SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                        Securities Exchange Act of 1934

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 Section 240.14a-11(c) or
    Section 240.14a-12

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


 -----------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
    or Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
    14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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>

  PHILLIPS        PHILLIPS PETROLEUM COMPANY
  66 LOGO         BARTLESVILLE, OKLAHOMA 74004








                                                         March 29, 1996

        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 13, 1996,
        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 1996 ANNUAL MEETING
                                  MAY 13, 1996
                               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 13, 1996



        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 13, 1996, 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 1996 (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 15, 1996,
        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 1995 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 29, 1996


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

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 29, 1996

                                 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 29, 1996, to
stockholders of record as of March 15, 1996.

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 Chemical Mellon
Shareholder Services, L.L.C. as tabulators of all proxies and ballots, and
has appointed two persons who are employees of Chemical Mellon 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 291,498,603 shares outstanding at the
close of business February 29, 1996. The record date for stockholders
entitled to vote at this meeting is March 15, 1996. 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 29, 1996, 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 29, 1996, 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 1996 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 29, 1996, 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.

               W. W. ALLEN, 59, 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,
PICTURE        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.

               NORMAN R. AUGUSTINE, 60, is President, Chief Executive Officer
               and Director of Lockheed Martin Corporation, positions he assumed
               in March 1995 and January 1996. He previously served as Chairman
PICTURE        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.

               GEORGE B. BEITZEL, 67, 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; Caliber
PICTURE        Systems, Inc., formerly Roadway Services, Inc.; Computer Task
               Group, Inc.; Datalogix International, Inc.; FlightSafety
               International, 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.

               DAVID L. BOREN, 54, 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
PICTURE        1979 until November 1994 and is a former Governor of Oklahoma. He
               is a director of AMR Corporation and Texas Instruments
               Corporation. Mr. Boren became a director in December 1994.

               C. L. BOWERMAN, 56, 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
PICTURE        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>

               ROBERT E. CHAPPELL, JR., 59, 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
PICTURE        December 1992. He previously served Metropolitan Life Insurance
               Company as Executive Vice President from October 1986 to October
               1989. He is also a director of First Colony Corporation and Igloo
               Products Corporation. Mr. Chappell became a director in December
               1990.

               LAWRENCE S. EAGLEBURGER, 65, 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,
PICTURE        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; Universal Corporation; and Virginia Fibre Corp. Mr.
               Eagleburger became a director in February 1993.

               JAMES B. EDWARDS, 68, 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.
PICTURE        He is a director of GS Industries, Inc.; General Engineering
               Laboratories, Inc.; Imo Industries Inc.; National Data
               Corporation; SCANA Corporation; and WMX Technologies, Inc. Mr.
               Edwards became a director in January 1983.

               LARRY D. HORNER, 61, 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
PICTURE        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.; First
               Eagle Fund International; and Laidlaw Holdings, Inc. Mr. Horner
               became a director in May 1991.

               J. J. MULVA, 49, 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
PICTURE        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.

               RANDALL L. TOBIAS, 53, is Chairman of the Board of Directors and
               Chief Executive Officer of Eli Lilly and Company, a position he
PICTURE        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>

               VICTORIA J. TSCHINKEL, 48, is a Senior Consultant to Landers &
               Parsons, a Tallahassee, Florida, law firm, a position she assumed
PICTURE        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.

               KATHRYN C. TURNER, 48, is Chairperson and Chief Executive Officer
               of Standard Technology, Inc., an engineering and manufacturing
PICTURE        firm she founded in 1985. She is a director of Carpenter
               Technology Corporation. Ms. Turner became a director in January
               1995.

In January 1996, Mr. J. L. Whitmire, a director and Executive Vice President,
retired from the Board and the Company.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
                                                                AMOUNT AND NATURE OF
                                                                BENEFICIAL OWNERSHIP
                    NAME AND ADDRESS OF                   -------------------------------              PERCENT OF
TITLE OF CLASS      BENEFICIAL OWNER                         Direct            Indirect                  CLASS
--------------     --------------------                   -------------      ------------              ----------
<S>                                                       <C>                <C>                       <C>
Common            Vanguard Fiduciary Trust Company        52,304,173 (1)             --                  17.94%
                  P. O. Box 2900
                  Valley Forge, Pennsylvania 19482

Common            The Capital Group Companies, Inc.       19,900,830 (2)             --                   6.83%
                  333 South Hope Street
                  Los Angeles, California 90071
</TABLE>

(1)  As of March 5, 1996, Vanguard as Trustee held 52,304,173 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 Company's 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 Guardian Trust Company and Capital Research and Management Company,
     investment management companies and operating subsidiaries of The Capital
     Group Companies, Inc., exercise as of December 29, 1995, sole voting power
     with respect to 1,830 shares and sole dispositive power with respect to
     19,900,830 shares. These shares are held for various of its institutional
     investor clients. The Capital Group of Companies, Inc. has advised that the
     shares are held solely for investment purposes and not for the purpose or
     effect of changing or influencing control. No one of the Capital Group's
     operating subsidiaries owns more than 5 percent of the Company's shares.
     Capital Trust Company, Capital Research and Management Company and The
     Capital Group Companies, Inc. have specifically disclaimed any beneficial
     ownership of these shares.

                                       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                     248,087                 --             less than 1%
Common             Norman R. Augustine               8,200                 --             less than 1%
Common             George B. Beitzel                68,425                 --             less than 1%
Common             David L. Boren                    2,100                 --             less than 1%
Common             C. L. Bowerman                  164,844                654             less than 1%
Common             Robert E. Chappell, Jr.           6,500                 --             less than 1%
Common             Lawrence S. Eagleburger           4,254                 --             less than 1%
Common             James B. Edwards                 11,477                 --             less than 1%
Common             Larry D. Horner                   5,500                 --             less than 1%
Common             J. J. Mulva                     180,258                 --             less than 1%
Common             Randall L. Tobias                 6,000                 --             less than 1%
Common             Victoria J. Tschinkel             4,143                 --             less than 1%
Common             Kathryn C. Turner                 2,100                 --             less than 1%

                   EXECUTIVE OFFICERS
                   ------------------
Common             K. Am                            50,795                 --             less than 1%
Common             R. G. Ceconi                     76,411                 --             less than 1%
Common             K. L. Hedrick                    72,848                 --             less than 1%
Common             J. L. Howe                      112,335                 --             less than 1%
Common             J. C. Mihm                      131,038                636             less than 1%
Common             T. C. Morris                    109,824                 --             less than 1%
Common             M. J. Panatier                   44,668                 --             less than 1%
Common             B. J. Price                      51,825                 --             less than 1%
Common             J. B. Whitworth                 144,294                 --             less than 1%
                                                 ---------               -----            -----------
All directors, nominees and executive officers
as a group (22 in group)                         1,505,926               1,290            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
--------------                ------------------------      ------             --------         ----------------
                              DIRECTORS AND NOMINEES
                              ----------------------
<S>                           <C>                           <C>               <C>                <C>
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            K. L. Hedrick                 1,000                --               less than 1%
Series A Preferred            J. C. Mihm                      --                 19 (2)           less than 1%
Series A Preferred            M. J. Panatier                1,600                --               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 (9 in group)                                     4,575             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.

                        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. The Board of Directors
held eight meetings in 1995. Attendance by the current directors at meetings
of the Board and of the Committees on which they served averaged over 
92 percent in calendar year 1995.

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 six
meetings in 1995.

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 other officers who are members of the
Board of Directors and for employees who earn $200,000 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
1995.

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 Nominating Committee held two meetings in
1995.

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 one meeting in 1995.

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 1995.

                 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 1995, 1994 and 1993 for those persons who were at
December 31, 1995, 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            1995        824,000       414,375          0              0         185,941        343,298 (3)        7,289
Chairman of the        1994        681,333       899,766          0              0          59,706        484,102 (4)        4,770
Board & CEO            1993        448,250       275,235          0              0          54,154        136,898 (5)        5,499

J. J. Mulva            1995        481,333       221,250          0              0          44,484        184,688 (3)        7,289
President &            1994        415,750       511,710          0              0          34,300        218,925 (4)        4,770
COO                    1993        289,417       126,226          0              0          25,504        111,134 (5)        5,499

C. L. Bowerman         1995        343,000       172,495          0              0          26,728        183,906 (3)        7,289
Executive Vice         1994        337,000       260,354          0              0          27,069        259,965 (4)        4,770
President              1993        325,250       155,876          0              0          31,467        114,489 (5)        5,499

W. G. Paul             1995        408,000       203,212          0              0          29,847        198,424 (3)        7,289
Sr. Vice President     1994        402,000       250,002          0              0          30,343        254,683 (4)        4,770
& General Counsel      1993        388,000       152,736          0              0          35,229        159,307 (5)        5,475
(Retired 12/31/95)

J. L. Whitmire         1995        385,000       237,250          0              0          31,838        163,234 (3)        7,288
Executive Vice         1994        374,917       285,830          0              0          29,335        260,764 (4)        4,770
President              1993        292,500       137,256          0              0          25,504         68,648 (5)        5,499
(Retired 1/8/96)
</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 transferable 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 29, 1995, 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 time) were:
     Mr. Allen, 16,032 shares, $546,090; Mr. Bowerman, 45,050 shares,
     $1,534,516; Mr. Mulva, 34,343 shares, $1,169,808; Mr. Paul, 0 shares, $0;
     Mr. Whitmire, 42,028 shares, $1,431,579.

(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 or unrestricted stock on the date of the award for
     performance under the Long-Term Incentive Plan Performance Period from
     1993-1995.

(4)  Value of the restricted stock on the date of the award for performance
     under the Strategic Incentive Plan Performance Period from 1991-1994.

(5)  Value of the restricted stock on the date of the award for performance
     under the Strategic Incentive Plan Performance Period from 1990-1993.

                                          11
<PAGE>

                    OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

Stock options granted during 1995 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                 85,941           6.45%             31.44         01/09/05       0          1,699,054        4,306,504
                           100,000           7.51%             34.75         04/10/05       0          2,185,000        5,538,000

J.J. Mulva                  44,484           3.34%             31.44         01/09/05       0            879,449        2,229,093

C. L. Bowerman              26,728           2.01%             31.44         01/09/05       0            528,413        1,339,340

W. G. Paul                  29,847           2.24%             31.44         01/09/05       0            590,075        1,495,633

J. L. Whitmire              31,838           2.39%             31.44         01/09/05       0            629,437        1,595,402
-----------------------------------------------------------------------------------------------------------------------------------
Total Stockholders (2)       N/A              N/A                N/A             N/A        0      5,172,591,899   13,110,702,078
</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, 1995, (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, 1995,
     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                    --                   --                   --              --
W. G. Paul                --              0                    --                   --                   --              --
J. L. Whitmire            --              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 1995 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
1995 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>
                                                                                       88,928                        873,723
W. W. Allen                     10,000                      216,235                   257,798                        614,674

                                                                                       80,385                      1,076,818
J. J. Mulva                      4,000                       81,980                    82,963                        310,812

                                                                                       56,525                        532,372
C. L. Bowerman                   3,275                       53,407                    62,764                        287,562

                                                                                       55,685                        481,992
W. G. Paul                       6,621                       68,596                    70,220                        321,848

                                                                                       16,155                        111,471
J. L. Whitmire                  36,471                      451,997                    66,592                        283,396
</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 $34.0625, the fair market value of the Company's common stock on
     December 29, 1995.

               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 1995 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                     14,062            12/31/97                 7,031                   14,062                28,124
J. J. Mulva                      7,144            12/31/97                 3,572                    7,144                14,288
C. L. Bowerman                   4,373            12/31/97                 2,187                    4,373                 8,746
W. G. Paul                       4,707            12/31/97                 2,354                    4,707                 9,414
J. L. Whitmire                   5,259            12/31/97                 2,630                    5,259                10,518
</TABLE>

(1)  At the end of the three-year performance period, from January 1, 1995,
     through December 31, 1997, 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 directors who are not employees 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 1995, the
quantitative measures employed included: relative total return to
stockholders; improved safety performance through reduced rates of recordable
injuries and chargeable vehicle accidents and through the implementation of
improved safety systems; comparative safety performance as measured by lost
work days; comparative finding and development cost and reserve replacement
and other internal business objectives. The Committee also uses qualitative
measures of performance such as experience, ability to develop and implement
strategic plans, 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 by commodity price movements and geopolitical
factors over which the Company and its management have no control. Therefore,
the Committee evaluates the quantitative and qualitative measures, but may
use discretion in recognizing performance achievements and value enhancement.

Section 162(m) of the Internal Revenue Code requires establishment of
performance-based standards for the deduction of certain compensation to any
individual in excess of $1 million 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
1996 which will result in non-deductibility of such compensation expense to
the Company. The Committee will study the implications of Section 162(m)
during 1996 to determine if a proposal will be presented for stockholder
approval in the 1997 Annual Meeting to qualify some or all of the
compensation plans administered by the Committee for the performance-based
exception to Section 162(m).

By design, the executive compensation program is variable, based on
performance and results in an opportunity for earnings through performance
over a longer term.

The Company's objective in so doing is to provide a greater percentage of the
total compensation of its executives through variable or "at-risk"
compensation arrangements under the Annual Incentive Compensation Plan, stock
options and through awards under the Long-Term Incentive Plan.

EXECUTIVE COMPENSATION ACTIONS FOR 1995

Salaries
--------

In its April 1995 meeting, the Committee recommended to the Board of
Directors salary increases for Mr. Allen, Chairman of the Board and Chief
Executive Officer, and for Mr. Mulva, President, to be effective May 1, 1995.
The recommendations, which were unanimously adopted by the non-employee
members of the Board of Directors, were based on, without assigning relative
weight to any of the factors: (i) a comparison of Mr. Allen's and Mr. Mulva's
salaries with those of chief executive officers and presidents of other
companies in the petroleum industry, including those in the peer group by
which the Company evaluates its stockholder return performance, and by
comparing Mr. Allen's and Mr. Mulva's salaries to those of chief executive
officers and presidents of companies outside the petroleum industry whose
relative size is similar to Phillips using internally developed competitive
salary information and competitive salary data provided by an independent
third party consultant; (ii) Mr. Allen's and Mr. Mulva's leadership in
directing key strategic corporate decisions; (iii) Mr. Allen's and 
Mr. Mulva's key leadership roles in implementing cost containment strategies; 
and (iv) their industry and national public service.

In October 1995 as part of a Companywide lump-sum merit salary program for
salaried employees, the Committee reviewed and approved lump-sum merit
payments for all employees with annual salaries of $200,000 or above, except
for the Chairman of the Board and the President whose salaries were increased
effective May 1, 1995.

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 1995, the minimum amount of cash flow generation that
was required was $1.29 billion and the amount for 100 percent of the award
for cash generation was $1.612 billion. In addition to the minimum cash flow
generation threshold, the AICP employs objectives, which the Committee
establishes each year. For 1995, the Committee set three Companywide
objectives: (i) total stockholder return for 1995 greater than the median
stockholder return of the oil industry peer group used by the Company to
measure its stockholder return performance as listed in the Performance
Graph; (ii) meeting pre-established safety targets for the recordable injury
rate; and (iii) generation of $1.612 billion cash from operating activities.

                                       14
<PAGE>

The Committee establishes targets each year for individual AICP awards on the
basis of a percentage of salary which varies according to the employee's job
grade classification established under the Company's job evaluation system.
The target awards are established using internally generated data and data
obtained from an independent third party consultant which are intended to
provide competitive bonus opportunities if performance objectives are met.
For 1995, 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
promotions 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
business units or staff groups with which they are related, as well as
corporate performance. In February 1996, the Committee approved cash awards
for strategic business units and staff units under the 1995 AICP ranging from
63 percent of target bonus to 138 percent of target bonus based on a review
of the Company's 1995 corporate and business unit or staff group performance.
In determining the amount of incentive compensation awards to be paid to
Mr. Allen and Mr. Mulva, the Committee determined that cash generated from
operating activities exceeded the minimum threshold by $200 million. While
the target of $1.612 billion was not met, the actual results were
14.6 percent better than 1994 and 32.4 percent better than 1993. The Company's
total return to stockholders did not meet the established objective and,
therefore, no credit was given for this measure in the award. The Company's
rate of recordable injuries, although slightly above the established target,
made 1995 the safest year in the Company's history. Taking the above into
consideration, it was the Committee's judgment to grant AICP awards to
Mr. Allen and Mr. Mulva which were 25 percent less than their target amounts.
The amount of the awards for Mr. Allen and Mr. Mulva are set forth in the
Summary Compensation Table found on page 11 of his Proxy Statement.

Stock Options
-------------

It is the Committee's practice to consider the grant of stock options in
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 positions. The number of shares subject
to option grants varies based on job grade classification and salary. Grants
in January 1995 ranged from 75 percent of annual salary for the lowest level
of eligibility to 350 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 as the grants in January. As part of the review of
total compensation including long-term incentive awards, the Committee also
approved a stock option grant to Mr. Allen in its April 1995 meeting. For
Mr. Allen 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 is currently administering two different long-term incentive
programs. Both the former stock plans and the Omnibus Securities Plan were
approved by shareholders. It has been the Committee's practice each year to
establish a three-year or four-year performance period, at the end of which
performance for the period is measured against pre-determined objectives and
awards, if any, are made.

In April 1995, the Committee approved payment of awards under the Strategic
Incentive Plan Performance Period VI ("SIP VI"). SIP VI covered the period
from January 1, 1991, through December 31, 1994. A target award for each
individual had been established at the outset of the performance period,
based on a percentage of salary varying according to job grade
classification. Supplemental target awards were approved for individuals who
were promoted during the performance period to positions with higher job
grade classifications. For SIP VI, target awards were based upon 22 percent
of salary for the lowest level of eligibility to 65 percent of salary for the
Chairman and Chief Executive Officer.

The Committee approved payments for SIP VI at 40 percent above the target
award level. The awards for SIP VI were based on the Company ranking second
of ten in the peer group for Total Stockholder Return, and second of ten for
safety performance as measured by lost work day rate. These rankings were
made for purposes of SIP VI on the Company's position within the range of
returns for the peer group and not on the market capitalization weighted
basis required in the Performance Graph presented in this Proxy Statement.
Also, the peer group for awards under the Strategic Incentive Plan included
one additional company not in the peer group used in the Performance Graph in
this Proxy Statement for evaluation of the Company's stockholder return
performance. This additional company ceased to be an integrated oil and gas
company and was removed from the peer group for purposes of the Proxy
Statement Performance Graph and for measurement of future performance under
the Long-Term Incentive Plan.

The Committee also employed internal performance measures with pre-determined
objectives for SIP VI. The objectives met included maintenance of Corporate
Staff expenses at a predetermined rate which was adjusted for inflation;
achieving span of control objectives; maintaining staff-to-line ratio
objectives; and replacement of 100 percent or more of hydrocarbon reserves
produced during the four-year period. An additional objective, which was met,
was maintenance of finding costs for hydrocarbon reserves in the lowest
quartile of a peer group (which includes three additional companies, as well
as those companies in the stockholder return peer group).

                                       15
<PAGE>

In addition, the Committee evaluated performance against certain internal
performance measures which it does not disclose in this report because of its
view that the standards and the Company's performance involve confidential
commercial or business information, which if disclosed would have an adverse
effect on the Company.

The value of the awards, which were settled in restricted stock for Mr. Allen
and the other named executive officers, for SIP VI are set forth on the line for
1994 in the Summary Compensation Table. 

SIP VI is the final performance period under the Strategic Incentive Plan.
The only continuing form of long-term incentive program is the Long-Term
Incentive Plan under the Company's Omnibus Securities Plan, which was
approved by stockholders in 1993. The Committee established the third
performance period of the plan, which extends from January 1, 1995, through
December 31, 1997. Target awards for Mr. Allen and the other named executive
officers were established as presented 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 this performance period were established by the Committee by
using internally-generated information and competitive data provided by an
independent third party consultant. 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, compared with
the peer group by which the Company evaluates its stockholder return
performance. Before awards may be granted the Company's total stockholder
return must be above the bottom quartile when compared with the industry peer
group.

In 1993, the Committee established the first performance period of the
Long-Term Incentive Plan ("LTIP I"). 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 group used by the Company to measure
its stockholder return performance as listed in the Performance Graph. The
LTIP I performance period covered three years from 1993 through 1995.

In 1993, the Committee established a target award for each individual based
on a percentage of salary varying according to job grade classification.
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 company peer
group. In February 1996, the Comittee approved awards for LTIP I. The
Committee determined that the Company's total return to stockholders for the
three-year period was above the total stockholder return of the companies in
the bottom quartile of the peer group. The Committee further determined that
the Company's total stockholder return for the three-year period was equal to
that of the median of the peer group. On the basis of this performance, the
Committee granted awards equal to 100 percent of the target amounts set in
1993 as adjusted for promotions, if any occurred, during the three-year
performance period.

The value of the awards for LTIP I, which were settled in restricted stock
for Messrs. Allen, Mulva and Bowerman, and in unrestricted stock for 
Messrs. Paul and Whitmire, are set forth on the line for 1995 in the Summary
Compensation Table found on page 11 of 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, 1990, through December 31, 1995.


    *Total return assumes dividend reinvestment
   **Amoco, Chevron, Exxon, Mobil, Texaco
     Amerada Hess, ARCO, Unocal

                     [Performance Graph appears in this space.]

Assumes $100 invested on 12/31/90 in
Phillips Common Stock, S&P 500 Index
and Peer Group Index.

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

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
                                   1991               1992                 1993                1994             1995
                                   ----               ----                 ----                ----             ----
<C>                                <C>                 <C>                  <C>                 <C>              <C>
(1) PHILLIPS PETROLEUM             $ 96                105                  126                 147              159
--------------------------------------------------------------------------------------------------------------------
(2) S&P 500 INDEX                   130                140                  155                 157              215
--------------------------------------------------------------------------------------------------------------------
(3) PEER GROUP INDEX                110                115                  131                 137              179
---------------------------------------------------------------------------------------------------------------------
</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.

<TABLE>
<CAPTION>

                                             PENSION PLAN TABLE
                ESTIMATED ANNUAL RETIREMENT BENEFITS UNDER FINAL AVERAGE EARNINGS FORMULA (1) (2)

  ANNUAL AVERAGE OF HIGHEST 3                           YEARS OF CREDITED SERVICE
  CONSECUTIVE CALENDAR YEARS'                              AT NORMAL RETIREMENT
 SALARY AND AICP AWARDS IN 10   ---------------------------------------------------------------------------------------------------
YEARS PRECEDING RETIREMENT (3)      10          15          20          25            30           35          40             45
-----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>         <C>           <C>          <C>          <C>           <C>
        $  450,000                 72,000     108,000     144,000     180,000       216,000      252,000      288,000       324,000
           650,000                104,000     156,000     208,000     260,000       312,000      364,000      416,000       468,000
           850,000                136,000     204,000     272,000     340,000       408,000      476,000      544,000       612,000
         1,150,000                184,000     276,000     368,000     460,000       552,000      644,000      736,000       828,000
         1,450,000                232,000     348,000     464,000     580,000       696,000      812,000      928,000     1,044,000
         1,750,000                280,000     420,000     560,000     700,000       840,000      980,000    1,120,000     1,260,000
         2,150,000                344,000     516,000     688,000     860,000     1,032,000    1,204,000    1,376,000     1,548,000
</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 29, 1996, for
     retirement purposes are: W. W. Allen, 36 years; C. L. Bowerman, 34 years;
     and J. J. Mulva, 24 years. Years of credited service for retirement
     purposes for W. G. Paul, 16 years, and J. L. Whitmire, 27 years, are based
     on their retirement dates of 12/31/95 and 1/8/96, respectively. 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 1996 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 1997 Annual Meeting
must be received at the Company's executive offices in Bartlesville,
Oklahoma, no later than November 27, 1996, for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting.

                              By Order of the Board of Directors,

                              /s/ Dale J. Billam
                              -----------------------------------
                              Dale J. Billam
                              Secretary
Bartlesville, Oklahoma 74004
March 29, 1996



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>








                                  LOGO


<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 13, 1996


The undersigned hereby appoints W. ALLEN, D. BOREN and K. TURNER 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 13,
1996, 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      from 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:______________________, 1996

__________________________________

__________________________________

  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>