Oil refiner Valero Energy Corp. (NYSE: VLO) reported fourth-quarter and full-year 2014 earnings before markets opened Thursday. Quarterly adjusted diluted earnings per share (EPS) totaled $1.83, compared with EPS a year ago of $1.78. Quarterly revenues totaled $27.86 billion, down from revenues of $34.43 billion in the fourth quarter of 2013. The consensus estimates called for EPS of $1.33 on revenues of $26.6 billion.

For the year, Valero reported EPS of $6.68 on revenues of $130.84 billion, compared with EPS of $4.41 and revenues of $138.07 billion in 2013. Analysts were looking for EPS of $6.07 on revenues of $129.06 billion.

On a GAAP basis Valero’s earnings for the quarter totaled $2.22 per share, compared with a total of $2.38 in the year-ago period. The big difference was a loss of $151 million on the refiner’s last-in, first-out accounting method. When crude oil prices fall, the more expensive barrels at the bottom of the storage tanks do not usually show a profit when they are refined.

Phillips 66 (NYSE: PSX) also reported earnings results Thursday morning. The country’s largest independent refiner posted EPS of $2.05 on revenues of $34.96 billion. In the same quarter last year, it posted EPS of $1.34 on revenues of $43.84 billion. Analysts were looking for EPS of $1.37 on revenues of $35.2 billion. Excluding $234 million in special items, adjusted earnings totaled $913 million, or $1.63 per share.

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For the full year, Phillips 66 said it had EPS of $6.62 on revenues of $161.21 billion, compared with EPS of $5.89 in 2013 on revenues of $174.81 billion. The consensus estimates called for EPS of $6.43 on revenues of $163.99 billion.

In the company’s refining business, adjusted earnings in the fourth quarter totaled $322 million, down from $558 million in the year-ago quarter. The shortfall was attributed to lower realized margins, partially offset by higher volume. Margins were lower due to weaker gasoline crack spreads and narrowing crude differentials. Margins on “secondary products” and distillates improved.

Both Valero and Phillips 66 did better than analysts expected in the fourth quarter, and much of the improvement was due to higher throughput of cheap crude. Valero paid $77.35 a barrel for crude in the fourth quarter, compared with a per-barrel price of $109.26 a year ago. For the year, the average barrel cost Valero $99.57, down from $108.74 in 2013.

Phillips 66 paid an average of $73.41 a barrel for West Texas Intermediate (WTI) crude in the fourth quarter, compared with $97.38 a year ago. For the year, the average price was $93.17, compared with $97.90 in 2013. The price differential between WTI and Brent dropped from around $11 in 2013 to about $6 in 2014. Refinery utilization rose from 93% a year ago to 94% and throughput rose by about 55,000 barrels a day.

Valero’s capital spending in 2014 totaled about $2.8 billion, and the company said it would spend about $2.65 billion in 2015 and expects about $2.4 billion in capex in 2016.

Phillips 66 invested $3.77 billion in capital projects in 2014 and gave no indication of planned spending for 2015. The company said it would discuss its plans during its conference call.

Refining margins were essentially flat for Phillips 66 year-over-year at around $9.90 a barrel. For Valero, throughput margins rose from $9.69 a barrel to $11.28. This number, combined with the gasoline crack spread, is key to continued profitability for the refiners.

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Analysts are high on refiners now that crude prices are low and demand has grown — at least in the United States — because of the low pump prices. As the industry heads into the turnaround season, pump prices are expected to rise and should remain higher during the summer driving season. That will help refining margins to some extent. How much is the big question.

Shares of Valero traded up about 2.5% early Thursday morning to $52.80, in a 52-week range of $42.53 to $59.69. The consensus target price for the shares was around $60.60 before the report.

Phillips 66 stock traded up about 1%, at $69.08 in a 52-week range of $57.33 to $87.98. The consensus target price was around $84 before the announcement.

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