SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                         ---------------
                            FORM 10-Q


(Mark One)

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

For the quarterly period ended        March 31, 1997
                               ---------------------------------------------
                                OR

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

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

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


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


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


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

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


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

The registrant had 263,615,464 shares of common stock, $1.25 par value,
outstanding at April 30, 1997.



<PAGE>



                   PART I. FINANCIAL INFORMATION


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


                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                    March 31
                                              -------------------
                                                1997         1996
                                              -------------------
Revenues
Sales and other operating revenues            $3,944        3,595
Equity in earnings of affiliated companies        30           (2)
Other revenues                                    20            9
-----------------------------------------------------------------
    Total Revenues                             3,994        3,602
-----------------------------------------------------------------

Costs and Expenses
Purchased crude oil and products               2,455        2,206
Production and operating expenses                514          520
Exploration expenses                              40           66
Selling, general and administrative expenses     161          126
Depreciation, depletion and amortization         183          241
Taxes other than income taxes                     74           66
Interest expense                                  54           59
Preferred dividend requirements of
  subsidiary and capital trusts                   20            8
-----------------------------------------------------------------
    Total Costs and Expenses                   3,501        3,292
-----------------------------------------------------------------
Income before income taxes and
  Kenai LNG tax settlement                       493          310
Kenai LNG tax settlement                           -          571
-----------------------------------------------------------------
Income before income taxes                       493          881
Provision for income taxes                       266          186
-----------------------------------------------------------------
Net Income                                    $  227          695
=================================================================

Net Income Per Share of Common Stock          $  .86         2.65
=================================================================

Dividends paid                                $  .32         .305

Average Common Shares Outstanding
  (in thousands)                             263,532      262,309
-----------------------------------------------------------------
See Notes to Financial Statements.


                                 1

<PAGE>



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


                                            Millions of Dollars
                                          -----------------------
                                          March 31    December 31
                                              1997           1996
                                          -----------------------
Assets
Cash and cash equivalents                  $   861            615
Accounts and notes receivable (less
  allowances: 1997--$19; 1996--$20)          1,733          1,988
Inventories                                    452            472
Deferred income taxes                          107            117
Prepaid expenses and other current assets      137            114
-----------------------------------------------------------------
    Total Current Assets                     3,290          3,306
Investments and long-term receivables          920            912
Properties, plants and equipment (net)       9,232          9,120
Deferred income taxes                           79             85
Deferred charges                               136            125
-----------------------------------------------------------------
Total                                      $13,657         13,548
=================================================================

Liabilities
Accounts payable                           $ 1,547          1,793
Notes payable and long-term debt due
  within one year                              341            574
Accrued income and other taxes                 625            483
Other accruals                                 219            287
-----------------------------------------------------------------
    Total Current Liabilities                2,732          3,137
Long-term debt                               2,555          2,555
Accrued dismantlement, removal and
  environmental costs                          781            783
Deferred income taxes                        1,106          1,047
Employee benefit obligations                   431            425
Other liabilities and deferred credits         662            700
-----------------------------------------------------------------
Total Liabilities                            8,267          8,647
-----------------------------------------------------------------

Preferred Stock of Subsidiary and Other
  Minority Interests                           350            350
-----------------------------------------------------------------

Company-Obligated Mandatorily Redeemable
  Preferred Securities of Phillips
  Capital Trusts I and II                      650            300
-----------------------------------------------------------------

Common Stockholders' Equity
Common stock--500,000,000 shares
  authorized at $1.25 par value
    Issued (306,380,511 shares)
      Par value                                383            383
      Capital in excess of par               2,009          1,999
    Treasury stock (at cost:
      1997--13,560,628 shares;
      1996--13,878,480 shares)                (740)          (757)
    Compensation and Benefits Trust (CBT)
      (at cost: 29,200,000 shares)            (989)          (989)
Foreign currency translation adjustments        28             54
Unearned employee compensation--Long-
  Term Stock Savings Plan (LTSSP)             (369)          (378)
Retained earnings                            4,068          3,939
-----------------------------------------------------------------
Total Common Stockholders' Equity            4,390          4,251
-----------------------------------------------------------------
Total                                      $13,657         13,548
=================================================================
See Notes to Financial Statements.


                                 2

<PAGE>



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

                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                    March 31
                                              -------------------
                                               1997          1996*
                                              -------------------
Cash Flows from Operating Activities
Net income                                    $ 227           695
Adjustments to reconcile net income to net
  cash provided by operating activities
    Non-working capital adjustments
      Depreciation, depletion and
        amortization                            183           241
      Dry hole costs and leasehold impairment     8            37
      Deferred taxes                             84            49
      Other                                      42          (119)
    Working capital adjustments
      Decrease in aggregate balance of
        accounts receivable sold                  -           (60)
      Decrease (increase) in other accounts
        and notes receivable                    247           (44)
      Decrease in inventories                    17            32
      Decrease (increase) in prepaid
        expenses and other current assets       (23)            2
      Decrease in accounts payable             (239)          (26)
      Increase (decrease) in taxes and other
        accruals                                 92          (100)
-----------------------------------------------------------------
Net Cash Provided by Operating Activities       638           707
-----------------------------------------------------------------

Cash Flows from Investing Activities
Capital expenditures and investments,
  including dry hole costs                     (378)         (316)
Proceeds from asset dispositions                  6             5
Long-term advances to affiliates and
  other investments                             (11)          (23)
-----------------------------------------------------------------
Net Cash Used for Investing Activities         (383)         (334)
-----------------------------------------------------------------

Cash Flows from Financing Activities
Repayment of debt                              (232)         (193)
Issuance of common stock                          4            10
Issuance of company-obligated mandatorily
  redeemable preferred securities               350             -
Dividends paid on common stock                  (84)          (80)
Other                                           (47)          (13)
-----------------------------------------------------------------
Net Cash Used for Financing Activities           (9)         (276)
-----------------------------------------------------------------

Increase in Cash and Cash Equivalents           246            97
Cash and cash equivalents at beginning
  of period                                     615            67
-----------------------------------------------------------------
Cash and Cash Equivalents at End of Period    $ 861           164
=================================================================
See Notes to Financial Statements.
*Reclassified to conform to current presentation.


                                 3

<PAGE>



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


Note 1--Interim Financial Information

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


Note 2--Accounting Policies for Derivative Instruments

Forward foreign currency contracts designated and effective as
hedges of firm commitments, commodity futures and commodity
option contracts designated and effective as hedges are recorded
at market value, either through monthly adjustments for
unrealized gains and losses (forwards and options) or through
daily settlements in cash (futures), and the resulting gains and
losses are deferred.  Forward foreign currency contracts
designated and effective as hedges of existing assets and
liabilities are recorded at market value through monthly
adjustments, with immediate recognition of the resulting gains
and losses.  Commodity swaps and forward commodity contracts
designated as hedges are not recorded until the resulting cash
flows are known.  The gains and losses from all of these
derivative instruments are recognized during the same period in
which the gains and losses from the underlying exposures being
hedged are recognized, except for gains and losses from hedges of
asset acquisitions, which are reported as adjustments to the
carrying value of the assets.

In accordance with company risk-management policies, any
derivative instrument held by the company must relate to an
underlying, offsetting position, probable anticipated transaction
or firm commitment, and must reduce market risk with an expected
correlation of 90 to 110 percent.  If an existing derivative
position is terminated prior to expected maturity or re-pricing,
any deferred or resultant gain or loss will continue to be
deferred unless the underlying position has ceased to exist.
Deferred gains and losses, deferred premiums paid for forward
exchange contracts, and deferred premiums paid for commodity
option contracts are reported on the balance sheet with other
current assets or other current accruals.  Gains and losses from
derivatives designated as hedges of sales are reported on the
statement of income with sales and other operating revenues,


                                 4

<PAGE>



whereas gains and losses from derivatives designated as hedges of
commodity purchases are reported with purchased crude oil and
products or with production and operating expenses, subject to
the effects of any related inventory costing reflected on the
balance sheet.  Gains and losses from hedging feedstock-to-
product margins are reported with purchased crude oil and
products.  Recognized gains and losses are reported on the
statement of cash flows in a manner consistent with the
underlying position being hedged.


Note 3--Inventories

Inventories consisted of the following:

                                            Millions of Dollars
                                          -----------------------
                                          March 31    December 31
                                              1997           1996
                                          -----------------------

Crude oil and petroleum products              $123            136
Chemical products                              248            255
Materials, supplies and other                   81             81
-----------------------------------------------------------------
                                              $452            472
=================================================================


Note 4--Properties, Plants and Equipment

Properties, plants and equipment included the following:

                                            Millions of Dollars
                                          -----------------------
                                          March 31    December 31
                                              1997           1996
                                          -----------------------
Properties, plants and equipment
  (at cost)                                $20,278         20,103
Less accumulated depreciation,
  depletion and amortization                11,046         10,983
-----------------------------------------------------------------
                                           $ 9,232          9,120
=================================================================


Note 5--Debt

At March 31, 1997, no amounts were outstanding under the
company's $1.1 billion bank credit facility, its commercial paper
program, or Phillips Petroleum Company Norway's $300 million
revolving credit facility.  The company plans to increase its
revolving bank credit facility from $1.1 billion to $1.5 billion,
with an expected closing on, or about, May 14, 1997.  The company
plans to amend the LTSSP $397 million 25-year term bank loan,
effective May 30, 1997, to extend the date that any participating


                                 5

<PAGE>



bank in the syndicate of lenders may cease to participate from
November 30, 2001, to November 30, 2004.


Note 6--Kenai LNG Tax Settlement

On February 26, 1996, the U.S. Tax Court's previous decisions
related to the company's sales of liquefied natural gas (LNG)
from its Kenai, Alaska, facility to Japan, became final.  The Tax
Court's decisions for years 1975 through 1978 supported the
company's position that more than 50 percent of the income was
from a foreign source.  The favorable resolution of this issue
increased first quarter 1996 net income by $565 million.


Note 7--Income Taxes

The company's effective tax rates for the three-month periods
ended March 31, 1997 and 1996, were 54 and 21 percent,
respectively.  Excluding the effect of the favorable resolution
of the Kenai LNG tax litigation discussed in Note 6, the
effective tax rate for the period ending March 31, 1996, would
have been 58 percent.  On an adjusted basis, the 4 percent
decrease from first quarter 1996 to first quarter 1997 was due
mainly to a greater proportion of domestic earnings in the
current period, which are generally taxed at a lower rate.


Note 8--Contingencies

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

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


                                 6

<PAGE>



Estimated future costs related to tax and legal matters are
subject to change as events evolve and as additional information
becomes available during the administrative and litigation
process.

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

Tax--The company has a number of issues outstanding with the IRS
related to tax years 1983 through 1992 that can proceed toward
final settlement as a result of resolving the Kenai LNG tax case.
Although it is too early to determine the final financial effects
of resolving these open years, a favorable outcome would have a
positive effect on net income and cash flow, while an unfavorable
one would not impact the company's net income or cash position.
While total resolution may require a number of years, the
majority of these open years are expected to be resolved in the
near term.

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

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


Note 9--Company-Obligated Mandatorily Redeemable Preferred
Securities of Phillips Capital Trusts

On January 17, 1997, Phillips 66 Capital II (Trust II) completed
a $350 million underwritten public offering of 350,000 shares of
8% Capital Securities (Capital Securities).  The sole asset of
Trust II is $361 million of the company's 8% Junior Subordinated
Deferrable Interest Debentures due 2037 (Subordinated Debt
Securities) purchased by Trust II on January 17, 1997.  The
Subordinated Debt Securities are unsecured obligations of
Phillips, subordinate and junior in right of payment to all


                                 7

<PAGE>



present and future senior indebtedness of Phillips, but equal in
right of payment with Phillips' 8.24% Junior Subordinated
Deferrable Interest Debentures due 2036.  The Subordinated Debt
Securities are due January 15, 2037, and are redeemable in whole,
or in part, at the option of Phillips, on or after January 15,
2007.  When the company redeems the Subordinated Debt Securities,
Trust II is required to apply all redemption proceeds to the
immediate redemption of the Trust's Capital Securities.  Phillips
fully and unconditionally guarantees Trust II's obligations under
the securities.

The Capital Securities are accounted for and reported in the
company's financial disclosures in the same manner as the 8.24%
Trust Originated Preferred Securities issued by Phillips Capital
Trust I in 1996.


Note 10--Cash Flow Information

Cash payments and non-cash financing activities for the three-
month periods ended March 31 were as follows:

                                              Millions of Dollars
                                              -------------------
                                              1997           1996
                                              -------------------
Cash Payments
Interest
  Debt                                         $50             53
  Taxes and other                                5              5
-----------------------------------------------------------------
                                               $55             58
=================================================================

Income taxes                                   $46             28
-----------------------------------------------------------------

Non-Cash Financing Activities
Treasury stock awards issued under
  incentive compensation plans                 $ 6              3
Issuance of promissory note to purchase
  service stations                               -              7
-----------------------------------------------------------------


Note 11--Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is effective for
financial statement periods ending after December 15, 1997.
Earlier application is not permitted.  Statement No. 128 replaces
the presentation of primary and fully diluted earnings per share
(EPS) with a presentation of basic and diluted EPS on the face of
the income statement.  The company is analyzing the potential
impact of Statement No. 128, but does not expect it to be
material.


                                 8

<PAGE>



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


Management's Discussion and Analysis contains forward-looking
statements including, without limitation, statements relating to
the company's plans, strategies, objectives, expectations,
intentions, and adequate resources, and are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.  The words "forecasts," "intends,"
"possible," "potential," "targeted," "believe," "expect," "plan,"
or "plans," "scheduled," "perceives," "anticipate," "estimate,"
"begin," and similar expressions identify forward-looking
statements.  The company does not undertake to update, revise or
correct any of the forward-looking information.  Readers are
cautioned that such forward-looking statements should be read in
conjunction with the company's disclosures under the heading:
"CAUTIONARY STATEMENT FOR THE PURPOSES OF THE 'SAFE HARBOR'
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995" beginning on page 29.


RESULTS OF OPERATIONS

Unless otherwise indicated, discussion of results for the three-
month period ending March 31, 1997, is based on a comparison with
the corresponding period in 1996.

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

                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
Exploration and Production (E&P)                $202           87
Gas Gathering, Processing and Marketing (GPM)     28           28
Refining, Marketing and Transportation (RM&T)      9            7
Chemicals                                         72           70
Corporate and Other                              (84)         503
-----------------------------------------------------------------
Net Income                                      $227          695
=================================================================
*Restated to reflect the transfer of the company's wholesale
 propane business from RM&T to Chemicals.  In addition, certain
 costs previously held at Corporate are now aligned with the
 operating segments.


                                 9

<PAGE>



Consolidated Results

Earnings included the following special items on an after-tax
basis:

                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996
                                              -------------------

Property impairments                            $  -          (45)
Pending claims and settlements                     -          (28)
Kenai LNG tax settlement                           -          565
Foreign currency losses                          (20)           -
Other items                                        -           (7)
-----------------------------------------------------------------
Total special items                             $(20)         485
=================================================================


Excluding the above special items, net operating income was
$247 million for the three-month period ended March 31, 1997,
compared with $210 million for the three-month period ended
March 31, 1996.  This marks the fifth consecutive quarter in
which the company's net operating income has exceeded
$200 million.

The 18 percent increase over the prior year is attributable to
higher net operating income from the company's E&P segment, which
benefited from higher crude oil and natural gas sales prices and
lower exploration expenses, partly offset by lower production.
GPM's operating results were the same as a year ago.  Margins
improved slightly on higher sales prices and raw gas throughput
volumes.  RM&T's net operating income was marginally higher, as
higher motor fuel and other refinery product margins were
partially offset by higher fuel-gas costs and the effect of an
extensive, scheduled maintenance turnaround.  Chemicals' earnings
were lower than the same period a year ago.  Contributing to the
decline was the planned shutdown of the company's Puerto Rico
Core operations for maintenance and expansion of the paraxylene
facility.  Results for Chemicals benefited from higher ethylene
and polyethylene margins.


                                 10

<PAGE>



                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996
Phillips at a Glance                          -------------------

U.S. crude oil production (MBD)                   67           72
Worldwide crude oil production (MBD)             214          224
U.S. natural gas production (MMCFD)            1,087        1,110
Worldwide natural gas production (MMCFD)       1,520        1,584
Worldwide natural gas liquids
  production (MBD)                               161          155
Liquefied natural gas sales (MMCFD)              130          131
Refinery utilization rate (%)                     83           90
U.S. automotive gasoline sales (MBD)             329          334
U.S. distillates sales (MBD)                     128          134
Worldwide petroleum products sales (MBD)         690          694
Natural gas liquids processed (MBD)              208          196
Ethylene production (MMlbs)*                     720          695
Polyethylene production (MMlbs)*                 506          513
Polypropylene production (MMlbs)*                110           89
Paraxylene production (MMlbs)                     20          158
-----------------------------------------------------------------
*Includes Phillips' share of equity affiliates' production.


Income Statement Analysis

Sales and other operating revenues increased 10 percent compared
with the first quarter of 1996.  The increase was attributable to
higher natural gas prices, which increased revenues in both the
E&P and GPM segments.  In addition, petroleum products revenues
were higher, due to higher sales prices.  These factors also
accounted for the corresponding 11 percent increase in purchase
costs, as GPM purchases raw natural gas and RM&T is a net
purchaser of petroleum products for its wholesale and retail
marketing operations.

Equity earnings of affiliated companies increased $32 million
over the same period last year.  The first quarter of 1996
included an impairment taken on equity companies related to the
Point Arguello field.  In addition, equity earnings from the
company's interest in the Sweeny Olefins Limited Partnership were
higher in the first quarter of 1997, due to higher ethylene
margins and sales volumes.  Other revenues increased $11 million
due to a number of small gains on E&P property dispositions in
Canada, along with income from the lease of certain R&D
facilities.

Controllable costs, composed primarily of production and
operating expenses and selling, general and administrative
expenses, both adjusted for special items, were 8 percent
higher than the corresponding period a year ago.  Higher fuel-


                                 11

<PAGE>



gas costs at manufacturing facilities, due to higher natural
gas prices, maintenance turnaround costs and expenses associated
with growth-related activities all contributed to the increase.

Exploration expenses were 39 percent lower than the first quarter
of 1996, mainly due to lower dry hole charges.  The first quarter
of 1996 included dry hole charges for exploratory activity in
Nevada, the Gulf of Mexico, Algeria and the U.K. sector of the
North Sea.  The first quarter of 1997 did not include any
significant dry hole charges.

After adjusting for property impairments recorded in the first
quarter of 1996, depreciation, depletion and amortization (DD&A)
was 4 percent lower in the first quarter of 1997 than in the
first quarter of 1996.  Upward revisions of recoverable reserves
in Norway and China were the main factors leading to the decrease
in DD&A.

Taxes other than income taxes were 12 percent higher than the
first quarter of 1996, mainly due to higher production taxes and,
to a lesser extent, higher ad valorem taxes.  Interest expense
was 8 percent lower than a year ago, primarily as a result of
lower debt levels.


                                 12

<PAGE>



Segment Results

E&P
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
                                              Millions of Dollars
                                              -------------------
Operating Income
Reported net income                             $202           87
Less special items                                 -          (64)
-----------------------------------------------------------------
Net operating income                            $202          151
=================================================================
*Restated to reflect that certain costs previously held at
 Corporate are now aligned with the operating segments.

                                                Dollars Per Unit
                                              -------------------
Average Sales Prices
Crude oil (per barrel)
    United States                             $19.95        16.77
    Foreign                                    21.05        18.98
    Worldwide                                  20.72        18.29
Natural gas--lease
  (per thousand cubic feet)
    United States                               2.60         2.00
    Foreign                                     2.69         2.50
    Worldwide                                   2.64         2.18
-----------------------------------------------------------------

                                              Millions of Dollars
                                              -------------------
Worldwide Exploration Expenses
Geological and geophysical                    $   31           28
Leasehold impairment                               6            7
Dry holes                                          2           30
Lease rentals                                      1            1
-----------------------------------------------------------------
                                              $   40           66
=================================================================

                                                 Thousands of
                                                 Barrels Daily
                                              -------------------
Operating Statistics
Crude Oil Produced
  United States                                   67           72
  Norway                                          96           97
  United Kingdom                                   5            7
  Nigeria                                         24           26
  China                                           18           17
  Canada                                           4            5
-----------------------------------------------------------------
                                                 214          224
=================================================================


                                 13

<PAGE>



                                              Three Months Ended
                                                    March 31
                                              -------------------
                                                1997         1996
                                              -------------------
                                                 Thousands of
                                                 Barrels Daily
                                              -------------------
Natural Gas Liquids Produced
  United States                                    4            5
  Norway                                           7            8
  Other areas                                      1            2
-----------------------------------------------------------------
                                                  12           15
=================================================================

                                                  Millions of
                                                Cubic Feet Daily
                                              -------------------
Natural Gas Produced
  United States (less gas equivalent
    of liquids shown above)                    1,087        1,110
  Norway*                                        280          321
  United Kingdom*                                105           99
  Canada                                          48           54
-----------------------------------------------------------------
                                               1,520        1,584
=================================================================
*Dry basis.

Liquefied Natural Gas Sales                      130          131
-----------------------------------------------------------------


E&P's net operating income in the first quarter of 1997 increased
substantially over the corresponding quarter in 1996.  Higher
natural gas sales prices, particularly in the United States,
along with higher crude oil sales prices and lower exploration
expenses contributed to the much improved results.  These
positive items were partially offset by lower production of both
crude oil and natural gas, as well as higher production taxes.

Phillips' worldwide crude oil sales price averaged $20.72 per
barrel in the first quarter of 1997, 13 percent higher than the
first quarter of 1996.  However, this was 10 percent lower than
the fourth quarter of 1996, as industry prices trended down
during the first quarter of 1997 on weakening supply/demand
fundamentals and the impact of the commodity fund markets
shifting from net long to net short positions.


                                 14

<PAGE>


U.S. E&P
--------
                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
Operating Income
Reported net income                             $126           37
Less special items                                 -          (64)
-----------------------------------------------------------------
Net operating income                            $126          101
=================================================================
*Restated to reflect that certain costs previously held at
 Corporate are now aligned with the operating segments.


Net operating income increased 25 percent in the company's U.S.
E&P operations.  Higher U.S. natural gas prices--30 percent
higher than a year ago--were primarily responsible for the
improved results.  Although higher than the corresponding quarter
of 1996, natural gas prices declined during the first quarter of
1997, as the heating season began to end and the storage season
began.  Also benefiting revenues, compared with the first quarter
of 1996, were higher U.S. crude oil and LNG sales prices.  U.S.
exploration costs were lower in 1997 due to several exploratory
wells in the Gulf of Mexico and Nevada being charged to dry holes
in the first quarter of 1996, while the first quarter 1997 did
not contain any significant dry hole charges.  Partially
offsetting the positive items above were lower production volumes
and higher production taxes.

U.S. crude oil production was 7 percent lower than the first
quarter of 1996, as a result of continued field declines from
Point Arguello, offshore California, and Prudhoe Bay, Alaska.
Various fields in the Gulf of Mexico also experienced production
declines.  Natural gas production was slightly lower, as new
production from onshore wells in the Gulf Coast area was more
than offset by decreased production from the Seastar field in the
Gulf of Mexico as a result of well workover activity.

Special items in the first quarter of 1996 included an after-tax
charge of $45 million for an impairment of the Point Arguello
field and associated assets.  Also included in special items in
the first quarter of 1996 were various contingency accruals, the
most significant of which was a court judgment regarding
producing properties in Alabama.


                                 15

<PAGE>


Foreign E&P
-----------
                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
Operating Income
Reported net income                              $76           50
Less special items                                 -            -
-----------------------------------------------------------------
Net operating income                             $76           50
=================================================================
*Restated to reflect that certain costs previously held at
 Corporate are now aligned with the operating segments.


Net operating income from the company's foreign E&P operations
increased 52 percent in the first quarter of 1997, compared with
the first quarter of 1996.  Higher natural gas and crude oil
sales prices, and lower exploration expenses primarily
contributed to the improved results.  Exploration expenses were
lower in 1997 than in 1996 due to exploratory wells in Algeria
and the U.K. sector of the North Sea being charged to dry hole
expense in the first quarter of 1996.  First quarter 1997 results
did not include any significant dry hole charges.

Foreign crude oil production was 3 percent lower than a year ago,
as most regions' production declined slightly.  Foreign natural
gas production was 9 percent lower, due to generally lower production
from the Ekofisk field in Norway, as well as a temporary shut in
of the Ekofisk processing and transportation platform in January. 


GPM

                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996
                                              -------------------
                                              Millions of Dollars
                                              -------------------
Operating Income
Reported net income                              $28           28
Less special items                                 -            -
-----------------------------------------------------------------
Net operating income                             $28           28
=================================================================

                                                Dollars Per Unit
                                              -------------------
Average Sales Prices
U.S. residue gas
  (per thousand cubic feet)                   $ 2.69         1.96
U.S. natural gas liquids
  (per barrel--unfractionated)                 14.34        12.29
-----------------------------------------------------------------


                                 16

<PAGE>



                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996
                                              -------------------
                                                  Millions of
                                                Cubic Feet Daily
                                              -------------------
Operating Statistics
Natural Gas Purchases
  Outside Phillips                             1,347        1,307
  Phillips                                       163          183
-----------------------------------------------------------------
                                               1,510        1,490
=================================================================

Raw Gas Throughput                             2,011        1,892
-----------------------------------------------------------------

Residue Gas Sales
  Outside Phillips                             1,004          997
  Phillips                                        58           83
-----------------------------------------------------------------
                                               1,062        1,080
=================================================================

                                                 Thousands of
                                                 Barrels Daily
                                              -------------------
Natural Gas Liquids Net Production
  From Phillips E&P leasehold gas                 15           18
  From gas purchased outside Phillips            134          122
-----------------------------------------------------------------
                                                 149          140
=================================================================


GPM's net operating income was the same as the first quarter of
1996.  Higher residue gas and natural gas liquids sales prices
and higher raw gas throughput volumes led to slightly higher
margins during the first quarter of 1997.  Although GPM's average
residue gas sales price was 37 percent higher in the first
quarter than the same quarter a year ago, the price declined from
a high of $3.91 per thousand cubic feet in January 1997 to
$1.66 per thousand cubic feet in March.  Milder weather and
adequate storage levels were primarily responsible for the
declining prices during the quarter.

Raw gas throughput volumes were higher due to acquisitions.  A
portion of these raw gas volumes have resulted in increased
gathering and processing of third-party gas.  NGL production
increased 6 percent, mainly due to a January 1997 acquisition and
more efficient operations at two of the company's plants that had
experienced start-up delays of new turbines in the first quarter
of 1996.  Residue gas sales volumes were down slightly, primarily
as a result of field declines in the Austin Chalk area of Texas,
partially offset by higher sales volumes in New Mexico and the
Panhandle areas of Texas and Oklahoma.


                                 17

<PAGE>



Operating expenses were higher in the first quarter of 1997 due
to bonus payments to employees under the company's incentive pay
programs in excess of previous estimates, and additional costs
associated with acquisitions.


RM&T
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
                                              Millions of Dollars
                                              -------------------
Operating Income
Reported net income                              $ 9            7
Less special items                                 -            -
-----------------------------------------------------------------
Net operating income                             $ 9            7
=================================================================

                                                Dollars Per Unit
                                              -------------------
Average Sales Prices (per gallon)
Automotive gasoline--wholesale                  $.70          .59
Automotive gasoline--retail                      .84          .75
Distillates                                      .66          .58
-----------------------------------------------------------------

                                                 Thousands of
                                                 Barrels Daily
                                              -------------------
Operating Statistics
U.S. Refinery Crude Oil
  Capacity                                       345          345
  Crude Runs                                     286          312
  Capacity utilization (percent)                  83%          90
-----------------------------------------------------------------

Petroleum Products Outside Sales
  United States
    Automotive gasoline--wholesale               281          287
    Automotive gasoline--retail                   36           35
    Aviation fuels                                25           23
    Distillates                                  128          134
    Other products                                12           14
-----------------------------------------------------------------
                                                 482          493
  Foreign                                         42           46
-----------------------------------------------------------------
                                                 524          539
=================================================================
*Restated to reflect the transfer of the company's wholesale
 propane business from RM&T to Chemicals.  In addition, certain
 costs previously held at Corporate are now aligned with the
 operating segments.


RM&T's net operating income increased $2 million in the first
quarter of 1997, compared with the first quarter of 1996.  Higher
gasoline and other refinery product margins were partially offset
by higher fuel-gas costs due to higher natural gas prices.  The
purchase cost of a barrel of crude oil delivered to the U.S.
refineries averaged $22.04, 14 percent higher than the


                                 18

<PAGE>



corresponding quarter of 1996, but lower than fourth quarter 1996,
when acquisition prices averaged $24.20 per barrel.

Also during the quarter, a scheduled major maintenance turnaround
at the company's largest refinery, located in Sweeny, Texas,
impacted both operating costs and throughput volumes.  As a
result, total refinery capacity utilization was 83 percent,
compared with 95 percent for the full year 1996.


Chemicals
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              -------------------
                                              Millions of Dollars
                                              -------------------
Operating Income
Reported net income                              $72           70
Less special item                                  -           (7)
-----------------------------------------------------------------
Net operating income                             $72           77
=================================================================

                                              Millions of Pounds
                                              Except as Indicated
Operating Statistics                          -------------------
Production**
  Ethylene                                       720          695
  Polyethylene                                   506          513
  Propylene                                      116          112
  Polypropylene                                  110           89
  Paraxylene                                      20          158
  Cyclohexane (millions of gallons)               33           43
-----------------------------------------------------------------
**Includes Phillips' share of equity affiliates' production.

                                                 Thousands of
                                                 Barrels Daily
                                              -------------------
U.S. Petroleum Products Outside Sales
  Automotive gasoline                             12           12
  Liquefied petroleum gas                        117          112
  Other products                                  37           31
-----------------------------------------------------------------
                                                 166          155
=================================================================

Natural Gas Liquids
  Processing capacity                            250          250
  Liquids processed                              208          196
-----------------------------------------------------------------
*Restated to reflect the transfer of the company's wholesale
 propane business from RM&T to Chemicals.  In addition, certain
 costs previously held at Corporate are now aligned with the
 operating segments.


The Chemicals segment's net operating income declined 6 percent
compared with the corresponding quarter a year ago, primarily due
to lower results from the company's Puerto Rico Core operations.
A shutdown of operations at Core related to the expansion of the
paraxylene facilities resulted in lower paraxylene sales volumes.


                                 19

<PAGE>



The paraxylene expansion has been completed, with total
paraxylene design capacity now at 880 million pounds per year.
In addition to lower volumes, paraxylene and motor fuel margins
at Core were lower than last year's first quarter.  Also
contributing to the segment's lower operating income were lower
margins in the company's plastic pipe business, along with higher
costs associated with worldwide growth projects.

Ethylene margins in the first quarter of 1997 were at their
highest level since the third quarter of 1995, leading to
improved operating income from the olefins business line and the
company's equity interest in the Sweeny Olefins Limited
Partnership.  In the company's plastic resins business,
polyethylene margins were higher than the first quarter of 1996.
In addition, the company's equity share of polypropylene
production was 24 percent higher than a year ago, reflecting the
expanded capacity attributable to the new, gas-phase
polypropylene facility at the Houston Chemical Complex.

The special item in the first quarter of 1996 was a tax item
related to the company's Puerto Rico Core operations.


Corporate and Other
                                              Millions of Dollars
                                              -------------------
                                              Three Months Ended
                                                   March 31
                                              -------------------
                                                1997         1996*
                                              --------------------
Operating Results
Reported Corporate and Other                    $(84)         503
Less special items                               (20)         556
-----------------------------------------------------------------
Adjusted Corporate and Other                    $(64)         (53)
=================================================================


Adjusted Corporate and Other includes:

Corporate general and
  administrative expenses                       $(18)         (16)
Net interest                                     (30)         (35)
Preferred dividend requirements                  (17)          (8)
Other                                              1            6
-----------------------------------------------------------------
Adjusted Corporate and Other                    $(64)         (53)
=================================================================
*Restated to reflect that certain costs previously held at
 Corporate are now aligned with the operating segments.


Corporate general and administrative expenses were $2 million
higher in the first quarter of 1997, compared with the first
quarter last year, primarily due to the timing of charitable
contributions.


                                 20

<PAGE>



Net interest represents interest income and expense, net of
capitalized interest.  Net interest expense was lower in the
first quarter of 1997, relative to the first quarter of 1996, due
to lower debt levels in 1997.

Preferred dividend requirements includes dividends on the
Phillips Gas Company preferred stock and on the preferred
securities of the Phillips 66 Capital I (Trust I) and Phillips 66
Capital II (Trust II) trusts.  The Trust I securities were issued
in May 1996 and the Trust II securities were issued in January
1997, leading to higher preferred dividend requirements in the
first quarter of 1997, compared with the first quarter of 1996.

Other consists primarily of the company's insurance operations,
along with income tax items and other items that are not directly
associated with the operating segments on a stand-alone basis.
Other was impacted by lower earnings from the company's insurance
operations, along with higher income taxes not directly
associated with the operating segments.

Special items in the first quarter of 1997 represented non-cash
foreign currency transaction losses due to the revaluing of an
intercompany, sterling-denominated receivable.  Special items in
the first quarter of 1996 included an after-tax gain of
$565 million related to the favorable settlement of the company's
Kenai LNG tax case.  This amount was partially offset by various
contingency accruals.


                                 21

<PAGE>



CAPITAL RESOURCES AND LIQUIDITY

Financial Indicators
                                        Millions of Dollars
                                  -------------------------------
                                        At           At        At
                                  March 31  December 31  March 31
                                      1997         1996      1996
                                  -------------------------------
Current ratio                          1.2          1.1       1.0
Total debt                          $2,896        3,129     2,929
Preferred stock of subsidiary       $  345          345       345
Company-obligated mandatorily
  redeemable preferred securities   $  650          300         -
Common stockholders' equity         $4,390        4,251     3,823
Percent of total debt to capital*       35%          39        41
Percent of floating-rate debt
  to total debt                         16%          22        17
-----------------------------------------------------------------
*Capital includes total debt, preferred stock of subsidiary,
 company-obligated mandatorily redeemable preferred securities
 and common stockholders' equity.


Cash from operations for the first quarter of 1997 decreased
10 percent, compared with the same period in 1996.  However,
excluding the impact of the favorable resolution of the Kenai LNG
tax proceeding in the first quarter 1996, cash from operations
increased $140 million.  This was primarily the result of changes
in working capital, with a decrease in accounts receivable,
partially offset by a decrease in accounts payable, resulting
from the March decline in prices, compared with year-end 1996
levels.  Also contributing to the difference in cash from
operations between the two periods was a $60 million decrease in
the aggregate balance of accounts receivable sold in 1996.  This
resulted from payments made on a receivable monetization program
during the first quarter 1996, while the program was inactive
in the first quarter 1997.

In January 1997, Phillips 66 Capital II (Trust II) completed a
$350 million underwritten public offering of 8% Capital
Securities.  The sole asset of Trust II is $361 million of the
company's 8% Junior Subordinated Deferrable Interest Debentures
due 2037.  Phillips owns all of the common stock of the trust and
fully and unconditionally guarantees the trust's obligation under
the securities.

During the first three months of 1997, cash increased
$246 million, primarily due to the previously mentioned
$350 million offering of company-obligated mandatorily redeemable
preferred securities.  This increase in cash, combined with a
$233 million decrease in notes payable and long-term debt due
within one year, resulted in an improved current ratio of 1.2 at
March 31, 1997, compared with 1.1 and 1.0 at year-end 1996 and
the end of first quarter 1996, respectively.


                                 22

<PAGE>



On April 14, 1997, Phillips' Board of Directors approved the
company's third dividend rate increase in three years, raising
the quarterly per share dividend to $.34, a 6 percent increase,
effective June 2, 1997.  In April, the Board authorized the
expenditure of up to $150 million to periodically buy back shares
of the company's common stock.  The purchases began in late
April.

At March 31, 1997, none of the company's $1.1 billion revolving
bank credit facility was outstanding, and no amount was
outstanding under its commercial paper program.  The company
plans to increase its revolving bank credit facility from
$1.1 billion to $1.5 billion, with an expected closing on, or
about, May 14, 1997.  The company plans to amend the LTSSP
$397 million 25-year term bank loan, effective May 30, 1997, to
extend the date that any participating bank in the syndicate of
lenders may cease to participate from November 30, 2001, to
November 30, 2004.

In late 1995, Phillips and Shanghai Petrochemical Company Limited
(SPC) formed a joint venture to build and operate a linear
polyethylene plant near Shanghai, China, with an annual capacity
of 220 million pounds.  In May 1997, the joint venture signed
loan agreements to partially fund the design and construction of
the plant.  Remaining funding was provided by registered capital
previously contributed by Phillips and SPC.  Phillips is
guaranteeing the U.S. dollar portion of the loan agreements,
totaling $33.7 million.  SPC is guaranteeing the foreign currency
portion of the loans.  Phillips has a 40-percent interest in the
joint venture.


Capital Expenditures and Investments

                                     Millions of Dollars
                            -------------------------------------
                                               Three Months Ended
                                                    March 31
                                               ------------------
                            Estimated 1997     1997          1996
                            --------------     ------------------

E&P                             $  905         $215           201
GPM                                100           43            13
RM&T                               245           46            52
Chemicals                          350           60            44
Corporate and Other                 70           14             6
-----------------------------------------------------------------
                                $1,670         $378           316
=================================================================
United States                   $1,036         $229           174
Foreign                            634          149           142
-----------------------------------------------------------------
                                $1,670         $378           316
=================================================================


                                 23

<PAGE>



Construction continues on the new processing and transportation
platform at Ekofisk.  This project (Ekofisk II), which is
85 percent complete, on time and under budget, replaces the
majority of the facilities in the existing Ekofisk complex.  Some
of the existing facilities that are to continue in operation
after the start up of Ekofisk II in 1998 will be impacted by the
continuing subsidence in the Ekofisk area, and studies are in
progress to determine what future actions are necessary with
regard to these facilities.  Future costs related to subsidence
of the existing facilities are not expected to materially impact
the financial results of the company.

GPM's capital expenditures and investments for the three months
ended March 31, 1997, increased substantially over the same
period in 1996, primarily due to a purchase of gathering assets
from Amoco Production Company in January 1997.

The company continues its planned retail-marketing expansion that
began in 1996.  Seven new outlets were opened in the first
quarter of 1997.  In addition, five existing units were razed and
rebuilt.  Since the expansion program began, utilizing both
capital funds and a master leasing program, the company has
acquired 24 outlets, opened 14 new ones, and razed and rebuilt
10 others.  The new outlets and the existing outlets that were
razed and rebuilt utilize the new Kicks 66 service station-
convenience store design.

In February, Phillips and its co-venturer announced plans to
convert a portion of the Seaway Pipeline system to refined
products service.  In conjunction with this conversion, Phillips
plans to construct a new 150-mile, 18-inch pipeline to connect the
Seaway line to the company's existing Midwest distribution system near
Wichita, Kansas, to transport gasoline and distillates from the
Gulf Coast to the growing Midwest market.  Construction is
scheduled to be completed in the first quarter of 1998.

During the first quarter, a paraxylene capacity increase from
675 million to 880 million pounds per year was completed at the
company's Puerto Rico Core facility.

Construction of a debottlenecking project at Sweeny Olefins
Limited Partnership's (SOLP) ethylene plant has been completed,
and in April 1997 the lawsuit between First Olefins Limited
Partnership (FOLP), one of the general partners in SOLP, and the
company was dismissed.  In the lawsuit, filed late in 1995, FOLP
was seeking an injunction to halt construction of the
debottlenecking project.  Phillips owns a 50-percent interest in
SOLP.


                                 24

<PAGE>



J-Block Update

Production had been delayed because the gas purchaser, Enron
Europe Limited (EEL), has decided not to take gas until sometime
in the future under its long-term take-or-pay agreements.  The
offshore U.K. gas reserves in Blocks 30/7a and 30/12a (J-Block)
are dedicated to a single purchaser, EEL, under long-term take-
or-pay gas sales agreements guaranteed by its parent, Enron Corp.
Under the agreements, EEL is required to pay for gas at a
predetermined rate even if it elects not to take actual
deliveries.  EEL has advised that its present non-binding
estimate of future total daily nominations for delivery is zero
through September 1999.

Gas injection facilities were completed and initial operations
were commenced in early April 1997.  These facilities allow for
initial production of liquids, while the associated natural gas
production is reinjected for later delivery.  The U.K. government
approved these plans and initial liquids production reached
30,000 gross barrels per day and is expected to reach
approximately 35,000 to 40,000 gross barrels per day later this
year after a brief shutdown for minor modifications.  On
March 17, 1997, Phillips and the other J-Block owners filed a
writ in the English High Court in London against EEL seeking a
declaration confirming that the J-Block gas injection program
complied with the relevant terms of their gas sales agreements.
A decision by the court is unlikely until 1998 at the earliest
and gas injection is expected to continue during this time.

The previous year, on March 29, 1996, the J-Block owners had
filed legal proceedings in the English High Court in London
seeking a declaration that EEL as buyer under the J-Block gas
sales agreements could not refuse to agree to a commissioning
date for the J-Block facilities on the basis of a decline in
natural gas prices in the United Kingdom, and thereby cannot
delay commencement of its take-or-pay obligations under the sales
agreements.  On May 8, 1996, the English High Court ruled in
favor of the J-Block owners.  On October 10, 1996, the English
Court of Appeal reversed the May 8 decision, concluding that the
date for commissioning the J-Block facilities could be delayed by
EEL until the contract fall-back date of September 25, 1996.  The
House of Lords, the highest court in England, has now agreed to
hear an appeal of the Appeal Court's decision by the J-Block
owners.  The appeal is expected to be heard sometime later in
1997.

The J-Block owners subsequently amended their claims in the
English High Court to enforce EEL's obligation to accept J-Block
commissioning gas on and after September 25, 1996, as well as to
seek damages resulting from EEL's breach.  Trial of this amended


                                 25

<PAGE>



claim by the J-Block owners, together with the related claim
filed in 1995 by the owners of the Central Area Transmission
System is now concluded and a decision is expected in the second
quarter of 1997.  EEL and Teesside Gas Transportation Limited
asserted as defenses in this litigation that the Capacity
Reservation and Transportation Agreement, the J-Block
transportation agreements, and the J-Block gas sales agreements
are terminated.

Further developments in this litigation are anticipated, and the
course of events and range of possible outcomes cannot be
predicted at this time.  The company intends to vigorously assert
its interests in each of the pending matters.

The J-Block and Block 30/6b are operated by Phillips, which has a
36.5-percent interest.  The company also owns 32.5-percent and
35-percent interests in Blocks 30/2c and 30/13, respectively.


Contingencies

Legal and Tax Matters

The company has a number of issues outstanding with the Internal
Revenue Service related to tax years 1983 through 1992 that can
proceed toward final settlement as a result of resolving the
Kenai LNG tax case.  Although it is too early to determine the
final financial effects of resolving these open years, a
favorable outcome would have a positive effect on net income and
cash flow, while an unfavorable one would not impact the
company's net income or cash position.  While total resolution
may require a number of years, the majority of these open years
are expected to be resolved in the near term.

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


Environmental

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


                                 26

<PAGE>



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

At year-end 1996, Phillips reported 47 sites where it had
information indicating that it might have been identified as a
Potentially Responsible Party (PRP).  Since then, one of these
sites was resolved through a consent decree.  No sites were added
during the first quarter.  Of the 46 sites remaining at March 31,
1997, the company believes it has a legal defense or its records
indicate no involvement for 16 sites.  At seven other sites,
present information indicates that it is probable that the
company's exposure is less than $100,000 per site.  At eight
sites, Phillips has had no communication or activity with
government agencies or other PRPs in more than two years.  Of the
15 remaining sites, the company has provided for any probable
costs that can be reasonably estimated.

Phillips does not consider the number of sites at which it has
been designated potentially responsible by state or federal
agencies as a relevant measure of liability.  Some companies may
be involved in few sites but have much larger liabilities than
companies involved in many more sites.  Although liability of
those potentially responsible is generally joint and several for
federal sites and frequently so for state sites, the company is
usually but one of many companies cited at a particular site.  It
has, to date, been successful in sharing cleanup costs with other
financially sound companies.  Many of the sites at which the
company is potentially responsible are still under investigation
by the Environmental Protection Agency (EPA) or the state
agencies concerned.  Prior to actual cleanup, those potentially
responsible normally assess site conditions, apportion
responsibility and determine the appropriate remediation.  In
some instances, Phillips may have no liability or attain a
settlement of liability.  Actual cleanup costs generally occur
after the parties obtain EPA or equivalent state agency approval.

At March 31, 1997, accruals of $8 million had been made for the
company's unresolved PRP sites.  In addition, the company has
accrued $86 million for other planned remediation activities,
including resolved state, PRP, and other federal sites, as well
as sites where no claims have been asserted, and $6 million for
other environmental contingent liabilities, for total


                                 27

<PAGE>



environmental accruals of $100 million.  No one site represents
more than 10 percent of the total.

After an assessment of environmental exposures for cleanup and
other costs, the company makes accruals on an undiscounted basis
for planned investigation and remediation activities for sites
where it is probable that future costs will be incurred and these
costs can be reasonably estimated.  These accruals have not been
reduced for possible insurance recoveries.  Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.


OUTLOOK

Phillips and its co-venturers are studying a plan to develop both
blocks of the Bayu-Undan gas condensate discovery in the Timor
Sea Zone of Cooperation as a single field, with BHP Petroleum
Pty. Ltd. as unit operator.  The field initially is planned to be
developed as a gas-reinjection project, with liquids production
processed on a floating processing, storage, and offloading
facility built from a modified tanker.  The co-venturers intend
to start production in January 2002.  A decision is pending on
the location and type of facility to liquefy the natural gas at a
later stage in the project's development.

Phillips and its co-venturers have signed an agreement with the
Republic of South Africa and the South Africa National Oil Co. to
explore 14.5 million acres in the Indian Ocean.  The prospecting
sub-lease agreement gives Phillips and its co-venturers the
exclusive rights to explore for oil and gas in Block 17/18 along
the east coast of South Africa.  Under the initial four-year
agreement, Phillips plans to gather seismic data and drill at
least one exploratory well.  Phillips is the operator of the sub-
lease with a 40-percent interest.

Phillips entered into an agreement with Arco, Texaco and
Corpoven, S. A., a subsidiary of Venezuela's state oil company,
to study the development of extra-heavy oil reserves from the
Hamaca region of the Orinoco Oil Belt in eastern Venezuela.  If
development occurs, an estimated 2.4 billion barrels of oil could
be recovered, with total production averaging nearly
200,000 barrels per day by 2006.  Phillips' initial interest in
the joint venture is 20 percent.

The company plans to construct a new pipeline and terminal, and
modify an existing pipeline to serve growing markets in the
Southwest.  The pipeline will carry refined products from the
Borger, Texas, refinery to markets in El Paso, Texas, and


                                 28

<PAGE>



Arizona.  Subject to approval by the Board of Directors,
construction is expected to begin in the fourth quarter 1997,
with completion in late 1998.

Phillips signed a letter of intent with Shanghai Petrochemical
Company Limited concerning a joint venture to study the
feasibility of constructing a polyethylene pipe plant in the
Pudong New Area of Shanghai.  The plant would have an initial
capacity of 24 millions pounds per year and would produce pipe
for use in industrial, municipal water and gas service
applications.  Phillips' interest would be 50 percent.

The company has signed a memorandum of understanding with
PTT Petrochemical Co., Ltd to study the feasibility of entering
into a joint venture that would build, own and operate a linear
polyethylene plant in Thailand, producing 440 million pounds
annually.  The facility would use Phillips' proprietary
polyethylene technology.

During the first quarter, crude oil prices weakened to their
lowest levels since early 1996 and natural gas prices have
weakened seasonally from their winter peaks.  Market fundamentals
indicate that if OPEC continues to produce in excess of
27 million barrels per day, the market will remain oversupplied
throughout most of 1997.  However, potential for escalating
violence in the Middle East could provide a floor to oil prices.
Other supply uncertainties could result in increases in prices.
However, given the current supply/demand picture, global
inventories are likely to be above year-ago levels for the
remainder of 1997.  Natural gas prices are expected to stay near
current levels throughout the summer.  Industry underground
storage levels have risen sharply and are above year-ago levels.
They are expected to remain above 1996 levels for most of 1997.


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

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

Where any such forward-looking statement includes a statement of
the assumptions or bases underlying such forward-looking
statement, the company cautions that, while it believes such


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

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

  o  Plans to drill wells and develop offshore or onshore
     exploration and production properties are subject to the
     company's ability to obtain agreements from co-venturers or
     partners, and governments; engage drilling, construction and
     other contractors; obtain economical and timely financing;
     geology, land or sea, or ocean conditions; world prices for
     oil, natural gas and natural gas liquids; foreign and United
     States laws, including tax laws; and the favorable
     resolution in the case of J-Block of current litigation.

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

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


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  o  Estimates of proved reserves, raw natural gas supplies, cost
     estimates of the Ekofisk II project, and planned spending
     for maintenance and environmental remediation were developed
     by company personnel using the latest available information
     and data, and recognized techniques of estimating, including
     those prescribed by the Securities and Exchange Commission,
     generally accepted accounting principles and other
     applicable requirements; however, new or revised information
     or changes in scope or economics could cause results to
     vary, perhaps materially.


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                   PART II.  OTHER INFORMATION


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
--------

12  Computation of Ratio of Earnings to Fixed Charges.

27  Financial Data Schedule.


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

During the three months ended March 31, 1997, the company did not
file any reports on Form 8-K.


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                            SIGNATURE


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


                                   PHILLIPS PETROLEUM COMPANY




                                  /s/ Jacqueline K. Wagner
                               ----------------------------------
                                      Jacqueline K. Wagner
                                 Vice President and Controller
                                  (Chief Accounting and Duly
                                      Authorized Officer)


May 9, 1997


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