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


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

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

Check the appropriate box:

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

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/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:


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


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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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    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.:

    ___________________________________________________________________________
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    ___________________________________________________________________________
    4) Date Filed:

    ___________________________________________________________________________


<PAGE>

                         NOTICE OF 1999 ANNUAL MEETING
                                  MAY 3, 1999
                              and PROXY STATEMENT

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

[LOGO] PHILLIPS PETROLEUM COMPANY
       BARTLESVILLE, OKLAHOMA 74004

                                           April 5, 1999

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 3, 1999, starting at 10 a.m. local time. Your
attendance will provide you with an opportunity to hear the chairman's and the
president's reports on the Company and its operations. Directors and other
representatives of the Company will also be in attendance.

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 11 directors, you are asked to vote on one
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

--------------------------------------------------------------------------------
<PAGE>

                               Table of Contents

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


--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------

2


<PAGE>
--------------------------------------------------------------------------------

PHILLIPS PETROLEUM COMPANY
BARTLESVILLE, OKLAHOMA 74004

NOTICE OF ANNUAL MEETING to be held May 3, 1999

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 3, 1999, 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 11 directors (pages 5 through 7);

   Proposal of the Company:
   -----------------------
     Proposal 1. To approve the designation of Ernst & Young LLP as independent
     auditors for 1999 (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 12, 1999, 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 1998 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 April 5, 1999

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

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

April 5, 1999

                                PROXY STATEMENT

                                  SOLICITATION

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

(1)  filing with the Secretary an instrument revoking the earlier proxy;

(2)  executing a later-dated proxy; or

(3)  voting in person by ballot at the meeting.

This Proxy Statement and Proxy Card are first being mailed on or about April 5,
1999, to stockholders of record as of March 12, 1999.

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
beginning 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:

(1) disclosure may be required by applicable law;

(2) stockholders write comments on their proxy cards;

(3) disclosure is expressly requested by a stockholder;

(4) in limited circumstances such as a proxy contest or other solicitation of
    proxies based on an opposition proxy statement; or

(5) any matter for stockholder approval requiring the vote of more than a
    majority of the shares present at any meeting.

The Company has engaged ChaseMellon Shareholder Services, L.L.C. to count the
votes represented by 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 281,272,366 shares outstanding at the
close of business February 26, 1999. The record date for stockholders entitled
to vote at this meeting is March 12, 1999. Each share is entitled to one vote.

Included in shares outstanding are 29,125,863 shares held by the Compensation
and Benefits Trust ("CBT") formed in December 1995. The CBT is designed to
acquire, hold and distribute shares of the Company's common stock to fund
certain future compensation and benefit obligations of the Company. The CBT does
not increase or alter the amount of benefits or compensation which will be paid
under existing plans, but offers the Company financial flexibility in providing
the funding requirements of those plans. Shares held by the CBT do not affect
earnings per share or total stockholders' equity until after they are
transferred out of the CBT. All shares are required to be transferred out of the
CBT by January 1, 2021.

The number of shares of the Company's common stock beneficially owned as of
February 26, 1999, by any person or group known to own 5 percent or more, and by
each of the directors and nominees, and by all directors and officers of the
Company as a group, is shown in the tables "Security Ownership of Certain
Beneficial Owners," and "Security Ownership of Management," respectively, on
pages 7 and 8 after the information on nominees for directors.

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

Under the Company's Bylaws, the holders of a majority of the issued and
outstanding shares of the common stock, present in person or represented by
proxy at the Annual Meeting, will constitute a quorum for all purposes unless
otherwise provided by law. Where a quorum is present, the affirmative vote of a
majority of the stock represented at the meeting is required for the election of
the directors, and the adoption of 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 26, 1999, unless otherwise stated.

4
<PAGE>
                       NOMINEES FOR ELECTION AS DIRECTORS

The number of directors to be elected is 11. The designated proxy holders of the
Company intend, unless otherwise instructed, to vote all proxies for the
election of the following 11 nominees. If elected, they will hold office until
the next Annual Meeting or until their successors are elected. The term of each
present director will expire with the election of directors at the 1999 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 26, 1999, 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 serve as directors.
--------------------------------------------------------------------------------

W. W. Allen

Director since 1989  [photo]

Age 62

W. W. Allen 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. He is a director of the
Bank of Oklahoma, N.A.
--------------------------------------------------------------------------------

Norman R. Augustine

Director since 1989  [photo]

Age 63

Norman R. Augustine is a lecturer in Aeronautical Engineering with the rank of
Professor at Princeton University, a position he assumed in August 1997. He is
also Chairman of the Executive Committee of the Board of Directors of Lockheed
Martin Corporation. Prior to that, he was Chairman of the Board of Directors of
Lockheed Martin Corporation from August 1997 through March 1998; Chief Executive
Officer from January 1996 through July 1997; and President from March 1995
through June 1996. He served as Chairman of the Board of Directors and Chief
Executive Officer of Martin Marietta Corporation from April 1988 until its
merger with Lockheed Corporation in March 1995. He is a director of The Procter
& Gamble Company and The Black & Decker Corporation.
--------------------------------------------------------------------------------

David L. Boren

Director since 1994  [photo]

Age 57

David L. Boren is President of the University of Oklahoma, a position he assumed
in November 1994. He previously served as a United States Senator from the State
of Oklahoma from November 1979 until November 1994, and is a former Governor of
Oklahoma. He is a director of AMR Corporation; Texas Instruments Corporation;
Torchmark Corporation; and Waddell & Reed Financial, Inc.
--------------------------------------------------------------------------------

C. L. Bowerman

Director since 1989  [photo]

Age 59

C. L. Bowerman is an Executive Vice President of the Company responsible for
human resources, capital budgeting and services, a position he assumed in
January 1999. He previously was Executive Vice President responsible for
planning and corporate relations and services beginning in January 1995, and
Executive Vice President responsible for corporate strategic planning, corporate
information technology and research and development beginning in April 1992.
--------------------------------------------------------------------------------
                                                                               5
<PAGE>

Robert E. Chappell, Jr.

Director since 1990  [photo]

Age 62

Robert E. Chappell, Jr., is self employed as an investment and management
consultant. He previously was the Senior Executive Vice President and Chief
Investment Officer of Metropolitan Life Insurance Company, a position he held
from October 1989 through December 1992.
--------------------------------------------------------------------------------

Lawrence S. Eagleburger

Director since 1993  [photo]

Age 68

Lawrence S. Eagleburger 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; Halliburton Company; Stimsonite Corporation; and
Universal Corporation.
--------------------------------------------------------------------------------

Larry D. Horner

Director since 1991  [photo]

Age 64

Larry D. Horner 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 served as Chairman and
Chief Executive Officer of KPMG Peat Marwick from October 1984 to December 1990.
He is a director of American General Corporation; Asia Pacific Wire & Cable
Corporation Limited; Atlantis Plastics, Inc.; Biological & Popular Culture,
Inc.; Laidlaw Holdings, Inc.; and Newmark Homes Corp.
--------------------------------------------------------------------------------

J. J. Mulva

Director since 1994  [photo]

Age 52

J. J. Mulva 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; and
Vice President and Chief Financial Officer beginning in March 1993.
--------------------------------------------------------------------------------

Randall L. Tobias

Director since 1992  [photo]

Age 56

Randall L. Tobias is Chairman Emeritus of Eli Lilly and Company, a position he
assumed in January 1999. He retired as Chairman of the Board of Directors and
Chief Executive Officer of Eli Lilly and Company in December 1998. 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.
--------------------------------------------------------------------------------
6
<PAGE>

Victoria J. Tschinkel

Director since 1993  [photo]

Age 51

Victoria J. Tschinkel is a Senior Consultant to Landers & Parsons, a
Tallahassee, Florida, law firm, a position she assumed in 1987. She previously
served as Secretary of the Florida Department of Environmental Regulation from
1981 to 1987.
--------------------------------------------------------------------------------

Kathryn C. Turner

Director since 1995  [photo]

Age 51

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

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------------------------------------------------------------------------------------
                       Name and Address of                      Amount and Nature of Beneficial
Title of Class          Beneficial Owner                                  Ownership                    Percent of Class
-----------------------------------------------------------------------------------------------------------------------------
                                                                   Direct           Indirect
                                                                -------------------------------
<S>                                                             <C>                <C>                <C>
Common           Vanguard Fiduciary Trust Company               46,289,594 (1)         --                  16.46%
                 P. O. Box 2900
                 Valley Forge, Pennsylvania 19482

Common           Capital Research and Management Company        26,703,500 (2)         --                   9.50%
                 333 South Hope Street
                 Los Angeles, California 90071
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As of February 26, 1999, Vanguard as Trustee held 46,289,594 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 29,125,863 shares in
    the Compensation and Benefits Trust ("CBT"), without any voting power.
    Vanguard has disclaimed beneficial ownership of such shares. As Trustee of
    the CBT, Vanguard will vote shares in the CBT only in accordance with the
    pro rata directions of eligible domestic employees and the trustees of
    certain international Company stock plans. Trust agreements for the Plans
    and CBT each provide that all voting directions of individual employees
    received by the Trustee will be held in confidence and not be disclosed to
    any person, including the Company.

(2) Capital Research and Management Company ("CRMC"), as investment adviser
    registered under Section 230 of the Investment Advisers Act of 1940, has
    reported that it exercises as of January 31, 1999, sole dispositive power
    with respect to 26,703,500 shares. According to the Schedule 13G filed by
    CRMC with the Securities and Exchange Commission, such shares equal 10.50
    percent of the Company's outstanding shares. However, when shares held by
    the CBT are included, shares held by CRMC equal only 9.50 percent of the
    Company's outstanding shares. CRMC has disclaimed beneficial ownership of
    these shares.

                                                                               7
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                    SECURITY OWNERSHIP OF MANAGEMENT
                                                       Phillips Petroleum Company
                                                              Securities
-----------------------------------------------------------------------------------------------------------------------------
                                                                     Amount and Nature of
                                                                     Beneficial Ownership
-----------------------------------------------------------------------------------------------------------------------------
Title of Class           Name of Beneficial Owner              Direct(1)        Indirect               Percent of Class
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>                    <C>
                         Directors and Nominees (2)

Common                   W. W. Allen                          579,678                --                  less than 1%
Common                   Norman R. Augustine                   21,884                --                  less than 1%
Common                   George B. Beitzel (3)                 88,791                --                  less than 1%
Common                   David L. Boren                        10,868                --                  less than 1%
Common                   C. L. Bowerman                       162,880               654                  less than 1%
Common                   Robert E. Chappell, Jr.               19,300                --                  less than 1%
Common                   Lawrence S. Eagleburger                8,175             6,000                  less than 1%
Common                   Larry D. Horner                       17,631                --                  less than 1%
Common                   J. J. Mulva                          343,994                --                  less than 1%
Common                   Randall L. Tobias                     16,906                --                  less than 1%
Common                   Victoria J. Tschinkel                 14,628                --                  less than 1%
Common                   Kathryn C. Turner                      9,699                --                  less than 1%

                         Executive Officers

Common                   R. G. Ceconi                         104,404                --                  less than 1%
Common                   E. K. Grigsby                         75,765                --                  less than 1%
Common                   R. K. Gupta                           54,908             3,926                  less than 1%
Common                   K. L. Hedrick                        146,219                --                  less than 1%
Common                   J. L. Howe                           148,132                --                  less than 1%
Common                   J. C. Mihm                           159,218               696                  less than 1%
Common                   T. C. Morris                          97,865                --                  less than 1%
Common                   M. J. Panatier                        95,054                --                  less than 1%
Common                   B. Z. Parker                         103,960                --                  less than 1%
Common                   B. J. Price                           69,396                --                  less than 1%
Common                   J. B. Whitworth                       78,809                --                  less than 1%
-----------------------------------------------------------------------------------------------------------------------------
All directors, nominees and executive officers
as a group (23 in group)                                    2,428,164            11,276                  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.

(3) Mr. George B. Beitzel, a current director, is retiring as director having
    reached mandatory retirement age.

                       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 1998, 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, Lawrence S. Eagleburger, Randall L. Tobias and Kathryn C. Turner. The
Company had no interlocking relationship during the last fiscal year.

8
<PAGE>
                              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 1998, the Board
of Directors held nine meetings and the directors attended an average of 99
percent of all Board and Committee meetings.

Committees of the Board

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

--------------------------------------------------------------------------------
                    Compen-         Directors'                   Public
   Audit            sation           Affairs      Executive      Policy

   Horner*          Beitzel*        Augustine*    Allen*         Tschinkel*
   Boren            Augustine       Chappell      Augustine      Boren
   Chappell         Eagleburger     Horner        Beitzel        Tobias
   Tschinkel        Tobias                        Horner         Turner
                    Turner                        Mulva
                                                  Tschinkel
* Chairman
--------------------------------------------------------------------------------

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 counsel, the
independent auditors, the internal audit staff or others 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 Conduct
and Ethics and oversees the activities of the Corporate Compliance and Ethics
Committee. The Audit Committee held five meetings in 1998.

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 1998.

The Committee on Directors' Affairs recommends to the Board qualified candidates
for election as directors and nominates candidates to the Board committees. The
Committee welcomes suggestions from stockholders about qualified candidates. A
stockholder wishing to submit a recommendation to the Committee may do so by
writing Dale J. Billam, Secretary, Phillips Petroleum Company, Bartlesville,
Oklahoma 74004. The Committee on Directors' Affairs held two meetings in 1998.

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 two meetings in 1998.

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

(1) in response to current and emerging public policy issues, and

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

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

    (b)  reviews information from management and approves recommendations to
         assist in the formulation and

                                                                               9
<PAGE>

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

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

The Committee also has the authority to authorize the use of Company funds for
political contributions on behalf of the Company, if and to the extent
permitted by law. The Public Policy Committee held three meetings in 1998.

                     COMPENSATION OF DIRECTORS AND NOMINEES

During 1998, the annual Board retainer fee for non-employee directors consisted
of $11,000 plus 1,000 shares of Phillips common stock. Board members received
$1,000 for each Board meeting attended. Committee retainer fees were $2,500 for
Board committee chairmen and $2,250 for committee members. Committee meeting
fees consisted of $750 for the Board committee chairmen and $500 for the
committee members for each committee meeting attended. The directors could elect
to defer all or a part of their cash compensation.

Effective January 1, 1998, the Board of Directors unanimously agreed to
terminate the Non-Employee Director Retirement Plan for all non-employee
directors whose normal retirement date is after 1998. Commensurate with this
action and to further align the interests of the non-employee directors with
those of stockholders, the Board of Directors unanimously approved the Phillips
Petroleum Company Stock Plan for Non-Employee Directors ("Non-Employee Director
Stock Plan"). The Non-Employee Director Stock Plan became effective January 1,
1998, and provides for the issuance of restricted or unrestricted Company common
stock.

The Non-Employee Director Stock Plan provided for an initial grant of restricted
stock in satisfaction of the non-employee directors' December 31, 1997, accrued
retirement benefits in the Non-Employee Director Retirement Plan. The
Non-Employee Director Stock Plan also provided for annual grants of restricted
stock which are targeted to render competitive the directors' total compensation
from the Company when compared to the total compensation of other non-employee
directors within the Company's peer group. The grant for 1998 was 400 shares of
the Company's common stock which is restricted, non-transferable and
forfeitable. Both the initial grant and the grant of the 400 shares of
restricted stock were made in March 1998. For 1998, a dividend-equivalent
amount was paid to each non-employee director who received shares equal to
the dividend which would have been payable on such shares if they had been
granted to and retained by the directors on the effective date of the Plan.
All dividends payable on restricted stock, and such dividend-equivalent, are
reinvested in restricted stock.

Effective January 1, 1999, the Board compensation is $106,500 per calendar year
for each director who chairs a committee of the Board and $105,000 per calendar
year for each director who does not chair a committee. One-half of this annual
compensation amount is paid in either restricted or unrestricted stock. The
other half is paid as cash, but may be deferred or taken as additional
restricted or unrestricted stock. The future payment of any deferred cash
compensation is funded in a grantor trust designed for this purpose.

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

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

As part of the Company's overall program to support communities and recognize
the importance of charitable giving, The Phillips Petroleum Company Charitable
Giving Program was established in December 1996. The program is funded by life
insurance policies on directors. Upon the death of an individual director, the
Company will donate the $1,000,000 proceeds from such life insurance to one or
more qualifying charitable organizations recommended by the individual director.
The proceeds will be paid in $100,000 installments over a 10-year period.
Individual directors derive no financial benefit from this program, because all
charitable deductions for Federal and State income taxes accrue solely to the
Company. The Company paid premiums of $336,274 in 1998.

10
<PAGE>


                           EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth compensation information
for services performed in 1998, 1997 and 1996 for those persons who were at
December 31, 1998, the Chief Executive Officer and the four most highly
compensated officers.

<TABLE>
<CAPTION>
                                                     Summary Compensation Table

                                                                                      Long-Term Compensation
                                                                             --------------------------------------
                                             Annual Compensation                      Awards              Payouts
                                    ---------------------------------------- ------------------------- ------------
                                                                             Restricted    Securities                   All Other
                                                                Other Annual    Stock      Underlying     Long-Term      Compen-
Name and                                                       Compensation   Award(s)(1)    Option/     Incentive       sation(2)
Principal Position           Year   Salary ($)    Bonus($)          ($)          ($)         SARs(#)      Payout($)         ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>      <C>          <C>               <C>          <C>       <C>          <C>             <C>
W. W. Allen                  1998     945,000      570,901           0            0         228,800      520,270(3)      9,211
Chairman of the              1997     870,000    1,105,328           0            0         210,400      568,289(4)      9,217
Board & CEO                  1996     850,000    1,105,000           0            0         237,359      579,469(5)      8,053

J. J. Mulva                  1998     684,501      398,300           0            0         124,500      316,361(3)      9,211
President &                  1997     625,500      738,787           0            0          66,600      293,552(4)      9,217
COO                          1996     594,667      731,340           0            0          65,105      322,656(5)      8,053

C. L. Bowerman               1998     478,752      214,461           0            0          72,800      175,434(3)      9,211
Executive Vice               1997     453,501      473,567           0            0          29,600      182,005(4)      9,217
President                    1996     445,250      379,842           0            0          36,592      263,025(5)      8,053

K. L. Hedrick                1998     431,499      171,010           0            0          74,700      176,721(3)      9,211
Executive Vice               1997     366,750      321,538           0            0          21,200       97,357(4)      9,217
President                    1996     345,750      232,476           0            0          22,802      124,294(5)      7,335

T. C. Morris                 1998     382,252      178,182           0            0          53,300      119,208(3)      9,211
Sr. Vice President           1997     363,751      334,348           0            0          21,000      116,442(4)      9,217
& CFO                        1996     356,000      243,493           0            0          24,240      131,600(5)      8,052
-----------------------------------------------------------------------------------------------------------------------------------
</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 that are not transferable prior to death,
    disability or retirement, unless restrictions are earlier lapsed by the
    Compensation Committee of the Board of Directors (the "Committee") or after
    a change of control. The aggregate number of such restricted shares held at
    December 31, 1998, 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, 25,993 shares,
    $1,110,390; Mr. Hedrick, 15,901 shares, $679,272; Mr. Morris, 21,720 shares,
    $927,852; Mr. Mulva, 60,331 shares, $2,577,268.

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

(4) Value of the restricted stock on the date of the award for performance under
    the Long-Term Incentive Plan Performance Period from 1995-1997.

(5) Value of the restricted stock on the date of the award for performance under
    the Long-Term Incentive Plan Performance Period from 1994-1996.

                                                                              11
<PAGE>

                     OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

Stock options granted during 1998 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      ($/Share)       Date       0%($)         5%($)                10%($)
-------------------------------------------------------------------------------------------------------------------------------
<S>                       <C>             <C>               <C>        <C>            <C>       <C>                 <C>
W. W. Allen               95,900          10.86%            43.35      01/12/08        0         2,614,234           6,625,731
                         132,900          15.05%            46.29      10/12/08        0         3,868,719           9,804,033

J. J. Mulva               50,000           5.66%            43.35      01/12/08        0         1,363,000           3,454,500
                          74,500           8.43%            46.29      10/12/08        0         2,168,695           5,495,865

C. L. Bowerman            31,300           3.54%            43.35      01/12/08        0           853,238           2,162,517
                          41,500           4.70%            46.29      10/12/08        0         1,208,065           3,061,455

K. L. Hedrick             27,800           3.15%            43.35      01/12/08        0           757,828           1,920,702
                          46,900           5.31%            46.29      10/12/08        0         1,365,259           3,459,813

T. C. Morris              21,300           2.41%            43.35      01/12/08        0           580,638           1,471,617
                          32,000           3.62%            46.29      10/12/08        0           931,520           2,360,640
--------------------------------------------------------------------------------------------------------------------------------
Total Stockholders (2)       N/A            N/A               N/A           N/A        0     7,173,386,648      18,180,824,779
--------------------------------------------------------------------------------------------------------------------------------
</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, 1998, (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, 1998, is shown
    above as "potential realizable value" for Total Stockholders.




                         TEN-YEAR OPTION/SAR REPRICING

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

<TABLE>
<CAPTION>
                               Number of Securities   Market Price    Exercise             Length of Original
                                     Underlying        Of Stock at      Price                  Option Term
                                    Options/SARs         Time of      At Time of     New    Remaining at Date
                                     Repriced or       Repricing or  Repricing or  Exercise  Of Repricing or
Name                         Date     Amended(#)       Amendment($)  Amendment($)  Price($)    Amendment
<S>                          <C>        <C>                <C>           <C>        <C>          <C>
W. W. Allen                   --           0                --           --           --          --
J. J. Mulva                   --           0                --           --           --          --
C. L. Bowerman                --           0                --           --           --          --
K. L. Hedrick                 --           0                --           --           --          --
T. C. Morris                  --           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 1998, 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 1998 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>
                                                                           395,971              3,328,208
W. W. Allen                       7,200                150,039             551,766              1,583,431
                                                                           158,779              1,768,552
J. J. Mulva                       8,125                180,995             218,124                378,473
                                                                            55,301                587,156
C. L. Bowerman                    3,850                120,173             120,158                220,743
                                                                            72,305                810,567
K. L. Hedrick                         0                      0             105,869                134,479
                                                                            12,499                 69,678
T. C. Morris                     26,699                476,901              85,402                141,319
------------------------------------------------------------------------------------------------------------------
</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 $42.7188, the fair market value of the Company's common stock on
    December 31, 1998.


              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 1998 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               33,347        12/31/00                  16,674               33,347            66,694
J. J. Mulva               19,104        12/31/00                   9,552               19,104            38,208
C. L. Bowerman            10,241        12/31/00                   5,121               10,241            20,482
K. L. Hedrick              9,100        12/31/00                   4,550                9,100            18,200
T. C. Morris               7,590        12/31/00                   3,795                7,590            15,180
------------------------------------------------------------------------------------------------------------------
</TABLE>


(1) At the end of the three-year performance period, from January 1, 1998,
    through December 31, 2000, the Compensation Committee will evaluate the
    Company's performance to determine the extent to which target awards have
    been earned. The Company's performance will be measured by total stockholder
    return and return on capital employed, compared with the total stockholder
    return and return on capital employed of the 1998 oil industry peer
    companies used in the Performance Graph on page 17.

(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, to achieve a high level
of return on the capital employed by the Company and to achieve industry safety
leadership.

Executive compensation decisions made by the Committee are based on a
combination of quantitative and qualitative measures. During 1998, quantitative
measures employed by the Committee to evaluate corporate performance were:
relative total return to stockholders; relative return on capital employed by
the corporation; and improving safety performance through reduction of
recordable injuries. Quantitative measures employed by the Committee to evaluate
business unit and staff performance were: the achievement of pre-established
targets set for organizations engaged in the development of projects designed to
result in profitable growth and the addition of value to the Company; the return
on capital employed by the business unit; controlling costs on a per unit of
sales/production basis; improving safety performance through reduction of
recordable injuries; and the implementation of a process to achieve safety
excellence. In addition, staff units are measured by the relative success of
their internal customers and by controlling expenses.

The Committee also uses the following qualitative measures of performance: 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 the creation of economic value enhancement.

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

Internal Revenue Code Section 162(m)
------------------------------------
The Compensation Committee has carefully considered the implications of Section
162(m) of the Internal Revenue Code. The Committee's policy is, where possible
and considered appropriate, to preserve corporate tax deductions, including the
deductibility of compensation to the executive officers named in the Summary
Compensation Table pursuant to Section 162(m) of the Internal Revenue Code. The
Committee's policy is also to maintain the flexibility to approve compensation
arrangements which it deems to be in the best interest of the Company and its
stockholders, but which may not always qualify for full tax deductibility. The
Committee believes that it is in the best interest of the Company and its
stockholders to preserve the flexibility to reward executives consistent with
the Company's pay philosophy for each element of compensation. The Committee
will continue to review the executive compensation practices of the Company to
determine if elements of executive compensation administered by the Committee
are appropriate for qualification as "performance-based compensation" under the
provisions of Section 162(m) of the Internal Revenue Code.


Executive Compensation Actions for 1998

Salaries
--------
During 1998, the Committee reviewed and approved salaries for all executive
officers and employees with annual salaries of $250,000 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 October 1998, as
part of the Company's annual salary program, the Committee reviewed competitive
salary data for the Chairman of the Board and for the President to determine if
the Committee would recommend to the Board of Directors that the salaries of
these two officers be changed. Competitive salary data provided by an
independent, third-party consultant was utilized for this purpose. Also
considered was Mr. Allen's individual performance during the year. On the basis
of the information provided, the Committee unanimously approved a resolution
recommending to the Board of Directors that Mr. Allen's annual salary be
increased from $930,000 to $990,000. In addition, after considering competitive
salary data, the Committee unanimously agreed to recommend to the Board of
Directors that the annual salary of Mr. Mulva, the President and Chief Operating

14

<PAGE>

Officer, be increased from $666,000 to $740,000. The changes to Mr. Allen's and
Mr. Mulva's salaries were approved by the Board effective October 1, 1998.

In addition to the recommendations stated above, in October 1998 the
Compensation Committee used competitive salary data to approve changes to the
annual salaries of other executive officers and all other employees whose annual
salary was $250,000 or greater. The changes to the annual salaries of executive
officers and other employees whose salary was $250,000 or greater were effective
October 1, 1998.

Annual Incentive Compensation Program
-------------------------------------
The Committee administers the Annual Incentive Compensation Plan ("AICP") which
provides an opportunity for the award of annual bonuses. The AICP contains
objectives which the Committee establishes each year. For 1998, the Committee
set three Companywide objectives: (i) total stockholder return for 1998 should
warrant award based on performance relative to the shareholder return of the
1998 oil industry peer companies, as listed in the Proxy Statement Performance
Graph used by the Company to compare its stockholder return performance;
(ii) return on capital employed by the corporation should warrant award based on
performance relative to the return on capital employed of the 1998 oil industry
peer companies, as listed on the Proxy Statement Performance Graph; and
(iii) safety performance should be better than pre-established targets
measuring recordable injury rate.

The Committee establishes targets each year for individual AICP awards based on
a percentage of salary. 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 1998, the target percentages varied from 22.5 percent of
salary for the beginning level of AICP eligibility to 75 percent of salary for
the Chief Executive Officer. The target percentages are prorated to recognize
changes in salary bands during the year. The Committee is authorized under the
terms of the AICP to approve individual awards from 0 percent of the target
amount to 200 percent of the target amount 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 the participant is related, as well
as corporate performance.

In February 1999, the Committee approved cash awards for strategic business
units and staff units under the 1998 AICP ranging from 32 percent of the target
bonus to 98 percent of the target bonus based on a review of the Company's 1998
corporate and business or staff group performance.

In determining the amount of incentive compensation award to be paid to
Mr. Allen and Mr. Mulva, the Committee focused on the three measures in the plan
that are determined by corporate performance. These three are relative
shareholder return, return on capital employed, and safety as measured by the
rate of recordable injuries incurred during the year.

It was determined that total shareholder return for Phillips in 1998 was
negative 9.7 percent. This placed the Company seventh in the peer group of eight
companies, including Phillips. The announcement of corporate combinations
involving three of the peer companies influenced these results.

It was further determined that return on capital employed by the corporation in
1998 was 4.6 percent which placed the Company fifth in the peer group. The
Company's rate of recordable injuries was 7.6 percent better than the prior year
and was the best year ever in the Company's history, exceeding the record set in
1997. Taking the above into consideration and considering the performance of the
strategic business units and staff units, it was the Committee's judgment to
grant an AICP award to Mr. Allen and Mr. Mulva which is 23 percent less than the
target amount.

The amount of the awards to 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. If the date of the grant is not
a day in which the Company's stock is traded on the New York Stock Exchange, the
fair market value is determined on the first trading day immediately preceding
the date on which the Committee grants the option. The number of shares subject
to options at the date of each grant is set using internally generated
information and information from independent, third-party consultants to achieve
option grants which approximate those granted by peer companies to persons in
corresponding job positions. In addition, individual performance is considered
when making each stock option grant. The size of each grant is a function of
total compensation targets and individual performance.

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.

In 1998, the Committee made two grants of stock options to eligible employees.
In January 1998, a partial grant approximating nine-twelfths of a normal grant
was made to eligible executives. It was the intent of the Committee to begin
annual grants in October of each year. The January

                                                                              15
<PAGE>

grant was made for the purpose of bridging the grant date from January to
October. In October 1998, the Committee approved a normal grant of stock options
to eligible employees. It is anticipated that in the future, stock option grants
will be made in October with the exception of supplemental stock option grants
to recognize promotions during the 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.

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.

In the January 1998 meeting, the Committee established the sixth performance
period of the plan, which extends from January 1, 1998, through December 31,
2000. 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 salary band 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 VI 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 two
measurements: the Company's relative total stockholder return compared with the
peer companies against which the Company evaluates its stockholder return
performance, and the Company's return on capital employed compared with the peer
companies against which the Company evaluates its stockholder return
performance.

In 1996, the Committee established the fourth performance period of the
Long-Term Incentive Plan ("LTIP IV"). The Plan has a single performance measure
which is total return to stockholders, compared with the total return to
stockholders of the 1998 oil industry peer companies as listed in the Proxy
Statement Performance Graph and used by the Company to compare its shareholder
return performance. For LTIP IV, the peer group included one additional company,
Unocal, which was a member of the peer group when LTIP IV commenced. The LTIP IV
performance period covered the three years from 1996 through 1998.

In 1996, the Committee established a target award for each individual based on a
percentage of salary varying by 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 1998 oil industry peer companies and Unocal.

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 37 percent for the three-year
performance period which placed the Company in the third quartile of the peer
group. The Company placed sixth of the nine positions in the oil industry peer
group including the Company.

On the basis of the above performance, the Committee granted awards equaling 25
percent less than the target amount set in 1996 adjusted for promotions, if any,
during the three-year performance period.

The value of the awards for LTIP IV, which are settled in restricted stock for
the five most highly compensated executive officers, is set forth on the line
for 1998 in the Summary Compensation Table found in this Proxy Statement.

THE COMPENSATION COMMITTEE

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

16

<PAGE>

                               PERFORMANCE GRAPH

The following graph shows the Company's total return to stockholders compared
with the S&P 500 Index and the two peer groups of seven integrated oil companies
over the five-year period from December 31, 1993, through December 31, 1998.


         COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL STOCKHOLDER RETURN(1)
      Among Phillips Petroleum, S&P 500 Index, and Peer Group Indexes(2)(3)

Assumes $100 invested on 12/31/93 in
Phillips Common Stock, S&P 500 Index
and Peer Group Indexes.

                   [ Line Graph Appears Here ]


-----------------------------------------------------------------------------
                        1994       1995        1996       1997        1998
Phillips Petroleum      $117       $126        $169       $191        $173
S&P 500 Index            101        139         171        229         294
Peer Group Index(2)      105        138         170        207         246
Peer Group Index(3)      102        124         157        186         163
-----------------------------------------------------------------------------

(1) Total return assumes dividend reinvestment

(2) Amerada Hess, Amoco, ARCO, Chevron, Exxon, Mobil, Texaco, the "1998 oil
    industry peer companies."

(3) In December 1998, the Compensation Committee, as part of its normal routine,
    reviewed the appropriateness of the peer group used for compensation
    comparison purposes. After review, the Committee unanimously agreed to
    change the peer group by dropping Exxon Corporation, Mobil Corporation,
    Chevron Corporation and Amoco Corporation and adding USX-Marathon Group,
    Conoco Inc., Occidental Petroleum Corporation and Unocal Corporation. The
    rationale for the change was that recently announced corporate combinations
    render Exxon, Mobil and Amoco no longer appropriate for purposes of
    comparison. Chevron was dropped from the peer group due to the difference in
    the relative size of the two companies.

    It was the Committee's opinion that the new peer group provides a better
    alignment for compensation comparisons and for purposes of comparing
    relative performance for measures used in the executive compensation
    programs. Future performance periods in the Annual Incentive Compensation
    Plan and the Long-Term Incentive Plan will utilize the peer group approved
    in the December 1998 Compensation Committee meeting.

                                                                              17
<PAGE>

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

<S>                              <C>         <C>          <C>         <C>          <C>         <C>
$ 650,000                        208,000     260,000      312,000     364,000      416,000     468,000
  850,000                        272,000     340,000      408,000     476,000      544,000     612,000
1,150,000                        368,000     460,000      552,000     644,000      736,000     828,000
1,450,000                        464,000     580,000      696,000     812,000      928,000   1,044,000
1,750,000                        560,000     700,000      840,000     980,000    1,120,000   1,260,000
2,050,000                        656,000     820,000      984,000   1,148,000    1,312,000   1,476,000
2,350,000                        752,000     940,000    1,128,000   1,316,000    1,504,000   1,692,000
2,650,000                        848,000   1,060,000    1,272,000   1,484,000    1,696,000   1,908,000
</TABLE>

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

(2) With respect to the executive officers named in the Summary Compensation
    Table, their years of credited service as of February 28, 1999, for
    retirement purposes are: W. W. Allen, 39 years; C. L. Bowerman, 37 years;
    K. L. Hedrick, 27 years; T. C. Morris, 33 years; and J. J. Mulva, 27 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>

                           TERMINATION OF EMPLOYMENT
                                      AND
                         CHANGE-IN-CONTROL ARRANGEMENTS

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

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

A change of control would take place if there is:

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

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

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

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

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

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

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


Other Change-in-Control Arrangements

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

                          PROPOSAL 1 - BY THE COMPANY

The Board of Directors unanimously recommends a vote FOR adoption of the
following resolution, which will be presented at the meeting:
                            ------------------------
RESOLVED, that the Board of Directors' designation of Ernst & Young LLP to serve
as the independent auditors to audit the books, records and accounts of the
Company for the 1999 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 2000 Annual Meeting must
be received at the Company's executive offices in Bartlesville, Oklahoma, no
later than December 7, 1999, 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
April 5, 1999

                                                                              19
<PAGE>











                                     [Logo]


                           Printed on recycled paper


<PAGE>

                                     [LOGO]

PROXY                                                                      PROXY

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

                           PHILLIPS PETROLEUM COMPANY

                          Annual Meeting May 3, 1999

The undersigned hereby appoints W. ALLEN, L. EAGLEBURGER and L. HORNER 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 3, 1999, 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            Please mark your
direct below.  In the absence of direction,             votes as indicated [X]
it will be voted FOR Directors, and FOR Proposal 1.     in this example


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

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

    [ ]                [ ]              ________________________________________

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

Company recommends a vote FOR:
Proposal 1 to approve the
designation of the independent
auditors, Ernst & Young LLP.
                                                    I PLAN TO ATTEND THE
  FOR      AGAINST     ABSTAIN                         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:__________________, 1999

                                                  ______________________________

                                                  ______________________________

                                                  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>