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


                                  FORM 10-Q


(Mark One)

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

For the quarterly period ended    September 30, 1999
                               --------------------------------------------

                                       OR

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

For the transition period from                       to
                               ---------------------    -------------------
Commission file number               1-720
                       ----------------------------------------------------

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


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


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


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


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


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

The registrant had 253,283,646 shares of common stock, $1.25 par value,
outstanding at October 31, 1999.

<PAGE>


                    PART I. FINANCIAL INFORMATION

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


                                           Millions of Dollars
                                    ---------------------------------
                                       Three Months      Nine Months
                                          Ended             Ended
                                       September 30      September 30
                                    ---------------------------------
                                      1999     1998*    1999     1998*
                                    ---------------------------------
Revenues
Sales and other operating revenues  $3,739    2,890    9,332    8,947
Equity in earnings of affiliated
  companies                             16       12       64       62
Other revenues                          14       11      143      158
---------------------------------------------------------------------
    Total Revenues                   3,769    2,913    9,539    9,167
---------------------------------------------------------------------

Costs and Expenses
Purchased crude oil and products     2,266    1,700    5,504    5,015
Production and operating expenses      508      521    1,521    1,567
Exploration expenses                    52       45      161      144
Selling, general and
  administrative expenses              150      147      499      456
Depreciation, depletion and
  amortization                         229      233      671      686
Property impairments                    13       37       64       67
Taxes other than income taxes           53       52      172      177
Interest expense                        70       56      210      136
Preferred dividend requirements
  of capital trusts                     14       14       40       40
---------------------------------------------------------------------
    Total Costs and Expenses         3,355    2,805    8,842    8,288
---------------------------------------------------------------------
Income before income taxes             414      108      697      879
Provision for income taxes             193       62      338      432
---------------------------------------------------------------------
Net Income                          $  221       46      359      447
=====================================================================

Net Income Per Share of Common
  Stock
    Basic                           $  .87      .18     1.42     1.72
    Diluted                            .87      .18     1.41     1.71
---------------------------------------------------------------------

Dividends Paid                      $  .34      .34     1.02     1.02
---------------------------------------------------------------------

Average Common Shares Outstanding
  (in thousands)
    Basic                          253,306  256,779  252,669  259,786
    Diluted                        255,445  258,659  254,340  261,858
---------------------------------------------------------------------
See Notes to Financial Statements.
*Reclassified to conform to current presentation.


                                1

<PAGE>


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


                                             Millions of Dollars
                                          -------------------------
                                          September 30  December 31
                                                  1999         1998
                                          -------------------------
Assets
Cash and cash equivalents                      $   180           97
Accounts and notes receivable (less
  allowances: 1999--$19; 1998--$13)              1,748        1,282
Inventories                                        575          540
Deferred income taxes                              173          217
Prepaid expenses and other current assets          103          213
-------------------------------------------------------------------
    Total Current Assets                         2,779        2,349
Investments and long-term receivables            1,059        1,015
Properties, plants and equipment (net)          11,101       10,585
Deferred income taxes                               80          100
Deferred charges                                   172          167
-------------------------------------------------------------------
Total                                          $15,191       14,216
===================================================================

Liabilities
Accounts payable                               $ 1,697        1,340
Notes payable and long-term debt due
  within one year                                   46          167
Accrued income and other taxes                     381          182
Other accruals                                     466          443
-------------------------------------------------------------------
    Total Current Liabilities                    2,590        2,132
Long-term debt                                   4,443        4,106
Accrued dismantlement, removal and
  environmental costs                              676          729
Deferred income taxes                            1,448        1,317
Employee benefit obligations                       429          424
Other liabilities and deferred credits             570          639
-------------------------------------------------------------------
Total Liabilities                               10,156        9,347
-------------------------------------------------------------------

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

Common Stockholders' Equity
Common stock--500,000,000 shares
  authorized at $1.25 par value
    Issued (306,380,511 shares)
      Par value                                    383          383
      Capital in excess of par                   2,089        2,055
    Treasury stock (at cost:
      1999--24,346,524 shares;
      1998--25,259,040 shares)                  (1,214)      (1,259)
    Compensation and Benefits Trust (CBT)
      (at cost: 1999--28,647,987 shares;
      1998--29,125,863 shares)                    (971)        (987)
Accumulated other comprehensive income
  Foreign currency translation adjustments         (25)         (22)
  Unrealized gain on available-for-sale
    securities                                       9            9
Unearned employee compensation--Long-
  Term Stock Savings Plan (LTSSP)                 (289)        (303)
Retained earnings                                4,403        4,343
-------------------------------------------------------------------
Total Common Stockholders' Equity                4,385        4,219
-------------------------------------------------------------------
Total                                          $15,191       14,216
===================================================================
See Notes to Financial Statements.


                                2

<PAGE>


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

                                              Millions of Dollars
                                              -------------------
                                               Nine Months Ended
                                                 September 30
                                              -------------------
                                                 1999        1998*
                                              -------------------
Cash Flows from Operating Activities
Net income                                    $   359         447
Adjustments to reconcile net income to net
  cash provided by operating activities
    Non-working capital adjustments
      Depreciation, depletion and
        amortization                              671         686
      Property impairments                         64          67
      Dry hole costs and leasehold
        impairment                                 67          29
      Deferred taxes                              114         139
      Other                                      (137)        (58)
    Working capital adjustments
      Increase in aggregate balance of
        accounts receivable sold                   18         200
      Decrease (increase) in other
        accounts and notes receivable            (486)        161
      Increase in inventories                     (41)        (97)
      Decrease (increase) in prepaid
        expenses and other current assets         132         (20)
      Increase (decrease) in accounts payable     355         (10)
      Increase in taxes and other accruals        279         132
-----------------------------------------------------------------
Net Cash Provided by Operating Activities       1,395       1,676
-----------------------------------------------------------------

Cash Flows from Investing Activities
Capital expenditures and investments,
  including dry hole costs                     (1,351)     (1,574)
Proceeds from asset dispositions                  175          36
Long-term advances to affiliates and
  other investments                                (6)        (11)
-----------------------------------------------------------------
Net Cash Used for Investing Activities         (1,182)     (1,549)
-----------------------------------------------------------------

Cash Flows from Financing Activities
Issuance of debt                                  528         712
Repayment of debt                                (338)       (124)
Purchase of company common stock                  (13)       (417)
Issuance of company common stock                   22          11
Dividends paid on common stock                   (258)       (266)
Other                                             (71)        (79)
-----------------------------------------------------------------
Net Cash Used for Financing Activities           (130)       (163)
-----------------------------------------------------------------

Net Change in Cash and Cash Equivalents            83         (36)
Cash and cash equivalents at beginning of
  period                                           97         163
-----------------------------------------------------------------
Cash and Cash Equivalents at End of Period    $   180         127
=================================================================
See Notes to Financial Statements.
*Reclassified to conform to current presentation.


                                3


<PAGE>


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


Note 1--Interim Financial Information

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


Note 2--Inventories

Inventories consisted of the following:

                                           Millions of Dollars
                                        -------------------------
                                        September 30  December 31
                                                1999         1998
                                        -------------------------

Crude oil and petroleum products                $216          177
Chemical products                                269          264
Materials, supplies and other                     90           99
-----------------------------------------------------------------
                                                $575          540
=================================================================


Note 3--Properties, Plants and Equipment

Properties, plants and equipment (net) included the following:

                                           Millions of Dollars
                                        -------------------------
                                        September 30  December 31
                                                1999         1998
                                        -------------------------
Properties, plants and equipment
  (at cost)                                  $22,765       22,868
Less accumulated depreciation,
  depletion and amortization                  11,664       12,283
-----------------------------------------------------------------
                                             $11,101       10,585
=================================================================
                                4

<PAGE>



Note 4--Impairments

Property impairments totaling $13 million before-tax, $10 million
after-tax, were recorded in the E&P segment in the third quarter
of 1999, primarily related to the Renee field in the U.K. North
Sea.  The Renee field impairment was triggered by an unsuccessful
development dry hole completed in the third quarter.

Property impairments totaling $64 million before-tax, $30 million
after-tax, were booked in the E&P segment in the nine-month
period ending September 30, 1999.  In addition to the Renee
field, impairments were taken on the Agate field in the Gulf of
Mexico and several outlying fields in the greater Ekofisk area of
the Norwegian North Sea.  The North Sea impairments were the
result of upward revisions of decommissioning costs, while the
Agate impairment was caused by a mechanical downhole well
failure.


Note 5--Debt

In March 1999, the company issued $300 million of 6 3/8% Notes
due 2009, and $200 million of 7% Debentures due 2029, in the
public market.

At September 30, 1999, there was no revolving debt outstanding
under the company's $1.5 billion revolving credit facility, but
$594 million of commercial paper was outstanding, which is
supported 100 percent by the credit facility.  The company's
wholly owned subsidiary, Phillips Petroleum Company Norway, has
$600 million available under two revolving credit facilities.  At
September 30, 1999, $330 million was outstanding under the
facilities.


Note 6--Income Taxes

The company's effective tax rates for the third quarter and first
nine months of 1999 were 47 and 48 percent, respectively, compared
with 57 and 49 percent for each of the same periods a year ago.
The third-quarter rate for 1998 was higher due to a larger
proportion of income in higher-tax-rate jurisdictions.


                                5

<PAGE>



Note 7--Contingencies

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

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

Environmental--The company is subject to federal, state and local
environmental laws and regulations.  These may result in
obligations to remove or mitigate the effects on the environment
of the placement, storage, disposal or release of certain
chemical, mineral and petroleum substances at various sites.  The
company is currently participating in environmental assessments
and clean-up under these laws at federal Superfund and comparable
state sites.  In the future, the company may be involved in
additional environmental assessments, clean-ups and proceedings.

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

Other Contingencies--The company has contingent liabilities
resulting from throughput agreements with pipeline and processing
companies in which it holds stock interests.  Under these
agreements, Phillips may be required to provide any such company
with additional funds through advances, most of which can be
recovered through reductions of future charges for the shipping
or processing of petroleum liquids, natural gas and refined
products.


                                6

<PAGE>



Note 8--Preferred Share Purchase Rights

On July 2, 1999, the company's Board of Directors declared a
dividend distribution of one preferred share purchase right for
each outstanding share of Phillips' common stock.  The dividend
distribution was made August 1, 1999, payable to stockholders of
record on that date.  These rights replace the rights issued
under the company's shareholder rights plan that expired July 31,
1999.  The new rights, which expire July 31, 2009, will be
exercisable only if a person or group acquires 15 percent or more
of the company's common stock or announces a tender offer that
would result in ownership of 15 percent or more of the common
stock.  Each right will entitle stockholders to buy one one-
hundredth of a share of preferred stock at an exercise price of
$180.  In addition, the rights enable holders to either acquire
additional shares of Phillips common stock or purchase the stock
of an acquiring company at a discount, depending on specific
circumstances.  The rights may be redeemed by the company in
whole, but not in part, for one cent per right.


Note 9--Non-Mineral Operating Leases

The company and its co-venturer in the Kenai liquefied natural
gas plant lease two tankers that are used to transport liquefied
natural gas from Kenai, Alaska, to Japan.  In June 1999, a
purchase option held by the company and its co-venturer was
allowed to become a binding commitment.  The purchase date for
the first tanker is June 2000, and December 2000 for the second.
In the event that the company and its co-venturer do not modify
the existing lease arrangements or enter into new lease
arrangements, the purchase option would be exercised and
Phillips' 70 percent interest in the aggregate purchase price for
both tankers would be approximately $240 million.



                                7

<PAGE>



Note 10--Supplemental Cash Flow Information

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

                                              Millions of Dollars
                                              -------------------
                                              1999           1998
                                              -------------------
Non-Cash Investing and Financing Activities
Company stock issued under compensation
 and benefit plans                             $24              7
Change in market value of investments            5             12
Deferred payment obligation to purchase
  property, plant and equipment                 26              8
Investment in joint venture in exchange
  for non-cash assets                            8              5
Investment in equity affiliate through
  direct guarantee of debt                       -             13
-----------------------------------------------------------------
Cash payments
Interest
  Debt                                        $212            125
  Taxes and other                                6              6
-----------------------------------------------------------------
                                              $218            131
=================================================================
Income taxes                                  $ 60            287
-----------------------------------------------------------------


Note 11--Environmental Cost Recovery

During the first nine months of 1998, as part of a comprehensive
environmental cost recovery project, the company entered into
settlement agreements with certain of its historical liability
and pollution insurers in exchange for releases or commutations
of their present and future liabilities to the company under its
historical liability and pollution policies.  As a result of
these settlement agreements, the company recorded a before-tax
benefit to earnings of $109 million, $71 million after-tax.


                                8

<PAGE>



Note 12--Foreign Currency

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

                                    Millions of Dollars
                          ---------------------------------------
                          Three Months Ended    Nine Months Ended
                             September 30          September 30
                          ------------------    -----------------
                          1999          1998    1999         1998
                          ------------------    -----------------
After-Tax
E&P                        $ 2            (5)      3          (12)
RM&T                         1             -       -            -
Chemicals                    -             1      (1)           -
Corporate and Other         16             7      (6)          10
-----------------------------------------------------------------
Total                      $19             3      (4)          (2)
=================================================================

Before-Tax
E&P                        $ 7             8      (8)          (8)
RM&T                         -             -       -            -
Chemicals                    1             1      (1)           -
Corporate and Other         16             7      (7)          11
-----------------------------------------------------------------
Total                      $24            16     (16)           3
=================================================================


Note 13--Comprehensive Income

Phillips' comprehensive income for the three- and nine-month
periods ended September 30, was as follows:

                                        Millions of Dollars
                                  -------------------------------
                                   Three Months      Nine Months
                                      Ended             Ended
                                   September 30      September 30
                                  -------------     -------------
                                  1999     1998     1999     1998
                                  -------------     -------------

Net income                        $221       46      359      447
After-tax changes in:
  Foreign currency translation
    adjustments                     20       13       (3)      (2)
  Net unrealized gain (loss)
    on available-for-sale
    securities                      (2)       8        -        8
-----------------------------------------------------------------
Comprehensive income              $239       67      356      453
=================================================================


                                9

<PAGE>



Note 14--Segment Disclosures

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

(1)  Exploration and Production (E&P)--Explores for and produces
     crude oil, natural gas and natural gas liquids on a
     worldwide basis.

(2)  Gas Gathering, Processing and Marketing (GPM)--Gathers and
     processes both natural gas produced by others and natural
     gas produced from the company's own reserves, primarily in
     Oklahoma, Texas and New Mexico.

(3)  Refining, Marketing and Transportation (RM&T)--Refines,
     markets and transports crude oil and petroleum products,
     primarily in the United States.  This segment also
     fractionates and markets natural gas liquids.

(4)  Chemicals--Manufactures and markets petrochemicals and
     plastics on a worldwide basis.

Corporate and Other includes general corporate overhead; all
interest revenue and expense, including preferred dividend
requirements of capital trusts; certain eliminations; and various
other corporate activities, such as the company's captive
insurance subsidiary and tax items not directly attributable to
the operating segments.


                               10

<PAGE>


The company evaluates performance and allocates resources based
on net income, among other items.  Intersegment sales are
recorded at market value.  There have been no material changes in
the basis of segmentation or in the basis of measurement of
segment net income since the 1998 annual report.


Analysis of Results by Operating Segment

                                              Millions of Dollars
                                        -------------------------------
                                              Operating Segments
                                        -------------------------------
                                           E&P    GPM   RM&T  Chemicals
Three Months Ended September 30, 1999   -------------------------------
Sales and Other Operating Revenues
  External customers                    $  772    254  2,081        632
  Intersegment                             141    219    145         46
-----------------------------------------------------------------------
    Segment sales                       $  913    473  2,226        678
=======================================================================

Net income                              $  152     39     47         50
=======================================================================

Three Months Ended September 30, 1998
Sales and Other Operating Revenues
  External customers                    $  618    182  1,533        556
  Intersegment                              87    124     91         30
-----------------------------------------------------------------------
    Segment sales                       $  705    306  1,624        586
=======================================================================

Net income                              $   22     13     53         24
=======================================================================


Nine Months Ended September 30, 1999
Sales and Other Operating Revenues
  External customers                    $2,011    603  5,004      1,713
  Intersegment                             333    486    337        107
-----------------------------------------------------------------------
    Segment sales                       $2,344  1,089  5,341      1,820
=======================================================================

Net income                              $  318     63     72        120
=======================================================================

Total Assets
  At September 30, 1999                 $6,655  1,140  3,368      2,870
-----------------------------------------------------------------------
  At December 31, 1998                  $6,173  1,080  2,910      2,790
-----------------------------------------------------------------------

Nine Months Ended September 30, 1998
Sales and Other Operating Revenues
  External customers                    $2,080    582  4,512      1,771
  Intersegment                             313    424    282        103
-----------------------------------------------------------------------
    Segment sales                       $2,393  1,006  4,794      1,874
=======================================================================

Net income                              $  188     44    159        142
=======================================================================


                                            Millions of Dollars
                                        ---------------------------
                                            Corporate
                                            and Other  Consolidated
Three Months Ended September 30, 1999   ---------------------------
Sales and Other Operating Revenues
  External customers                          $     -         3,739
  Intersegment (eliminations)                    (551)            -
-------------------------------------------------------------------
    Segment sales                             $  (551)        3,739
===================================================================

Net income (loss)                             $   (67)          221
===================================================================

Three Months Ended September 30, 1998
Sales and Other Operating Revenues
  External customers                          $     1         2,890
  Intersegment (eliminations)                    (332)            -
-------------------------------------------------------------------
    Segment sales                             $  (331)        2,890
===================================================================

Net income (loss)                             $   (66)           46
===================================================================


Nine Months Ended September 30, 1999
Sales and Other Operating Revenues
  External customers                          $     1         9,332
  Intersegment (eliminations)                  (1,263)            -
-------------------------------------------------------------------
    Segment sales                             $(1,262)        9,332
===================================================================

Net income (loss)                             $  (214)          359
===================================================================

Total Assets
  At September 30, 1999                       $ 1,158        15,191
-------------------------------------------------------------------
  At December 31, 1998                        $ 1,263        14,216
-------------------------------------------------------------------

Nine Months Ended September 30, 1998
Sales and Other Operating Revenues
  External customers                          $     2         8,947
  Intersegment (eliminations)                  (1,122)            -
-------------------------------------------------------------------
    Segment sales                             $(1,120)        8,947
===================================================================

Net income (loss)                             $   (86)          447
===================================================================



                               11

<PAGE>



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


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


RESULTS OF OPERATIONS

Unless otherwise noted, discussion of results for the three- and
nine-month periods ending September 30, 1999, are based on a
comparison with the corresponding periods in 1998.


Consolidated Results

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

                                     Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                               September 30        September 30
                           ------------------   -----------------
                           1999          1998   1999         1998
                           ------------------   -----------------
Exploration and Production
  (E&P)                    $152            22    318          188
Gas Gathering, Processing
  and Marketing (GPM)        39            13     63           44
Refining, Marketing and
  Transportation (RM&T)      47            53     72          159
Chemicals                    50            24    120          142
Corporate and Other         (67)          (66)  (214)         (86)
-----------------------------------------------------------------
Net income                 $221            46    359          447
=================================================================


                               12

<PAGE>



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

                                    Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                           1999          1998   1999         1998
                           ------------------   -----------------
Property impairments*      $(10)          (26)   (30)         (46)
Work force reduction
  charges                     -             1     (7)           1
Net gain on asset sales       4             -     53            3
Pending claims and
  settlements                 -            (2)    38           98
Deferred tax adjustments      8             -    (11)           -
Other items                  (2)            4    (17)           4
-----------------------------------------------------------------
Total special items**      $  -           (23)    26           60
=================================================================
 *See Note 4 to the financial statements for additional
  information.
**1998 periods restated to exclude foreign currency transaction
  gains and losses.


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

                                    Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                           1999          1998*  1999         1998*
                           ------------------   -----------------

E&P                        $158            47    312          214
GPM                          39            11     64           42
RM&T                         47            53     78          156
Chemicals                    42            22    101          145
Corporate and Other         (65)          (64)  (222)        (170)
-----------------------------------------------------------------
Net operating income       $221            69    333          387
=================================================================
*Restated to include foreign currency transaction gains and
 losses.


Phillips' net income in the third quarter of 1999 was
$221 million, compared with net income of $46 million in the
third quarter of 1998.  The impact of special items on net income
in the third quarter of 1999 was zero, while special items
reduced net income $23 million in the third quarter of the prior
year.  After excluding special items, net operating income in the
third quarter of 1999 was also $221 million, compared with
$69 million in the third quarter of 1998.


                               13

<PAGE>



The increase in net operating income for the third quarter of
1999 was primarily the result of sharply higher crude oil and
natural gas liquids sales prices in Phillips' upstream segments.
Natural gas sales prices and crude oil production were higher as
well.  Downstream, RM&T results in the third quarter were lower
than a year ago, mainly because of lower marketing margins, while
Chemicals results improved relative to the third quarter last
year on higher ethylene margins.

Phillips' net income for the first nine months of 1999 was
$359 million, a 20 percent decline from the corresponding period
in 1998.  Special items benefited nine-month net income by
$26 million in 1999 and $60 million in 1998.  After excluding
special items, net operating income was 14 percent lower in the
1999 nine-month period.  Upstream results in the nine-month
period of 1999 were higher than the corresponding period in 1998,
primarily due to higher crude oil and natural gas liquids sales
prices.  Downstream results were lower in the first nine months,
reflecting lower margins across most product lines.  Corporate and
Other incurred higher expenses in the nine-month period of 1999,
primarily because of increased interest expense.


                               14

<PAGE>



                           Three Months Ended   Nine Months Ended
                               September 30         September 30
                           ------------------   -----------------
                            1999         1998    1999        1998
Phillips at a Glance       ------------------   -----------------

U.S. crude oil
  production (MBD)            46           59      52          62
Worldwide crude oil
  production (MBD)           223          195     229         229
U.S. natural gas
  production (MMCFD)         948          985     962         981
Worldwide natural gas
  production (MMCFD)       1,361        1,370   1,394       1,476
Worldwide natural gas
  liquids production (MBD)   171          169     164         174
Liquefied natural gas
  sales (MMCFD)              130          145     126         130
Refinery utilization
  rate (%)                   100           94      98          94
U.S. automotive gasoline
  sales (MBD)*               309          344     307         323
U.S. distillates
  sales (MBD)*               132          150     134         136
Worldwide petroleum
  products sales (MBD)*      685          709     675         678
Natural gas liquids
  processed (MBD)            210          177     214         211
Ethylene
  production (MMlbs)**       839          656   2,407       2,314
Polyethylene
  production (MMlbs)**       632          563   1,952       1,713
Polypropylene
  production (MMlbs)**        97          112     346         344
Paraxylene
  production (MMlbs)         184          178     418         560
-----------------------------------------------------------------
 *Includes certain sales by the Chemicals segment.
**Includes Phillips' share of equity affiliates' production.


Income Statement Analysis

Sales and other operating revenues increased 29 percent in the
third quarter of 1999 and 4 percent in the nine-month period.
The primary reasons for the increase in both periods were higher
petroleum products and crude oil revenues, mainly due to higher
sales prices.  Higher natural gas prices also benefited the third
quarter of 1999.  These same factors also accounted for the
33 percent and 10 percent increase in purchase costs for the
third quarter and first nine months of 1999, respectively.


                               15

<PAGE>



Equity in earnings of affiliated companies increased 33 percent
in the third quarter of 1999 and 3 percent in the nine-month
period.  The increase in the third quarter was primarily the
result of improved earnings from Phillips' olefins and polyolefins
equity affiliates.  For the nine-month period of 1999, higher
equity earnings from pipeline investments were mostly offset by
lower olefins/polyolefins equity earnings.  Other revenues
increased 27 percent in the third quarter of 1999, reflecting
higher net gains on asset sales.  Other revenues decreased
9 percent in the first nine months of 1999, primarily because the
1998 period included recoveries from certain of the company's
historical liability and pollution insurers related to claims
made as a part of a comprehensive environmental cost recovery
project.  The decrease was mitigated by net gains on asset sales
recorded in the first nine months of 1999.

Controllable costs are primarily production and operating
expenses, and selling, general and administrative expenses,
adjusted to exclude special items and foreign currency
transaction gains and losses.  Controllable costs declined
slightly in the third quarter of 1999 and 4 percent in the nine-
month period, reflecting cost reduction efforts across all
business lines, as well as the impact of property dispositions.
Special items excluded from controllable costs mainly included
severance charges and contingency-related items.  Before-tax
foreign currency transaction gains/(losses) excluded from
controllable costs were $24 million and $16 million in the third
quarters of 1999 and 1998, respectively, and $(16) million and
$3 million in the nine-month periods of 1999 and 1998,
respectively.

Exploration expenses increased 16 percent in the third quarter of
1999 and 12 percent in the nine-month period.  The increase in
both periods was primarily attributable to higher dry hole
expenses.  The impact of higher dry hole expenses was partially
offset in the nine-month period by lower geological and
geophysical expenses.

Depreciation, depletion and amortization (DD&A) was slightly
lower in both the third quarter and first nine months of 1999.
In both periods, U.S. E&P DD&A was lower, mainly due to decreased
production volumes and reduced DD&A rates caused by property
impairments in the second half of 1998.  This was partially
offset by higher DD&A from the company's U.K. E&P operations,
where several new fields have come on stream.


                               16

<PAGE>



Property impairments of $13 million and $64 million were recorded
in the third quarter and first nine months of 1999, respectively,
compared with $37 million and $67 million in the corresponding
1998 periods.  Impairments in all periods were primarily for E&P
properties in the Gulf of Mexico and the North Sea.  See Note 4
to the financial statements for additional information on
property impairments.

Taxes other than income taxes increased slightly in the third
quarter of 1999 and decreased 3 percent in the nine-month period.
Emission taxes in Norway have been lower in 1999, due to lower
fuel consumption resulting from the increased efficiencies of the
new Ekofisk II turbines.  In addition, the tax rate was lower in
the third quarter of 1999 than in the prior year third quarter.
Production taxes have been higher in 1999 because of higher crude
oil prices.

Interest expense increased 25 percent in the third quarter of
1999 and 54 percent in the first nine months, primarily
reflecting higher average debt levels compared with the
corresponding periods in 1998.  In addition, the nine-month
period of 1998 included reversals of the interest expense
component of certain contingency accruals.  Preferred dividend
requirements were unchanged from the prior year.


                               17

<PAGE>



Segment Results

E&P
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                             1999        1998    1999        1998
                           ------------------   -----------------
                                    Millions of Dollars
                           --------------------------------------
Operating Income
Reported net income          $152          22     318         188
Less special items*            (6)        (25)      6         (26)
-----------------------------------------------------------------
Net operating income*        $158          47     312         214
=================================================================
*1998 amounts restated to exclude foreign currency transaction
 gains and losses from special items and include them in net
 operating income.

                                     Dollars Per Unit
                           --------------------------------------
Average Sales Prices
Crude oil (per barrel)
    United States          $18.42       10.70   13.87       11.20
    Foreign                 20.81       12.22   15.97       13.14
    Worldwide               20.32       11.81   15.50       12.64
Natural gas--lease (per
  thousand cubic feet)
    United States            2.33        1.75    1.95        1.90
    Foreign                  2.21        2.39    2.31        2.48
    Worldwide                2.28        1.99    2.09        2.15
-----------------------------------------------------------------

                                    Millions of Dollars
                           --------------------------------------
Worldwide Exploration
  Expenses
Geological, geophysical
  and lease rentals           $39          41      94         115
Leasehold impairment            5           4      18          16
Dry holes                       8           -      49          13
-----------------------------------------------------------------
                              $52          45     161         144
=================================================================

                                 Thousands of Barrels Daily
                           --------------------------------------
Operating Statistics
Crude oil produced
  United States                46          59      52          62
  Norway                       95          76      97         103
  United Kingdom               37          20      34          23
  Nigeria                      19          19      20          20
  China                         6          13      10          14
  Australia                     6           -       5           -
  Canada                        7           7       7           7
  Denmark                       5           -       3           -
  Venezuela                     2           1       1           -
-----------------------------------------------------------------
                              223         195     229         229
=================================================================

Natural gas liquids produced
  United States                 2           3       2           3
  Norway                        4           3       4           6
  Other areas                   5           5       5           5
-----------------------------------------------------------------
                               11          11      11          14
=================================================================


                               18

<PAGE>



                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                             1999        1998    1999        1998
                           ------------------   -----------------
                               Millions of Cubic Feet Daily
                           --------------------------------------
Natural gas produced*
  United States               948         985     962         981
  Norway                      113         132     125         216
  United Kingdom              201         158     215         185
  Canada                       90          95      89          94
  Nigeria                       9           -       3           -
-----------------------------------------------------------------
                            1,361       1,370   1,394       1,476
=================================================================
*Represents quantities available for sale.  Excludes gas
 equivalent of natural gas liquids shown above.

Liquefied natural gas
  sales                       130         145     126         130
-----------------------------------------------------------------


E&P's net operating income in the third quarter of 1999 was over
three times higher than the third quarter of 1998, and the nine-
month period of 1999 was 46 percent higher than the same period
of the prior year.  Both periods reflected dramatically improved
crude oil prices.  Results for the third quarter of 1999 also
benefited from higher natural gas prices and higher crude oil
production.

Phillips' average worldwide crude oil sales price increased to
$20.32 per barrel in the third quarter of 1999, compared with
$11.81 per barrel in the third quarter of 1998, and $15.09 per
barrel in the second quarter of 1999.  Industry crude oil prices
rose in response to the late-March 1999 agreement by major
exporting countries to reduce output, and reported continuing
adherence to agreed production levels.


                               19

<PAGE>



U.S. E&P
--------
                                    Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                            1999         1998    1999        1998
                           ------------------   -----------------
Operating Income
Reported net income          $94           38     246         147
Less special items             4            2      47           1
-----------------------------------------------------------------
Net operating income         $90           36     199         146
=================================================================


Net operating income in the company's U.S. E&P operations
increased 150 percent in the third quarter of 1999 and 36 percent
in the nine-month period.  The improvement in the third quarter
of 1999 is attributable to higher crude oil and natural gas sales
prices, as well as lower depreciation, depletion and amortization
charges (DD&A) and lower lifting costs.  Higher crude oil and
natural gas prices, lower DD&A, and lower lifting costs were the
primary factors behind the improved results in the first nine
months of 1999.  These items were partially offset by lower crude
oil and natural gas production volumes.

U.S. crude oil production continued to trend downward in the
third quarter of 1999, averaging 22 percent less than the third
quarter of 1998, and 12 percent lower than the second quarter of
1999.  These reductions reflect the impact of normal field
declines and property dispositions in late 1998 and the first
half of 1999, primarily in Texas, central Oklahoma and the Gulf
of Mexico.  U.S. natural gas production decreased 4 percent in
the third quarter of 1999, compared with the third quarter a year
ago, as field declines and property dispositions were partially
offset by increased production in the San Juan Basin.

Special items in the third quarter of 1999 represented net gains
on asset sales.  The nine-month 1999 period also included
additional gains on asset sales, partially offset by property
impairments.  Special items in the third quarter of 1998
primarily consisted of a gain from the sale of the company's right
to an interest in a power plant being constructed in Mississippi.
The nine-month period of 1998 also included a reversal of a
previously accrued contingency, which was mostly offset by
impairments taken on two producing properties in the Gulf of
Mexico.


                               20

<PAGE>



Foreign E&P
-----------
                                     Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                           1999          1998   1999         1998
                           ------------------   -----------------
Operating Income
Reported net income (loss) $ 58           (16)    72           41
Less special items*         (10)          (27)   (41)         (27)
-----------------------------------------------------------------
Net operating income*      $ 68            11    113           68
=================================================================
*1998 amounts restated to exclude foreign currency transaction
 gains and losses from special items and include them in net
 operating income.


Net operating income in the company's foreign E&P operations in
the third quarter of 1999 increased more than six times the 1998
third quarter amount, and was 66 percent higher in the nine-month
period.  Both periods benefited from much improved crude oil
sales prices as well as higher production volumes.  The third
quarter and nine-month period of 1999 included after-tax foreign
currency transaction gains of $2 million and $3 million,
respectively, while the corresponding periods in 1998 incurred
foreign currency losses of $5 million and $12 million.  Partially
offsetting these positive items in 1999 were higher exploration
expenses, higher DD&A charges and higher lifting costs.

Foreign crude oil production increased 30 percent in the third
quarter of 1999, compared with the third quarter of the prior
year, while natural gas production increased 7 percent.  These
improvements reflect new crude oil production from Australia and
Denmark, as well as new oil and gas production from the
Britannia, Janice and Renee/Rubie fields in the U.K. North Sea.
Crude oil production also benefited from higher output in Norway
due to downtime in the third quarter of 1998 as a result of the
tie-in of Ekofisk II and the problems encountered following
conversion.

In August of this year, the company completed a 12-day scheduled
maintenance shutdown at Ekofisk II to eliminate production
bottlenecks in the gas processing facilities.  The Ekofisk field
was also shut down on October 22, 1999, due to a small gas leak
in a gas cooler.  Gas coolers have a large number of small pipes
through which gas is circulated and cooled by sea water.
Production resumed on October 28, after a six-day shutdown.

In the South China Sea, a scheduled two-month maintenance
shutdown for the Xijiang production platform and floating
production storage and offloading vessel was successfully
completed, and production resumed on October 12, 1999.


                               21

<PAGE>



Special items in the third quarter of 1999 consisted primarily of
a property impairment of the Renee field in the U.K. North Sea,
following the drilling of an unsuccessful development well.
Special items in the nine-month period of 1999 also included
charges to increase the decommissioning accruals for certain
North Sea fields, as well as deferred tax asset adjustments.
Special items in the third quarter and first nine months of 1998
primarily consisted of impairments of three fields in the U.K.
North Sea totaling $26 million after-tax.


GPM
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                             1999        1998    1999        1998
                           ------------------   -----------------
                                    Millions of Dollars
                           --------------------------------------
Operating Income
Reported net income           $39          13      63          44
Less special items              -           2      (1)          2
-----------------------------------------------------------------
Net operating income          $39          11      64          42
=================================================================

                                     Dollars Per Unit
                           --------------------------------------
Average Sales Prices
U.S. residue gas (per
  thousand cubic feet)     $ 2.51        1.90    2.08        2.02
U.S. natural gas liquids
  (per barrel--
  unfractionated)           14.95        8.36   11.45        9.30
-----------------------------------------------------------------

                                Millions of Cubic Feet Daily
                           --------------------------------------
Operating Statistics
Natural gas purchases
  Outside Phillips          1,351       1,281   1,274       1,318
  Phillips                    144         152     146         154
-----------------------------------------------------------------
                            1,495       1,433   1,420       1,472
=================================================================

Raw gas throughput          1,786       1,829   1,746       1,879
-----------------------------------------------------------------

Residue gas sales
  Outside Phillips            962         930     926         951
  Phillips                     32          47      41          54
-----------------------------------------------------------------
                              994         977     967       1,005
=================================================================

                                 Thousands of Barrels Daily
                           --------------------------------------
Natural gas liquids net
  production
    From Phillips E&P
      leasehold gas            15          15      15          15
    From gas purchased
      outside Phillips        145         143     138         145
-----------------------------------------------------------------
                              160         158     153         160
=================================================================


                               22

<PAGE>



GPM's net operating income increased 255 percent in the third
quarter of 1999, and 52 percent in the nine-month period.  The
improvement in both periods was primarily attributable to a
79 percent increase in natural gas liquids sales prices in the
third quarter of 1999, compared with the third quarter of 1998.
Natural gas liquids prices have benefited from the increase in
crude oil prices, as well as from an increase in the demand for
ethane, a feedstock for ethylene.  Also contributing to the
improved results in both periods was higher miscellaneous
revenues--mainly from low-grade crude oil, for which prices have
increased as crude oil prices increased.  Low-grade crude oil
separates from the raw natural gas stream as the gas is gathered
through pipelines.  The nine-month period of 1999 also benefited
from lower operating expenses.

Both residue gas sales volumes and natural gas liquids production
were higher in the third quarter of 1999 than in the third quarter
last year or the second quarter of this year, reflecting improved
operating consistency and the impact of acquisitions.  In
addition, natural gas liquids production benefited from increased
ethane extraction.

Special items in the nine-month 1999 period and the 1998 periods
consisted of work force reduction charges.


                               23

<PAGE>



RM&T
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                           1999          1998   1999         1998
                           ------------------   -----------------
                                     Millions of Dollars
                           --------------------------------------
Operating Income
Reported net income         $47            53     72          159
Less special items            -             -     (6)           3
-----------------------------------------------------------------
Net operating income        $47            53     78          156
=================================================================

                                     Dollars Per Gallon
                           --------------------------------------
Average Sales Prices
Automotive gasoline
  Wholesale                $.69           .49    .57          .51
  Retail                    .82           .66    .71          .67
Distillates                 .60           .41    .48          .44
-----------------------------------------------------------------

                                 Thousands of Barrels Daily
                           --------------------------------------
Operating Statistics
U.S. refinery crude oil
    Capacity                355           355    355          355
    Crude runs              355           335    348          334
    Capacity utilization
      (percent)             100%           94     98           94
Natural gas liquids
  fractionation
    Capacity                252           252    252          252
    Processed               210           177    214          211
    Capacity utilization
      (percent)              83%           70     85           84
Refinery and natural gas
  liquids production        596           540    594          571
-----------------------------------------------------------------

Petroleum products outside
  sales
    United States
      Automotive gasoline
        Wholesale           241           258    240          240
        Retail               37            37     36           37
        Spot                 16            37     18           34
      Aviation fuels         42            33     35           32
      Distillates
        Wholesale and
          retail            101           120    106          106
        Spot                 30            30     28           30
      Natural gas liquids
        (fractionated)      130           129    125          124
      Other products         40            26     38           28
-----------------------------------------------------------------
                            637           670    626          631
    Foreign                  32            27     36           35
-----------------------------------------------------------------
                            669           697    662          666
=================================================================


                               24

<PAGE>



RM&T's net operating income decreased 11 percent in the third
quarter of 1999 and 50 percent in the first nine months.  The
decrease in the third quarter was primarily due to lower
wholesale and retail gasoline margins.  Earnings from the
refining business in the third quarter of 1999 were about the
same as the third quarter of the prior year, while earnings were
improved in the natural gas liquids fractionation business.

In the first nine months of 1999, refining and marketing product
margins were lower than a year ago, as crude oil feedstock costs
increased 24 percent relative to the first nine months of 1998,
while gasoline and distillates prices increased only 12 percent
and 9 percent, respectively.

The company continued to operate its crude oil refineries at peak
performance in the third quarter of 1999.  Crude oil throughput
for Phillips' three U.S. refineries averaged 355,000 barrels per
day, which was 100 percent of rated capacity, and the highest
quarterly throughput rate in the company's history.

Special items in the nine-month period of 1999 primarily
consisted of work force reduction charges and contingency
accruals.  Special items in the first nine months of 1998
consisted of gains from the sales of certain non-strategic retail
service stations.


                               25

<PAGE>



Chemicals
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
                           ------------------   -----------------
                           1999          1998    1999        1998
                           ------------------   -----------------
                                    Millions of Dollars
                           --------------------------------------
Operating Income
Reported net income         $50            24     120         142
Less special items*           8             2      19          (3)
-----------------------------------------------------------------
Net operating income*       $42            22     101         145
=================================================================
*1998 amounts restated to exclude foreign currency transaction
 gains and losses from special items and include them in net
 operating income.

                                     Millions of Pounds
                                     Except as Indicated
                           --------------------------------------
Operating Statistics
Production*
  Ethylene                  839           656   2,407       2,314
  Polyethylene              632           563   1,952       1,713
  Propylene                 134           115     390         387
  Polypropylene              97           112     346         344
  Paraxylene                184           178     418         560
  Cyclohexane (millions
    of gallons)              56            40     157         138
-----------------------------------------------------------------
*Includes Phillips' share of equity affiliates' production.


The Chemicals segment's net operating income increased 91 percent
in the third quarter of 1999, primarily as a result of improved
ethylene margins, as well as higher olefins and polyolefins sales
volumes.  These items were partially offset by lower polyethylene
margins.  Net operating income decreased 30 percent in the nine-
month period of 1999, reflecting lower polyolefins margins.

The company's olefins and polyolefins facilities operated well in
the third quarter, with ethylene production 28 percent higher
than the corresponding quarter in the prior year and polyethylene
production 12 percent higher.  Ethylene production in the third
quarter of 1998 was negatively impacted by a maintenance
turnaround and a temporary shutdown of the company's Sweeny,
Texas, petrochemical facility due to flooding caused by tropical
storms.

The company's K-Resin facility, located at the Houston Chemical
Complex (HCC), was damaged by a flash fire in June.  Portions of
the damaged plant have been repaired and re-started.  The new
K-Resin expansion is now on line as well.  K-Resin production was
12 million pounds in the third quarter of 1999, compared with
50 million pounds in the third quarter of 1998.  The company's
polyolefins facilities at HCC were not affected.


                               26

<PAGE>



Special items in the third quarter of 1999 represented deferred
tax adjustments.  In addition, the nine-month period of 1999 also
included favorable contingency settlements.  Special items in the
third quarter of 1998 represented a favorable excise tax
settlement.  The 1998 nine-month period also included an
impairment taken on a plastics recycling facility that was closed.


Corporate and Other
                                    Millions of Dollars
                           --------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30        September 30
                           ------------------   -----------------
                            1999         1998   1999         1998
                           ------------------   -----------------
Operating Results
Reported Corporate and
  Other                    $ (67)         (66)  (214)         (86)
Less special items*           (2)          (2)     8           84
-----------------------------------------------------------------
Adjusted Corporate and
  Other*                   $ (65)         (64)  (222)        (170)
=================================================================
*1998 amounts restated to exclude foreign currency transaction
 gains and losses from special items and include them in adjusted
 corporate and other.


Adjusted Corporate and Other includes:

Corporate general and
  administrative expenses  $ (25)         (22)   (62)         (59)
Net interest                 (49)         (39)  (144)        (101)
Preferred dividend
  requirements               (10)         (10)   (31)         (31)
Other                         19            7     15           21
-----------------------------------------------------------------
Adjusted Corporate and
  Other                    $ (65)         (64)  (222)        (170)
=================================================================


Corporate general and administrative expenses increased
$3 million in both the third quarter and first nine months of
1999.  The increase in both periods was attributable to higher
benefit-related costs and higher depreciation expense on the
company's new computing systems, partially offset by lower Year-
2000 costs.

Net interest represents interest income and expense, net of
capitalized interest.  Net interest costs increased 26 percent in
the third quarter and 43 percent in the first nine months of
1999, primarily as a result of higher average debt balances.  The
increase in interest on debt in the third quarter was partially
offset by higher capitalized interest.


                               27

<PAGE>



Preferred dividend requirements represent dividends on the
preferred securities of the Phillips 66 Capital Trusts I and II.

Other consists primarily of the company's captive insurance
subsidiary, certain foreign currency transaction gains and
losses, and income tax and other items that are not directly
associated with the operating segments on a stand-alone basis.
Other was improved in the third quarter of 1999, relative to a
year ago, primarily due to higher foreign currency gains in the
1999 period, as well as lower income tax-related items.  Other
was lower in the nine-month period of 1999, mainly the result of
foreign currency losses in 1999, compared with gains in 1998,
partially offset by lower income tax-related items.

Special items in the third quarter of 1999 consisted of a
contingency item.  In addition, the nine-month period included
deferred tax adjustments, insurance claims and a $24 million
favorable resolution of prior years' U.S. income tax issues.
Special items in the third quarter of 1998 primarily consisted of
insurance claims for property damage caused by tropical storms.
The nine-month period of 1998 also included insurance recoveries
related to a comprehensive environmental cost recovery project,
as well as favorable contingency-related settlements or accrual
reversals.


                               28

<PAGE>



CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators
                                     Millions of Dollars
                          ---------------------------------------
                                    At           At            At
                          September 30  December 31  September 30
                                  1999         1998          1998
                          ---------------------------------------

Current ratio                      1.1          1.1           1.0
Total debt                      $4,489        4,273         3,619
Company-obligated
  mandatorily redeemable
  preferred securities          $  650          650           650
Common stockholders'
   equity                       $4,385        4,219         4,639
Percent of total debt to
  capital*                          47%          47            41
Percent of floating-rate
  debt to total debt                30%          37            25
-----------------------------------------------------------------
*Capital includes total debt, company-obligated mandatorily
 redeemable preferred securities and common stockholders' equity.


The company has agreements with a bank-sponsored entity for the
revolving sale of credit card and trade receivables.  During
September 1999, the supporting liquidity facility agreements were
extended until March 2000, the expiration date of the receivables
purchase agreements.  At September 30, 1999, $200 million was
outstanding.  Since October 6, 1999, the maximum aggregate amount
of receivables that can be sold and outstanding under these
agreements is limited to $182 million.

Cash from operations in the first nine months of 1999 decreased
$281 million from the same period in 1998.  However, excluding
the $109 million favorable cash impact of settlements pursuant to
a comprehensive environmental cost recovery project in 1998, cash
from operations decreased $172 million.  Contributing to this
decrease was a $54 million reduction in net operating income and
a $182 million decrease in cash provided by the sale of accounts
receivable under the company's receivables monetization program.
This resulted because $200 million of receivables were sold
during the first nine months of 1998, compared with only
$18 million during the same period in 1999.  Partially offsetting
these items was a $120 million cash refund from the Internal
Revenue Service (IRS) received in the second quarter of 1999.
This cash refund resulted from agreements reached with the IRS on
the Kenai liquefied natural gas issues in December 1998 and
certain other tax issues in first quarter 1999.


                               29

<PAGE>



In March 1999, the company issued $300 million of 6 3/8% Notes
due 2009, and $200 million of 7% Debentures due 2029, in the
public market.  After the issuance of these securities,
$200 million of securities remained available under the company's
shelf registration previously filed with the U.S. Securities and
Exchange Commission (SEC).  During the second quarter of 1999, the
company filed a universal shelf registration statement with the
SEC for an additional $800 million of various types of debt and
equity securities, and securities convertible into either.  This
registration statement became effective October 1, 1999.
Securities to be issued under this universal shelf registration
statement can be combined by prospectus with the $200 million of
securities that remained under the earlier shelf registration.
As a result, the company has available, to issue and sell, a
total of $1 billion of the various types of securities offered
under the universal shelf registration statement.

During the first nine months of 1999, cash increased $83 million.
Cash was provided by operating activities, the previously
mentioned issuance of notes and debentures, and asset
dispositions of $175 million.  Cash was used to fund the
company's capital expenditures program, pay dividends, and repay
debt.  During the nine-month period, cash borrowings exceeded
cash repayments of debt by $190 million.

At September 30, 1999, there was no revolving debt outstanding
under the company's $1.5 billion revolving credit facility, but
$594 million of commercial paper was outstanding, which is
supported 100 percent by the credit facility.  The company's
wholly owned subsidiary, Phillips Petroleum Company Norway, has
$600 million available under two revolving credit facilities.  At
September 30, 1999, $330 million was outstanding under the
facilities.

During second quarter 1999, Phillips increased the total
available under master leasing arrangements, under which it
leases and supervises construction of retail marketing outlets,
by $25 million, to a total of $125 million.  During third quarter
1999, the company entered into a new $100 million master leasing
arrangement, of which $25 million will replace the $25 million
secured in the second quarter.  At September 30, 1999,
approximately $111 million had been financed under these
arrangements.  In addition, the company had another $45 million
leasing arrangement to provide for the leasing of approximately
600 new covered hopper railcars.  At September 30, 1999, about
$39 million had been financed under this arrangement.  All the
railcars have been received and on October 18, 1999, the
$45 million railcar lease facility was refinanced under a new
leveraged lease facility.


                               30

<PAGE>



In late 1998, as part of general cost cutting programs, the
company identified 1,325 positions to be eliminated, primarily in
the company's E&P segment and corporate staffs, which resulted in
a $91 million before-tax charge ($61 million after-tax) in 1998.
In addition, 93 unfilled positions were eliminated during 1998.
The total liability for severance benefits at December 31, 1998,
was $123 million, a portion of which was expected to be
reimbursed by co-venturers under applicable agreements and
therefore that portion was reflected as a receivable.  During the
first nine months of 1999, the company identified an additional
150 positions to be eliminated, primarily in the company's GPM,
RM&T and Chemicals segments, which resulted in additional before-
tax severance charges of $11 million ($7 million after-tax).
Also, during the first nine months of 1999, the company paid
severance benefits of $70 million, resulting in a remaining
liability for severance benefits of approximately $64 million at
September 30, 1999.  As of that date, 1,098 notices of
termination had been given.  The balance, relating primarily to
operations in the North Sea, is expected to be essentially
complete by year-end.  Severance benefit payments will continue
through 1999 and into 2000.

The company and its co-venturer in the Kenai liquefied natural
gas plant lease two tankers that are used to transport liquefied
natural gas from Kenai, Alaska, to Japan.  In June 1999, a
purchase option held by the company and its co-venturer was
allowed to become a binding commitment.  The purchase date for
the first tanker is June 2000, and December 2000 for the second.
In the event that the company and its co-venturer do not modify
the existing lease arrangements or enter into new lease
arrangements, the purchase option would be exercised and
Phillips' 70 percent interest in the aggregate purchase price for
both tankers would be approximately $240 million.  Phillips
anticipates entering into a new leasing arrangement for these
tankers prior to the mandatory purchase dates.

During second quarter, Phillips closed the sale of its 50 percent
interest in the Breton Sound field, offshore Louisiana.  This
sale resulted in an after-tax financial gain of $17 million.  In
August 1999, the company signed a purchase and sale agreement to
sell its interests in 42 leases in 22 Gulf of Mexico fields.
Closing of the transaction occurred in September, and the sale of
various properties where preferential purchase rights were
exercised will occur in the fourth quarter.  Phillips has decided
to cancel the planned sales of its other oil and gas interests in
the Gulf of Mexico and South Louisiana.  During first quarter,
Phillips closed the sale of its oil and gas interests in central
Oklahoma, which resulted in an after-tax financial gain of
$33 million.


                               31

<PAGE>



To meet its liquidity requirements, including funding its capital
program, the company will look primarily to existing cash
balances, cash generated from operations, financing and sales of
assets.


Capital Expenditures and Investments

                               Millions of Dollars
               --------------------------------------------------
                           Three Months Ended   Nine Months Ended
                              September 30         September 30
               Estimated   ------------------   -----------------
                    1999   1999          1998    1999        1998
               ---------   ------------------   -----------------

E&P               $1,253    222           573     875       1,114
GPM                  110     26            22      90          51
RM&T                 352     91            49     279         154
Chemicals            179     18            66      72         188
Corporate
  and Other           64      9            22      35          67
-----------------------------------------------------------------
                  $1,958    366           732   1,351       1,574
=================================================================

United States     $1,020    227           226     720         685
Foreign              938    139           506     631         889
-----------------------------------------------------------------
                  $1,958    366           732   1,351       1,574
=================================================================


In the second quarter of 1999, the company increased its 1999
capital budget a second time, raising it to $2 billion from the
original 1999 capital budget of $1.465 billion.  Of this $2 billion,
approximately $1.958 billion has been allocated.  The E&P capital
spending program received the largest increase--from $800 million
to $1.253 billion.  The increase was applied to the acquisition
of an additional interest in the Bayu-Undan unitized gas/gas
condensate field in the Timor Sea's Zone of Cooperation (ZOCA),
the acquisition of interests in exploration and production assets
in North Louisiana, appraisal wells in block 11/05 of China's
Bohai Bay, and the acquisition of a 50 percent working interest
in coalbed methane acreage located in Wyoming's Powder River
Basin.

In April 1999, Phillips acquired The Broken Hill Proprietary
Company Limited's (BHP) 23.4 percent interest in the previously
mentioned Bayu-Undan field in the ZOCA with the acquisition of
BHP's 42.42 percent interest in ZOCA block 91-12 (Undan).  Along
with Phillips' 60 percent interest in the adjacent ZOCA block
91-13 (Bayu), the acquisition brought Phillips' total interest in
the unitized Bayu-Undan field to 50.3 percent, and Phillips
became operator of the unitized field.  The company also acquired
BHP's interests in three producing oil fields--Elang, Kakatua and
Kakatua North--as well as permits for static gas resources in
other properties in ZOCA and Australian Commonwealth waters.


                               32

<PAGE>



Phillips expects to book approximately 80 million barrels of oil,
condensate and natural gas liquids in 1999 as a result of this
acquisition.

Phillips and its co-venturers plan to proceed with development of
the Bayu-Undan field.  Under terms of an operating agreement, the
majority of the co-venturers have approved the $1.4 billion gas
recycle development phase of the project.  Final approval from
the Joint Authority is expected during fourth quarter.  Based on
final governmental sanctioning by year-end, it is anticipated
that this project will begin production by late 2003 or early
2004.  The Timor Gap Zone of Cooperation is in transition as a
result of East Timor's recent vote for independence from Indonesia,
and Indonesia's recent vote to proceed with de-annexation.
Phillips plans to monitor the legal, fiscal, and administrative
arrangements under the Timor Gap Treaty associated with East Timor's
independence and proceed with development in a manner warranted
by these arrangements.

During second quarter 1999, the company closed on an exploration
and development agreement with Contour Energy Company (Contour),
formerly Kelley Oil & Gas Corporation, relating to its interests
in the West Bryceland and Sailes fields in North Louisiana.
Under the agreement, Phillips will operate, develop, exploit and
explore the assets.  Contour will retain an eight-year volumetric
overriding royalty interest totaling approximately 42 billion
cubic feet of gas.  The agreement added approximately 130 billion
cubic feet of gas equivalent to the company's reserves at
closing, with additional reserves expected in future years as the
fields are developed.

In November 1999, production began from the Chinook development,
located 60 miles offshore Louisiana in about 300 feet of water.
Initial gross production rates from the first three wells are
approximately 14,000 barrels of oil per day and 30 million cubic
feet of gas per day.  Phillips has a 33 percent interest in
Chinook.

Also in November 1999, Phillips announced it had drilled and
tested a fourth successful well on a large anticline in
block 11/05 of China's Bohai Bay.  This follows discovery and
appraisal wells announced in third quarter 1999.  This latest
appraisal well was drilled in a previously untested fault block
on the western flank of the field, nearly two miles from the
earlier discovery.  The field is estimated to contain more than
400 million barrels of potentially recoverable oil and gas.
Joint commercialization studies with China National Offshore Oil
Corporation (CNOOC) have begun.  Phillips now has a 100 percent
undivided working interest in the block, after acquiring Atlantic
Richfield Company's (ARCO) 40 percent interest during the second


                               33

<PAGE>



quarter of 1999, but CNOOC has the right to acquire up to a
51 percent interest in any development in the block.  Immediate
plans are to drill three additional appraisal wells to delineate
the production area of the southern portion of this feature.

During the third quarter, Phillips acquired a 50 percent interest
in Yates Petroleum Corporation's (Yates) coalbed methane acreage
position in Wyoming's Powder River Basin.  The agreement
establishes a joint development partnership between the two
companies covering 340,000 gross acres.  There are 90 existing
coalbed methane wells awaiting development.  The companies could
drill as many as 2,000 shallow wells during the next 10 to
20 years depending upon the extent and characteristics of the
coalbed methane deposits.  Yates will serve as operator for the
project.

The construction of new Ekofisk offshore living quarters has been
delayed indefinitely.  Phillips and its co-venturers have
postponed the project as the seabed subsidence rate has dropped
sharply.  If the current subsidence rate forecasts prove correct,
the replacement would not be required until 2009.  Recent studies
strongly suggest that reservoir repressuring is the cause of the
sharp drop in the subsidence rate.  Although reservoir
repressuring was accelerated by the temporary reduction in the
production rate during the conversion to Ekofisk II,
repressuring of the reservoir is a long-term consequence of the
current production and water injection strategy.

The cessation plan for redundant Ekofisk facilities and shut-in
outlying fields was completed and submitted to the Norwegian
government in October 1999.  The plan outlines the long-term
cessation plans for 15 structures in the Greater Ekofisk area
that are currently shutdown, or that will be shut down over the
next decade.  Under this plan, the platforms will be removed
between 2003 and 2018 at an estimated cost of $1.14 billion.  Due
to the tax structure in Norway, it is anticipated that the
Norwegian state will fund more than two-thirds of this cost, with
the remainder funded by Phillips and its co-venturers.  The
Norwegian government will review this plan and associated
assessment documents, and formulate its own recommendations.  A
final decision is expected in the second half of 2001.  Phillips
has a 35.11 percent interest in Ekofisk.

Work is proceeding according to schedule on the Eldfisk water
injection project.  This is the largest development project in
E&P's 1999 capital budget and is comprised of a new platform and
pipelines, as well as modifications to existing platforms, in
order to accomplish waterflood, gas injection and gas lift.  The
new water-injection platform, controlled from an existing manned
Eldfisk platform, is scheduled to begin water injection during


                               34

<PAGE>



the fourth quarter of 1999.  Previously, water injection had been
obtained from a leased facility.  The remaining modifications to
the existing platforms are expected to be completed in the first
quarter of 2000.

In July 1999, Phillips exchanged its 18 percent interest in the
LL-652 oil field in Lake Maracaibo, Venezuela, for two-thirds of
Atlantic Richfield Company's (ARCO) 30 percent working interest
in the Hamaca heavy oil project.  Under the exchange, the LL-652
interest is subject to preferential rights to purchase by the
co-venturers, who continue to evaluate their option to exercise
these rights.  The exchange increased Phillips' share in the
Hamaca project from 20 percent to 40 percent.  The LL-652 field
interest, which Phillips exchanged with ARCO, is a redevelopment
and secondary recovery project in Lake Maracaibo that was
acquired in the Venezuela third bid round.

On June 30, 1999, Phillips and its co-venturers, including a
subsidiary of Venezuela's state oil company, approved a project
to develop the heavy oil reserves from the Hamaca region in
Venezuela's Orinoco Oil Belt.  Construction of an upgrader,
pipelines and associated production facilities is expected to
begin in the second quarter of 2000.  During the construction
phase, anticipated gross production is 30,000 barrels per day of
heavy oil.  The upgrader is expected to begin producing 26-degree
API gravity oil in 2004 at the rate of 165,000 barrels per day.
Phillips and its co-venturers are discussing whether to transfer
their working interests in the Hamaca project to a newly formed,
jointly owned entity, which would place the project debt in the
financial markets, and for which Phillips would use equity method
accounting.  The additional working interest in, and approval of,
the Hamaca Project will result in Phillips' reporting
approximately 700 million additional barrels-of-oil-equivalent in
1999, increasing Phillips' total worldwide reserves by
32 percent, to nearly 3 billion barrels-of-oil-equivalent.

Two other projects were acquired in the Venezuela third bid
round, La Vela and Ambrosio.  Phillips holds a 31.5 percent
interest in, and is operator of, the La Vela block offshore
northwest Venezuela where two exploratory wells have been
drilled.  The investment in both wells was written off to dry
hole expense in the second quarter.  Additional exploration
prospects in the Northern area of the block are being evaluated.
Ambrosio, in which Phillips holds a 90 percent interest, is a
redevelopment project operated by the company in Lake Maracaibo.
Drilling of the first major development well was completed, and
the well is currently producing approximately 1,600 net barrels
of oil per day under choke for further testing.  Drilling of the
second major development well is expected to be completed during
fourth quarter 1999.


                               35

<PAGE>



In the second quarter of 1999, Phillips signed an exploration and
production sharing agreement with the state of Oman, covering
4.23 million acres in southwest Oman.  Phillips has a 100 percent
working interest in the block and plans geological and
geophysical studies in the first exploration phase (three years).
Block 38 is the second concession in Oman for Phillips and is
contiguous to block 36, where Phillips plans to drill a well in
2000.

In late 1998, Phillips acquired a 7.1 percent interest in an
exploration project in the Kazakhstan sector of the Caspian Sea
where drilling on the first well began in August 1999.

GPM's 1999 capital budget was increased from $90 million to
$110 million, due to acquisitions.  During the first nine months
of 1999, GPM acquired gathering systems in the Austin Chalk area
of south-central Texas and in Oklahoma, and purchased a
co-venturer's interest in a plant and gathering system in New
Mexico.  These acquisitions added about 74 million cubic feet of
gas per day to GPM's total raw gas throughput, in addition to
providing opportunities to improve operating efficiencies.

RM&T continues its retail-marketing rationalization and
expansion, and now plans to have about 350 company-operated
retail outlets in the United States by 2005--a 30 percent
reduction from the previous plan of 500 outlets.  During the
first nine months of 1999, RM&T opened 10 new outlets.  In
addition, 13 outlets were razed and rebuilt.  Since the expansion
program began in 1996, the company has acquired 42 retail
outlets, opened 55 new ones, and razed and rebuilt 37 others.
Both new outlets and those that are razed and rebuilt utilize the
Kicks 66 convenience store design.  During the first nine months
of 1999, the company also sold three units, bringing the total to
79 retail units in non-strategic areas sold since the program
began.

Construction of a new 55-mile natural gas liquids pipeline from
Wichita, Kansas, to Conway, Kansas, was completed during the
second quarter.  The new pipeline began carrying product in May
1999, and will allow RM&T to better serve its customers by
providing better access to propane and butane bulk storage in the
Midwest.  Also, an expansion of the El Paso terminal and pipeline
system was completed during the second quarter and started up in
August 1999.  A 25-percent interest in this terminal and system
was purchased from Ultramar Diamond Shamrock during 1998.
Phillips' participation in the expansion increased the company's
interest to 33 percent.


                               36

<PAGE>



During second quarter 1999, Phillips and its co-venturer in the
Seaway Pipeline Company (Seaway) announced plans to increase the
capacity of its 30-inch crude oil pipeline by approximately
110,000 barrels per day, with completion expected by
January 2000.  Seaway also announced it signed new connection
agreements with Exxon Pipeline Company.  These agreements are
expected to permit the delivery of crude oil, originating in the
western Gulf of Mexico, to two Seaway crude oil transportation
systems.  Start-up of expanded operations is expected in second
quarter 2000.

Phillips and the Venezuelan state oil company, Petroleos de
Venezuela S.A., each hold a 50 percent interest in a limited
partnership building a 58,000 barrels-per-day delayed coker and
related facilities at Phillips' Sweeny Complex.  The total
construction cost of the project, including the coker and related
facilities, is estimated at $538 million.  In June 1999, the
limited partnership issued $350 million of 8.85% Bonds due 2019,
the proceeds of which will be used to fund the project.
Remaining expenditures will be funded through bank financing and
equity contributions.

In May 1999, Phillips announced the completion of a 100-million-
pounds-per-year expansion of its K-Resin copolymer plant at the
company's Houston Chemical Complex, increasing capacity to
370 million pounds per year.  In June 1999, a spare reactor at
the existing K-Resin plant experienced a flash fire, resulting in
two contractor-employee fatalities.  Damage to the K-Resin plant
is currently estimated at $15 million; however, there was no
damage to Phillips' polyethylene or polypropylene facilities.  On
August 13, 1999, the company notified its K-Resin customers that
it was declaring force majeure, and would have to delay or cancel
certain existing orders of K-Resin.  The K-Resin business
continues to operate under force majeure.  It is anticipated that
force majeure will be lifted during the fourth quarter of 1999.


Year 2000 Update

General

Phillips' companywide Year 2000 Project (Project) is
substantially complete.  The Project addresses the issue of
computer programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000.  In 1995, in
order to improve access to business information through common,
integrated computing systems across the company, Phillips began a
worldwide business systems replacement project with systems that
use programs primarily from SAP America, Inc. (SAP) and, for
certain upstream operations, Oracle Corporation (Oracle).  The


                               37

<PAGE>



new systems, which have made approximately 70 percent of the
company's business computer systems Year 2000 compliant, have
been completed on schedule.  Remaining business software programs
were remediated or replaced as a part of the company's Year 2000
Project, and are substantially complete.  None of the company's
other information technology (IT) projects have been delayed due
to the implementation of the Year 2000 Project.

"Year 2000 compliant," as used in this discussion, means that a
date-handling problem relating to the Year 2000 date change that
would cause computers, software or other equipment to fail to
correctly perform, process and handle date-related data is not
expected to interfere with normal business operations.


Project

The Project is divided into four major sections--Infrastructure,
Applications Software (Infrastructure and Applications Software
are collectively referred to as "IT Systems"), third-party
suppliers and customers (External Agents), and process control
and instrumentation (PC&I).  The four sections are coordinated
companywide by a Program Management Office (PMO), which is
comprised of a cross-functional team and includes a business
continuity/contingency manager.  PMO representatives meet
regularly with executive management, and periodically advise the
Audit Committee and the Board of Directors on the status of the
Project.

The company has engaged various third parties to assist in the
completion of certain phases of the Project.  The general phases
common to all sections are:  (1) inventorying Year 2000 items;
(2) assigning priorities to identified items; (3) assessing the
Year 2000 compliance of items determined to be material to the
company; (4) repairing or replacing material items that are
determined not to be Year 2000 compliant; (5) testing material
items; and (6) designing and implementing contingency and
business continuation plans for each organization and company
location.

The inventory, prioritization and assessment phases of each
section of the Project have been completed.  The remediation,
testing and business continuity planning phases are substantially
complete.  Material items are those believed by the company to
have a risk involving the safety of individuals, or that may
cause damage to property or the environment, or affect net income
or cash flows.  The testing phases of the Project were performed
by the company.


                               38

<PAGE>



The company estimates that 99.8 percent of scheduled Project
activities were complete at September 30, 1999.  The following
table shows the estimated percentage of completed scheduled
activities at September 30, 1999:

                                                         Percent
                                                       Completed
                                                       ---------
Sections
SAP/Oracle                                                 100.0%
Infrastructure                                              99.7
Applications software                                       99.8
  (Third-party remediation               100.0%)
  (In-house remediation                   99.8%)
  (Vendor upgrades/replacements           99.5%)
PC&I                                                        99.5
External agents                                             99.4
  (Tier 1 assessment                     100.0%)
  (Tier 2 assessment                     100.0%)
  (Tier 1 contingency planning           100.0%)
  (Tier 1 reassessment                   100.0%)
  (Tier 2 reassessment                   100.0%)
  (Tier 2 contingency planning           100.0%)
  (Third-round Tier 1 reassessment       100.0%)
  (Final follow-up --
       scheduled for fourth quarter 1999)
Business continuity planning                               100.0

Total Year 2000 effort (weighted calculation)               99.8
----------------------------------------------------------------


Substantially all scheduled Year 2000 activities for the
Infrastructure, Applications Software and PC&I sections were
completed by September 30, 1999.  The remaining activities in
those sections are expected to be completed in the last quarter
of 1999 because of scheduled facility turnarounds and vendor
scheduling.  The company will continue to monitor new releases and
updates of vendor-supplied software, and will apply new releases
as necessary for Year 2000 compliance.  However, as part of
Phillips' Year 2000 business continuity plans, the company does
not intend to make any material changes to its equipment,
software or hardware during December 1999 to minimize the
likelihood of introducing new Year 2000 issues.


                               39

<PAGE>



IT Systems

The Infrastructure section consists of hardware and systems
software other than Applications Software.  This section is
substantially complete.  The company estimates that approximately
99.7 percent of the planned activities related to the section had
been completed at September 30, 1999.  The testing phase was
completed as hardware or system software was remediated, upgraded
or replaced.  Contingency planning for this section was completed
in June 1999.

The Applications Software section includes both the conversion of
applications software that is not Year 2000 compliant and, where
available from the supplier, the replacement of such software.
This section is substantially complete.  The company estimates
that the software conversion portion was 99.9 percent complete at
September 30, 1999.  The vendor software replacements and
upgrades were approximately 99.5 percent complete at
September 30, 1999.  The company estimates that, overall,
99.8 percent of the planned activities of the Applications
Software section were complete at September 30, 1999.  Testing
was conducted as software was repaired or replaced.  Contingency
planning for this section began in third quarter 1998 and was
completed in June 1999.


PC&I

The PC&I section of the Project includes the hardware, software
and associated embedded computer chips that are used in the
operation of all facilities operated by the company.  This
section is substantially complete.  The company estimates that
the repair and testing of PC&I equipment was approximately
99.5 percent complete at September 30, 1999.  Contingency
planning for this section began in third quarter 1998 and was
completed by June 30, 1999.


External Agents

The External Agents section includes the process of identifying
and prioritizing critical suppliers, customers and partners, by
direct contact if possible, and communicating with them about
their plans and progress in addressing the Year 2000 problem.
Initial detailed evaluations of approximately 1,700 third parties
have been completed, with an estimated 650 of those classified as
most critical to the company.  These evaluations were followed by
the development of preliminary contingency plans where results of
the initial assessment indicated that such plans might be
necessary.  Contingency planning for this section was completed


                               40

<PAGE>



by June 30, 1999.  The company estimates that this section was on
schedule and 99.4 percent of its scheduled activities were
complete at September 30, 1999.  The process of evaluating these
external agents began in the third quarter of 1998 and two rounds
of evaluation were completed by June 30, 1999.  A third round of
evaluation of the most critical external agents was completed by
September 30, 1999.  The company plans to continuously monitor
critical external agents by conducting follow-up reviews of those
critical external agents on a schedule that extends to year-end
1999.


Business Continuity/Contingency Planning

The company has business continuity and disaster recovery plans
in place that cover its worldwide operations.  Specific Year 2000
contingency planning is substantially complete for each section
of the Project.  In addition, the company has incorporated
specific Year 2000 contingency planning into its existing
business continuity and disaster recovery plans and the planning
process is substantially complete as of September 30, 1999.
Follow-up reviews took place in the third quarter, and will
continue through year-end.

The company currently believes that the most reasonably likely
worst-case scenario is that there will be some Year 2000
disruptions at individual locations that could affect individual
business processes, facilities or third parties for a short time.
The company does not expect such disruptions to be long-term, or
for the disruptions to affect the operations of the company as a
whole.  Because of the uncertainty as to the exact nature or
location of potential Year 2000-related problems that might
arise, the business continuity/contingency planning will focus on
development of flexible plans to minimize the scope and duration
of any Year 2000 disruptions that might occur.  The company
expects to have personnel and resources available to deal with
any Year 2000 problems that occur.  Some of the contingency
actions under consideration include designating emergency
response teams, stockpiling inventories, increasing staffing at
critical times, arranging for alternative suppliers of critical
products and services, and developing manual workarounds.


Costs

The company's latest estimate of total cost of the Year 2000
Project is expected to not exceed $39 million.  This estimate
includes Phillips' estimated share of Year 2000 repair and
replacement costs that may be incurred by partnerships and joint
ventures in which the company participates but is not the


                               41

<PAGE>



operator, but does not include any estimates of liability for
non-compliance.  The costs of implementing the SAP and Oracle
business replacement systems are not included in these cost
estimates.  The following table shows the approximate amounts
expended by various sections of the Project through September 30,
1999:

                                                         Millions
                                                       of Dollars
                                                       ----------
Sections
IT systems (includes program management costs)                $23
PC&I                                                           10
External agents (includes continuity/contingency
  planning costs)                                               3
Third-party-operated facilities                                 1
-----------------------------------------------------------------
Total                                                         $37
=================================================================


The company estimates that the future cost of completing the
Year 2000 Project is approximately $2 million, most of which will
be for operations for which Phillips is not the operator.  The
costs of implementing the SAP and Oracle business replacement
systems are not included in these cost estimates.


Risks

The failure to correct a material Year 2000 problem could result
in an interruption in, or a failure of, certain normal business
activities or operations.  Such failures could materially and
adversely affect the company's results of operations, liquidity
and financial condition.  Due to the general uncertainty inherent
in the Year 2000 problem, resulting in part from the uncertainty
of the Year 2000 readiness of third-party suppliers and
customers, the company is unable to determine at this time
whether the consequences of Year 2000 failures will have a
material impact on the company's results of operations, liquidity
or financial condition.  The Year 2000 Project is expected to
significantly reduce the company's level of uncertainty about the
Year 2000 problem and, in particular, about the Year 2000
compliance and readiness of its material external agents.  The
company believes that, with the implementation of new business
systems and the completion of the Project as scheduled, the
possibility of significant interruptions of normal operations
should be reduced.


                               42

<PAGE>



Contingencies

Legal and Tax Matters

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


Environmental

Most aspects of the businesses in which the company engages are
subject to various federal, state, local and foreign
environmental laws and regulations.  Similar to other companies
in the petroleum and chemical industries, the company incurs
costs for preventive and corrective actions at facilities and
waste disposal sites.

Phillips may be obligated to take remedial action as the result
of the enactment of laws, such as the federal Superfund law, the
issuance of new regulations, or as a result of leaks and spills.
In addition, an obligation may arise when a facility is closed or
sold.  Most of the expenditures to fulfill these obligations
relate to facilities and sites where past operations followed
practices and procedures that were considered appropriate under
regulations, if any, existing at the time, but may now require
investigatory or remedial work to adequately protect the
environment or address new regulatory requirements.

At year-end 1998, Phillips reported 45 sites where it had
information indicating that it might have been identified as a
Potentially Responsible Party (PRP).  Since then, 16 sites have
been resolved and three new sites were added.  Of the 32 sites
remaining, the company believes it has a legal defense or its
records indicate no involvement for six sites.  At four sites,
present information indicates that it is probable that the
company's exposure is less than $100,000 per site.  At eight
sites, Phillips has had no communication or activity with
government agencies or other PRPs in more than two years.  Of the
14 remaining sites, the company has provided for any probable
costs that can be reasonably estimated.

Phillips does not consider the number of sites at which it has
been designated potentially responsible by state or federal
agencies as a relevant measure of liability.  Some companies may
be involved in few sites but have much larger liabilities than
companies involved in many more sites.  Although liability of


                               43

<PAGE>



those potentially responsible is generally joint and several for
federal sites and frequently so for state sites, the company is
usually but one of many companies cited at a particular site.  It
has, to date, been successful in sharing clean-up costs with
other financially sound companies.  Many of the sites at which
the company is potentially responsible are still under
investigation by the Environmental Protection Agency (EPA) or the
state agencies concerned.  Prior to actual clean-up, those
potentially responsible normally assess site conditions,
apportion responsibility and determine the appropriate
remediation.  In some instances, Phillips may have no liability
or attain a settlement of liability.  Actual clean-up costs
generally occur after the parties obtain EPA or equivalent state
agency approval.

At September 30, 1999, $5 million had been accrued for the
company's unresolved PRP sites.  In addition, the company has
accrued $57 million for other planned remediation activities,
including resolved state, PRP, and other federal sites, as well
as sites where no claims have been asserted, and $3 million for
other environmental contingent liabilities, for total
environmental accruals of $65 million.

After an assessment of environmental exposures for clean-up and
other costs, the company makes accruals on an undiscounted basis
for planned investigation and remediation activities for sites
where it is probable that future costs will be incurred and these
costs can be reasonably estimated.  These accruals have not been
reduced for possible insurance recoveries, although claims for
recovery of remediation costs have been filed with certain of the
company's insurers.


OUTLOOK

During third quarter, Phillips' Management announced a change in
strategy for the future.  In a time of industry megamergers and
intense competition, and in recognition that a $2 billion annual
capital program is not sufficient to adequately fund growth plans
for all four Phillips business lines, Management concluded that a
new plan was needed.  The new plan calls for accelerated growth
in E&P--significantly increasing its size through a balanced plan
of exploration, exploitation, redevelopment, new ventures and
acquisitions--with a goal of developing or acquiring legacy
assets in targeted areas.  For GPM, a possible sale or joint
venture is planned.  Joint venture opportunities will be sought
for Chemicals and RM&T, although an RM&T transaction will most
likely be deferred until major project upgrades have been
completed at the Sweeny refinery.  Phillips has no intention of
exiting the Chemicals and RM&T businesses but is seeking a way to
participate differently in larger, more competitive operations.


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A late-March 1999 agreement by major exporting countries to
reduce production volumes, along with reported continuing
adherence to these production levels, has caused industry crude
oil prices to increase to their highest levels since late 1997.
If production restraint continues, markets have the potential to
tighten further.  Natural gas liquids' prices should somewhat
follow the crude oil price changes, while natural gas prices will
be influenced by supply deliverability, anticipated normal winter
weather and economic growth.  Weather remains the strongest
factor in determining realized gas prices in the near term.

In the United Kingdom, consent to the cessation of production
from the Maureen platform was received from the Department of
Trade and Industry in October 1999.  The current financial
provision for decommissioning is expected to be sufficient to
cover the cost of the removal and onshore scrapping of the
platform.  As an alternative to scrapping, efforts continue to
find a re-use opportunity for the platform and commercial
discussions are taking place with more than one party.

In the fourth quarter of 1999, Phillips Norway identified
approximately 160 onshore positions to be eliminated before the
end of 1999, primarily in operations support and staff functions.
These reductions are in addition to the previously discussed
reductions resulting from companywide general cost cutting
programs.  The company is also studying the feasibility of
consolidating its Scandinavian and European divisions to improve
work efficiencies.  This could result in further staff
reductions.  The consolidation study is expected to be concluded
by year-end.

In October 1999, Phillips announced plans to build a semi-
commercial facility at its Borger, Texas, refinery to demonstrate
the benefits of its S Zorb sulfur-removal process.  This is a new
technology that significantly lowers sulfur content in gasoline
and promotes cleaner air while limiting manufacturing cost
increases.  Test results show this technology can make gasoline
that more than meets proposed regulations for reduced sulfur
content and, unlike conventional technologies, has little octane
loss and very low volume loss.  Construction of the
6,000 barrels-per-day unit is expected to begin in the first
quarter of 2000, with start-up scheduled early in 2001.

On August 27, 1999, Phillips and its co-venturer signed a
$750 million financing agreement for the construction of a major
petrochemical complex in Qatar.  At September 30, 1999,
$45 million had been drawn under this agreement.  Site
preparation has begun and construction is expected to begin
during first quarter 2000, with commercial production from the
complex expected in mid-2002.  Phillips' ownership share is
49 percent.


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Phillips and Solvay Polymers, Inc. (Solvay), a wholly owned
subsidiary of the Solvay Group of Brussels, Belgium, have agreed
to build and operate a high-density polyethylene plant.  Subject
to approval by the companies' boards of directors, a definitive
agreement is expected by year-end.  Phillips and Solvay each
would own 50 percent of the 700 million-pounds-per-year facility,
and would each independently market its share of production.  The
facility, expected to be operational in 2002, is expected to be
built on one of the two companies' existing U.S. manufacturing
sites.  The majority of the ethylene for the facility is expected
to be provided by Phillips from its Sweeny, Texas, Complex.

Phillips operates in three countries where cutbacks in production
were announced in 1998.  The Norwegian Ministry of Petroleum and
Energy has increased the production curtailment measures for oil
production on the Norwegian continental shelf, and has extended
the curtailment to year-end 1999.  It will amount to a
6.8 percent reduction, based on updated production forecasts
given to the Ministry.  The Nigerian government dictated quota
reductions totaling 19.5 percent, effective April 1, 1999, which
are expected to continue throughout 1999.  These affect leases
operated on behalf of the company under the joint operating
agreement with Nigerian Agip Oil Company.  Venezuela, an OPEC
member, has agreed to cut back oil production, but Phillips and
other third-bid-round-property operators have not been asked to
curtail production.  Based on the above, the company does not
expect the economic impact of these announced production
curtailments in any of the three countries to have a material
adverse impact on the company's results of operations or
financial position in 1999.


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

Phillips is including the following cautionary statement to take
advantage of the "safe harbor" provisions of the PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 for any forward-looking
statement made by, or on behalf of, the company.  The factors
identified in this cautionary statement are important factors
(but not necessarily all important factors) that could cause
actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the company.

Where any such forward-looking statement includes a statement of
the assumptions or bases underlying such forward-looking
statement, the company cautions that, while it believes such
assumptions or bases to be reasonable and makes them in good
faith, assumed facts or bases almost always vary from actual


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results, and the differences between assumed facts or bases and
actual results can be material, depending on the circumstances.
Where, in any forward-looking statement, the company, or its
Management, expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no
assurance that the statement of expectation or belief will
result, or be achieved or accomplished.

Taking into account the foregoing, the following are identified
as important risk factors that could cause actual results to
differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the company:

  o  Plans to implement Management's announced strategy for its
     four business segments are subject to:  finding a buyer for
     GPM or a joint venturer, and joint venturers for Chemicals
     and RM&T; the negotiation and execution of satisfactory
     agreements; receipt of any approvals that may be required
     from state and federal government agencies; approvals by the
     boards of directors of the entities involved; the
     identification and acquisition by E&P of commercial
     quantities of oil, natural gas and/or condensate reserves
     through discovery and/or through purchase or joint venture.

  o  Plans to drill wells and develop offshore or onshore
     exploration and production properties are subject to (1) the
     company's ability to obtain agreements from co-venturers or
     partners, and governments; engage drilling, construction and
     other contractors; obtain economical and timely financing;
     (2) geological, land, or sea conditions; (3) world prices for
     oil, natural gas and natural gas liquids; and (4) foreign and
     United States laws, including tax laws.

  o  Plans for the construction, modernization or debottlenecking
     of domestic and foreign refineries and chemical plants, and
     the timing of production from such plants are subject to
     approval from the company's and/or subsidiaries' Boards of
     Directors; loan or project financing; the issuance by
     foreign, federal, state, and municipal governments, or
     agencies thereof, of building, environmental and other
     permits; and the availability of specialized contractors and
     work force.  Production and delivery of the company's
     products are subject to worldwide prices and demand for the
     products; availability of raw materials; and the availability
     of transportation in the form of pipelines, railcars, trucks
     or ships.


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  o  The ability to meet liquidity requirements, including the
     funding of the company's capital program from borrowings,
     asset sales and operations, is subject to the negotiation
     and execution of certain project financings and other
     financing documents; the identification of buyers and the
     negotiation and execution of instruments of sale; and
     changes in the commodity prices of the company's basic
     products of oil, natural gas and natural gas liquids, over
     which Phillips has no control, and to a lesser extent the
     commodity prices for its chemical and other products; its
     ability to operate its refineries and chemical plants
     consistently; and the effect of foreign and domestic
     legislation of federal, state and municipal governments that
     have jurisdiction in regard to taxes, the environment and
     human resources.

  o  Estimates of proved reserves, raw natural gas supplies,
     project cost estimates, and planned spending for maintenance
     and environmental remediation were developed by company
     personnel using the latest available information and data,
     and recognized techniques of estimating, including those
     prescribed by the U.S. Securities and Exchange Commission,
     generally accepted accounting principles and other
     applicable requirements.

  o  The risks posed by the inability of computer systems,
     possibly including Phillips' and those of Phillips'
     customers, suppliers and partners, to recognize the change
     of the date to the Year 2000 could adversely affect the
     company's business in a number of significant ways.  The
     company relies on information technology supplied by third
     parties, and customers, suppliers and partners are also
     dependent upon their own internally developed information
     technology and third-party systems.  Year 2000 problems
     affecting either the company's systems or those of its
     customers, suppliers and partners could materially adversely
     affect the company's business.  While the company has
     evaluated its information technology, consulted with its
     customers, suppliers and partners to ascertain their Year
     2000 status, and developed extensive contingency and
     business continuity plans, it is not possible to guarantee
     that Phillips' systems will be Year 2000 compliant or that
     the systems of strategic customers, suppliers and partners
     will be Year 2000 compliant.  Due to the general uncertainty
     inherent in the Year 2000 problem, resulting in part from
     the uncertainty of the Year 2000 readiness of third-parties
     and the interconnection of global businesses, the company
     cannot ensure its ability to timely and cost-effectively
     resolve problems associated with the Year 2000 issue that
     may affect its operations and business, or expose it to
     third-party liability.


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                  PART II.  OTHER INFORMATION


Item 5. OTHER INFORMATION

On June 21, 1999, W. W. Allen announced his plans to retire as
Chief Executive Officer of the company, effective June 30, 1999.
J. J. Mulva was elected Vice Chairman and Chief Executive
Officer, effective July 1, 1999.  Mr. Allen retired as an
employee and as Chairman of the company on October 13, 1999, at
which time, Mr. Mulva became Chairman of the Board and Chief
Executive Officer.

Effective at the close of business September 13, 1999,
C. L. Bowerman resigned as Executive Vice President of the
company and as a member of Phillips' Board of Directors.
Effective December 1, 1999, he will retire.  Mr. Bowerman has not
been replaced.


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
--------

 3(ii) Bylaws of Phillips Petroleum Company, as amended effective
         September 13, 1999.

12     Computation of Ratio of Earnings to Fixed Charges.

27     Financial Data Schedule.


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

During the three months ended September 30, 1999, the company
filed one report on Form 8-K.  The Form 8-K was filed July 12,
1999.  An Item 5 was reported, disclosing the company's adoption
of a new preferred share purchase rights plan to replace,
effective as of August 1, 1999, the company's existing preferred
share purchase rights plan, which expired at the close of
business on July 31, 1999.


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SIGNATURE


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


                                    PHILLIPS PETROLEUM COMPANY



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

November 11, 1999


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