<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

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

Check the appropriate box:

/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12


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


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

Payment of Filing Fee (Check the appropriate box):

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

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


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


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


       ----------------------------------------------------------------------
    4) Proposed maximum aggregate value of transaction:


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

    5) Total fee paid:


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

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

    1) Amount Previously Paid:

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

    ___________________________________________________________________________
    3) Filing Party:

    ___________________________________________________________________________
    4) Date Filed:

    ___________________________________________________________________________





<PAGE>

[LOGO]   PHILLIPS PETROLEUM COMPANY
         BARTLESVILLE, OKLAHOMA 74004









                                                                March 28, 1997



Dear Phillips Stockholder:

You are cordially invited to the Annual Meeting of Phillips Petroleum Company to
be held in the Adams Building, 4th Street and Keeler Avenue, Bartlesville,
Oklahoma, on Monday, May 12, 1997, commencing at 10 a.m. local time. Your
attendance will provide you with an opportunity to hear management's report on
the operations and meet the directors and representatives of the Company.

The Secretary's formal notice of the meeting and the Proxy Statement accompany
this letter and describe the matters on which action will be taken.

In addition to the election of 13 directors, you are asked to vote on one other
proposal. Proposal 1 is by the Company to approve the independent auditors
designated by the Board of Directors. Our Board of Directors unanimously
recommends that you vote For Proposal 1.

It is important that your views be represented at the meeting whether or not you
are able to attend. Accordingly, we respectfully request that you sign, date and
promptly return your proxy in the enclosed postage-paid envelope.

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

                                        Sincerely,


                                    /s/ W. W. Allen

                                        W. W. Allen
                                        Chairman and Chief Executive Officer


                          NOTICE OF 1997 ANNUAL MEETING
                                  MAY 12, 1997
                               and PROXY STATEMENT


<PAGE>



                      (This page left blank intentionally.)







                                       2


<PAGE>


PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004




NOTICE OF ANNUAL MEETING to be held May 12, 1997







To the Stockholders:

The Annual Meeting of Stockholders will be held at the Adams Building, 4th
Street and Keeler Avenue, Bartlesville, Oklahoma, on Monday, May 12, 1997, at
10 a.m. local time, for the purposes of considering and voting on the following
matters as described in the attached Proxy Statement:


     Election of 13 directors (pages 5 through 7);

     Proposal of the Company:
     -----------------------
          Proposal 1. To approve the designation of Ernst & Young LLP as
          independent auditors for 1997 (page 19); and

     Any other matters that may properly come before the meeting (page 19).


Only stockholders of record at the close of business March 14, 1997, will be
entitled to vote at this meeting.

A copy of the Company's Annual Report containing financial data and a summary of
operations for 1996 is being mailed to the Company's stockholders in advance of
or with this Proxy Statement.

                                           By Order of the Board of Directors,



                                       /s/ Dale J. Billam

                                           Dale J. Billam
                                           Secretary



Dated March 28, 1997

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

IMPORTANT:

Please sign, date and promptly mail the enclosed proxy in the accompanying
postage-paid envelope. If you wish to vote in accordance with the Company's
recommendations, it is not necessary to specify your choice but your proxy must
be signed and returned. In any event, your prompt response is requested and your
cooperation will be appreciated.

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

                                       3
<PAGE>



PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004

March 28, 1997


                                 PROXY STATEMENT

                                  SOLICITATION

Your proxy is solicited by the Board of Directors and all costs of solicitation
will be borne by the Company. Your proxy will be voted as you direct and may be
revoked by you at any time before it is voted by filing with the Secretary an
instrument revoking it, by executing a later-dated proxy or by voting in person
by ballot at the meeting. This Proxy Statement and Proxy Card are first being
mailed on or about March 28, 1997, to stockholders of record as of March 14,
1997.

Georgeson & Co. Inc. has been engaged by the Company to solicit proxies for this
Annual Meeting from brokers, banks and other institutional holders, and
individual holders of record. The fee for this service, payable one-half at the
commencement of solicitation and the balance at its completion, is $16,000, plus
the reimbursement of certain out-of-pocket costs. In addition to solicitation by
mail, officers, directors and employees of the Company may solicit proxies by
telephone, facsimile or personal contact.


                               CONFIDENTIAL VOTING

It is the policy of the Company that all proxies, ballots, and voting
tabulations that identify stockholders be kept confidential, except where
disclosure may be required by applicable law, where stockholders write comments
on their proxy cards, and where disclosure is expressly requested by a
stockholder, and in limited circumstances such as a proxy contest or other
solicitation of proxies based on an opposition proxy statement or any matter
requiring for stockholder approval the vote of more than a majority of the
shares present at any meeting. The Company has engaged ChaseMellon Shareholder
Services, L.L.C. as tabulators of all proxies and ballots, and has appointed two
persons who are employees of ChaseMellon Shareholder Services to be Inspectors
of Election.


                     VOTING SECURITIES AND PRINCIPAL HOLDERS

The Company's only class of voting securities is its $1.25 par value common
stock. For voting purposes, there were 292,815,408 shares outstanding at the
close of business February 28, 1997. The record date for stockholders entitled
to vote at this meeting is March 14, 1997. Each share is entitled to one vote.

Included in shares outstanding are 29,200,000 shares held by the Compensation
and Benefits Trust ("CBT") formed in December 1995. The CBT is designed to
acquire, hold and distribute shares of the Company's common stock to fund
certain future compensation and benefit obligations of the Company. The CBT does
not increase or alter the amount of benefits or compensation which will be paid
under existing plans, but offers the Company enhanced financial flexibility in
providing the funding requirements of those plans. Shares held by the CBT do not
affect earnings per share or total stockholders' equity until after they are
transferred out of the CBT. All shares are required to be transferred out of the
CBT by January 1, 2021.

The number of shares of the Company's common stock beneficially owned as of
February 28, 1997, by any person or group known to own five percent or more, and
by each of the directors and nominees, and by all directors and officers of the
Company as a group, is shown in the tables "Security Ownership of Certain
Beneficial Owners," and "Security Ownership of Management," respectively, on
pages 7 through 9 after the information on nominees for directors.


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

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

Information included in this Proxy Statement is as of the date of preparation,
approximately February 28, 1997, unless otherwise stated.



                                       4
<PAGE>

                       NOMINEES FOR ELECTION AS DIRECTORS

The number of directors to be elected is 13. The designated proxy holders of the
Company intend, unless otherwise instructed, to vote all proxies for the
election of the following 13 nominees, to hold office for the ensuing year or
until their successors are elected. The term of each present director will
expire concurrently with the election of directors at the 1997 Annual Meeting.
If any nominee is unable or unwilling to serve, the Company, through the
designated proxy holders, reserves discretionary authority to vote for a
substitute. The Company has no reason to believe that any nominee will be unable
or unwilling to serve if elected. The following provides information about each
nominee as of February 28, 1997, including data on the nominees' business
backgrounds for the past five years, and the names of public companies and other
selected entities for which they also serve as directors.

[photo]     W. W. Allen, 60, is Chairman of the Board of Directors and Chief
            Executive Officer of the Company, a position he assumed in May 1994.
            He previously was President and Chief Operating Officer, beginning
            in December 1991; Senior Vice President responsible for worldwide
            exploration and production beginning in July 1989; and Vice
            President of International Exploration and Production beginning
            January 1988. He is a director of the Bank of Oklahoma, N.A.
            Mr. Allen became a director in December 1989.


[photo]     Norman R. Augustine, 61, is Chairman of the Board of Directors and
            Chief Executive Officer of Lockheed Martin Corporation, positions he
            assumed in January 1997 and January 1996, respectively. He
            previously served as Chairman of the Board of Directors and Chief
            Executive Officer of Martin Marietta Corporation from April 1988
            until March 1995. He is a director of The Procter & Gamble Company.
            Mr. Augustine became a director in January 1989.


[photo]     George B. Beitzel, 68, is a director of various corporations. He
            previously served as Senior Vice President and Director of
            International Business Machines Corporation, from July 1955 to March
            1987. He is a director of Bankers Trust New York Corporation and its
            subsidiary, Bankers Trust Company; Bitstream Inc.; Caliber Systems,
            Inc., formerly Roadway Services, Inc.; Computer Task Group, Inc.;
            Phillips Gas Company, a subsidiary of the Company with a series of
            preferred stock registered under the Securities Exchange Act of 1934
            and listed on the New York Stock Exchange; Rohm and Haas Company;
            TIG Holdings; and Xillix Technologies Corp. Mr. Beitzel became a
            director in July 1980.


[photo]     David L. Boren, 55, is President of the University of Oklahoma, a
            position he assumed in November 1994. He previously served as a
            United States Senator from the State of Oklahoma from November 1979
            until November 1994 and is a former Governor of Oklahoma. He is a
            director of AMR Corporation; Texas Instruments Corporation; and
            Torchmark Corporation. Mr. Boren became a director in December 1994.


[photo]     C. L. Bowerman, 57, is an Executive Vice President responsible for
            planning and corporate relations and services, a position he assumed
            in January 1995. He previously was Executive Vice President
            responsible for corporate strategic planning, corporate information
            technology and research and development, beginning in April 1992;
            Executive Vice President responsible for corporate engineering,
            corporate strategic planning and research and development beginning
            December 1991; and Senior Vice President responsible for refining,
            marketing, supply and transportation beginning in October 1988.
            Mr. Bowerman became a director in December 1989.


                                       5
<PAGE>

[photo]     Robert E. Chappell, Jr., 60, is self employed as an investment and
            management consultant. He previously was the Senior Executive Vice
            President and Chief Investment Officer of Metropolitan Life
            Insurance Company, a position he held from October 1989 through
            December 1992. He previously served Metropolitan Life Insurance
            Company as Executive Vice President from October 1986 to October
            1989. Mr. Chappell became a director in December 1990.


[photo]     Lawrence S. Eagleburger, 66, is Senior Foreign Policy Advisor for
            Baker, Donelson, Bearman & Caldwell, a Washington, D.C. law firm, a
            position he assumed in January 1993. He previously served as
            Secretary of State from December 1992 through January 1993, Acting
            Secretary of State from August 1992 to December 1992, and Deputy
            Secretary of State from February 1989 to August 1992. He is a
            director of COMSAT Corporation; Corning Incorporated; Dresser
            Industries, Inc.; Jefferson Bankshares, Inc.; Stimsonite
            Corporation; and Universal Corporation. Mr. Eagleburger became a
            director in February 1993.


[photo]     James B. Edwards, 69, is President of the Medical University of
            South Carolina, a position he has held since November 1982. He is a
            former U.S. Secretary of Energy and Governor of South Carolina. He
            is a director of GS Industries, Inc.; Imo Industries Inc.; National
            Data Corporation; SCANA Corporation; and WMX Technologies, Inc.
            Mr. Edwards became a director in January 1983.


[photo]     Larry D. Horner, 62, is Chairman of Pacific USA Holdings
            Corporation, a position he assumed in August 1994. He previously was
            a Managing Director of Arnhold and S. Bleichroeder, Inc., from April
            1991 through July 1994. He previously was a partner in KPMG Peat
            Marwick, and is a former Chairman and Chief Executive of that firm
            from October 1984 to December 1990. He is a director of American
            General Corporation; Atlantis Plastics, Inc.; Biological & Popular
            Culture, Inc.; Laidlaw Holdings, Inc.; and Asia Pacific Wire & Cable
            Corp., Ltd. Mr. Horner became a director in May 1991.


[photo]     J. J. Mulva, 50, is President and Chief Operating Officer of the
            Company, a position he assumed in May 1994. Previously he was an
            Executive Vice President of the Company and its Chief Financial
            Officer from January 1994 through April 1994; Senior Vice President
            and Chief Financial Officer beginning in May 1993; Vice President
            and Chief Financial Officer beginning in March 1993; Vice President,
            Treasurer and Chief Financial Officer beginning in March 1990; and
            Vice President and Treasurer beginning in September 1988. He is
            Chairman of the Board of Directors of Phillips Gas Company.
            Mr. Mulva became a director in January 1994.


[photo]     Randall L. Tobias, 54, is Chairman of the Board of Directors and
            Chief Executive Officer of Eli Lilly and Company, a position he
            assumed in June 1993. He previously was Vice Chairman of the Board
            of Directors of AT&T from September 1986 to June 1993. He is a
            director of Kimberly-Clark Corporation and Knight-Ridder, Inc.
            Mr. Tobias became a director in July 1992.

                                       6
<PAGE>

[photo]     Victoria J. Tschinkel, 49, is a Senior Consultant to Landers &
            Parsons, a Tallahassee, Florida, law firm, a position she assumed in
            1987. She previously served as Secretary of the Florida Department
            of Environmental Regulation from 1981 to 1987. Mrs. Tschinkel became
            a director in July 1993.


[photo]     Kathryn C. Turner, 49, is Chairperson and Chief Executive Officer of
            Standard Technology, Inc., an engineering and manufacturing firm she
            founded in 1985. She is a director of Carpenter Technology
            Corporation. Ms. Turner became a director in January 1995.


               SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (1)

<TABLE>
<CAPTION>
                                  Name and Address of                  Amount and Nature of                   Percent of
Title of Class                      Beneficial Owner                   Beneficial Ownership                      Class
--------------                    --------------------              --------------------------                ----------
                                                                     Direct           Indirect
                                                                     ------           --------

<S>                   <C>                                         <C>                  <C>                     <C>
Common                Vanguard Fiduciary Trust Company            48,665,050 (2)          --                     16.62%
                      P. O. Box 2900
                      Valley Forge, Pennsylvania 19482
</TABLE>

(1) The Capital Group Companies, Inc. ("CGC") and Capital Research and
    Management Company ("CRMC"), have reported to the Company that collectively
    they exercise as of December 31, 1996, sole dispositive power with respect
    to 14,495,530 shares. CGC exercises sole voting power and sole dispositive
    power with respect to 530 shares. According to the Schedule 13G filed by CGC
    and CRMC with the Securities and Exchange Commission, such shares equal 5.50
    percent of the Company's outstanding shares. However, when shares held by
    the Company's Compensation and Benefits Trust ("CBT") are included, shares
    held by CGC equal only 4.94 percent of the Company's outstanding shares. CGC
    is the parent holding company of a group of six investment managment
    companies, including CRMC, which holds shares for various of its
    institutional investor clients. CGC has advised that the shares are held
    solely for investment purposes and not for the purpose or effect of changing
    or influencing control. CGC and CRMC have specifically disclaimed any
    beneficial ownership of these shares.
(2) As of February 28, 1997, Vanguard as Trustee held 48,665,050 shares under
    the Company's Thrift Plan, Long-Term Stock Savings Plan ("LTSSP"), and
    Retirement Savings Plan (together the "Plans") with shared voting power.
    Vanguard and the Plans have disclaimed beneficial ownership of the shares
    held by Vanguard as Trustee of the Plans. Vanguard votes shares held by the
    Plans which represent the allocated interests of participants in the manner
    directed by individual participants. Employee participants in the Thrift
    Plan and LTSSP are appointed by the Company as fiduciaries entitled to
    direct the Trustee as to how to vote allocated shares which are not directed
    in these plans and unallocated shares held by the LTSSP. Such shares are
    allocated pro rata among employee participants accepting their fiduciary
    appointment and are voted by the Trustee as directed by the employee
    fiduciaries. The Trustee votes non-directed shares of the Retirement Savings
    Plan at its discretion. The Trustee will vote other shares held by the Plans
    at its discretion only if required to do so by the Employee Retirement
    Income Security Act of 1974 ("ERISA").

    Vanguard is also the Trustee and record holder of the 29,200,000 shares in
    the CBT, without any voting power. Vanguard has disclaimed beneficial
    ownership of such shares. As Trustee of the CBT, Vanguard will vote shares
    in the CBT only in accordance with the pro rata directions of eligible
    domestic employees and the trustees of certain international Company stock
    plans. Trust agreements for the Plans and CBT each provide that all voting
    directions of individual employees received by the Trustee will be held in
    confidence and not be disclosed to any person, including the Company.

                                       7
<PAGE>

                        SECURITY OWNERSHIP OF MANAGEMENT
                           Phillips Petroleum Company
                                   Securities
                               ------------------
<TABLE>
<CAPTION>

                                                                       Amount and Nature of
                                                                       Beneficial Ownership
                                                                       --------------------
Title of Class          Name of Beneficial Owner                 Direct (1)          Indirect         Percent of Class
--------------          ------------------------                 ----------          --------         ----------------

                     Directors and Nominees (2)
                     --------------------------
<S>                  <C>                                         <C>                  <C>                <C>
Common               W. W. Allen                                  309,716                --              less than 1%
Common               Norman R. Augustine                            9,200                --              less than 1%
Common               George B. Beitzel                             69,922                --              less than 1%
Common               David L. Boren                                 3,100                --              less than 1%
Common               C. L. Bowerman                               182,629               654              less than 1%
Common               Robert E. Chappell, Jr.                        7,500                --              less than 1%
Common               Lawrence S. Eagleburger                        5,293                --              less than 1%
Common               James B. Edwards                              12,837                --              less than 1%
Common               Larry D. Horner                                6,500                --              less than 1%
Common               J. J. Mulva                                  227,893                --              less than 1%
Common               Randall L. Tobias                              7,000                --              less than 1%
Common               Victoria J. Tschinkel                          5,272                --              less than 1%
Common               Kathryn C. Turner                              3,100                --              less than 1%

                     Executive Officers
                     ------------------
Common               K. Am                                         65,708                --              less than 1%
Common               R. G. Ceconi                                  90,936                --              less than 1%
Common               K. L. Hedrick                                 91,636                --              less than 1%
Common               J. L. Howe                                   125,322                --              less than 1%
Common               J. C. Mihm                                   147,747               656              less than 1%
Common               T. C. Morris                                  99,495                --              less than 1%
Common               M. J. Panatier                                60,910                --              less than 1%
Common               B. J. Price                                   62,614                --              less than 1%
Common               J. B. Whitworth                              158,423                --              less than 1%
                                                                ---------             -----              ------------

All directors, nominees and executive officers
as a group (22 in group)                                        1,752,753             1,310               less than 1%
</TABLE>

(1) Direct ownership includes shares which may be acquired under options within
    60 days of the record date.
(2) The shares stated as being beneficially owned by each nominee do not include
    shares beneficially owned by the other companies on whose boards of
    directors the nominees, directors or officers serve. (The list of nominees
    for directors on pages 5 through 7 contains the names of the other companies
    for which the nominees serve as directors.) Each nominee disclaims
    beneficial ownership of all such shares.

                                       8

<PAGE>
                        SECURITY OWNERSHIP OF MANAGEMENT
                              Phillips Gas Company
                                 Securities (1)
                                 --------------
<TABLE>
<CAPTION>
                                                                     Amount and Nature of
                                                                     Beneficial Ownership
                                                                     --------------------
   Title of Class              Name of Beneficial Owner              Direct          Indirect         Percent of Class
   --------------              ------------------------              ------          --------         ----------------
<S>                           <C>                                     <C>             <C>              <C>
                              Directors and Nominees
                              ----------------------
Series A Preferred            W. W. Allen                                 --            500 (2)          less than 1%
Series A Preferred            George B. Beitzel                        1,000             --              less than 1%
Series A Preferred            J. J. Mulva                                475          1,070 (2)          less than 1%

                              Executive Officers
                              ------------------
Series A Preferred            R. G. Ceconi                                --          1,000 (2)          less than 1%
Series A Preferred            J. C. Mihm                                  --             19 (2)          less than 1%
Series A Preferred            M. J. Panatier                           2,900             --              less than 1%
Series A Preferred            B. J. Price                                500             --              less than 1%
Series A Preferred            J. B. Whitworth                             --            300 (2)          less than 1%
                                                                       -----          -----              ------------
All directors, nominees and executive officers
as a group (8 in group)                                                4,875          2,889              less than 1%
</TABLE>
(1) Table shows only those directors, nominees and executive officers who own
    shares.
(2) Messrs. Allen, Ceconi, Mihm, Mulva and Whitworth have disclaimed beneficial
    ownership of all such shares.


                       SECTION 16(a) BENEFICIAL OWNERSHIP
                              REPORTING COMPLIANCE

To the Company's knowledge, no person or entity who was a director, officer or
beneficial owner of more than 10 percent of the Company's common stock failed to
file, on a timely basis during 1996, reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended.


                        COMPENSATION COMMITTEE INTERLOCKS
                            AND INSIDER PARTICIPATION

Members of the Compensation Committee are Norman R. Augustine, George B.
Beitzel, Larry D. Horner, Randall L. Tobias and Victoria J. Tschinkel. The
Company had no interlocking relationship during the last fiscal year.


                               GENERAL INFORMATION
                       RELATING TO THE BOARD OF DIRECTORS

The Board of Directors

The business and affairs of the Company are managed under the direction of the
Board of Directors. To assist it in carrying out its duties, the Board has
delegated certain authority to five Committees. In calendar year 1996, the Board
of Directors held eight meetings and the Directors attended an average of 95
percent of all Board and Committee meetings, except for Lawrence S. Eagleburger
who attended 71 percent of such meetings. Mr. Eagleburger had back surgery in
the Fall and was unable to travel in the latter part of 1996. He participated in
seven of eight Board meetings either in person or by telephone. He was unable
to participate in certain of the Public Policy Committee meetings. It is
anticipated that he will be able to resume full participation in Board and
Committee meetings, including travel, in 1997.


Charitable Giving Program

As part of the Company's overall program to support communities and recognize
the importance of charitable giving, The Phillips Petroleum Company Charitable
Giving Program was established in December 1996. The program is funded by life
insurance policies on directors. Upon the death of an individual director, the
Company will donate the $1,000,000 proceeds from such life insurance to one or
more qualifying charitable organizations recommended by the individual director,
which will be paid in $100,000 installments over a ten-year period. Individual
directors derive no financial benefit from this program, since all charitable
deductions for Federal and State income taxes accrue solely to the Company.
During 1996, the Company paid no premiums for these policies. The Company will
pay premiums in 1997.


Committees of the Board

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

               Compen-        Directors'                    Public
Audit          sation         Affairs       Executive       Policy
--------------------------------------------------------------------------------
Chappell*      Horner*        Beitzel*      Allen*          Eagleburger*
Boren          Augustine      Augustine     Beitzel         Boren
Horner         Beitzel        Edwards       Chappell        Edwards
Tobias         Tobias                       Eagleburger     Tschinkel
Turner         Tschinkel                    Horner          Turner
                                            Mulva
--------------------------------------------------------------------------------
* Chairman
                                       9
<PAGE>


The Audit Committee recommends to the Board the independent auditors to be
engaged by the Company, reviews the scope of their engagement, including the
remuneration to be paid, and reviews on a continuing basis the independence of
the auditors. The Committee reviews with the independent auditors, the
Controller, the General Auditor, the General Counsel, the Chief Financial
Officer and other appropriate Company personnel: (1) the Company's general
policies and procedures with respect to audits and accounting and financial
controls; (2) the general accounting and reporting principles and practices
applied in preparing the Company's financial statements and conducting financial
audits; (3) the interim and year-end financial statements and any certification,
report or opinion which the independent auditors propose to render in connection
with such statements; (4) the extent to which the Company has implemented
changes suggested by the internal audit staff, the independent auditors or the
Committee; and (5) the adequacy of the Company's accounting practices and
internal control structure. The Committee may direct the General Counsel, the
independent auditors and the internal audit staff to inquire into and report to
it on any matter having to do with the Company's business affairs. The Committee
also monitors compliance with the Company's Code of Business Ethics, Conduct and
Responsibility and oversees the activities of the Corporate Compliance and
Ethics Committee. The Audit Committee held five meetings in 1996.

The Compensation Committee recommends for Board approval the salaries for the
Chairman of the Board of Directors and Chief Executive Officer and the
President, and approves salaries for all Executive Officers and for all
employees who earn $250,000 or above. The Committee makes recommendations to the
Board with respect to proposals for the application of new benefits, incentive
plans or programs to officers who are also directors and the application of
amendments to existing plans or programs which would significantly increase such
officers' compensation. The Committee approves awards under the Annual Incentive
Compensation Plan and the Omnibus Securities Plan. The Compensation Committee
held six meetings in 1996.

The Committee on Directors' Affairs, formerly known as the Nominating Committee,
recommends to the Board qualified candidates for election as directors and
nominates candidates to the Board committees. The Committee welcomes suggestions
from stockholders about qualified candidates. A stockholder wishing to submit a
recommendation to the Committee may do so by writing Dale J. Billam, Secretary,
Phillips Petroleum Company, Bartlesville, Oklahoma 74004. The Committee on
Directors' Affairs held one meeting in 1996.

The Executive Committee, when the Board is not in session, may exercise all
power and authority of the Board in the management and business of the Company,
subject to the limitations imposed by the Bylaws. The Committee has the
authority to review and approve proposed corporate action when the Board is not
in session and may advise the Board of any recommendations of the Committee
regarding any proposed corporate action presented to the Board. The Executive
Committee held four meetings in 1996.

The Public Policy Committee advises management and the Board of Directors (i) in
response to current and emerging public policy issues, and (ii) in the
development and review of policies and budgets in respect of contributions,
including, but not limited to, contributions to organizations whose primary
purpose is charitable, civic, cultural or educational. In order to carry out
these duties, the Committee (a) identifies, evaluates and monitors the social,
political, environmental, occupational, safety and health trends, issues and
concerns, domestic and foreign, which affect or could affect the Company's
business activities and performance; (b) reviews information from management and
approves recommendations to assist in the formulation and adoption of policies,
programs and practices concerning the matters set forth in (a) above, including,
but not limited to ecological and environmental protection, employee safety,
ethical business conduct, consumer affairs, alcohol and drug abuse, equal
opportunity matters and government relations; and (c) monitors and evaluates on
an on-going basis the Company's compliance with such policies, programs and
practices. The Committee also has the authority to authorize the use of Company
funds for political contributions on behalf of the Company, if and to the extent
permitted by law. The Public Policy Committee held five meetings in 1996.


                     COMPENSATION OF DIRECTORS AND NOMINEES

The annual Board retainer fee for non-employee directors consists of $11,000
plus 1,000 shares of Phillips common stock. Board members receive $1,000 for
each Board meeting attended. Committee retainer fees are $2,500 for Board
committee chairmen and $2,250 for committee members. Committee meeting fees
consist of $750 for the Board committee chairmen and $500 for the committee
members for each committee meeting attended. These directors may elect to defer
all or a part of their cash compensation. The future payment of this deferred
compensation has been pre-funded in a special trust designated for this purpose.

These directors also participate in the Non-Employee Director Retirement Plan.
This plan provides a post-Board service benefit paid monthly which is equal to
one-twelfth of the annual cash retainer fee paid for Board service (currently
$11,000) plus one-twelfth of the fair market value of the 1,000 shares of
Phillips common stock paid as the retainer for Board service. The benefit is
based on the number of years that the director was a member of the Board of
Directors. The fair market value is determined by calculating the higher of the
average of the fair market values for the twelve months preceding the director's
retirement or the average of the high three years fair market values of the last
ten years. The fair market value is calculated using a formula which includes
daily and monthly calculations. If a director who has retired from Board service
should die prior to completion of the payment period, the director's surviving
spouse will receive the remainder of the payments due under the plan. If the
surviving spouse dies during the payment period, payments shall cease.



                                       10
<PAGE>


In lieu of monthly payments, subject to certain limitations, the director may
elect to receive or defer a form of payment which is of equivalent value. Plan
payments have been pre-funded by the Company in a special trust designated for
this purpose. Prior to retirement from Board service, the Company provides each
director with life insurance, the amount of coverage which is based on length of
Board service, begins at $200,000 and increases to a maximum of $300,000.


                             EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth compensation information for
services performed in 1996, 1995 and 1994 for those persons who were at December
31, 1996, the Chief Executive Officer and the four most highly compensated
officers.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                  Long-Term Compensation
                                                                          -------------------------------------
                                        Annual Compensation                        Awards               Payouts
                              ---------------------------------------     ------------------------      -------
                                                                          Restricted    Securities     Long-Term       All Other
                                                         Other Annual        Stock      Underlying     Incentive        Compen-
Name and                                                 Compensation    Award(s) (1)  Options/SARs     Payout         sation (2)
Principal Position    Year    Salary ($)     Bonus($)         ($)             ($)           (#)           ($)             ($)
-----------------------------------------------------------------------------------------------------------------------------------

<S>                   <C>      <C>         <C>            <C>             <C>           <C>            <C>               <C>
W. W. Allen           1996     850,000     1,105,000           0               0         237,359        579,469 (3)       8,053
Chairman of the       1995     824,000       414,375           0               0         185,941        343,298 (4)       7,289
Board & CEO           1994     681,333       899,766           0               0          59,706        484,102 (5)       4,770

J. J. Mulva           1996     594,667       731,340           0               0          65,105        322,656 (3)       8,053
President &           1995     481,333       221,250           0               0          44,484        184,688 (4)       7,289
COO                   1994     415,750       511,710           0               0          34,300        218,925 (5)       4,770

C. L. Bowerman        1996     445,250       379,842           0               0          36,592        263,025 (3)       8,053
Executive Vice        1995     343,000       172,495           0               0          26,728        183,906 (4)       7,289
President             1994     337,000       260,354           0               0          27,069        259,965 (5)       4,770

T. C. Morris          1996     356,000       243,493           0               0          24,240        131,600 (3)       8,052
Sr. Vice President    1995     280,000       109,122           0               0          16,921         76,602 (4)       7,285
& CFO                 1994     258,500       140,980           0               0          14,393         83,261 (5)       4,770

J. B. Whitworth       1996     336,750       232,984           0               0          25,760        184,100 (3)       8,053
Sr. Vice President    1995     303,000       129,857           0               0          18,311        115,090 (4)       7,289
and General Counsel   1994     297,750       159,757           0               0          18,548        163,151 (5)       4,770
</TABLE>

(1) The Company has not made any outright grants of restricted stock to any
    executive during any of the periods covered by the table. The Company
    settled awards under its 1985 and 1987 annual incentive plans and under all
    long-term incentive plans since 1986 by distributing to award recipients
    shares of restricted stock which are not transferrable prior to death,
    disability or retirement, unless restrictions are earlier lapsed by the
    Compensation Committee of the Board of Directors (the "Committee"). The
    aggregate number of such restricted shares held at December 31, 1996, and
    the market value of such shares on that date (calculated according to SEC
    regulation without regard to the restrictions and the resulting inability of
    the named executives to realize such values at such times) were: Mr. Allen,
    0 shares, $0; Mr. Bowerman, 40,171 shares, $1,802,674; Mr. Morris, 23,964
    shares, $1,075,385; Mr. Mulva, 39,775 shares, $1,784,903; Mr. Whitworth,
    25,957 shares, $1,164,820.
(2) Includes Company contributions to the Thrift Plan for the benefit of
    participants and the value of the shares allocated to Long-Term Stock
    Savings Plan participants as of the respective valuation dates.
(3) No decision has been made on awards for performance under the Long-Term
    Incentive Plan Performance Period from 1994-1996.
(4) Value of the restricted or unrestricted stock on the date of the award for
    performance under the Long-Term Incentive Plan Performance Period from
    1993-1995.
(5) Value of the restricted stock on the date of the award for performance under
    the Strategic Incentive Plan Performance Period from 1991-1994.

                                       11
<PAGE>


                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

Stock options granted during 1996 to the Chief Executive Officer and the four
most highly compensated officers of the Company are reflected in the following
Option/SAR Grants in Last Fiscal Year table.

<TABLE>
<CAPTION>
                                                                                          Potential Realizable Value at
                                                                                          Assumed Annual Rates of Stock
                                Individual Grants                                      Price Appreciation for Option Term (1)
------------------------------------------------------------------------------------------------------------------------------------
                       Number of     Percent of Total
                      Securities       Options/SARS
                      Underlying        Granted to       Exercise or
                     Options/SARs      Employees in      Base Price      Expiration
Name                  Granted (#)       Fiscal Year        ($/Sh)          Date         0% ($)        5% ($)          10% ($)
------------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>                <C>             <C>            <C>           <C>         <C>              <C>
W. W. Allen              112,359            8.44%           34.75          01/08/06         0        2,455,044        6,222,441
                         125,000            9.38%           38.69          04/08/06         0        3,041,250        7,707,500

J.J. Mulva                63,450            4.76%           34.75          01/08/06         0        1,386,383        3,513,861
                           1,655            0.12%           42.44          10/14/06         0           44,172          111,944

C. L. Bowerman            36,470            2.74%           34.75          01/08/06         0          796,870        2,019,709
                             482            0.04%           42.44          10/14/06         0           12,865           32,602

T. C. Morris              23,463            1.76%           34.75          01/08/06         0          512,667        1,299,381
                             777            0.06%           42.44          10/14/06         0           20,738           52,556

J. B. Whitworth           25,760            1.99%           34.75          01/08/06         0          562,856        1,426,589

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

Total Stockholders (2)     N/A              N/A              N/A              N/A           0    5,727,606,050   14,516,925,540
</TABLE>

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

(2) To lend perspective to the illustrative "potential realizable value," if the
    Company's stock price increased 5 percent or 10 percent per year for 10
    years from January 1, 1996, (disregarding dividends and assuming for purpose
    of the calculation a constant number of shares outstanding), the total
    increase in the value of all shares outstanding at January 1, 1996, is shown
    above as "potential realizable value" for Total Stockholders.


                          TEN-YEAR OPTION/SAR REPRICING

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

<TABLE>
<CAPTION>
                              Number of Securities     Market Price           Exercise                       Length of Original
                                   Underlying           Of Stock at             Price                           Option Term
                                  Options/SARs            Time of            At Time of              New      Remaining at Date
                                   Repriced or         Repricing or         Repricing or          Exercise     Of Repricing or
Name                   Date        Amended (#)         Amendment ($)        Amendment ($)         Price ($)       Amendment
------------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>         <C>                 <C>                   <C>                  <C>           <C>
W. W. Allen             --              0                   --                   --                  --              --
J. J. Mulva             --              0                   --                   --                  --              --
C. L. Bowerman          --              0                   --                   --                  --              --
T. C. Morris            --              0                   --                   --                  --              --
J. B. Whitworth         --              0                   --                   --                  --              --
</TABLE>

                                       12
<PAGE>


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

The following table shows the number of shares acquired and the net value
realized from exercising stock options during 1996 and the number and value of
exercisable and unexercisable stock options granted under the 1986 Stock Plan,
the 1990 Stock Plan and the Omnibus Securities Plan at fiscal year-end 1996 for
the Chief Executive Officer and the four most highly compensated executive
officers of the Company.
<TABLE>
<CAPTION>
                                                                          Number of Securities            Value of Unexercised
                                                                         Underlying Unexercised               In-the-Money
                                                                             Options/SARs at                 Options/SARs at
                                                                             Fiscal Year-End             Fiscal Year-End ($) (2)

                  Number of Shares Acquired           Net Value               Exercisable/                    Exercisable/
Name                     on Exercise              Realized ($) (1)            Unexercisable                   Unexercisable
------------------------------------------------------------------------------------------------------------------------------------

<S>                        <C>                        <C>                        <C>                              <C>
                                                                                  95,529                          1,371,559
W. W. Allen                68,348                     1,037,172                  420,208                          4,221,302
                                                                                  96,112                          2,004,626
J. J. Mulva                10,346                       286,740                  121,995                          1,456,745
                                                                                  66,319                          1,230,056
C. L. Bowerman             11,522                       174,751                   78,400                            992,558
                                                                                  20,418                            287,471
T. C. Morris               23,430                       405,547                   49,745                            603,323
                                                                                  59,290                          1,159,522
J. B. Whitworth            12,002                       316,567                   53,941                            682,771
</TABLE>

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

(2) Based on $44.875, the fair market value of the Company's common stock on
    December 31, 1996.


               LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR

The following table shows Long-Term Incentive Plan awards established under the
Omnibus Securities Plan during 1996 for the Chief Executive Officer and the four
most highly compensated executive officers of the Company.


<TABLE>
<CAPTION>
                                                                Estimated Future Payouts Under Non-Stock Price Based Plans
                                                                ----------------------------------------------------------
                                           Performance or
                                            Other Period                              Number of Shares (1)
                         Number of        Until Maturation
Name                    Shares (#)            Or Payout        Threshold (#) (2)           Target (#)              Maximum (#)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                 <C>                   <C>                    <C>                      <C>
W. W. Allen              17,248               12/31/98              8,624                  17,248                   34,496
J. J. Mulva               9,740               12/31/98              4,870                   9,740                   19,480
C. L. Bowerman            5,598               12/31/98              2,799                   5,598                   11,196
T. C. Morris              3,601               12/31/98              1,800                   3,601                    7,202
J. B. Whitworth           3,954               12/31/98              1,977                   3,954                    7,908
</TABLE>

(1) At the end of the three-year performance period, from January 1, 1996,
    through December 31, 1998, the Compensation Committee will evaluate the
    Company's performance to determine the extent to which target awards have
    been earned. The Company's performance will be measured by total stockholder
    return, compared with the total stockholder return of the peer group of
    eight integrated oil companies used in the Performance Graph.

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

                                       13
<PAGE>


                          COMPENSATION COMMITTEE REPORT
                                 TO STOCKHOLDERS
                            ON EXECUTIVE COMPENSATION

The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee is composed
of the directors named below, all of whom are independent outside directors and
who qualify as disinterested persons for purposes of Rule 16b-3 adopted under
the Securities Exchange Act of 1934.

The executive compensation programs are designed to motivate all executives to
work as a team to maximize long-term stockholder value and achieve industry
safety leadership.

Executive compensation decisions made by the Committee are based on a
combination of quantitative and qualitative measures. During 1996, quantitative
measures employed by the Committee to evaluate Corporate performance included
the following: relative total return to stockholders; the generation of cash
flow adjusted for working capital changes and other changes in long-term
accounts from the Company's operating activities and improving safety
performance through reduction of recordable injuries. Quantitative measures
employed by the Committee to evaluate business unit and staff performance
include: controlling expenses; the generation of funds from the business unit's
operating activities; improving safety performance through reduction of
recordable injuries and major vehicle accidents along with the implementation of
a process to achieve safety excellence. In addition, staff units are measured by
the relative success of their internal customers.

The Committee also uses qualitative measures of performance such as; the
application of experience, accomplishments in developing and implementing
strategic plans, contribution to growth of business lines, leadership in the
industry and community and social responsibility.

The Committee recognizes that the Company's businesses are extremely capital
intensive, requiring large investments, in most cases over a number of years,
before tangible financial returns are achieved. In addition, in the short-term,
the Company's prospects and performance as measured by its share price can be
significantly affected upward or downward by commodity price movements and
geopolitical factors over which the Company and its management have no control.
Therefore, the Committee evaluates both quantitative and qualitative measures
and external factors and may use discretion in recognizing performance
achievements leading to value enhancement.

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

Internal Revenue Code Section 162(m)
------------------------------------
Section 162(m) of the Internal Revenue Code requires the establishments of
performance-based standards for the deduction of certain compensation to any
individual in excess of $1,000,000 per year. The stock options granted by the
Committee under prior stockholder approved plans are exempt from this provision.
No officer of the Company is expected to receive compensation in 1997 which will
result in non-deductibility of such compensation expense to the Company. In
order to retain flexibility, the Committee again elects to defer a decision to
qualify the Annual Incentive Compensation Plan, the Long-Term Incentive Plan and
stock option grants under Section 162(m) of the Internal Revenue Code.


Executive Compensation Actions for 1996

Salaries
--------
During 1996, The Committee reviewed and approved salaries for all employees with
annual salaries of $200,000 or above except for the Chairman of the Board and
the President in which cases the Committee recommends their salaries to the
Board of Directors for consideration. In the December 9, 1996, meeting of the
Board of Directors, the Bylaws of the Company were amended to provide an
increase in the minimum level of the Committee's approval for salary actions.
Subsequent to December 8, 1996, forward, the Committee reviews and approves
salaries for all Executive Officers and all other employees whose salary is
$250,000 or greater with the exception of the Chairman of the Board and the
President in which cases the Committee recommends their salaries to the Board of
Directors for consideration.

In the April 1996 meeting, the Committee utilized competitive salary data
provided by independent third party compensation experts to determine whether
the Committee would recommend to the Board of Directors that the Board of
Directors consider a salary increase for Mr. Allen, Chairman of the Board. The
Committee compared Mr. Allen's salary to those of other Chief Executive Officers
in the petroleum industry, as well as Chief Executive Officers of companies of
similar size outside the petroleum industry. The Committee determined that
Mr. Allen's salary was competitive and therefore unanimously agreed that no
recommendation would be made to the Board of Directors to increase Mr. Allen's
salary in 1996. However, in order to recognize Mr. Allen's performance for the
past year, his leadership in directing key strategic corporate decisions, his
pivotal role in implementing both growth and cost containment strategies, and
his contribution to the industry and to national public service, the Committee
unanimously agreed to grant Mr. Allen an option for 125,000 shares of Phillips
common stock. The grant made to Mr. Allen was made at the fair market value of
the Company's stock on the date the grant was made.



                                       14
<PAGE>



During the January 1996 meeting, the Committee reviewed a presentation from an
independent, third-party compensation consultant. On the basis of competitive
data presented by the consultant, the Committee unanimously agreed to recommend
to the Board of Directors that the salary of Mr. Mulva, the President and Chief
Operating Officer be increased from $500,000 annually to $600,000 annually
effective February 1, 1996. During the February meeting, the Committee also
reviewed the competitive nature of the salaries of all other senior officers and
unanimously approved competitive adjustments to those salaries.

In October 1996, the Committee reviewed salaries of all executives with an
annual salary of $200,000 and above. This review was conducted in conjunction
with the Company's annual merit salary evaluation. After reviewing the data, the
Committee recommended to the Board of Directors that the salary for Mr. Mulva be
adjusted from $600,000 to $612,000. The Committee also approved salary actions
consistent with market trends for certain other executive officers. The salaries
of Mr. Allen, Mr. Mulva, and other executive reporting officers are set forth in
the Summary Compensation Table.

Annual Incentive Compensation Program
-------------------------------------
The Committee administers the Annual Incentive Compensation Plan ("AICP") which
provides an opportunity for the award of annual bonuses. Under the AICP, a
threshold of Company financial performance must be met before awards can be
approved. For 1996, the minimum amount of cash flow generation, after
adjustments for changes in working capital and other changes in long-term
accounts that was required to activate this Plan, was $1.26 billion and the
target amount for cash generation was $1.57 billion. In addition to the minimum
cash threshold, the AICP contains objectives which the Committee establishes
each year. For 1996, the Committee set three Companywide objectives: (i) total
stockholder return for 1996 should exceed the median stockholder return of the
oil industry peer companies, as listed in the Proxy Statement Performance Graph
used by the Company to compare its stockholder return performance; (ii) safety
performance should be better than pre-established targets measuring recordable
injury rate; and (iii) cash flow generation from operating activities adjusted
for working capital changes and other changes in long-term accounts should
exceed $1.57 billion.

The Committee establishes targets each year for individual AICP awards based on
a percentage of salary which varies according to the employee's job
classification established under the Company's job evaluation system. The target
awards are established using both internally generated data and data obtained
from an independent, third-party consultant and are intended to provide
competitive bonus opportunities if performance objectives are met. For 1996, the
target percentages varied from 12 percent of salary for the beginning level of
AICP eligibility to 65 percent of salary for the Chief Executive Officer. The
target percentages are prorated to recognize changes in job grades during the
year. The Committee is authorized under the terms of the AICP to approve
individual awards from 0 percent to 200 percent of target for the award year.

Mr. Allen's and Mr. Mulva's AICP awards are based on overall corporate
performance. Awards to all other AICP participants reflect the performance of
the business unit or staff group with which they are related, as well as
corporate performance. In February 1997, the Committee approved cash awards for
SBU and staff units under the 1996 AICP ranging from 139 percent of target bonus
to 198 percent of target bonus, based on a review of the Company's 1996
corporate and business unit or staff group performance.

In determining the amount of incentive compensation award to be paid to Mr.
Allen and Mr. Mulva, the Committee determined that cash flow adjusted for
working capital changes and other changes in long-term accounts exceeded the
minimum threshold by $711 million. The results for 1996 exceeded the target by
25 percent and were 32 percent better than 1995. The Company's total return to
stockholders exceeded 33 percent in 1996 and ranked second in the peer group.
The Company's rate of recordable injuries, although slightly above the
established target, made 1996 the safest year in the Company's history,
exceeding the previous record set in 1995. Taking the above into consideration,
it was the Committee's judgment to grant AICP awards to Mr. Allen and Mr. Mulva
at the plan maximum which is 100 percent greater than the target amount. The
amount of the awards for Mr. Allen and Mr. Mulva are set forth in the Summary
Compensation Table found in this Proxy Statement.

Stock Options
-------------
It is the Committee's practice to consider the grant of stock options during
January of each year. All grants to date have been made at the fair market value
of the Company's stock on the date of the grant. The number of shares subject to
options at the date of each grant is set using internally generated information
and information from independent third party consultants to achieve option
grants which approximate those granted by peer companies to persons in
corresponding job positions. The number of shares subject to option grants
varies based on job grade classification and salary. Grants in January 1996
ranged in estimated value from 35 percent of annual salary for the lowest level
of eligibility to 200 percent of annual salary for the Chairman and Chief
Executive Officer. It is also the Committee's practice to consider supplemental
stock option grants in recognition of promotions during the year based on the
same criteria used by the Committee in grants during January of each year.

For Mr. Allen, Mr. Mulva and the other Executive Officers, the stock option
grants are set out in the Options/SAR Grants In Last Fiscal Year table.

                                       15
<PAGE>



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

In the January 1996 meeting, the Committee established the fourth performance
period of the plan, which extends from January 1, 1996, through December 31,
1998. Target awards for Mr. Allen and the other Executive Officers are shown in
the Long-Term Incentive Plan Awards In Last Fiscal Year table and were based on
a percentage of salary varying according to job grade classification and the
price of the Company's stock at the beginning of the performance period. The
target levels approved by the Committee for Performance Period IV were
established by the Committee using both internally generated information and
competitive data provided by an independent, third-party consultant.
Supplemental target awards, which are included in the target awards listed in
the table, were approved in recognition of promotions during the year. Actual
awards, if any, will be determined by the Committee at the end of the
performance period based on the single measurement of the Company's relative
total stockholder return as compared to the peer companies which the Company
evaluates its stockholder return performance.

In 1994, the Committee established the second performance period of the
Long-Term Incentive Plan ("LTIP II"). The Plan has a single performance measure
which is total return to stockholders, compared with the total return to
stockholders of the oil industry peer companies as listed in the Proxy Statement
Performance Graph and used by the Company to compare its shareholder return
performance. The LTIP II performance period covered three years from 1994
through 1996.

In 1994, the Committee established a target award for each individual based on a
percentage of salary varying according to job grade classification and price of
Company stock at the beginning of the performance period. Under the terms of the
Long-Term Incentive Plan, no award can be granted unless the Company's total
return to stockholders is greater than the total return to stockholders of the
bottom quartile of the eight oil industry peer companies. The Committee
determined that the Company's total return to stockholders for the three-year
period was above the total return to stockholders of the companies in the bottom
quartile of the peer group. The Committee further determined that the Company's
total return to stockholders was 68.8 percent for the three-year period, which
exceeded the total return to stockholders for each of the companies in the oil
industry peer group comprising the bottom quartile. The Committee also
determined that the Company's total return to stockholders for the three-year
period exceeded the average total return to stockholders of the peer group by
6.7 percent. The 68.8 percent total return to stockholders placed the Company in
the fifth of nine positions in the oil industry peer group including the
Company. On the basis of the above performance, the Committee granted awards
equal to 125 percent of the target amounts set in 1994 as adjusted for
promotions, if any occurred, during the three-year performance period.

The value of the awards for LTIP II, which are settled in restricted stock for
active employees, is set forth on the line for 1996 in the Summary Compensation
Table found in this Proxy Statement.

THE COMPENSATION COMMITTEE

Larry D. Horner, Chairman
Norman R. Augustine
George B. Beitzel
Randall L. Tobias
Victoria J. Tschinkel

                                       16

<PAGE>

                                PERFORMANCE GRAPH

The following graph shows the Company's total return to stockholders compared
with the S&P 500 Index and a peer group of eight integrated oil companies over
the five-year period from December 31, 1991, through December 31, 1996.


          COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN*
         Among Phillips Petroleum, S&P 500 Index, and Peer Group Index**

     225|------------------------------------------------------------------|
        |  *  Total return assumes dividend reinvestment             *     |
        | **  Amoco, Chevron, Exxon, Mobil, Texaco                         |
        |     Amerada Hess, ARCO, Unocal                                   |
        |                                                            &     |
     200|------------------------------------------------------------#-----|
        |                                                                  |
        |                                                                  |
        |                                                                  |
        |                                                                  |
     175|------------------------------------------------------------------|
        |                                                                  |
        |                                              *&#                 |
        |                                                                  |
  D     |                                     *                            |
  O  150|------------------------------------------------------------------|
  L     |                                                                  |
  L     |                                                                  |
  A     |                                                                  |
  R     |                        *                                         |
  S  125|-------------------------------------#----------------------------|
        |                        &#           &                            |
        |                                                                  |
        |               *&                                                 |
        |               #                                                  |
     100|---*&#------------------------------------------------------------|
        |                             Assumes $100 invested on 12/31/91 in |
        |                             Phillips Common Stock, S&P 500 Index |
        |                             and Peer Group Index.                |
        |                                                                  |
      75|----|----------|---------|-----------|-----------|-----------|----|
            1991      1992      1993        1994         1995        1996



   *=Phillips Petroleum (1)    &=S&P 500 Index (2)    #=Peer Group Index** (3)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                    1992                1993                1994                 1995                 1996
                                    ----                ----                ----                 ----                 ----
<S>                                 <C>                 <C>                 <C>                  <C>                  <C>
  (1) PHILLIPS PETROLEUM            $ 110               131                 153                  166                  221
------------------------------------------------------------------------------------------------------------------------------------
  (2) S&P 500 INDEX                   108               119                 120                  165                  203
------------------------------------------------------------------------------------------------------------------------------------
  (3) PEER GROUP INDEX                105               119                 125                  163                  201
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       17

<PAGE>


                            TERMINATION OF EMPLOYMENT
                                       AND
                         CHANGE-IN-CONTROL ARRANGEMENTS

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

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

A change of control would take place if there is either (i) an acquisition
(other than directly from the Company) of 20 percent or more of the beneficial
interest in the Company's voting stock by a party other than the Company, a
subsidiary or a Company-sponsored benefit plan, or (ii) a change in the Board of
Directors as a result of which the current directors (together with the
successors which they nominate or approve for nomination) cease to be a majority
of the Board.

                                  PENSION PLAN

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

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

                               PENSION PLAN TABLE

Estimated Annual Retirement Benefits Under Final Average Earnings Formula (1)(2)
<TABLE>
<CAPTION>
                                                           Years of Credited Service
  Annual Average of Highest 3                                 At Normal Retirement
  Consecutive Calendar Years       -------------------------------------------------------------------------------------------------
 Salary and AICP Awards in 10
Years Preceding Retirement (3)         20             25                30               35               40             45
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>               <C>              <C>               <C>            <C>
      $  450,000                    144,000        180,000           216,000          252,000           288,000        324,000
         650,000                    208,000        260,000           312,000          364,000           416,000        468,000
         850,000                    272,000        340,000           408,000          476,000           544,000        612,000
       1,150,000                    368,000        460,000           552,000          644,000           736,000        828,000
       1,450,000                    464,000        580,000           696,000          812,000           928,000      1,044,000
       1,750,000                    560,000        700,000           840,000          980,000         1,120,000      1,260,000
       2,050,000                    656,000        820,000           984,000        1,148,000         1,312,000      1,476,000
       2,350,000                    752,000        940,000         1,128,000        1,316,000         1,504,000      1,692,000
</TABLE>
(1) As required by the Internal Revenue Code of 1986, as amended, the retirement
    plan may not provide annual benefits exceeding a maximum amount, or include
    in benefit computations, compensation in excess of the amount specified in
    the Internal Revenue Code. Also, participation in the Company's AICP
    deferral program and voluntary salary reduction program may cause a
    reduction in retirement plan benefits. Additional amounts, if required to
    provide the total benefits indicated in the table, would be made by
    supplemental Company payments. The Company also maintains, as a recruiting
    tool, a supplemental plan under which officers and other executives who are
    hired during mid-career may receive retirement income in excess of that
    which their shorter Credited Service would provide under the retirement
    plan. However, total benefits under this supplemental plan and the
    retirement plan will not exceed benefits obtainable under the retirement
    plan by a full career employee at similar salary levels. These supplemental
    benefits have been partially pre-funded by the Company in a special trust
    designated for this purpose.
(2) With respect to the executive officers named in the Summary Compensation
    Table, their years of credited service as of February 28, 1997, for
    retirement purposes are: W. W. Allen, 37 years; C. L. Bowerman, 35 years;
    T. C. Morris, 31 years; J. J. Mulva, 25 years; and J. B. Whitworth,
    31 years. See the Summary Compensation Table for their current
    covered compensation.
(3) AICP Awards are shown under the heading "Bonus" in the Summary Compensation
    Table.
                                       18
<PAGE>


                           PROPOSAL 1 - BY THE COMPANY

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

     ---------------------------------------------------------------------
RESOLVED, that the Board of Directors' designation of Ernst & Young LLP to serve
as the independent auditors to audit the books, records and accounts of the
Company for the 1997 fiscal year be and hereby is approved.
     ----------------------------------------------------------------------


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

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

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


                                  OTHER MATTERS

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



DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Stockholder proposals intended to be presented at the 1998 Annual Meeting must
be received at the Company's executive offices in Bartlesville, Oklahoma, no
later than December 1, 1997, for inclusion in the Company's Proxy Statement and
form of proxy relating to that meeting.

                                             By Order of the Board of Directors,



                                         /s/ Dale J. Billam

                                             Dale J. Billam
                                             Secretary

Bartlesville, Oklahoma 74004
March 28, 1997

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

                                       19

<PAGE>

                     APPENDIX - FORM OF PROXY
                                                        Definitive Copy

                            PHILLIPS' Shield


PROXY                                                            PROXY

      THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

                      PHILLIPS PETROLEUM COMPANY

                      Annual Meeting May 12, 1997


The undersigned hereby appoints W. ALLEN, G. BEITZEL and J. EDWARDS as
proxy holders with power of substitution, or, if all do not act on a
matter, those who do act, to vote all stock which the undersigned could
vote at the Company's annual stockholders' meeting to be held at the Adams
Building, 4th Street and Keeler Avenue, Bartlesville, Oklahoma, on May 12,
1997, at 10 a.m., and at any adjournment thereof, in the manner stated
herein as to the following matters and in their discretion on any other
matters that come before the meeting, all as described in the Notice and
Proxy Statement.


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


                         ^ FOLD AND DETACH HERE ^

<PAGE>


This Proxy will be voted or not voted as you direct below. In the absence
of such direction, it will be voted FOR Directors, and FOR Proposal 1.


                                                  Please mark
                                                 your votes as  [X]
                                                 indicated in
                                                 this example


Company recommends a vote FOR: ELECTION OF DIRECTORS: Nominees: W. Allen,
N. Augustine, G. Beitzel, D. Boren, C. Bowerman, R. Chappell, Jr.,
L. Eagleburger, J. Edwards, L. Horner, J. Mulva, R. Tobias, V. Tschinkel
and K. Turner.

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

     [ ]                [ ]               ---------------------------------



Company recommends a vote FOR:
Proposal 1 to approve the
designation of the independent
auditors, Ernst & Young LLP.

 FOR       AGAINST      ABSTAIN

 [ ]         [ ]          [ ]


                                                I PLAN TO ATTEND THE [ ]
                                                   ANNUAL MEETING


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


Dated:______________________, 1997

__________________________________

__________________________________

  Signature(s) of Stockholder(s)

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


                         ^ FOLD AND DETACH HERE ^

<PAGE>