present information indicates that it is probable that the
company's exposure is less than $100,000 per site.  Of the
remaining sites, the company has provided for any probable costs
that can be reasonably estimated.  At a number of sites, Phillips
has had no communication or activity with government agencies or
other PRPs in more than two years.  Experience has shown,
however, that the mere passage of time is no guarantee that the
site will never become active or that the company's connection to
the site will not be established.

Phillips does not consider the number of sites at which it has
been designated potentially responsible by state or federal
agencies as a relevant measure of liability.  Some companies may
be involved in few sites but have much larger liabilities than
companies involved in many more sites.  Although liability of
those potentially responsible is generally joint and several for
federal sites and frequently so for state sites, the company is
usually but one of many companies cited at a particular site.
Phillips has, to date, been successful in sharing cleanup costs
with other financially sound companies.  Many of the sites at
which the company is potentially responsible are still under
investigation by the EPA or the state agencies concerned.  Prior
to actual cleanup, those potentially responsible normally assess
site conditions, apportion responsibility and determine the
appropriate remediation.  In some instances, Phillips may have no
liability or attain a settlement of liability.  Actual cleanup
costs generally occur after the parties obtain EPA or equivalent
state agency approval.

At June 30, 2002, contingent liability accruals of $1 million had
been made for the company's PRP sites, and $3 million for other
environmental contingent liabilities.  In addition, the company
had accrued $517 million for other planned remediation
activities, including partially and fully resolved state, PRP,
and other federal sites, as well as sites where no claims have
been asserted, for total environmental accruals of $521 million,
compared with $539 million at December 31, 2001.  No one site
exceeds 10 percent of the total.


                                43

<PAGE>


After an assessment of environmental exposures for cleanup and
other costs, except those acquired in purchase business
combinations, the company makes accruals on an undiscounted basis
for planned investigation and remediation activities for sites
where it is probable that future costs will be incurred and these
costs can be reasonably estimated.  These accruals have not been
reduced for possible insurance recoveries.


NEW ACCOUNTING STANDARDS

In April 2002, the Financial Accounting Standards Board (FASB)
issued FASB Statement No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections."  For information about the anticipated
impact of adopting this statement, see the second paragraph of
Note 20--New Accounting Standards in the Notes to Financial
Statements, which is incorporated herein by reference.


OUTLOOK

The Boards of Directors and stockholders of Phillips and Conoco
have approved a merger of the two companies to form a new
company, ConocoPhillips.  At inception, Phillips stockholders
will own approximately 57 percent of the new company and Conoco
stockholders will own approximately 43 percent.  Both companies
are finalizing plans for the integration.  The transaction is
expected to close in the second half of 2002, after FTC clearance
is received.

In June 2002, in connection with a possible FTC settlement
related to the Conoco merger, the company announced it would
undertake to sell its Woods Cross refinery in the Salt Lake City,
Utah, area, plus associated business assets.  An investment bank
has been engaged to assist with preparing for a potential sale.

Effective January 1, 2002, the Norwegian authorities implemented
a production curtailment on the Norwegian Continental shelf to
support the efforts of OPEC to stabilize crude prices.  Phillips
has incurred only minimal impacts to its Norway production
volumes during the first half of 2002 as a result of these
curtailments--less than 1 percent, compared with budgeted
volumes.  The voluntary curtailments were lifted effective
July 1, 2002, and no significant changes are expected during the
remainder of the year.  In Nigeria, curtailment of oil production
from the company's joint-venture operations is expected for the
remainder of 2002, in support of OPEC curtailment
recommendations.


                                44

<PAGE>


The company expects its third-quarter 2002 production to be at
about the same level as that of the second quarter.  For the full
year 2002, with continued curtailments, production of 820,000
barrels-of-oil-equivalent per day is anticipated.

In March 2002, the Norwegian government approved, in a
parliamentary bill, the company's plan for in-place disposal of
the Ekofisk I concrete tank in a cleaned condition.  Removal of
other Ekofisk structures, according to the recommended cessation
plan, had been previously approved in December 2001.  All removal
and cleaning activity is expected to be completed by 2013.

On July 9, 2002, Phillips announced plans to construct
commercial-scale S Zorb units at two of its refineries.  S Zorb
is the company's proprietary technology to significantly reduce
sulfur content in gasoline and diesel fuels in preparation for
meeting new government regulations.  The company will build an
S Zorb gasoline unit at its Ferndale, Washington, refinery and
its first S Zorb diesel unit at its Sweeny, Texas, refinery.
Construction of both units is expected to be completed in late
2003.

On April 17, 2002, the U.K. government announced proposed
changes, as part of its 2002 budget, to corporate tax laws
specifically impacting the oil and gas industry and production
from the U.K. sector of the North Sea.  After a period of public
and industry review and comment, the changes became law on
July 24, 2002.  A 10 percent supplementary charge to corporation
taxes is now assessed on profits, partially offset by the
elimination of royalties and an increase in first-year deduction
allowances for capital investments.  Phillips estimates a one-
time deferred tax charge of approximately $24 million during the
third quarter of 2002, with an ongoing increase in U.K. taxes of
$5 million to $10 million annually.

Crude oil and natural gas prices are subject to external factors
over which the company has no control, such as global economic
conditions, demand growth, inventory levels, weather, competing
fuel prices and availability of supply.  Crude oil prices
continued to improve during the second quarter due to continuation
of export restraint by major exporting countries and inventory
declines, as well as continued tension in the Middle East.  World
crude oil demand levels remain in question as the pace of economic
recovery during the remainder of the year is uncertain.  U.S.
natural gas prices continued to climb from the depressed levels
experienced during the winter, but in the middle of the second
quarter began to decline due to expectations that the economic
growth pace would slow and to decreased consumption in the power
generation market.  However, long-range natural gas demand for
power generation is expected to improve.


                                45

<PAGE>


Refining margins are subject to the price of crude oil and other
feedstocks, and the prices of petroleum products, which are
subject to market factors over which the company has no control,
such as the U.S. economy; seasonal factors that affect demand,
such as the summer driving months; and the levels of refining
output, including refining capacity relative to demand.  Refining
margins remained depressed during the second quarter.  Marketing
margins improved during the quarter to levels more consistent
with industry historical averages.  Gasoline and distillates
stocks remained above average levels.  While refined product
prices remained relatively flat during the period, oil prices
continued to improve which tightened the refining margins that
depend upon oil for feedstock.  Energy demand growth would be
expected if the U.S. economic climate improves, which could
enhance refining and marketing margins.


CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995

Phillips is including the following cautionary statement to take
advantage of the "safe harbor" provisions of the PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 for any forward-looking
statement made by, or on behalf of, the company.  The factors
identified in this cautionary statement are important factors
(but not necessarily all important factors) that could cause
actual results to differ materially from those expressed.  Where
any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement,
the company believes such assumptions or bases to be reasonable
and makes them in good faith.  Assumed facts or bases almost
always vary from actual results, and the differences between
assumed facts or bases and actual results can be material,
depending on the circumstances.  Where, in any forward-looking
statement, the company, or its Management, expresses an
expectation or belief as to future results, there can be no
assurance that the statement of expectation or belief will
result, or be achieved or accomplished.

The following are identified as important risk factors, but not
all of the risk factors, that could cause actual results to
differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the company:


                                46

<PAGE>


o  Plans for the further implementation of Management's announced
   strategy for certain of its business segments are subject to:
   the completion of the announced merger with Conoco; receipt of
   any approvals or clearances that may be required from domestic
   and foreign government authorities; sale of certain assets, if
   any, to meet regulatory requirements; successful integration
   of Conoco businesses, assets, operations and personnel with
   those of the company; continued successful integration of the
   recently acquired Tosco businesses and assets; the successful
   development and operation of the company's current E&P
   projects, and the achievement of production estimates; the
   achievement of cost savings and synergies that are dependent
   on the integration of personnel, business systems and
   operations from the Conoco merger and the Tosco acquisition;
   the operation and financing of the DEFS and CPChem joint
   ventures; and the demand and prices for the products produced
   by DEFS and CPChem.

o  Plans to drill wells and develop offshore or onshore
   exploration and production properties are subject to: the
   company's ability to obtain agreements with co-venturers,
   partners and governments and government agencies, including
   necessary permits; its ability to engage specialized drilling,
   construction and other contractors and equipment and to obtain
   economical and timely financing; construction of pipelines,
   processing and production facilities for its Bayu-Undan, Bohai
   Bay, Hamaca, Kashagan development, and other E&P projects;
   geological, land or sea conditions; world prices for oil,
   natural gas and natural gas liquids; adequate and reliable
   transportation systems, including the Trans-Alaska Pipeline
   System, the Valdez Marine Harbor Terminal, and the acquired
   and to-be-constructed crude oil tankers; and foreign and
   United States laws, including tax laws.

o  Plans for the modernization, the debottlenecking or other
   improvement projects at its refineries, including the
   installation and operation of its proprietary sulfur removal
   technology implementation, and the timing of production from
   such plants are subject to: approval from the company's and/or
   subsidiaries' Boards of Directors; obtaining loans and/or
   project financing; the issuance by foreign, federal, state,
   and municipal governments, or agencies thereof, of timely
   building, environmental and other permits; and the
   availability of specialized contractors, work force and
   equipment.  Production and delivery of the company's products
   are subject to: domestic and worldwide prices and demand for
   refined products; availability of raw materials; and the
   availability of transportation for products in the form of
   pipelines, railcars, trucks or ships.


                                47

<PAGE>


o  The ability to meet liquidity requirements, including the
   funding of the company's capital program from borrowings,
   asset sales, and operations, is subject to: the negotiation
   and execution of various bank, project and public financings
   and related financing documents, the market for any such debt,
   and interest rates on the debt; the identification of buyers
   and the negotiation and execution of instruments of sale for
   any assets that may be identified for sale; changes in the
   commodity prices of the company's basic products of oil,
   natural gas and natural gas liquids, over which Phillips may
   have little or no control; its ability to operate refineries
   and exploration and production operations consistently and
   safely, with no major disruption in production or
   transportation of products from such operations; the
   successful and profitable operations of its chemicals and mid-
   stream joint ventures; and the effect of foreign and domestic
   legislation of federal, state and municipal governments that
   have jurisdiction in regard to taxes, the environment and
   human resources.

o  Estimates of proved reserves, and planned spending for
   maintenance and environmental remediation were developed by
   company personnel using the latest available information and
   data, and recognized techniques of estimating, including those
   prescribed by the U.S. Securities and Exchange Commission,
   generally accepted accounting principles and other applicable
   requirements.  Estimates of project costs, cost savings and
   synergies were developed by the company from current
   information.  The estimates for reserves, supplies, costs,
   maintenance, environmental remediation, savings and synergies
   can change positively or negatively as new information and
   data become  available.


                                48

<PAGE>


                   PART II.  OTHER INFORMATION


Item 1. LEGAL PROCEEDINGS

The following is a description of legal proceedings involving
governmental authorities under federal, state and local laws
regulating the discharge of materials into the environment.
While it is not possible to predict the outcome of such
proceedings, if it were decided adversely to Phillips, there
would be no material effect on the company's consolidated
financial position.  Nevertheless, such proceedings are reported
pursuant to the U.S. Securities and Exchange Commission's
regulations.

On June 24, 2002, Phillips Petroleum Company received a Proposed
Agreed Order from the Texas Natural Resource Conservation
Commission (TNRCC) proposing a penalty of $400,402 in connection
with alleged air emission violations at the company's Borger,
Texas, refinery as a result of an inspection conducted by the
TNRCC in October 2000.

On June 28, 2002, Tosco Corporation, a wholly owned subsidiary of
the company, received an administrative civil complaint from the
Environmental Protection Agency, alleging violation of Emergency
Planning and Community Right to Know Act found during an audit of
the Los Angeles refinery in March 2000.  The complaint seeks a
$528,000 penalty.  Approximately $176,000 of the proposed penalty
is, in Tosco's opinion, attributable to operations of the
refinery when it was owned by Unocal, and Unocal has been
notified that Tosco would seek reimbursement of such amount under
the indemnity in the refinery sale agreement.


                                49

<PAGE>


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

The company held its annual stockholders' meeting on May 6, 2002.
A brief description of each proposal and the voting results
follow:

  A company proposal to elect ten directors.

                                      For                Withheld
                              -----------------------------------

  Norman R. Augustine         348,246,061               5,858,972
  David L. Boren              345,260,643               8,844,390
  Robert E. Chappell, Jr.     345,334,882               8,770,151
  Robert M. Devlin            345,478,483               8,626,550
  Larry D. Horner             345,308,622               8,796,411
  J. J. Mulva                 347,801,222               6,303,811
  J. Stapleton Roy            345,186,749               8,918,284
  Randall L. Tobias           348,529,430               5,575,603
  Victoria J. Tschinkel       345,237,828               8,867,205
  Kathryn C. Turner           348,223,840               5,881,193

  A company proposal to approve the designation of Ernst &
  Young LLP as independent auditors for 2002.

                  For         330,177,494
              Against          21,807,124
          Abstentions           2,120,414
            Not Voted          58,070,363

A stockholder proposal requesting that the Board of Directors
prepare a report on the potential environmental damage that would
result from the company drilling for oil or gas in the Coastal
Plain of the Arctic national Wildlife Refuge, including the
financial costs of the Plan and the expected return.

                  For          16,395,648
              Against         283,833,696
          Abstentions          11,203,592
            Not Voted         109,825,637

A stockholder proposal requesting "an increase of three percent
of the annual basic salary of the Chairman and other officers,
for every position increase in the ranking of the world's largest
energy companies, measured by their market value."

                  For          10,256,206
              Against         296,789,881
          Abstentions           4,384,283
            Not Voted         103,008,894


                                50

<PAGE>


All ten nominated directors were elected, and the independent
auditors designated by the company were approved.  The
stockholder proposals regarding an environmental report and
officers' salary increases were not approved.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
--------

12     Computation of Ratio of Earnings to Fixed Charges.

99     Certification Pursuant to 18 U.S.C. Section 1350, as
       Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
       of 2002.


Reports on Form 8-K
-------------------

During the three months ended June 30, 2002, the company filed
one report on Form 8-K.

The report was filed June 28, 2002, to report in Item 9 the
declaration of commerciality of the Kashagan field in the North
Caspian Sea offshore Kazakhstan.


                                51

<PAGE>


                            SIGNATURE


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


                                    PHILLIPS PETROLEUM COMPANY



                                       /s/ Rand C. Berney
                                   -----------------------------
                                           Rand C. Berney
                                   Vice President and Controller
                                    (Chief Accounting and Duly
                                        Authorized Officer)

August 9, 2002


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