U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:

/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-12


                           PHILLIPS PETROLEUM COMPANY
-----------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)


 -----------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

    1) Title of each class of securities to which transaction applies:


       ----------------------------------------------------------------------
    2) Aggregate number of securities to which transaction applies:


       ----------------------------------------------------------------------
    3) Per unit price or other underlying value of transaction computed
       pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
       filing fee is calculated and state how it was determined):


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    4) Proposed maximum aggregate value of transaction:


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    5) Total fee paid:


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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
    0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

    1) Amount Previously Paid:

    ___________________________________________________________________________
    2) Form, Schedule or Registration Statement No.:

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:

    ___________________________________________________________________________


<PAGE>


[LOGO]

PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004

NOTICE OF
2001
ANNUAL
STOCKHOLDERS
MEETING

MAY 7, 2001

and

PROXY
STATEMENT

Monday
May 7, 2001
10 a.m. local time

Adams Building
4th Street &
Keeler Avenue
Bartlesville,
Oklahoma 74004



March 29, 2001


Dear Phillips Stockholder:

You are cordially invited to the Annual Meeting of Phillips Petroleum Company to
be held in the Adams Building, 4th Street and Keeler Avenue, Bartlesville,
Oklahoma, on Monday, May 7, 2001, starting at 10 a.m. local time. Your
attendance will provide you with an opportunity to hear the chairman's report on
the Company and its operations. Directors and representatives of the Company
will also be in attendance.

The matters to be acted upon are described in the accompanying Notice of Annual
Meeting and the Proxy Statement. At the meeting, we will also respond to any
questions you may have.

In addition to the election of nine directors, you are asked to vote on two
proposals. Proposal 1 is by the Company to approve the independent auditors
designated by the Board of Directors. Proposal 2 is by the Company to authorize
the 2002 Omnibus Securities Plan of Phillips Petroleum Company for executive
compensation. Our Board of Directors unanimously recommends that you vote For
Proposals 1 and 2.

It is important that your views be represented at the meeting whether or not you
are able to attend. Stockholders of record may instruct the proxy holders how to
vote your shares of common stock by using the toll-free telephone number on the
Proxy Card or by signing, dating and mailing the Proxy Card in the postage-paid
envelope that we have provided to you.

On behalf of the Directors and worldwide employees of Phillips Petroleum
Company, we express our appreciation to you, the owners of this Company, for
your continued support and interest.

Sincerely,


/s/ J. J. Mulva

J. J. Mulva
Chairman and Chief Executive Officer

<PAGE>

===============================================================================
2      TABLE OF CONTENTS
===============================================================================

Page
    3  Notice of Annual Meeting
    4  Solicitation
    4  Confidential Voting
    4  Voting Securities and Principal Holders
    4  Vote Required for Election of Directors and Adoption of Company and
       Stockholder Proposals
  5-6  Nominees for Election as Directors
    7  Security Ownership of Certain Beneficial Owners
    8  Security Ownership of Management
    8  Section 16(a) Beneficial Ownership Reporting Compliance
    9  General Information Relating to the Board of Directors
   10  Compensation of Directors and Nominees
10-11  Audit Committee Report
   12  Executive Compensation
   13  Options/SAR Grants in Last Fiscal Year
   13  Ten-Year Option/SAR Repricing
   14  Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
       Option/SAR Value
   14  Long-Term Incentive Plan Awards in Last Fiscal Year
15-17  Compensation Committee Report to Stockholders on Executive Compensation
   18  Performance Graph
   19  Pension Plan
   20  Termination of Employment and Change-in-Control Arrangements
   20  Proposal 1
21-22  Proposal 2
   22  Date for Receipt of Stockholder Proposals
23-24  Appendix A -- Audit Committee Charter
25-32  Appendix B-- 2002 Omnibus Securities Plan of Phillips Petroleum Company

Stockholders are encouraged to keep their account address up to date and
promptly deposit their dividend checks to avoid surrender of these funds and
related shares of stock to their respective states under unclaimed property
laws.


<PAGE>

===============================================================================
                                                   NOTICE OF ANNUAL MEETING   3
===============================================================================

        PHILLIPS PETROLEUM COMPANY
        BARTLESVILLE, OKLAHOMA 74004


                                                           Dated March 29, 2001

        NOTICE OF ANNUAL MEETING to be held May 7, 2001

        To the Stockholders:

        The Annual Meeting of Stockholders will be held in the Adams Building,
        4th Street and Keeler Avenue, Bartlesville, Oklahoma, on Monday, May 7,
        2001, at 10 a.m. local time, for the purposes of considering and voting
        on the following matters as described in the attached Proxy Statement:

            Election of nine directors (pages 5 and 6);

            Proposal of the Company:
                 Proposal 1. To approve the designation of Ernst & Young LLP as
                 independent auditors for 2001 (page 20);

                 Proposal 2. To authorize the 2002 Omnibus Securities Plan of
                 Phillips Petroleum Company for executive compensation (pages 21
                 and 22); and

            Any other matters that may properly come before the meeting (page
            22).

        Only stockholders of record at the close of business March 16, 2001,
        will be entitled to vote at this meeting.

        A copy of the Company's Annual Report containing financial data and a
        summary of operations for 2000 is being mailed to the Company's
        stockholders in advance of or with this Proxy Statement.

                                            By Order of the Board of Directors,



                                            /s/ Dale J. Billam

                                            Dale J. Billam
                                            Secretary

IMPORTANT:

Please (1) use the toll-free telephone number on the Proxy Card to submit your
proxy by phone or (2) sign, date and promptly mail the enclosed proxy in the
accompanying postage-paid envelope. If you wish to vote in accordance with the
Company's recommendations, please follow the instructions on how to do so for
telephone voting. If you vote by using the Proxy Card, it is not necessary to
specify your choice but the Proxy Card must be signed and returned.


<PAGE>

===============================================================================
4    PROXY STATEMENT
===============================================================================

March 29, 2001

                                  SOLICITATION

Your proxy is solicited by the Board of Directors and all costs of solicitation
will be paid by the Company. Your proxy will be voted as you direct. It may be
revoked by you at any time before it is voted by:

(1) filing with the Secretary an instrument revoking the earlier proxy;
(2) executing a later-dated proxy; or
(3) voting in person by ballot at the meeting.

This Proxy Statement and Proxy Card are first being mailed on or about March 29,
2001, to stockholders of record as of March 16, 2001.

Georgeson Shareholder Communications Inc. has been engaged by the Company to
solicit proxies for this Annual Meeting from brokers, banks and other
institutional holders, and individual holders of record. The fee for this
service, payable one-half at the beginning of solicitation and the balance at
its completion, is $12,000 plus the reimbursement of certain out-of-pocket
costs. In addition to solicitation by mail, officers, directors and employees of
the Company may solicit proxies by telephone, facsimile or personal contact.


                               CONFIDENTIAL VOTING

It is the policy of the Company that all proxies, ballots, and voting
tabulations, including telephone voting, that identify stockholders be kept
confidential, except where:

(1) disclosure may be required by applicable law;
(2) stockholders write comments on their proxy cards;
(3) disclosure is expressly requested by a stockholder;
(4) in limited circumstances such as a proxy contest or other solicitation of
    proxies based on an opposition proxy statement; or
(5) any matter for stockholder approval requiring the vote of more than a
    majority of the shares present at any meeting.

The Company has engaged Mellon Investor Services LLC to count the votes
represented by proxies, ballots and cast by phone. Two employees of Mellon
Investor Services have been appointed Inspectors of Election.


                    VOTING SECURITIES AND PRINCIPAL HOLDERS

The Company's only class of voting securities is its $1.25 par value common
stock. For voting purposes, there were 283,556,730 shares outstanding at the
close of business February 28, 2001. The record date for stockholders entitled
to vote at this meeting is March 16, 2001. Each share is entitled to one vote.

Included in shares outstanding are 27,856,573 shares held by the Compensation
and Benefits Trust ("CBT") formed in December 1995. The CBT is designed to
acquire, hold and distribute shares of the Company's common stock to fund
certain future compensation and benefit obligations of the Company. The CBT does
not increase or alter the amount of benefits or compensation which will be paid
under existing plans, but offers the Company financial flexibility in providing
the funding requirements of those plans. Shares held by the CBT do not affect
earnings per share or total stockholders' equity until after they are
transferred out of the CBT. All shares are required to be transferred out of the
CBT by January 1, 2021.

The number of shares of the Company's common stock beneficially owned as of
February 28, 2001, by any person or group known to own five percent or more, and
by each of the directors and nominees, and by all directors and officers of the
Company as a group, is shown in the tables "Security Ownership of Certain
Beneficial Owners," and "Security Ownership of Management," respectively, on
pages 7 and 8 after the information on nominees for directors.


                   VOTE REQUIRED FOR ELECTION OF DIRECTORS AND
                  ADOPTION OF COMPANY AND STOCKHOLDER PROPOSALS

Under the Company's Bylaws, the holders of a majority of the issued and
outstanding shares of the common stock, present in person or represented by
proxy at the Annual Meeting, will constitute a quorum for all purposes unless
otherwise provided by law. Where a quorum is present, the affirmative vote of a
majority of the stock represented at the meeting is required for the election of
the directors, and the adoption of Proposals 1 and 2. For purposes of
determining whether the directors have been elected or a proposal has received a
majority vote, abstentions are the equivalent of a negative vote.

Information included in this Proxy Statement is as of the date of preparation,
approximately February 28, 2001, unless otherwise stated.


<PAGE>

===============================================================================
                                           NOMINEES FOR ELECTION AS DIRECTORS 5
===============================================================================

The number of directors to be elected is nine. The designated proxy holders of
the Company intend, unless otherwise instructed, to vote all proxies for the
election of the following nine nominees. If elected, they will hold office until
the next Annual Meeting or until their successors are elected. The term of each
present director will expire with the election of directors at the 2001 Annual
Meeting. If any nominee is unable or unwilling to serve, the Company, through
the designated proxy holders, reserves discretionary authority to vote for a
substitute. The Company has no reason to believe that any nominee will be unable
or unwilling to serve if elected. The following provides information about each
nominee as of February 28, 2001, including data on the nominees' business
backgrounds for the past five years, and the names of public companies and other
selected entities for which they also serve as directors.

NORMAN R. AUGUSTINE    AGE 65   Director since 1989

[photo]

Norman R. Augustine is Chairman of the Executive Committee of the Board of
Directors of Lockheed Martin Corporation, a position he assumed in August 1997.
Prior to that, he was Chairman of the Board of Directors of Lockheed Martin
Corporation from August 1997 through March 1998; and Chief Executive Officer
from January 1996 through July 1997. He previously served as Chairman of the
Board of Directors and Chief Executive Officer of Martin Marietta Corporation
until its merger with Lockheed Corporation in March 1995. He is a director of
The Procter & Gamble Company and The Black & Decker Corporation.

DAVID L. BOREN   AGE 59   Director since 1994

[photo]

David L. Boren is President of the University of Oklahoma, a position he assumed
in November 1994. He previously served as a United States Senator from the State
of Oklahoma and is a former Governor of Oklahoma. He is a director of AMR
Corporation; Texas Instruments Incorporated; Torchmark Corporation; and Waddell
& Reed Financial, Inc.

ROBERT E. CHAPPELL, JR.   AGE 64   Director since 1990

[photo]

Robert E. Chappell, Jr., is self-employed as an investment and management
consultant. He previously was the Senior Executive Vice President and Chief
Investment Officer of Metropolitan Life Insurance Company.

ROBERT M. DEVLIN   AGE 60   Director since 2000

[photo]

Robert M. Devlin is Chairman, President and Chief Executive Officer of American
General Corporation and was elected to the Company's Board in February 2000. He
was elected Chairman of the Board of American General in April 1997 and Chief
Executive Officer in October 1996. He previously served as Vice Chairman of
American General from 1993 to 1995. He is a director of Cooper Industries, Inc.

<PAGE>

===============================================================================
6  NOMINEES FOR ELECTION AS DIRECTORS
===============================================================================

LARRY D. HORNER   AGE 66   Director since 1991

[photo]

Larry D. Horner is Chairman of Pacific USA Holdings Corporation, a position he
assumed in August 1994. He previously served as Chairman and Chief Executive
Officer of KPMG Peat Marwick. He is a director of American General Corporation;
Asia Pacific Wire & Cable Corporation Limited; Atlantis Plastics, Inc.; Laidlaw
Global Corporation; Newmark Homes Corp.; and UTStarcom, Inc.

J. J. MULVA   AGE 54   Director since 1994

[photo]

J. J. Mulva is Chairman of the Board of Directors and Chief Executive Officer of
the Company, a position he assumed October 13, 1999. Previously he was elected
Vice Chairman of the Board of Directors, President and Chief Executive Officer
June 30, 1999, through October 13, 1999; President and Chief Operating Officer
of the Company from May 1994 through June 1999. He is a director of Duke Energy
Field Services, L.L.C.

RANDALL L. TOBIAS   AGE 58   Director since 1992

[photo]

Randall L. Tobias is Chairman Emeritus of Eli Lilly and Company, a position he
assumed in January 1999. He previously served as Chairman of the Board of
Directors and Chief Executive Officer of Eli Lilly and Company from July 1993 to
December 1998. He is a director of Agilent Technologies, Inc.; Kimberly-Clark
Corporation; and Knight-Ridder, Inc.

VICTORIA J. TSCHINKEL   AGE 53   Director since 1993

[photo]

Victoria J. Tschinkel is a Senior Consultant to Landers & Parsons, a
Tallahassee, Florida, law firm, a position she assumed in 1987. She previously
served as Secretary of the Florida Department of Environmental Regulation.

KATHRYN C. TURNER  AGE 53 Director since 1995

[photo]

Kathryn C. Turner is Chairperson and Chief Executive Officer of Standard
Technology, Inc., an engineering and manufacturing firm she founded in 1985. She
is a director of Carpenter Technology Corporation.


<PAGE>


===============================================================================
                              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 7
===============================================================================


                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS


<TABLE>
<CAPTION>

                            Name and Address of                     Amount and Nature of Beneficial
Title of Class              Beneficial Owner(1)                                 Ownership                Percent of Class
--------------       ---------------------------------------        --------------------------------     ----------------
                                                                        Direct      Indirect
                                                                    --------------------------------
<S>                  <C>                                            <C>             <C>                  <C>

      Common         Vanguard Fiduciary Trust Company               35,243,354 (2)       --                  12.43%
                     P. O. Box 2900
                     Valley Forge, Pennsylvania 19482

      Common         Capital Research and Management Company        23,263,200 (3)       --                   8.20%
                     333 South Hope Street
                     Los Angeles, California 90071

      Common         AXA Financial, Inc.                            23,459,658 (3)       --                   8.27%
                     767 Fifth Avenue
                     New York, NY  10153

</TABLE>

(1) Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow") reported on
    February 12, 2001, that it exercised sole dispositive power with respect to
    14,033,550 shares, which according to their Schedule 13G is 5.54 percent of
    the Company's shares outstanding. However, the shares held by Barrow equal
    only 4.9 percent of the Company's shares outstanding on February 28, 2001,
    when shares held by the CBT are included.

(2) As of February 28, 2001, Vanguard as Trustee held 35,243,354 shares under
    the Company's Thrift Plan, Long-Term Stock Savings Plan ("LTSSP"), and
    Retirement Savings Plan (together the "Plans") with shared voting power.
    Vanguard and the Plans have disclaimed beneficial ownership of the shares
    held by Vanguard as Trustee of the Plans. Vanguard votes shares held by the
    Plans which represent the allocated interests of participants in the manner
    directed by individual participants. Employee participants in the Thrift
    Plan and LTSSP are appointed by the Company as fiduciaries entitled to
    direct the Trustee as to how to vote allocated shares which are not directed
    in these plans and unallocated shares held by the LTSSP. Such shares are
    allocated pro rata among employee participants accepting their fiduciary
    appointment and are voted by the Trustee as directed by the employee
    fiduciaries. The Trustee votes non-directed shares of the Retirement Savings
    Plan at its discretion. The Trustee will vote other shares held by the Plans
    at its discretion only if required to do so by the Employee Retirement
    Income Security Act of 1974 ("ERISA").

    Vanguard is also the Trustee and record holder of the 27,856,573 shares in
    the Compensation and Benefits Trust ("CBT"), without any voting power.
    Vanguard has disclaimed beneficial ownership of such shares. As Trustee of
    the CBT, Vanguard will vote shares in the CBT only in accordance with the
    pro rata directions of eligible domestic employees and the trustees of
    certain international Company stock plans. Trust agreements for the Plans
    and CBT each provide that all voting directions of individual employees
    received by the Trustee will be held in confidence and not be disclosed to
    any person, including the Company.

(3) On February 12, 2001, Capital Research and Management Company ("CRMC")
    reported that it exercised sole dispositive power with respect to 23,263,200
    shares as of December 31, 2000, in which shares CRMC has disclaimed
    beneficial ownership. On February 12, 2001, AXA Financial, Inc.
    ("Alliance"), the parent of Alliance Capital Management L.P. which acquired
    the investment advisory assets of Sanford C. Bernstein & Co., Inc., reported
    that it exercised sole voting power over 12,725,579 shares, shared voting
    power over 2,704,789 shares, and sole dispositive power over 23,459,658
    shares as of December 31, 2000. According to the Schedule 13Gs filed by CRMC
    and Alliance with the Securities and Exchange Commission, such shares equal
    9.10 percent and 9.20 percent of the Company's outstanding shares,
    respectively. However, when shares held as of February 28, 2001, by the CBT
    are included, shares held by CRMC equal only 8.20 percent; and by Alliance,
    8.27 percent of the Company's outstanding shares.


<PAGE>

================================================================================
8  SECURITY OWNERSHIP OF MANAGEMENT
================================================================================

                        SECURITY OWNERSHIP OF MANAGEMENT
                           Phillips Petroleum Company
                                   Securities

<TABLE>
<CAPTION>

                                                                   Amount and Nature of
                                                                   Beneficial Ownership
                                                               ------------------------------
Title of Class       Name of Beneficial Owner                  Direct(1)             Indirect         Percent of Class
--------------       ------------------------                  ---------             ---------        ----------------
<S>                  <C>                                       <C>                   <C>              <C>
                     Directors and Nominees (2)
   Common            Norman R. Augustine                          24,656                   --           less than 1%
   Common            David L. Boren                               13,264                   --           less than 1%
   Common            Robert E. Chappell, Jr.                      21,393                   --           less than 1%
   Common            Robert M. Devlin                              2,412                   --           less than 1%
   Common            Lawrence S. Eagleburger (3)                  10,869                  6,000         less than 1%
   Common            Larry D. Horner                              21,714                   --           less than 1%
   Common            J. J. Mulva                                 608,587                   --           less than 1%
   Common            Randall L. Tobias                            19,521                   --           less than 1%
   Common            Victoria J. Tschinkel                        18,450                   --           less than 1%
   Common            Kathryn C. Turner                            12,097                   --           less than 1%

                     Executive Officers
   Common            E. L. Batchelder                             30,563                   --           less than 1%
   Common            J. A. Carrig                                124,879                   --           less than 1%
   Common            D. W. DeCamp                                  1,601                   --           less than 1%
   Common            E. K. Grigsby                                65,007                   --           less than 1%
   Common            J. E. Lowe                                   42,326                   --           less than 1%
   Common            K. O. Meyers                                 35,951                   --           less than 1%
   Common            J. C. Mihm                                  156,876                  1,947         less than 1%
   Common            B. Z. Parker                                173,325                   --           less than 1%
   Common            R. A. Ridge (4)                              78,593                   --           less than 1%
   Common            J. B. Whitworth                             142,308                                less than 1%
   All directors, nominees and executive officers
   as a group (20 in group)                                    1,604,392                  7,947         less than 1%

</TABLE>

(1) Direct ownership includes shares which may be acquired under options within
    60 days of the record date.
(2) The shares stated as being beneficially owned by each nominee do not include
    shares beneficially owned by the other companies on whose boards of
    directors the nominees, directors or officers serve. (The list of nominees
    for directors on pages 5 and 6 contains the names of the other companies for
    which the nominees serve as directors.) Each nominee disclaims beneficial
    ownership of all such shares.
(3) Mr. Lawrence S. Eagleburger, a current director, is retiring as director
    having reached mandatory retirement age.
(4) Mr. R. A. Ridge assumed the position of Vice President Health, Environment
    and Safety effective March 1, 2001.


                       SECTION 16(a) BENEFICIAL OWNERSHIP
                              REPORTING COMPLIANCE

To the Company's knowledge, except as reported below for Mr. E. K. Grigsby, no
person or entity who was a director, officer or beneficial owner of more than 10
percent of the Company's common stock failed to file, on a timely basis during
2000, reports required by Section 16(a) of the Securities Exchange Act of
1934, as amended.

Mr. E. K. Grigsby, Vice President Investor and Public Relations of the Company,
sold 200 shares of the Company's common stock on August 16, 2000. Under Section
16(a) of the Securities Exchange Act of 1934, and the regulations promulgated
thereunder, a report of this sale was required to be filed with the U.S.
Securities and Exchange Commission on or before September 10, 2000.
Inadvertently, the report was delayed, but was filed on October 4, 2000.

<PAGE>

===============================================================================
                     GENERAL INFORMATION RELATING TO THE BOARD OF DIRECTORS   9
===============================================================================

                              GENERAL INFORMATION
                       RELATING TO THE BOARD OF DIRECTORS

The Board of Directors

The business and affairs of the Company are managed under the direction of the
Board of Directors. To assist it in carrying out its duties, the Board has
delegated certain authority to five Committees. In calendar year 2000, the Board
of Directors held nine meetings and the directors attended an average of 97
percent of all Board and Committee meetings.

Committees of the Board

The Audit Committee, the Compensation Committee, the Committee on Directors'
Affairs, the Executive Committee and the Public Policy Committee are the
standing committees of the Board of Directors. Membership is as follows:

                Compen-      Directors'                  Public
   Audit        sation        Affairs    Executive       Policy
 ----------------------------------------------------------------
 Horner*      Tobias*       Augustine*    Mulva*        Tschinkel*
 Boren        Augustine     Chappell      Augustine     Boren
 Chappell     Eagleburger   Horner        Horner        Devlin
 Devlin       Turner                      Tobias        Tobias
 Tschinkel                                Tschinkel     Turner
 * Chairman


The Audit Committee's functions and activities during the year ended December
31, 2000, are described under the heading "Audit Committee Report." During the
year, the Board examined the composition of the Audit Committee in light of the
adoption by the New York Stock Exchange of new rules governing audit committees.
Based upon this examination, the Board confirmed that all members of the Audit
Committee are "independent" within the meaning of the Exchange's new rules. The
Audit Committee held four meetings in 2000.

The Compensation Committee recommends for Board approval the salaries for the
Chairman of the Board of Directors and Chief Executive Officer and the
President, and approves salaries for all Executive Officers and for all
employees who earn $250,000 or above. The Committee makes recommendations to the
Board with respect to proposals for the application of new benefits, incentive
plans or programs to officers who are also directors and the application of
amendments to existing plans or programs which would significantly increase such
officers' compensation. The Committee approves awards under the Annual Incentive
Compensation Plan and the Omnibus Securities Plan. The Compensation Committee
held five meetings in 2000. The Company had no interlocking relationship during
the last fiscal year.

The Committee on Directors' Affairs recommends to the Board qualified candidates
for election as directors and nominates candidates to the Board committees. The
Committee welcomes suggestions from stockholders about qualified candidates. A
stockholder wishing to submit a recommendation to the Committee may do so by
writing Dale J. Billam, Secretary, Phillips Petroleum Company, Bartlesville,
Oklahoma 74004. The Committee on Directors' Affairs held one meeting in 2000.

The Executive Committee, when the Board is not in session, may exercise all
power and authority of the Board in the management and business of the Company,
subject to the limitations imposed by the Bylaws. The Committee has the
authority to review and approve proposed corporate action when the Board is not
in session and may advise the Board of any recommendations of the Committee
regarding any proposed corporate action presented to the Board. The Executive
Committee held three meetings in 2000.

The Public Policy Committee advises management and the Board of Directors:

(1) in response to current and emerging public policy issues, and
(2) in the development and review of policies and budgets in respect of
    contributions, including, but not limited to, contributions to organizations
    whose primary purpose is charitable, civic, cultural or educational. In
    order to carry out these duties, the Committee:

    (a) identifies, evaluates and monitors the social, political, environmental,
        occupational, safety and health trends, issues and concerns, domestic
        and foreign, which affect or could affect the Company's business
        activities and performance;

    (b) reviews information from Management and approves recommendations to
        assist in the formulation and adoption of policies, programs and
        practices concerning the matters set forth in (a) above, including, but
        not limited to ecological and environmental protection, employee safety,
        ethical business conduct, consumer affairs, alcohol and drug abuse,
        equal opportunity matters and government relations; and

    (c) monitors and evaluates on an on-going basis the Company's compliance
        with such policies, programs and practices.

The Committee also has the authority to authorize the use of Company funds for
political contributions on behalf of the Company, if and to the extent permitted
by law. The Public Policy Committee held three meetings in 2000.

<PAGE>

===============================================================================
10  COMPENSATION OF DIRECTORS AND NOMINEES
===============================================================================


                     COMPENSATION OF DIRECTORS AND NOMINEES

The Board compensation is $106,500 per calendar year for each director who
chairs a committee of the Board and $105,000 per calendar year for each director
who does not chair a committee. One-half of this annual compensation amount is
paid in either restricted or unrestricted stock. The other half is paid as cash,
but may be deferred or taken as additional restricted or unrestricted stock. The
future payment of any deferred cash compensation is funded in a grantor trust
designed for this purpose.

All shares of restricted stock issued on behalf of each non-employee director
are restricted until retirement from the Board of Directors. The dividends
payable on restricted stock are reinvested in restricted stock. The Non-Employee
Director Stock Plan, which became effective January 1, 1998, provides for annual
lapsing of the restrictions on a percentage of the shares held in the account on
behalf of the non-employee director beginning five years before normal
retirement from the Board, and all restrictions will lapse in the year the
director reaches age 70. A director may elect to delay the lapsing of the
restrictions until retirement from the Board of Directors. Based on the
director's election, which is made in the year the director reaches age 65 or
the year prior to retirement if the director elects to delay the lapsing until
retirement, the director may have the value of lapsed shares credited to the
director's account in the Deferred Compensation Plan for Non-Employee Directors
or may take possession of the lapsed shares.

Prior to retirement from Board service, the Company provides each director with
life insurance. The amount of coverage, which is based on length of Board
service, begins at $200,000 and increases to a maximum of $300,000.

As part of the Company's overall program to support communities and recognize
the importance of charitable giving, The Phillips Petroleum Company Charitable
Giving Program was established in December 1996. The program is funded by life
insurance policies on directors who have served the Company as a director for
five years. Upon the death of an individual director, the Company will donate
the $1,000,000 proceeds from such life insurance to one or more qualifying
charitable organizations recommended by the individual director. The proceeds
will be paid in $100,000 installments over a 10-year period. Individual
directors derive no financial benefit from this program because all charitable
deductions for Federal and State income taxes accrue solely to the Company. The
Company paid premiums of $336,274 in 2000.

                             AUDIT COMMITTEE REPORT

During the year ended December 31, 2000, the Audit Committee of the Board of
Directors developed an updated charter for the Committee, which was approved by
the full Board on May 8, 2000. The text of the new charter, which reflects the
standards set forth in the new U.S. Securities and Exchange Commission
regulations and New York Stock Exchange rules, is reproduced in Appendix A to
this Proxy Statement.

As set forth in more detail in the charter, the Audit Committee's primary
responsibilities fall into three broad categories:

(1) The Committee is charged with monitoring the preparation of quarterly and
    annual financial reports by the Company's Management, including discussions
    with Management and the Company's outside auditors about draft annual
    financial statements and key accounting and reporting matters;

(2) The Committee is responsible for matters concerning the Company's
    relationship with its outside auditors, including recommending their
    appointment or removal; reviewing the scope of their audit services and
    related fees, as well as any other services being provided to the Company;
    and determining whether the outside auditors are independent (based in part
    on the annual letter provided to the Company pursuant to Independence
    Standards Board Standard No. 1, "Independence Discussions With Audit
    Committees"); and

(3) The Committee oversees Management's implementation of effective systems of
    internal control, including review of policies relating to legal, regulatory
    and ethical compliance, and conflicts of interests; and review of the
    activities and recommendations of the Company's internal auditing program.

The Committee has implemented procedures to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committee's charter.

In overseeing the Company's internal accounting staff, its internal audit
staff, its independent auditors, and the preparation of the Company's financial
statements, the Committee meets regularly with the Chief Financial Officer
("CFO"), the Controller, the General Auditor, and the Company's independent
auditors to discuss their judgments as to the quality, not just the
acceptability, of the Company's accounting principles and to review and discuss
all financial statements, the reasonableness of significant accounting
judgments, and the clarity of disclosures in the financial statements. Prior to
the issuance of financial statements, the Chairman of the Committee, or the full
Committee, reviews the statements with the CFO, Controller and the independent
auditors, who are responsible for expressing an opinion on the conformity of the
Company's audited financial statements with generally accepted accounting
principles. Management has advised the Committee that all financial statements
were prepared in accordance with generally accepted accounting




<PAGE>


===============================================================================
                                                      AUDIT COMMITTEE REPORT 11
===============================================================================

principles. The Committee's review included discussing with the independent
auditors the matters required to be discussed pursuant to Statement on Auditing
Standards No. 61, "Communication With Audit Committees."

With respect to the Company's independent auditors, the Committee, among other
things, discussed with Ernst & Young LLP matters relating to that firm's
independence, including the disclosures made to the Committee as required by the
Independence Standards Board Standard No. 1, "Independence Discussions With
Audit Committees," and considered the compatability of non-audit services with
the auditor's independence.

The Committee monitored the scope and adequacy of the Company's internal
auditing program, including the results of domestic and foreign internal audits,
both regularly scheduled and surprise; proposals for adequate staffing; and
proposals to strengthen internal controls and procedures where appropriate.

On the basis of the reviews, discussions and procedures outlined above, the
Committee recommended to the Board of Directors, and the Board has approved, the
inclusion of the Company's audited financial statements in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, for filing with the
U.S. Securities and Exchange Commission.

The report of the Audit Committee does not constitute soliciting materials and
should not be deemed filed or incorporated by reference into any other Company
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this
Report by reference therein.

THE AUDIT COMMITTEE

Larry D. Horner, Chairman
David L. Boren
Robert E. Chappell, Jr.
Robert M. Devlin
Victoria J. Tschinkel

<PAGE>

================================================================================
12 EXECUTIVE COMPENSATION
================================================================================

                             EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth compensation information for
services performed in 2000, 1999 and 1998 for those persons who were at December
31, 2000, the Chief Executive Officer and the four most highly compensated
officers of the Company.


<TABLE>
<CAPTION>

                           Summary Compensation Table




                                             Annual Compensation                                  Long-Term Compensation
                                     --------------------------------------    ----------------------------------------------------
                                                                                        Awards                 Payouts

                                                                                Restricted     Securities                 All Other
                                                               Other Annual       Stock        Underlying     Long-Term    Compen-
     Name and                                                  Compensation     Award(s)(1)     Option/       Incentive   sation (2)
Principal Position            Year    Salary ($)    Bonus ($)      ($)            ($)           SARs (#)      Payout ($)     ($)
------------------            ----    ---------- ------------  ------------    ------------   ------------  ------------  ---------
<S>                           <C>     <C>        <C>           <C>             <C>            <C>           <C>           <C>
J. J. Mulva                   2000   1,045,833   4,516,875(3)         0        2,195,854        167,800      3,102,763(4)    16,619
Chairman of the               1999     806,669   1,075,804            0                0        186,800        558,803(5)    14,580
Board & CEO                   1998     684,501     398,300            0                0        124,500        316,361(6)     9,211

J. A. Carrig                  2000     294,082     677,273(3)         0        1,000,012         22,800        283,985(4)    16,415
Sr. Vice President,           1999     253,017     213,806            0                0         10,900         78,103(5)    13,393
CFO & Treasurer               1998     225,372      95,906            0                0         19,500         43,879(6)     7,064

T. C. Morris                  2000     441,500     977,209(3)         0                0         24,200        897,867(4)    16,619
Formerly Sr. Vice             1999     404,997     374,368            0                0         40,100        187,769(5)    14,580
President & CFO               1998     382,252     178,182            0                0         53,300        119,208(6)     9,211
now on special
assignment to CEO

B. Z. Parker                  2000     497,253     553,041            0                0         31,600        725,257(4)    15,769
Executive Vice                1999     452,502     387,311            0                0         52,800        260,054(5)    13,780
President                     1998     333,751     234,304            0                0         57,700        106,298(6)     8,207

J. B. Whitworth               2000     398,497     960,962(3)         0          800,009         26,500        961,582(4)    16,619
Exec. Vice President          1999     364,002     372,320            0                0         36,000        192,047(5)    14,580
& Chief                       1998     349,001     148,301            0                0         48,600        119,249(6)     9,211
Administrative Officer

</TABLE>

(1) The value of restricted stock awards on the date of grant made in 2000. The
    Company settled awards under its 1985 and 1987 annual incentive plans and
    under all long-term incentive plans since 1986 by distributing to award
    recipients shares of restricted stock that are not transferable prior to
    death, disability or retirement, unless restrictions are earlier lapsed by
    the Compensation Committee of the Board of Directors (the "Committee") or
    after a change of control. The aggregate number of such restricted shares
    held at December 29, 2000, and the market value of such shares on that date
    (calculated according to SEC regulation without regard to the restrictions
    and the resulting inability of the named executives to realize such values
    at such times) were: Mr. Carrig, 33,774 shares, $1,943,018; Mr. Morris, 0
    shares, $0; Mr. Mulva, 128,791 shares, $7,409,346; Mr. Parker, 29,370
    shares, $1,689,656; Mr. Whitworth, 16,172 shares, $930,375.

(2) Includes Company contributions to the Thrift Plan for the benefit of
    participants and the value of the shares allocated to Long-Term Stock
    Savings Plan participants as of the respective valuation dates.

(3) The amount shown includes a special recognition award for major
    accomplishments in the successful completion of the Duke Energy Field
    Services joint venture, the Chevron Phillips Chemical Company joint venture
    and the acquisition of the ARCO Alaskan businesses. The award amounts were:
    Mr. Carrig, $300,000; Mr. Morris, $400,000; Mr. Mulva, $900,000; and Mr.
    Whitworth, $400,000.

(4) Value of the restricted stock on the date of the award for performance under
    the Long-Term Incentive Plan Performance Period from 1998-2000 made in
    February 2001.

(5) Value of the restricted stock on the date of the award for performance under
    the Long-Term Incentive Plan Performance Period from 1997-1999.

(6) Value of the restricted stock on the date of the award for performance under
    the Long-Term Incentive Plan Performance Period from 1996-1998.

<PAGE>

===============================================================================
                                                        OPTIONS/SAR GRANTS   13
===============================================================================

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

    Stock options granted during 2000 to the Chief Executive Officer and the
    four most highly compensated officers of the Company are reflected in the
    following Options/SAR Grants in Last Fiscal Year table.


<TABLE>
<CAPTION>

                                       INDIVIDUAL GRANTS
                    ---------------------------------------------------------    POTENTIAL REALIZABLE VALUE AT ASSUMED
                      Number of    Percent of Total                                   ANNUAL RATES OF STOCK PRICE
                     Securities      Options/SARS                                    APPRECIATION FOR OPTION TERM(1)
                     Underlying       Granted to      Exercise or
                    Options/SARS    Employees in       Base Price  Expiration
    Name               Granted       Fiscal Year       ($/Share)      Date       0%($)       5%($)            10%($)
-----------------------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>             <C>         <C>            <C> <C>               <C>

 J.J. Mulva           167,800          12.91%          62.28       10/09/10       0        6,572,726        16,655,828

 J. A. Carrig           2,800           0.22%          49.47       05/08/10       0           87,108           220,752
                       20,000           1.54%          62.28       10/09/10       0          783,400         1,985,200

 T. C. Morris          24,200           1.86%          62.28       10/09/10       0          947,914         2,402,092

 B. Z. Parker          31,600           2.43%          62.28       10/09/10       0        1,237,772         3,136,616

 J. B. Whitworth       26,500           2.04%          62.28       10/09/10       0        1,038,005         2,630,390


Total Stockholders (2)    N/A             N/A            N/A            N/A       0   11,044,785,817    27,988,395,205

</TABLE>


(1) Potential realizable value" is disclosed in response to SEC rules which
    require such disclosure for illustration only. The values disclosed are not
    intended to be, and should not be, interpreted by stockholders as
    representations or projections of future value of the Company's stock or of
    the stock price.

(2) To lend perspective to the illustrative "potential realizable value," if the
    Company's stock price increased 5 percent or 10 percent per year for 10
    years from January 1, 2000, (disregarding dividends and assuming for purpose
    of the calculation a constant number of shares outstanding), the total
    increase in the value of all shares outstanding at January 1, 2000, is shown
    above as "potential realizable value" for total stockholders.


                         TEN-YEAR OPTION/SAR REPRICING

There have been no option or stock appreciation right repricings during the last
10 years for the Chief Executive Officer or for any of the four most highly
compensated officers of the Company as reflected in the following Ten-Year
Option/SAR Repricing table.


<TABLE>
<CAPTION>


                             Number of Securities   Market Price          Exercise                   Length of Original
                                  Underlying         Of Stock at            Price                       Option Term
                                 Options/SARs          Time of           At Time of           New     Remaining at Date
                                  Repriced or       Repricing or        Repricing or       Exercise    Of Repricing or
       Name          Date           Amended         Amendment ($)       Amendment ($)      Price ($)      Amendment
------------------------------------------------------------------------------------------------------------------------
<S>                  <C>     <C>                   <C>                  <C>                <C>        <C>

   J. J. Mulva        --               0                 --                  --               --             --
   J. A. Carrig       --               0                 --                  --               --             --
   T. C. Morris       --               0                 --                  --               --             --
   B. Z. Parker       --               0                 --                  --               --             --
   J. B. Whitworth    --               0                 --                  --               --             --

</TABLE>


<PAGE>

================================================================================
14 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR/LTIP
================================================================================

              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                      AND FISCAL YEAR-END OPTION/SAR VALUE

The following table shows the number of shares acquired and the net value
realized from exercising stock options during 2000, and the number and value of
exercisable and unexercisable stock options granted under the 1986 Stock Plan,
the 1990 Stock Plan and the Omnibus Securities Plan at fiscal year-end 2000 for
the Chief Executive Officer and the four most highly compensated officers of the
Company.

<TABLE>
<CAPTION>

                                                                          Number of Securities      Value of Unexercised
                                                                         Underlying Unexercised         In-the-Money
                                                                             Options/SARs at           Options/SARs at
                                                                             Fiscal Year-End        Fiscal Year-End ($) (2)
-----------------------------------------------------------------------------------------------------------------------------
                       Number of Shares Acquired        Net Value              Exercisable/              Exercisable/
        Name                  On Exercise           Realized ($) (1)          Unexercisable             Unexercisable
-----------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                          <C>                   <C>                       <C>
                                                                               328,293                  6,138,765
   J. J. Mulva                   16,410                  478,609               386,800                  2,163,462
                                                                                42,101                    857,717
   J. A. Carrig                   3,895                  121,091                42,625                    249,689
                                                                                62,060                    836,459
   T. C. Morris                   7,049                   82,023                86,175                    713,001
                                                                                91,532                  1,394,403
   B. Z. Parker                   4,388                  105,701               103,325                    791,659
                                                                                67,508                  1,038,691
   J. B. Whitworth                1,398                   41,849                82,750                    647,658

</TABLE>

(1) Net value realized is the market price on the date of exercise less the
    option price times the number of shares exercised under the option.

(2) Based on $57.53, the fair market value of the Company's common stock on
    December 29, 2000.


              LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR

The following table shows Long-Term Incentive Plan awards established under the
Omnibus Securities Plan during 2000 for the Chief Executive Officer and the four
most highly compensated officers of the Company.


<TABLE>
<CAPTION>

                                                                     Estimated Future Payouts Under Non-Stock Price Based Plans
                                                                     ----------------------------------------------------------
                                           Performance or
                                            Other Period                               Number of Shares (1)
                           Number of      Until Maturation
       Name                 Shares            or Payout               Threshold (2)      Target                 Maximum
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>                         <C>                <C>                    <C>
   J. J. Mulva              40,885            12/31/02                 20,443            40,885                 81,770

   J. A. Carrig              5,012            12/31/02                  2,506             5,012                 10,024

   T. C. Morris              8,924            12/31/02                  4,462             8,924                 17,848

   B. Z. Parker             10,792            12/31/02                  5,396            10,792                 21,584

   J. B. Whitworth           8,021            12/31/02                  4,011             8,021                 16,042

</TABLE>

(1) At the end of the three-year performance period, from January 1, 2000,
    through December 31, 2002, the Compensation Committee will evaluate the
    Company's performance to determine the extent to which target awards have
    been earned. The Company's performance will be measured by total stockholder
    return and return on capital employed, compared with the total stockholder
    return and return on capital employed of the 2000 oil industry peer
    companies used in the Performance Graph.

(2) The Company's total stockholder return must be above the bottom quartile
    when compared with the peer group (threshold performance) before any award
    can be approved. If the threshold performance is achieved, the Committee
    expects to approve awards at the threshold level which is 50 percent of the
    target number of shares established for the performance period. The actual
    awards earned can range from 0 percent to 200 percent of the target awards.

<PAGE>

===========================================================================
                                         COMPENSATION COMMITTEE REPORT   15
===========================================================================


                         COMPENSATION COMMITTEE REPORT
                                 TO STOCKHOLDERS
                            ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors administers the Company's
executive compensation program. The Committee is composed of independent,
outside directors who qualify as disinterested persons for purposes of Rule
16b-3 of the Securities Exchange Act of 1934.

The executive compensation programs are designed to motivate all executives to
work as a team to (i) maximize long-term stockholder value, (ii) achieve a high
level of return on capital employed by the Company, and (iii) provide industry
safety leadership and environmental stewardship.

Executive compensation decisions made by the Committee are based on a
combination of quantitative and qualitative measures. During 2000, the
quantitative measures were: relative total return to stockholders; relative
return on capital employed by the Company; and the Company's safety performance.
The determination of safety performance is based on several factors which
include employee and contractor recordable injury rate, progress on the
Company's Process for Safety Excellence performance, lost time injuries,
severity of injuries, and awards for environmental performance. Quantitative
measures to evaluate Corporate and Award Unit performance included: (i)
operating units - controllable expense, operating efficiency, return on capital
employed, capital efficiency and safety performance; (ii) growth units -
progress on growth project milestones and accomplishments, exploration value
indices, growth value indices, controllable expense and safety performance; and
(iii) staff units - controllable expense, safety performance and the success of
customers who bear their costs.

The Committee uses the following qualitative measures of performance for
individuals: the application of experience; accomplishments in developing and
implementing strategic plans; contribution to the growth or success of
business-line accomplishments; leadership in the industry and community; and
social responsibility.

The Company's businesses are extremely capital intensive, requiring large
investments, in most cases over a number of years, before tangible financial
returns are achieved. For the near term, the Company's prospects and performance
are measured by its share price which can be significantly affected upward or
downward by commodity price movements and geopolitical factors over which the
Company and its management have no control. Therefore, the Committee evaluates
the quantitative and qualitative measures set out above, along with external
factors that may have affected such measures, and uses its discretion in
evaluating performance achievements of executives, business units and staffs.

By design, executive compensation provides awards that vary with performance and
produce an opportunity for earnings through performance over a longer term. The
Company's objective is to provide a substantial percentage of the total
compensation of its executives through variable or "at-risk" compensation
arrangements under the Annual Incentive Compensation Plan, the granting of stock
options and awards under the Long-Term Incentive Plan.

Internal Revenue Code Section 162(m)
------------------------------------
The Compensation Committee has carefully considered the implications of Section
162(m) of the Internal Revenue Code. The Committee's policy is, where possible
and considered appropriate, to preserve corporate tax deductions, including the
deductibility of compensation to the executive officers named in the Summary
Compensation Table under such Section. To that end, Company Proposal 2 found on
pages 21-22 of this Proxy Statement contains a new plan which will provide stock
for compensation. When approved by stockholders, the stock options granted under
this plan will be qualified under the provisions of Section 162(m).

The Committee's policy is also to maintain flexibility to approve compensation
arrangements which it deems to be in the best interest of the Company and its
stockholders, but such arrangements may not always qualify for full tax
deductibility. The Committee will continue to review the executive compensation
practices of the Company, other than the stock options discussed above, to
determine if other elements of executive compensation administered by the
Committee are appropriate for qualification as "performance-based compensation"
under the provisions of Section 162(m) of the Internal Revenue Code.

                    Executive Compensation Actions for 2000
Salaries
--------
During 2000, the Committee reviewed and approved salaries for all executive
officers and employees with annual salaries of $250,000 or greater. In the case
of the Chairman of the Board and Chief Executive Officer, the Committee
recommends any salary change to the Board of Directors, which must approve the
change. At its September 11, 2000 meeting, the Committee reviewed competitive
salary and total compensation data for Chief Executive Officers in the petroleum
industry. An independent, third-party consultant provided the data reviewed by
the Compensation Committee. A salary increase was recommended to the Board of
Directors and was approved by the Board in the September 11, 2000 meeting which
resulted in an annual salary for Mr. Mulva of $1,250,000. The increase was both
competitive and recognized Mr. Mulva's accomplishments in the successful
corporate transactions completed during the year, as well as the magnitude of
change in the relative size of the Company

<PAGE>


===============================================================================
16 COMPENSATION COMMITTEE REPORT
===============================================================================

resulting from the acquisition of all of ARCO's Alaskan businesses.

In the October 2000 Committee meeting, the Committee used competitive salary
data to approve changes to the annual salaries of other executive officers and
all other employees whose annual salary was $250,000 or greater. The approved
changes to the annual salaries of such officers and employees were effective
October 1, 2000.

Annual Incentive Compensation Program
-------------------------------------
The Committee administers the Annual Incentive Compensation Plan ("AICP") which
provides an opportunity to award annual bonuses. The AICP has objectives which
are established by the Committee each year. For 2000, the Committee set three
Companywide objectives: (i) total stockholder return for 2000 should warrant an
award based on performance relative to the shareholder return of the oil
industry peer companies, as listed in the Proxy Statement Performance Graph;
(ii) return on capital employed by the Company should warrant an award based on
performance relative to the return on capital employed of the oil industry peer
companies, as listed on the Proxy Statement Performance Graph; (iii) safety
performance awards as measured by a number of factors including employee and
contractor recordable injury rate, progress on the Process for Safety Excellence
Plan performance, chargeable vehicle incidents, and lost time injuries, which
takes into consideration the severity of injuries, as well as
industry/governmental awards for safety and environmental performance.

The Committee established targets for individual AICP awards based on individual
grades. The target awards are established using data internally generated and
data obtained from an independent, third-party consultant. For 2000, the target
percentages varied from 22.5 percent of salary for the beginning level of AICP
eligibility to 100 percent of salary for the Chief Executive Officer. The target
percentages are prorated to recognize changes in salary grades during the year.
The Committee is authorized under the terms of AICP to approve individual awards
from 0 percent of the target amount to 200 percent of the target amount for the
award year based upon the Committee's assessment of performance.

Mr. Mulva's AICP award is based on overall corporate performance; awards to all
other AICP participants reflect the performance of the business unit or staff
group with which the participant is related, as well as corporate performance.
In the February 2001 meeting of the Board of Directors, AICP awards for the 2001
Performance Year were reviewed and determined. Based on the Company's Corporate
and Business Unit performance for the year, awards ranging from 111 percent to
188 percent of the target amount were approved by the Board.

With respect to Mr. Mulva's award, the Board of Directors determined that the
Company was second in the group of peer companies for total shareholder return,
fifth in the group of peer companies for Return on Capital Employed and
continued to make progress in the achievement of safety objectives. Further, the
Board considered the Company's performance wherein net operating income for 2000
exceeded the previous highest amount by approximately $1 billion. Additionally,
the successful accomplishment of the joint ventures and acquisitions critically
important to the success of the Company were considered.

Based on these results, Mr. Mulva received an award for 2000 performance, which
was 193 percent of the target amount. In addition, the Board approved an
individual performance adjustment to this award of 50 percent to recognize Mr.
Mulva's role in the transformation of the Company and his role in its improved
operating and financial performance.

The amount of the award to Mr. Mulva is set forth in the Summary Compensation
Table found in this Proxy Statement.

Stock Options
-------------
The Committee practice is to consider the grant of stock options in October of
each year. To date, all grants have been made at no less than the fair market
value of the Company's stock on the date of the grant. If the date of the grant
is not a day in which the Company's stock is traded on the New York Stock
Exchange, the fair market value is determined on the first trading day
immediately preceding the date on which the Committee grants the option. The
number of shares subject to options at the date of each grant is set using
internally generated information and information from independent, third-party
consultants to achieve option grants which approximate those granted by peer
companies to persons in corresponding job positions. In addition, individual
performance is considered when making each option grant.

It is also the Committee's practice to consider supplemental stock option grants
in recognition of promotions during the year based on the same criteria used by
the Committee when considering such grants in October of each year.

At the October 9, 2000 meeting, the Compensation Committee approved a stock
option grant for Mr. Mulva for 167,800 shares of common stock. The October stock
option grant was in conjunction with the annual stock option grants to eligible
employees.

For Mr. Mulva and the other executive officers, the stock option grants are set
out in the Options/SAR Grants in Last Fiscal Year table.


<PAGE>

===============================================================================
                                               COMPENSATION COMMITTEE REPORT 17
===============================================================================


Long-Term Incentive Program
---------------------------
The Committee administers the Long-Term Incentive Plan under the Omnibus
Securities Plan approved by stockholders in 1993. Under the terms of this Plan,
each year the Committee establishes a three-year performance period. The Plan
contains a single performance measure which is the Company's total return to
stockholders compared with the total return to stockholders for the oil industry
peer companies listed in the Performance Graph information on page 18. Before
awards may be granted, the Company's total stockholder return must be above the
bottom quartile of the industry peer companies.

In its December 1999 meeting, the Committee established the eighth performance
period under the Plan, which is for the period of January 1, 2000, through
December 31, 2002. Target awards for Mr. Mulva and the other executive officers
are shown in the Long-Term Incentive Plan Awards in Last Fiscal Year table on
page 14 and were based on a percentage of salary varying according to salary
grade and the price of the Company's stock at the beginning of the performance
period. The target levels approved by the Committee for Performance Period VIII
were established using both internally generated information and competitive
data provided by an independent, third-party consultant. Supplemental target
awards, which are included in the target awards listed in the table, were
approved in recognition of promotions during the year. Actual awards, if any,
will be determined by the Committee at the end of the performance period based
on two measures: the Company's relative total stockholder return and its return
on capital employed compared with the peer companies against which the Company
evaluates its stockholder return performance.

In the February 2001 meeting of the Board of Directors, awards for the sixth
performance period of the Plan covering the period 1998 through 2000 were
determined. Total shareholder return for the period was 27.3 percent, placing
the Company's performance third of nine companies in the peer group for the
entire three-year period. In addition, the Company achieved an average return on
capital employed for the three-year period of 11.5 percent, also placing the
Company third in the peer group.

Based on the combined performance for shareholder return and return on capital
employed for the three-year period, the Board granted awards equaling 75 percent
greater than the target amount set for the participants at the beginning of the
sixth performance period.

Mr. Mulva's award was increased by 40 percent to recognize his leadership and
individual performance during the three-year performance period. The value of
the awards for LTIP VI, which is settled in restricted stock for the five most
highly compensated executive officers, is set forth on the line for 2000 in the
Summary Compensation Table found on page 12 of this Proxy Statement.

Special Recognition Awards
--------------------------
During 2000, the Compensation Committee granted recognition awards to key
employees who were instrumental in the successful completion of: the joint
venture of Phillips' gas processing assets with Duke Energy's to form Duke
Energy Field Services; the joint venture of Phillips' chemicals assets with
Chevron's to form Chevron Phillips Chemical Company; and the acquisition of
ARCO's Alaskan businesses. These transactions represent defining moments in the
history of the Company. The form of recognition included cash, restricted stock,
deferred compensation and performance-based restricted stock.

During a special meeting in June 2000, the Committee approved an award for
Mr. Mulva, Chairman of the Board and Chief Executive Officer. The award
consisted of deferred compensation of one year's salary. Mr. Mulva also
received a restricted stock grant of 40,430 shares that vest five years from
the date of the grant. In addition, the Committee approved a Performance
Incentive Award for Mr. Mulva. Under the terms of the Performance Incentive
Award, Mr. Mulva will receive an additional $1,000,000 if Phillips' share price
achieves an average 10 percent annual increase for the five-year period ending
May 8, 2005. This amount will increase by $200,000 for each additional
percentage of share price increase above 10 percent to a maximum $2,000,000
payment. Therefore, the maximum additional Performance Incentive Award
is $2,000,000.

THE COMPENSATION COMMITTEE

Randall L. Tobias, Chairman
Norman R. Augustine
Lawrence S. Eagleburger
Kathryn C. Turner



<PAGE>


===============================================================================
18 PERFORMANCE GRAPH
===============================================================================


The following graph shows the Company's total return to stockholders compared
with the S&P 500 Index and the peer group index of integrated oil companies over
the five-year period from December 31, 1995, through December 31, 2000.

                               PERFORMANCE GRAPH
        COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN (1)
        Among Phillips Petroleum, S&P 500 Index, and Peer Group Index(2)

                                  [LINE GRAPH]



                              1996     1997      1998       1999    2000
 -----------------------------------------------------------------------
  Phillips Petroleum         $ 134    $ 151      $ 137     $ 155   $ 193
  S&P 500 Index                123      164        211       255     232
  Peer Group Index(2)          127      157        176       208     213


(1) Assumes $100 invested at closing prices on December 31, 1995, in Phillips
    common stock, S&P 500 Index and Peer Group Index. Also assumes dividend
    reinvestment.
(2) Peer Group Index includes Amerada Hess, BP Amoco (1999 and 2000 only),
    Chevron, Conoco (1999 and 2000 only), Exxon Mobil, Marathon, Occidental,
    Texaco and Unocal.

<PAGE>

===============================================================================
                                                             PENSION PLAN    19
===============================================================================


                                  PENSION PLAN

The Retirement Income Plan, in which all active eligible employees (including
executive officers) participate, does not require participant contributions.
Benefits are computed in accordance with several formulas. Officers, including
executive officers, generally receive benefits under a final average earnings
formula. Benefits are based on length of service, a participant's annual
salary and awards paid under the Annual Incentive Compensation Plan. Normal
retirement age is 65. A participant may retire as early as age 55 and receive a
reduced benefit. Benefits for a retiring employee are paid in the form of a
straight-life annuity or one of several other forms of equivalent actuarial
value.

The Pension Plan Table shows the maximum estimated straight-life annual benefits
payable at normal retirement age to employees in the higher salary
classifications, prior to reductions required by the plan for Social Security
benefits.

<TABLE>
<CAPTION>

                               PENSION PLAN TABLE

            Estimated Annual Retirement Benefits Under Final Average
                            Earnings Formula (1) (2)




  Annual Average of Highest 3                                          Years of Credited Service
  Consecutive Calendar Years'                                            At Normal Retirement
 Salary and AICP Awards in 10
Years Preceding Retirement (3)   20                25             30              35                40             45
-------------------------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>            <C>              <C>             <C>             <C>

          $  450,000            144,000          180,000        216,000          252,000          288,000        324,000
             650,000            208,000          260,000        312,000          364,000          416,000        468,000
             850,000            272,000          340,000        408,000          476,000          544,000        612,000
           1,150,000            368,000          460,000        552,000          644,000          736,000        828,000
           1,450,000            464,000          580,000        696,000          812,000          928,000      1,044,000
           1,750,000            560,000          700,000        840,000          980,000        1,120,000      1,260,000
           2,050,000            656,000          820,000        984,000        1,148,000        1,312,000      1,476,000
           2,350,000            752,000          940,000      1,128,000        1,316,000        1,504,000      1,692,000
           2,650,000            848,000        1,060,000      1,272,000        1,484,000        1,696,000      1,908,000
           2,950,000            944,000        1,180,000      1,416,000        1,652,000        1,988,000      2,124,000
           3,250,000          1,040,000        1,300,000      1,560,000        1,820,000        2,080,000      2,340,000
           3,550,000          1,136,000        1,420,000      1,704,000        1,988,000        2,272,000      2,556,000
           3,850,000          1,232,000        1,540,000      1,848,000        2,156,000        2,464,000      2,772,000

</TABLE>


(1) As required by the Internal Revenue Code of 1986, as amended, the retirement
    plan may not provide annual benefits exceeding a maximum amount, or include
    in benefit computations, compensation in excess of the amount specified in
    the Internal Revenue Code. Also, participation in the Company's AICP
    deferral program and voluntary salary reduction program may cause a
    reduction in retirement plan benefits. Additional amounts, if required to
    provide the total benefits indicated in the table, would be made by
    supplemental Company payments. The Company also maintains, as a recruiting
    tool, a supplemental plan under which officers and other executives who are
    hired during mid-career may receive retirement income in excess of that
    which their shorter Credited Service would provide under the retirement
    plan. However, total benefits under this supplemental plan and the
    retirement plan will not exceed benefits obtainable under the retirement
    plan by a full career employee at similar salary levels. These supplemental
    benefits have been funded by the Company in a grantor trust designated for
    this purpose.

(2) With respect to the executive officers named in the Summary Compensation
    Table, their years of credited service as of February 28, 2001, for
    retirement purposes are: J. A. Carrig, 23 years; T. C. Morris, 35 years; J.
    J. Mulva, 29 years; B. Z. Parker, 32 years; and J. B. Whitworth, 35 years.
    See the Summary Compensation Table for their current covered compensation.

(3) AICP Awards are shown under the heading "Bonus" in the Summary Compensation
    Table.


<PAGE>

===============================================================================
20  PROPOSAL 1
===============================================================================


                           TERMINATION OF EMPLOYMENT
                                      AND
                         CHANGE-IN-CONTROL ARRANGEMENTS

The Work Force Stabilization Plan authorized on April 26, 1988, provides that
all employees of the Company, including executive officers, who are laid off (as
defined in the plan) within two years following a change of control of the
Company (as defined below) will be entitled to severance benefits equal to four
weeks' pay for each year of service, subject to a maximum of 104 weeks. "Pay" is
determined by adding the employee's current base salary, regularly scheduled
overtime pay and most recent Annual Incentive Compensation Plan or Performance
Incentive Programs award (or target award, if greater).

Company-sponsored medical, dental and life insurance programs would be continued
for affected employees. The period of time which severance benefits cover would
be added to service for purposes of retirement plan calculations, and all
affected employees would be immediately vested. In addition, affected employees
would be entitled to require the Company to purchase their principal residences
under a formula-pricing arrangement intended to protect them from loss of value,
and would be entitled to reimbursement of legal expenses incurred in connection
with certain claims for benefits under the plan.

A change of control would take place if there is:

(1) an acquisition (other than directly from the Company) of 20 percent or more
    of the beneficial interest in the Company's voting stock by a party other
    than the Company, a subsidiary or a Company-sponsored benefit plan;

(2) a change in the Board of Directors as a result of which the current
    directors (together with the successors which they nominate or approve for
    nomination) cease to be a majority of the Board;

(3) approval of a complete liquidation or dissolution of the Company by
    stockholders; or

(4) approval by stockholders of a reorganization, merger, consolidation, sale or
    other disposition of all or substantially all of the assets of the Company,
    or the acquisition of the assets of another entity, unless following such
    transaction:

    (a) stockholders of the Company prior to the transaction continue to
        beneficially own at least 60 percent of the resulting corporation's
        stock and voting securities;

    (b) no person (other than employee benefit plans of the Company or the
        resulting corporation) beneficially owns more than 20 percent of such
        corporation's stock and voting securities; and

    (c) a majority of the Board of Directors of the resulting corporation were
        directors of the Company immediately prior to the transaction.


                    Other Change-in-Control Arrangements

Upon a change of control, benefits to officers and other employees would be
accelerated under the Omnibus Securities Plan approved in 1993, the 1986 Stock
Plan, the 1990 Stock Plan, the Annual Incentive Compensation Plan, and, if
approved, the 2002 Omnibus Securities Plan.


                           PROPOSAL 1 - BY THE COMPANY

The Board of Directors unanimously recommends a vote FOR adoption of the
following resolution, which will be presented at the meeting:

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

RESOLVED, that the Board of Directors' designation of Ernst & Young LLP to serve
as the independent auditors to audit the books, records and accounts of the
Company for the 2001 fiscal year be and hereby is approved.

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

Upon the recommendation of the Audit Committee, the Board of Directors has
designated Ernst & Young LLP for the purpose stated above and, in accordance
with the Bylaws of the Company, has directed that a vote of stockholders be
taken to determine their approval or disapproval.

As provided in the Company's Bylaws, in the event of stockholder disapproval,
the Board must then determine whether to replace the independent auditors before
the end of the current year and shall designate other independent auditors for
the following year.

Fees of Ernst & Young LLP for the annual audit for the year ended December 31,
2000, were $2,857,000 and all other fees were $3,962,000, including
audit-related services of $1,976,000; financial information systems design and
implementation services of $137,000; and other non-audit services of $1,849,000.
Audit-related services generally include fees for pension, subsidiary-company
and statutory audits, accounting consultations, internal audit and U.S.
Securities and Exchange Commission registration statements. Financial
information systems design and implementation fees consist entirely of fees
billed by the Ernst & Young LLP consulting group prior to its sale on May 27,
2000, to Cap Gemini, a separate French public company.

Ernst & Young LLP, which has served as the Company's independent auditors since
1949, is familiar with the Company's operations, accounting policies and
procedures and is, in the Company's opinion, well-qualified to act in this
capacity. Representatives of Ernst & Young LLP will be present at the meeting to
make any statement they desire and to answer questions directed to them.


<PAGE>

===============================================================================
                                                                  PROPOSAL 2 21
===============================================================================


                           PROPOSAL 2 - BY THE COMPANY

At the Company's Board of Directors meeting on February 12, 2001, the seven
non-employee directors in attendance voted for a resolution authorizing the
adoption of the 2002 Omnibus Securities Plan of Phillips Petroleum Company (the
"Plan") which is Appendix B to this Proxy Statement. The Board directed that the
Company submit the Plan to the stockholders of the Company for approval at the
next Annual Meeting of Stockholders. As an eligible participant, the single
employee director abstained from voting.

The Board of Directors unanimously recommends a vote FOR adoption of the
following resolution, which will be presented at the meeting:

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

RESOLVED, that the stockholders of the Company hereby authorize and approve the
2002 Omnibus Securities Plan of Phillips Petroleum Company as set out in
Appendix B to the Proxy Statement for the 2001 Annual Meeting of Stockholders.

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

The Compensation Committee of the Board of Directors and the Board of Directors
continue to believe that the Company's compensation programs are a key element
in achieving the Company's continued financial and operational success. The
programs have been designed to recruit, reward and motivate all executives to
work as a team to achieve our corporate goal of maximizing shareholder return.
At the 1986, 1989 and 1993 Annual Meetings, stockholders approved stock plans
that emphasized the common goal of appreciation of the value of Phillips common
stock.

The Omnibus Securities Plan approved in 1993 provides that the number of shares
for which awards may be granted in each calendar year during any part of which
the plan is in effect shall not exceed eight-tenths of one percent (0.8%) of the
total issued and outstanding shares of Stock on December 31 of the immediately
preceding year. In the event that not all of the shares available in one year
are used for awards in that year, the number of shares not used for awards that
year shall be carried forward and shall be available for awards in succeeding
calendar years in addition to the eight-tenths of one percent (0.8%) of shares
that would otherwise be available in such years.

This carry forward as of January 1, 2001, including the 0.8% allocation of the
shares issued and outstanding on December 31, 2000, is 5,973,529 shares. In
addition to this carry forward, one more allocation will be made on January 1,
2002, of 0.8% of the shares issued and outstanding on December 31, 2001, before
the Omnibus Securities Plan expires on December 31, 2002. As of December 31,
2000, Stock Options that have been granted under the Omnibus Securities Plan and
other previous plans and which have not yet been exercised total 9,862,967
shares. The weighted average exercise price for these options is $43.82 and the
weighted average life is 6.82 years. Restricted Stock outstanding as of December
31, 2000, that has been issued to employees under the Omnibus Securities Plan
and other prior plans is 601,026 shares.

The Omnibus Securities Plan approved in 1993 will continue as provided in
Section 17 of the 2002 Omnibus Securities Plan of Phillips Petroleum Company
(the "Plan").

The Plan proposed by the Board of Directors is designed to compensate executives
for the creation of shareholder value. The Plan is also designed with the intent
of placing more of executive compensation at risk and in the longer term. The
Plan provides variable long-term compensation to management that is consistent
with the philosophy adopted by the Compensation Committee as set out in its
report to the stockholders on pages 15 through 17. This philosophy is based on
the fundamental principles of pay for performance and external competitiveness,
and the Board of Directors sees Proposal 2 as a means of further aligning the
goals of the Company's management team with those of the stockholders.

The Plan provides for awards in the Company's common stock, $1.25 par value,
which can be restricted or non-restricted, or in stock options that can be
"qualified" or "non-qualified" under the Internal Revenue Code of 1986, as
amended, or stock appreciation rights ("SARs"), or other stock or
non-stock-based awards, including but not limited to stock units, securities
convertible into stock, phantom securities and dividend equivalents. The awards
may be granted singly or in tandem with other awards, or as a replacement of, or
in combination or alternatives to grants or rights under the Plan or other
employee benefit plans of the Company. Awards under the Plan may be performance
based, and contingent upon the performance of all or a portion of the Company
and/or its subsidiaries. Although the Company intends that awards will generally
be performance-based, awards may be used for recruitment or in other selected
circumstances in which performance is not a factor in respect of a particular
award.

The Plan would be administered by the Compensation Committee of the Board of
Directors or its successor committee. The Committee would determine from among
the salaried employees of the Company, all of whom are eligible participants,
who would be designated as a participant and the type of award or awards to be
granted and the conditions and limitations, if any, applicable to such awards.
It is currently the Committee's intention to limit eligibility to an executive
and management group, defined by their level of job responsibility. There are
approximately 1,000 persons in

<PAGE>

================================================================================
22  OTHER MATTERS
================================================================================

the Company and its subsidiaries, as of February 28, 2001, who would be eligible
as a class, if eligibility is limited to the executive and management group,
from among whom the Committee could select as participants under the Plan.

The Plan may be amended or terminated by the Board of Directors without further
approval of the stockholders except that the Plan may not be amended to:

(i)   increase the number of shares of stock which may be issued under the Plan
      except for changes in capitalization;

(ii)  materially modify the requirements as to eligibility for participation;

(iii) materially increase the benefits accruing to participants under the Plan;
      or

(iv)  extend the duration beyond that approved by the stockholders.

The Plan, which is subject to adjustment for changes in capitalization, provides
that the number of shares which may be issued shall not exceed 12,500,000. The
maximum qualified award, one that is qualified under Section 162(m) of the
Internal Revenue Code, is 2,000,000 shares or which allows a payout of
$10,000,000. If all available shares were awarded under the Plan, the result
would be a 4.4 percent dilution of stockholder's voting interests over the life
of the Plan. The Plan, if approved, would be effective January 1, 2002, and
would terminate on December 31, 2006, unless earlier terminated by the Board of
Directors.

Currently, it is the Compensation Committee's intention, if the Plan is
approved, that if any grant of stock options is made to the Chief Executive
Officer in 2002, such grants would qualify under Section 162(m) of the Internal
Revenue Code. No other benefits for the Chief Executive Officer, the next four
most-highly-compensated officers, the executive officers as a group and/or all
non-executive officer employees as a group are determinable at this time.


                                  OTHER MATTERS

The Company knows of no matters to be presented at the meeting other than those
included in the Notice preceding this Proxy Statement. If other matters should
come before the meeting which require a stockholder vote, it is intended that
the proxy holders will use their own discretion in voting on such other matters.


                    DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Stockholder proposals intended to be presented at the 2002 Annual Meeting must
be received at the Company's executive offices in Bartlesville, Oklahoma, no
later than December 4, 2001, for inclusion in the Company's Proxy Statement and
form of proxy relating to that meeting.

                    By Order of the Board of Directors,


                    /s/ Dale J. Billam

                    Dale J. Billam
                    Secretary

Bartlesville, Oklahoma 74004
March 29, 2001

<PAGE>

===============================================================================
                                     APPENDIX A -- AUDIT COMMITTEE CHARTER   23
===============================================================================

                           PHILLIPS PETROLEUM COMPANY
                            AUDIT COMMITTEE CHARTER

The Audit Committee is appointed by the Board of Directors to assist the Board
in monitoring (1) the integrity of the financial statements of the Company, (2)
the compliance by the Company with legal and regulatory requirements and (3) the
independence and performance of the Company's internal and external auditors by
providing an open avenue of communication between the internal auditors, the
independent auditors, management and the Board of Directors.

The members of the Audit Committee shall meet the independence and experience
requirements of the New York Stock Exchange. The members of the Audit Committee
shall be appointed by the Board on the recommendation of the Committee on
Directors' Affairs.

The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.

The Audit Committee shall make regular reports to the Board of Directors.

In addition to the functions specifically described in the Company's bylaws,
the Audit Committee shall:

1.   Review and reassess the adequacy of this Charter annually and submit it to
     the Board of Directors for approval.

2.   Review the annual audited financial statements with management, including
     major issues regarding accounting and auditing principles and practices as
     well as the adequacy of internal controls, including computerized
     information system controls and security, that could significantly affect
     the Company's financial statements.

3.   Review with management and the independent auditor significant financial
     reporting issues and judgments made in connection with the preparation of
     the Company's financial statements.

4.   Review with management and the independent auditor the Company's quarterly
     financial statements prior to the filing of the Form 10-Q.

5.   Meet periodically with management to review the Company's major financial
     risk exposures and the steps management has taken to monitor and control
     such exposures.

6.   Review major changes to the Company's auditing and accounting principles
     and practices as suggested by the independent auditor, internal auditors or
     management.

7.   Recommend to the Board of Directors the appointment of the independent
     auditor, which firm is ultimately accountable to the Audit Committee and
     the Board, as the shareholders' representatives.

8.   Approve the fees to be paid to the independent auditor.

9.   Receive periodic reports from the independent auditor regarding the
     auditor's independence and discuss such reports with the auditor.

10.  Evaluate the performance of the independent auditor and, if so determined
     by the Audit Committee, recommend that the Board of Directors replace the
     independent auditor.

11.  Review and concur in the appointment, replacement, reassignment, or
     dismissal of the General Auditor.

12.  Review the significant reports to management prepared by the internal
     auditing department and management's responses.

13.  Meet with the independent auditor prior to the audit to review the planning
     of the audit.

14.  Obtain from the independent auditor assurance that Section 10A of the
     Private Securities Litigation Reform Act of 1995 has not been implicated.

15.  Obtain reports from management, with regard to the Company's compliance
     with the Company's Code of Business Ethics, Conduct and Responsibility.

16.  Discuss with the independent auditor the matters required to be discussed
     by Statement on Auditing Standards No. 61 relating to the conduct of the
     audit.

17.  Review with the independent auditor any management letter provided by the
     auditor and the Company's response to that letter.

18.  Review with the General Auditor any difficulties encountered in the course
     of the audit work, including any restrictions on the scope of activities or
     access to required information; any changes required in the planned scope
     of the internal audit; and the internal audit charter, budget and staffing.

19.  Prepare the report required by the rules of the U.S. Securities and
     Exchange Commission to be included in the Company's annual proxy statement.

20.  Advise the Board of Directors with respect to the Company's policies and
     procedures regarding compliance with applicable laws and regulations and
     with the Company's Code of Conduct.

<PAGE>

================================================================================
24   APPENDIX A -- AUDIT COMMITTEE CHARTER
================================================================================


21.  Review with the Company's General Counsel legal matters that may have a
     material impact on the financial statements, the Company's compliance
     policies and any material reports or inquiries received from regulators or
     governmental agencies.

22.  Meet at least annually with the Chief Financial Officer, the General
     Auditor and the independent auditor in separate executive sessions.

While the Audit Committee has the responsibilities and powers set forth in this
Charter and the Company's bylaws, it is not the duty of the Audit Committee to
plan or conduct audits or to determine that the Company's financial statements
are complete and accurate and are in accordance with generally accepted
accounting principles. This is the responsibility of management and the
independent auditor. Nor is it the duty of the Audit Committee to conduct
investigations, to resolve disagreements, if any, between management and the
independent auditor or to assure compliance with laws and regulations and the
Company's Code of Conduct.

<PAGE>

===============================================================================
                                APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN   25
===============================================================================


                        2002 OMNIBUS SECURITIES PLAN OF
                           PHILLIPS PETROLEUM COMPANY
                                   (2002-2006)

Section 1.  Purpose and Establishment

The purpose of the Omnibus Securities Plan of Phillips Petroleum Company (the
"Plan") is to benefit the Company's stockholders by encouraging high levels of
performance by individuals whose performance is a key element in achieving the
Company's continued financial and operational success, and to enable the Company
to recruit, reward, retain and motivate employees to work as a team to achieve
the Company's mission of being the top performer in each of our businesses by
rewarding the creation of shareholder value.

The 2002 Omnibus Securities Plan of Phillips Petroleum Company shall become
effective January 1, 2002, upon its adoption by the Company's stockholders at
the 2001 Annual Meeting.

Section 2.  Definitions

For purposes of the Plan, the following terms, as used herein, shall have the
meaning specified:

(a) "Award" or "Awards" means an award granted pursuant to Section 4 hereof.

(b) "Award Agreement" means an agreement described in Section 5 hereof entered
    into between the Company and a Participant, setting forth the terms,
    conditions and any limitations applicable to the Award granted to the
    Participant.

(c) "Beneficiary" means a person or persons designated by a Participant to
    receive, in the event of death, any unpaid portion of an Award held by the
    Participant. Any Participant may, subject to such limitations as may be
    prescribed by the Committee, designate one or more persons primarily or
    contingently as beneficiaries in writing upon forms supplied by and
    delivered to the Company, and may revoke such designations in writing. If a
    Participant fails effectively to designate a beneficiary, then the Award
    will be paid in the following order of priority:

    (i)   Surviving spouse;

    (ii)  Surviving children in equal shares; or

    (iii) To the estate of the Participant.

(d) "Board" means the Board of Directors of the Company as it may be comprised
    from time to time.

(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
    time, or any successor statute.

(f) "Committee" means the Compensation Committee of the Board or any successor
    committee with substantially the same responsibilities.

(g) "Company" means Phillips Petroleum Company, a Delaware corporation or any
    successor corporation.

(h) "Covered Employee" means a Participant designated prior to
    the grant of Restricted Stock or Performance Awards by the Committee as one
    who is or may be a "covered employee" within the meaning of Section
    162(m)(3) of the Code in the year in which Restricted Stock or Performance
    Awards are expected to be taxable to such Participant.

(i) "Date of Change of Control" shall mean the earliest date on which any of the
    occurrences listed in Section 9 of this Plan should occur.

(j) "Disability" shall mean the inability, in the opinion of the independent
    third party who administers the Long Term Disability Plan for the Company or
    as certified by a physician who is licensed as a Medical Doctor (M.D.) or a
    Doctor of Osteopathy (D.O.) that the Participant, because of an injury or
    sickness, is unable to work at a reasonable occupation which is available
    with the Company or at any gainful occupation which the Participant is or
    may become fitted.

(k) "Employee" means any individual who is a salaried employee of the Company or
    any Participating Subsidiary.

(l) "Executive Officer" means the Chief Executive Officer (CEO) position and
    those positions that report directly to the CEO and other positions so
    designated by the Compensation Committee.

(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended and in
    effect from time to time, or any successor statute.

(n) "Fair Market Value" in reference to the common stock of the Company means

    (i)  the average of the reported highest and lowest sales prices per share
         of such Stock during regular business hours as reported on the
         composite tape of New York Stock Exchange transactions (or such other
         reporting system as shall be selected by the Committee) on the relevant
         date; or

    (ii) in the absence of reported sales on that date, the average of the
         reported highest and lowest sales prices per share during regular
         business hours on the last previous day for which there was a reported
         sale.

    The Committee shall determine the Fair Market Value of any security that is
    not publicly traded, using such criteria as it shall determine, in its sole
    discretion, to be appropriate for such valuation.

(o) "Insider" means any person who is subject to Section 16 of the Exchange Act.

<PAGE>


===============================================================================
26 APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN
===============================================================================

(p) "Involuntary Termination" of a Participant means:

   (i)   Termination of the Participant's employment with the Company for any
         reason other than voluntary termination (except as provided in clause
         (ii)), death, disability or termination for cause,

   (ii)  A termination of employment by the Participant within 60 days following
         a reduction of ten percent or more of the Participant's annual salary
         or a reduction in the Participant's job responsibilities, or

   (iii) A termination of the Participant's employment by the Company as a
         consequence of refusing a transfer by the Company to a location in
         excess of 50 miles from the Participant's work location upon the Date
         of Change of Control, unless the move is covered by the Company's
         moving policy.

In no event shall a Participant be considered Involuntarily Terminated if he or
she is retained in the employment of the Company, its subsidiaries or
affiliates.

(q) "Participant" means an Employee who has been designated by the Committee to
    be eligible for an Award pursuant to this Plan.

(r) "Performance Goal" means a performance goal established by the Committee in
    connection with the grant of a Qualified Performance-Based Award, which is
    based on the attainment of specified levels of one or more of the following
    measures on either absolute or relative basis: earnings per share, sales,
    net profit after tax, gross profit, operating profit, cash generation, unit
    volume, return on equity, economic profit, safety, growth project
    achievement, change in working capital, return on capital, return on
    investment, shareholder return, and is established in writing by the
    Committee within the time period prescribed by Section 162(m) of the Code
    and related regulations.

(s) "Qualified Performance-Based Award" means an Award of Restricted Stock or
    Performance Units or another type of Award designated as such by the
    Committee at the time of grant, based upon a determination that (i) the
    recipient is a Covered Employee with respect to such Award and (ii) the
    Committee wishes such Award to qualify for the Section 162(m) Exemption.

(t) "Participating Subsidiary" means an entity of the Company, of which the
    Company beneficially owns, directly or indirectly, more than 50 percent of
    the aggregate voting power of all outstanding classes and series of stock or
    membership interest, and in which one or more Employees are Participants, or
    are eligible for Awards pursuant to this Plan.

(u) "Restricted Stock" means shares of Stock which have certain restrictions
    attached to the ownership thereof, which may be issued under Section 4.3.

(v) "Retirement" means termination of employment with the Company or a
    Participating Subsidiary which qualifies the Employee for Retirement as that
    term is defined in the Retirement Income Plan of Phillips Petroleum Company
    or of the applicable retirement plan of a Participating Subsidiary.

(w) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and Exchange
    Commission as now in force or as such regulation or successor regulation
    shall be hereafter amended.

(x) "Section 16" means Section 16 of the Exchange Act or any successor
    regulation and the rules promulgated thereunder as they may be amended from
    time to time.

(y) "Section 162(m) Exemption" means the exemption from the limitation on
    deductibility imposed by Section 162(m) of the Code that is set forth in
    Section 162(m)(4)(C) of the 27 Code.

(z) "Stock" means shares of common stock of the Company, par value $1.25 or as
    modified from time to time.

(aa) "Stock Appreciation Right" means a right, the value of which is determined
     relative to the appreciation in value of shares of Stock, which may be
     issued under Section 4.2.

(bb) "Stock Option" means a right to purchase shares of Stock granted pursuant
     to Section 4.1 and includes Incentive Stock Options and Non-Qualified
     Stock Options as defined in Section 4.1.

Section 3.  Eligibility

Awards may be granted only to Employees who are designated as Participants from
time to time by the Committee. The Committee shall determine which Employees
shall be Participants, the types of Awards to be made to Participants and the
terms, conditions and limitations applicable to the Awards.

Section 4.  Awards

Awards may include, but are not limited to, those described in this Section 4.
The Committee may grant Awards singly, in tandem or in combination with other
Awards, as the Committee may in its sole discretion determine. Subject to the
other provisions of this Plan, Awards may also be granted in combination or in
tandem with, in replacement of, or as alternatives to, grants or rights under
this Plan and any other employee plan of the Company. The Committee must approve
all grants made under this Plan to the Chief Executive Officer. The Committee
may also designate from time to time other classes of officers or employees for
whom Committee approval will be required for grants of equity under this Plan.
The Chief Executive Officer shall have authority to approve stock option grants,
restricted stock, or other forms of equity compensation, to Participants other
than those whose grant has been designated by the Committee for approval by the
Committee.

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                                  APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN 27
===============================================================================

4.1  Stock Options

A Stock Option is a right to purchase a specified number of shares of Stock at a
specified price during such specified time as the Committee shall determine.

(a) Options granted may be either of a type that complies with the
    requirements of incentive stock options as defined in Section 422 of the
    Code and is designated as such ("Incentive Stock Options") or of a type that
    does not comply with such requirements or is designated as not being an
    Incentive Stock Option ("Non-Qualified Stock Options"). The maximum award
    term for all Stock Options awarded under this Plan shall be ten (10) years.

(b) The exercise price per share of any Stock Option shall be no less than the
    Fair Market Value per share of the Stock subject to the option on the date
    the Stock Option is granted.

(c) A Stock Option may be exercised, in whole or in part, by giving written
    notice of exercise to the Company specifying the number of shares of Stock
    to be purchased.

(d) The exercise price of the Stock subject to the Stock Option may be paid in
    cash or, at the discretion of the Committee, may also be paid by the tender
    of Stock already owned by the Participant, or through a combination of cash
    and Stock, or through such other means the Committee determines are
    consistent with the Plan's purpose and applicable law. No fractional shares
    of Stock will be issued or accepted.

(e) Notwithstanding any other provision of this Plan, other than Section 8, no
    Participant may be granted Stock Options and Stock Appreciation Rights
    covering in excess of 2,000,000 shares of Stock in any calendar year. If
    Stock Appreciation Rights are granted in tandem with an equal number of
    Stock Options, the total number of shares covered by such Stock Appreciation
    Rights and Stock Options shall be deemed, for purposes of this limitation,
    to equal the number of shares covered by such Stock Options.

4.2  Stock Appreciation Rights

A Stock Appreciation Right is a right to receive, upon surrender of the right,
but without payment, an amount payable in cash and/or shares of Stock under the
terms and conditions as the Committee shall determine.

(a) A Stock Appreciation Right may be granted in tandem with part or all of, in
    addition to, or completely independent of a Stock Option or any other Award
    under this Plan. A Stock Appreciation Right issued in tandem with a Stock
    Option may be granted at the time of grant of the related Stock Option or at
    any time thereafter during the term of the Stock Option.

(b) The amount payable in cash and/or shares of Stock with respect to each right
    shall be equal in value to a percent of the amount by which the Fair Market
    Value per share of Stock on the exercise date exceeds the exercise price of
    the Stock Appreciation Right. The applicable percent shall be established by
    the Committee. The amount payable in shares of Stock, if any, is determined
    with reference to the Fair Market Value on the date of exercise.

(c) Stock Appreciation Rights issued in tandem with Stock Options shall be
    exercisable only to the extent that the Stock Options to which they relate
    are exercisable. Upon exercise of the Stock Appreciation Right, the
    Participant shall surrender to the Company the underlying Stock Option.
    Stock Appreciation Rights issued in tandem with Stock Options shall
    automatically terminate upon the exercise of such Stock Options.

(d) Grants of Stock Appreciation Rights are subject to the limitations set forth
    in Section 4.1(e) above.

4.3  Restricted Stock

Restricted Stock is Stock that is issued to a Participant and is subject to such
terms, conditions and restrictions as the Committee deems appropriate, which may
include, but is not limited to, restrictions upon the sale, assignment, transfer
or other disposition of the Restricted Stock and the requirement of forfeiture
of the Restricted Stock upon termination of employment under certain specified
conditions. The Committee may provide for the lapse of any such term or
condition or waive any term or condition based on such factors or criteria as
the Committee may determine. Pursuant to this Section 4.3, an Award of
Restricted Stock may be either time-lapsed Restricted Stock or Performance-Based
Restricted Stock. The Participant shall have, with respect to awards of
Restricted Stock, all of the rights of a shareholder of the Company, including
the right to vote the Restricted Stock and the right to receive any cash or
stock dividends on such Stock.

4.4  Performance Awards

Performance Awards may be granted under this Plan from time to time based on the
terms and conditions as the Committee deems appropriate provided that such
Awards shall not be inconsistent with the terms and purposes of this Plan.
Performance Awards are Awards which are contingent upon the performance of all
or a portion of the Company and/or its Participating Subsidiaries or which are
contingent upon the individual performance of a Participant. Performance Awards
may be in the form of performance units, performance shares and such other forms
of performance Awards which the Committee shall determine. The Committee shall
determine the performance measurements and criteria for such Performance Awards.

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28 APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN
================================================================================

4.5  Other Awards

The Committee may from time to time grant stock, other stock based and non-stock
based Awards under the Plan, including without limitations those Awards pursuant
to which shares of stock are or may in the future be acquired, Awards
denominated in stock units, securities convertible into stock, phantom
securities and dividend equivalents. The Committee shall determine the terms and
conditions of such other stock, stock based and non-stock based Awards provided
that such Awards shall not be inconsistent with the terms and purposes of this
Plan.

4.6  Qualified Performance-Based Awards

The provisions of this Section 4.6 shall apply to all Qualified
Performance-Based Awards, notwithstanding any other provision of this Plan,
other than Sections 8 and 9. No Participant may be granted Qualified
Performance-Based Awards covering in excess of 2,000,000 shares of Stock or
allowing for the payment of cash in excess of $10,000,000 in any calendar year.
Each Qualified Performance-Based Award shall be earned, vested and payable (as
applicable) only upon the achievement of one or more Performance Goals (together
with the satisfaction of any other conditions, such as continued employment, as
the Committee may determine to be appropriate); provided, that (i) the Committee
may provide, either in connection with the grant thereof or by amendment
thereafter, that achievement of such Performance Goals will be waived upon the
death or disability of the Participant, and (ii) the provisions of Sections 8
and 9 shall apply notwithstanding this sentence. Except as specifically provided
in the preceding sentence, no Qualified Performance-Based Award may be amended,
nor may the Committee exercise any discretionary authority it may otherwise have
under this Plan with respect to a Qualified Performance-Based Award under this
Plan, in any manner to waive the achievement of the applicable Performance Goals
or to increase the amount payable pursuant thereto or the value thereof, or
otherwise in a manner that would cause the Qualified Performance-Based Award to
cease to qualify for the Section 162(m) Exemption. Under this Plan, a Qualified
Performance-Based Award may include Restricted Stock.

Section 5.  Award Agreements

Each Award under this Plan shall be evidenced by an Award Agreement setting
forth the number of shares of Stock or other security, Stock Appreciation
Rights, or units subject to the Award and such other terms and conditions
applicable to the Award as determined by the Committee.

(a)   Award Agreements shall include the following terms:

    (i)   Non-assignability: A provision that the Awards under the Plan other
          than Awards representing Non-Qualified Stock Options shall not be
          assigned, pledged or otherwise transferred except by will or by the
          laws of descent and distribution, and that during the lifetime of a
          Participant, an Award other than an Award representing Non-Qualified
          Stock Options shall be exercised only by such Participant or by the
          Participant's legal guardian or legal representative.

    (ii)  Termination of Employment: A provision describing the treatment of an
          Award in the event of the Retirement, Disability, death or other
          termination of a Participant's employment with the Company, including
          but not limited to terms relating to the vesting, time for exercise,
          forfeiture or cancellation of an Award in such circumstances.

    (iii) Rights as Stockholder: A provision that a Participant shall have no
          rights as a stockholder with respect to any securities covered by an
          Award until the date the Participant becomes the holder of record.
          Except as provided in Section 8 hereof, no adjustment shall be made
          for dividends or other rights, unless the Award Agreement specifically
          requires such adjustment, in which case, grants of dividend
          equivalents or similar rights shall not be considered to be a grant of
          any other stockholder right.

    (iv)  Withholding: A provision requiring the withholding of applicable taxes
          required by law from all amounts paid in satisfaction of an Award. In
          the case of an Award paid in cash, the withholding obligation shall be
          satisfied by withholding the applicable amount and paying the net
          amount in cash to the Participant. In the case of Awards paid in
          shares of Stock or other securities of the Company, a Participant may
          satisfy the withholding obligation by paying the amount of any taxes
          in cash or, with the approval of the Committee, shares of Stock or
          other securities may be deducted from the payment to satisfy the
          Company's minimum withholding obligation in full or in part as long as
          such withholding of shares does not violate any applicable laws, rules
          or regulations of Federal, state or local authorities. The number of
          shares to be deducted shall be determined by reference to the Fair
          Market Value of such shares of Stock on the applicable date.

(b)  Award Agreements may include the following terms:

    (i)   Replacement and Substitution: Except as provided in Section 13(b)
          dealing with repricing of Stock Options, such provisions permitting
          the surrender of outstanding Awards or securities held by the
          Participant in order to exercise or realize rights under other Awards,
          or in exchange for the grant of new Awards under similar or different
          terms, may be included.

    (ii)  Transferability of Non-Qualified Stock Options: Such provisions as the
          Committee may, in its discretion,

<PAGE>

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                                 APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN  29
===============================================================================

          authorize in any particular case, with respect to all or any portion
          of any Non-Qualified Stock Options to be granted to Participant, the
          transfer by such Participant of any of such Non-Qualified Stock
          Options to (a) the spouse, children or grandchildren (including in
          each case stepchildren or step grandchildren) of the Participant (all
          such persons collectively "Immediate Family Members"), (b) a trust or
          trusts for the exclusive benefit of persons all of whom are Immediate
          Family Members, or (c) a partnership in which all partners are
          Immediate Family Members, provided that following any such permitted
          transfer, subsequent transfers of transferred Non-Qualified Stock
          Options, except by will or the laws of descent and distribution, are
          prohibited. Following any transfer contemplated hereby, the
          transferred Non-Qualified Stock Options shall continue to be subject
          to all of the terms hereof, the administrative procedures and the
          Award Agreement pursuant to which it was originally granted, and the
          transferee shall be obliged to comply in all respects with all of the
          terms and conditions hereof, the administrative procedures and the
          Award Agreement in the same manner as if the transferee were a
          Participant hereunder.

    (iii) Other Terms: Such other terms as are necessary and appropriate to
          effect an Award to the Participant including but not limited to the
          term of the Award, vesting provisions, deferrals, any requirements for
          continued employment with the Company, any other restrictions or
          conditions (including performance requirements) on the Award and the
          method by which restrictions or conditions lapse, effect on the Award
          of a Change of Control as defined in Section 9, the price, amount or
          value of Awards.

Section 6.  Shares of Stock Subject to the Plan
(a) Subject to the adjustment provisions of Section 8 hereof, the number of
    shares of Stock for which Awards may be granted during the term of this Plan
    shall be 12,500,000; provided, that immediately following the Effective Time
    of the Merger (as those terms are defined in the next sentence), the number
    of shares of Stock for which Awards may be granted during the term of this
    Plan shall be increased by the product of (i) a fraction, the numerator of
    which is 12,500,000 and the denominator of which is the number of shares of
    Stock outstanding immediately before the Effective Time times (ii) the
    number of shares of Stock issued by the Company to stockholders of Tosco
    Corporation pursuant to the Merger; and provided, further, that the numbers
    described in clauses (i) and (ii) of the preceding proviso shall be adjusted
    as appropriate in the event there is any adjustment made pursuant to Section
    8 hereof before the Effective Time of the Merger. The terms "Effective Time"
    and "Merger" shall have the meanings given to them in the Agreement and Plan
    of Merger, dated as of February 4, 2001, by and among the Company, Ping
    Acquisition Corp. and Tosco Corporation, as the same may be amended from
    time to time.

    Shares issued under the Plan which do not fall under Section 4.1 or 4.2
    shall be limited to 2,000,000 shares during the term of the Plan; provided,
    that immediately following the Effective Time of the Merger, the 2,000,000
    share limitation shall be increased by the product of (i) a fraction, the
    numerator of which is 2,000,000 and the denominator of which is the number
    of shares of Stock outstanding immediately before the Effective Time times
    (ii) the number of shares of Stock issued by the Company to stockholders of
    Tosco Corporation pursuant to the Merger; and provided, further, that the
    numbers described in clauses (i) and (ii) of the preceding proviso shall be
    adjusted as appropriate in the event there is any adjustment made pursuant
    to Section 8 hereof before the Effective Time of the Merger.

(b) Any unexercised or undistributed portion of any terminated, expired,
    exchanged, or forfeited Award or Awards settled in cash in lieu of shares of
    Stock shall be available for further Awards in addition to those available
    under Section 6(a) hereof.

(c) For the purposes of computing the total number of shares of Stock granted
    under the Plan, the following rules shall apply to Awards payable in Stock
    or other securities, where appropriate:

    (i)   except as provided in (v) of this Section, each Stock Option shall be
          deemed to be the equivalent of the maximum number of shares that may
          be issued upon exercise of the particular Stock Option;

    (ii)  except as provided in (v) of this Section, each other stock-based
          Award payable in some other security shall be deemed to be equal to
          the number of shares to which it relates;

    (iii) except as provided in (v) of this Section, where the number of shares
          available under the Award is variable on the date it is granted, the
          number of shares shall be deemed to be the maximum number of shares
          that could be received under that particular Award;

    (iv)  where one or more types of Awards (both of which are payable in shares
          of Stock or another security) are granted in tandem with each other,
          such that the exercise of one type of Award with respect to a number
          of shares cancels an equal number of shares of the other, each joint
          Award shall be deemed to be the equivalent of the number of shares
          under the other; and

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30 APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN
================================================================================

    (v) each share awarded or deemed to be awarded under the preceding
        subsections shall be treated as shares of Stock, even if the Award is
        for a security other than Stock.

Additional rules for determining the number of shares of Stock granted under the
Plan may be made by the Committee, as it deems necessary or appropriate.

(d) The Stock which may be issued pursuant to an Award under the Plan may be
    treasury or authorized but unissued Stock or Stock may be acquired,
    subsequently or in anticipation of the transaction, in the open market to
    satisfy the requirements of the Plan.

Section 7.  Administration

(a) A majority of the members of the Committee shall constitute a quorum. The
    vote of a majority of a quorum shall constitute action by the Committee.

(b) The Committee shall periodically determine the Participants in the Plan and
    the nature, amount, pricing, timing, and other terms of Awards to be made to
    such individuals.

(c) The Committee shall have the power to interpret and administer the Plan. All
    questions of interpretation with respect to the Plan, the number of shares
    of Stock or other security, Stock Appreciation Rights, or units granted, and
    the terms of any Award Agreements shall be determined by the Committee and
    its determination shall be final and conclusive upon all parties in
    interest. In the event of any conflict between an Award Agreement and the
    Plan, the terms of the Plan shall govern.

(d) It is the intent of the Company that the Plan and Awards hereunder satisfy
    and be interpreted in a manner, that, in the case of Participants who are or
    may be Insiders, satisfies the applicable requirements of Rule 16b-3, so
    that such persons will be entitled to the benefits of Rule 16b-3 or other
    exemptive rules under Section 16 and will not be subjected to avoidable
    liability thereunder. If any provision of the Plan or of any Award would
    otherwise frustrate or conflict with the intent expressed in this Section
    7(d), that provision, to the extent possible, shall be interpreted and
    deemed amended so as to avoid such conflict. To the extent of any remaining
    irreconcilable conflict with such intent, the provision shall be deemed void
    as applicable to Insiders.

(e) The Committee may delegate to the officers or employees of the Company the
    authority to execute and deliver such instruments and documents, to do all
    such acts and things, and to take all such other steps deemed necessary,
    advisable or convenient for the effective administration of the Plan in
    accordance with its terms and purpose, except that the Committee may not
    delegate any discretionary authority with respect to substantive decisions
    or functions regarding the Plan or Awards thereunder as these relate to any
    Qualified Performance-Based Awards nor to Insiders including, but not
    limited to, decisions regarding the timing, eligibility, pricing, amount or
    other material term of such Awards.

Section 8.  Adjustments Upon Changes in Capitalization

Subject to any required action by the Company's stockholders, in the event of a
reorganization, recapitalization, Stock split, Stock dividend, exchange of
Stock, combination of Stock, merger, consolidation or any other change in
corporate structure of the Company affecting the Stock, or in the event of a
sale by the Company of all or a significant part of its assets, or any
distribution to its stockholders other than a normal cash dividend, the
Committee may make appropriate adjustment in the number, kind, price and value
of Stock authorized by this Plan, in the limitations imposed by Sections 4.1(e)
and 4.6, and any adjustments to outstanding Awards as it determines appropriate
so as to prevent dilution or enlargement of rights; provided, that such
adjustments to the limitations imposed by Sections 4.1(e) and 4.6, and to
Qualified Performance-Based Awards shall be carried out in a manner complying
with the requirements for the Section 162(m) Exemption.

Section 9.  Change of Control

(a) In the event of a Change of Control, unless explicitly provided otherwise in
    the applicable Award Agreement:

    (i)   Any Stock Options and Stock Appreciation Rights outstanding as of the
          Date of Change of Control that are not then fully exercisable and
          vested, shall become fully exercisable and vested to the full extent
          of the original grant and shall remain exercisable following any
          Involuntary Termination for a period not less than the lesser of one
          year and the remainder of the original term of such Stock Option or
          Stock Appreciation Right;

    (ii)  All restrictions and other limitations applicable to any Restricted
          Stock shall lapse, and such Restricted Stock shall become free of all
          restrictions and become fully vested and transferable to the full
          extent of the original grant;

    (iii) All Performance Awards and other Awards outstanding as of the Date of
          Change of Control shall be considered to be earned, at the higher of
          the target level or the level earned based upon performance from the
          beginning of the applicable performance period through the Date of
          Change of Control, and shall be paid in full, and any deferral or
          other restriction shall lapse and except as provided in subsection (c)
          of this Section 9, such Performance Awards shall be settled in cash as
          promptly as is practicable; and

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                                 APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN  31
===============================================================================

    (iv)  All noncompetition covenants and other similar restrictive covenants
          applicable to any outstanding Awards shall lapse and become null and
          void and of no further effect.

(b) A "Change of Control" shall mean:

    (i)   The acquisition by any individual, entity or group (within the meaning
          of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")) of
          beneficial ownership (within the meaning of Rule 13d-3 promulgated
          under the Exchange Act) of 15 percent or more of either (a) the then
          outstanding shares of common stock of the Company (the "Outstanding
          Company Common Stock") or (b) the combined power of the then
          outstanding voting securities of the Company entitled to vote
          generally in the election of directors (the "Outstanding Company
          Voting Securities"); provided, however, that for purposes of this
          subsection (i), the following acquisitions shall not constitute a
          Change of Control: (A) any acquisition directly from the Company, (B)
          any acquisition by the Company, (C) any acquisition by any employee
          benefit plan (or related trust) sponsored or maintained by the Company
          or any corporation controlled by the Company or (D) any acquisition
          pursuant to a transaction which complies with clauses (A), (B) and (C)
          of subsection (iii) of this Section 9(b); or

    (ii)  Individuals who, as of May 7, 2001, constituted the Board (the
          "Incumbent Board") cease for any reason to constitute at least a
          majority of the Board; provided, however, that any individual becoming
          a director subsequent to May 7, 2001, whose election, or nomination
          for election by the Company's stockholders, was approved by a vote of
          at least a majority of the directors then comprising the Incumbent
          Board shall be considered as though such individual were a member of
          the Incumbent Board, but excluding, for this purpose, any such
          individual whose initial assumption of office occurs as a result of an
          actual or threatened election contest with respect to the election or
          removal of directors or other actual or threatened solicitation of
          proxies or consents by or on behalf of a Person other than the Board;
          or

    (iii) Consummation of a reorganization, merger or consolidation or sale or
          other disposition of all or substantially all of the assets of the
          Company or the acquisition of assets of another entity (a "Corporate
          Transaction"), in each case, unless, following such Corporate
          Transaction, (A) all or substantially all of the individuals and
          entities who were the beneficial owners, respectively, of the
          Outstanding Company Common Stock and Outstanding Company Voting
          Securities immediately prior to such Corporate Transaction
          beneficially own, directly or indirectly, more than 60 percent of,
          respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors, as the case
          may be, of the corporation resulting from such Corporate Transaction
          (including, without limitation, a corporation which as a result of
          such transaction owns the Company or all or substantially all of the
          Company's assets either directly or through one or more subsidiaries)
          in substantially the same proportions as their ownership, immediately
          prior to such Corporate Transaction of the Outstanding Company Common
          Stock and Outstanding Company Voting Securities, as the case may be,
          (B) no Person (excluding any employee benefit plan (or related trust)
          of the Company or such corporation resulting from such Corporate
          Transaction) beneficially own, directly or indirectly, 15 percent or
          more of, respectively, the then outstanding shares of common stock of
          the corporation resulting from such Corporate Transaction or the
          combined voting power of the then outstanding voting securities of
          such corporation except to the extent that such ownership existed
          prior to the Corporate Transaction and (C) at least a majority of the
          members of the board of directors of the corporation resulting from
          such Corporate Transaction were members of the Incumbent Board at the
          time of the execution of the initial agreement, or of the action of
          the Board, providing for such Corporate Transaction; or

    (iv)  Approval by the stockholders of the Company of a complete liquidation
          or dissolution of the Company.

(c) Notwithstanding the foregoing, if any right to receive cash granted pursuant
    to this Section 9 would make a Change of Control transaction ineligible for
    pooling-of-interests accounting under APB No. 16 that but for the nature of
    such right would be eligible for such accounting treatment, the Committee
    shall have the ability to substitute for the cash payable pursuant to such
    right Stock or other securities with a Fair Market Value equal to the cash
    that would otherwise be payable hereunder and to make such other adjustments
    as may be necessary to preserve such eligibility (so long as such other
    adjustments do not materially diminish the value of the affected Awards).

Section 10.  Rights of Employee

(a) Status as an eligible Employee shall not be construed as a commitment that
    any Award will be made under the Plan to such eligible Employee or to
    eligible Employees generally.

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32  APPENDIX B -- 2002 OMNIBUS SECURITIES PLAN
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(b) Nothing contained in the Plan (or in any other documents related to this
    Plan or to any Award) shall confer upon any Employee or Participant any
    right to continue in the employ or other service of the Company or
    constitute any contract or limit in any way the right of the Company to
    change such person's compensation or other benefits or to terminate the
    employment of such person with or without cause.

Section 11.  Awards in Foreign Countries

The Committee shall have the authority to adopt such modifications, procedures
and subplans as may be necessary or desirable to comply with provisions of the
laws of foreign countries in which the Company or its Participating Subsidiaries
may operate to assure the viability of the benefits of Awards made to
Participants employed in such countries and to meet the purpose of this Plan.

Section 12.   Compliance with Applicable Legal Requirements

No Stock certificate distributable pursuant to this Plan shall be issued and
delivered unless the issuance of such certificate complies with all applicable
legal requirements including, without limitation, compliance with the provisions
of applicable state securities laws, the Securities Act of 1933, as amended from
time to time, or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Company's Stock may, at the time, be listed.

Section 13.  Amendment and Termination

(a) The Board of Directors may at any time amend, suspend or terminate the Plan.
    The Committee may at any time alter or amend any or all Award Agreements
    under the Plan, but no such alteration or amendment may adversely affect the
    rights of the Participant in question without such Participant's consent.
    However, no such action may, without further approval of the stockholders of
    the Company, be effective if such approval is required in order that
    transactions in Company securities under the Plan be exempt from the
    operation of Section 16(b) of the Securities Exchange Act of 1934, nor may
    any such action amend the Plan so as to

    (i)   increase the number of shares of Stock which may be issued under the
          Plan, except as provided for in Section 8; or

    (ii)  materially modify the requirements as to eligibility for
          participation.

(b) In addition, except for adjustments pursuant to Section 8 hereof, in no
    event may any Stock Option or Stock Appreciation Right granted under this
    Plan be amended to decrease the exercise price thereof, cancelled in
    conjunction with the grant of any new Stock Option or Stock Appreciation
    Right with a lower price, or otherwise be subject to any action that would
    be treated, for accounting purposes, as a repricing of such Stock Option or
    Stock Appreciation Right.

Section 14.  Unfunded Plan

The Plan shall be unfunded. Neither the Company nor the Board of Directors shall
be required to segregate any assets that may at any time be represented by
Awards made pursuant to the Plan. Neither the Company, the Committee, nor the
Board of Directors shall be deemed to be a trustee of any amounts to be paid
under the Plan.

Section 15.  Limits of Liability

(a) Any liability of the Company to any Participant with respect to an Award
    shall be based solely upon contractual obligations created by the Plan and
    the Award Agreement.

(b) Neither the Company nor any member of the Board of Directors or of the
    Committee, nor any other person participating in any determination of any
    question under the Plan, or in the interpretation, administration or
    application of the Plan, shall have any liability to any party for any
    action taken or not taken, in good faith under the Plan.

Section 16.  Duration of the Plan

This Plan shall become effective on January 1, 2002, upon the adoption by the
Company's stockholders at the 2001 Annual Meeting, and the Committee shall have
authority to grant Awards hereunder until December 31, 2006, subject to the
ability of the Board of Directors to terminate the Plan as provided in Section
13.

Section 17.  Termination of Other Plans

The Omnibus Securities Plan of 1993 ("1993 Plan") shall continue for its
duration or until December 31, 2002, and grants may be made from the 1993 Plan
until it expires by its terms or until shares of Stock are no longer awardable
under the 1993 Plan. Grants other than Incentive Stock Options, Non-Qualified
Stock Options, and Stock Appreciation Rights that are made under the 1993 Plan,
following the approval by stockholders of the 2002 Omnibus Securities Plan,
shall not exceed 700,000 shares. All Stock Options granted under the 1993 Plan,
following the approval by stockholders of the 2002 Omnibus Securities Plan,
shall be granted at not less than the Fair Market Value of the Stock on the date
of the grant, and the term of such options shall not exceed ten (10) years.

[Graphic]
Printed on recycled paper

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PROXY                                                                   PROXY

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

                           PHILLIPS PETROLEUM COMPANY

                          Annual Meeting May 7, 2001

The undersigned hereby appoints J. MULVA, K. TURNER and D. BOREN as proxy
holders with power of substitution, or, if all do not act on a matter, those
who do act, to vote all stock which the undersigned could vote at the Company's
Annual Stockholders' Meeting to be held at the Adams Building, 4th Street and
Keeler Avenue, Bartlesville, Oklahoma, on May 7, 2001, at 10 a.m., and at any
adjournment thereof, in the manner stated herein as to the following matters
and in their discretion on any other matters that come before the meeting, all
as described in the Notice and Proxy Statement.


                  This Proxy is Continued on the Reverse Side
              Please Sign on the Reverse Side and Return Promptly

Comments:_____________________________________________________________
         _____________________________________________________________

 ..............................................................................
                             Fold and Detach Here


                            YOUR VOTE IS IMPORTANT!
                        You can vote in one of two ways:

 1. Call toll-free 1-800-840-1208 on a touch-tone telephone in the United
    States, Puerto Rico or Canada, and follow the instructions on the reverse
    side.  There is NO CHARGE to you for this call.

                                     or

 2. Mark, sign and date your proxy card and return it promptly in the enclosed
    envelope.  If you are outside the United States, Puerto Rico or Canada, you
    must return your proxy card by mail to vote.

                                 PLEASE VOTE

In order to reduce the costs associated with producing and mailing your Annual
Report and Proxy Statement in future years, we urge you to elect on your proxy
card that you would like to view your Annual Report and Proxy Statement
electronically via the Internet.  Your election can be revoked at any time by
calling 1-800-840-1208.  You will continue to receive your proxy card in the
mail, regardless of your election.


<PAGE>


This Proxy will be voted or not voted as you           Please mark your
direct below.  In the absence of such direction,       votes as indicated [X]
it will be voted FOR Directors, and FOR Proposal 1     in this example
and Proposal 2.

------------------------------------------------------------------------------
Company recommends a vote FOR:  ELECTION OF DIRECTORS:  Nominees:
01 N. Augustine, 02 D. Boren, 03 R. Chappell, 04 R. Devlin, 05 L. Horner,
06 J. Mulva, 07 R. Tobias, 08 V. Tschinkel and 09 K. Turner.

  VOTE FOR         VOTE WITHHELD     *To withhold authority to vote for any
all nominees     from all nominees    nominee write that nominee's name on the
listed above*      listed above       space below.

    [ ]                [ ]            ________________________________________

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

Company recommends a vote FOR:             I consent to future access of the
Proposal 1 to approve the                  Annual Reports and Proxy Statements
designation of the independent             electronically via the Internet.  I
auditors, Ernst & Young LLP.               understand that the Company may no
                                           longer distribute printed materials
  FOR     AGAINST     ABSTAIN              to me for any future Stockholder
  [ ]       [ ]         [ ]                Meeting until such consent is
                                           revoked.  [ ]

Company recommends a vote FOR:
Proposal 2 to authorize the 2002
Omnibus Securities Plan of Phillips             I PLAN TO ATTEND THE
Petroleum Company.                              ANNUAL MEETING       [ ]

  FOR     AGAINST     ABSTAIN                Please mark, date, sign and return
  [ ]       [ ]         [ ]                  this proxy card promptly.  To vote
                                             in accordance with the Company's
                                             recommendations no boxes need be
                                             checked.


                                             Dated:__________________, 2001

                                             ______________________________

                                             ______________________________

                                             Signature(s) of Stockholder(s)

                                             Your signature(s) on this proxy
                                             form should be exactly the same as
                                             the name(s) imprinted hereon.
                                             Persons signing as executors,
                                             administrators, trustees, or
                                             in similar capabilities, should so
                                             indicate.

 ..............................................................................
                            Fold and Detach Here

------------------------------------------------------------------------------
IF YOU WISH TO VOTE BY TELEPHONE IN THE UNITED STATES, PUERTO RICO OR CANADA,
PLEASE FOLLOW THE INSTRUCTIONS BELOW.  IF YOU VOTE BY TELEPHONE, PLEASE DO NOT
RETURN YOUR CARD BY MAIL.
------------------------------------------------------------------------------

HAVE YOUR VOTING DIRECTION CARD IN HAND.

TO VOTE BY PHONE THROUGH OUR TABULATOR, MELLON INVESTOR SERVICES LLC:

 o On a touch-tone telephone call Toll Free 1-800-840-1208 -- 24 hours a
   day -- 7 days a week.
 o Enter your eleven-digit Control Number which is indicated below.

------------------------------------------------------------------------------
Option 1: To vote as the Board of Directors recommends, press 1.  If you
wish to vote separately for the Election of Directors, Proposal 1 and
Proposal 2, press 0.
------------------------------------------------------------------------------
  When you press 1, your vote will be confirmed and cast as you directed. END
OF CALL
------------------------------------------------------------------------------
Option 2: If you chose to vote separately for the Election of Directors,
Proposal 1 and Proposal 2, you will hear the following instructions:

  Election of   To VOTE FOR ALL nominees, press 1;
  Directors:    To WITHHOLD FOR ALL nominees, press 9;
                To WITHHOLD FOR AN INDIVIDUAL nominee, press 0, enter the two
                digit number that appears next to the name of the nominee for
                whom you DO NOT wish to vote.

  Proposal 1    You may make your selection at any time.
  and           To vote FOR, press 1;
  Proposal 2:   To vote AGAINST, press 9;
                To ABSTAIN, press 0.
------------------------------------------------------------------------------

Your vote will be repeated and you will have an opportunity to confirm it.

                              THANK YOU FOR VOTING


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