Last checked at 
(Repeats to additional subscribers)
* Shares fall after Q4 earnings miss expectations
* CEO warns against over reacting to oil drop
* To maintain dividend in Q1
By Ron Bousso and Karolin Schaps
LONDON, Jan 29 (Reuters) - Royal Dutch Shell blamedwritedowns and forex losses for making almost no money in oilproduction, its most powerful division, in the last quarter of2014, causing the company to miss profit forecasts by more than20 percent.
Shell, the largest of the European energy majors, alsoannounced a relatively modest three-year, $15 billion cut inspending to help it weather the plunge in oil prices.
"We are taking a prudent approach here and we must becareful not to over-react to the recent fall in oil prices,"Chief Executive Ben van Beurden said.
The company also kept dividends unchanged to sootheinvestors but its shares fell four percent, hit by the earningsshortfall.
The company's fourth-quarter 2014 adjusted net income of$3.3 billion was weighed down by weaker than expected earningsfrom oil and gas production, known as upstream.
"Upstream earnings of $1.7 billion were well below our andconsensus expectations of $2.8 billion," Morgan Stanley analystssaid in a note.
"Integrated gas accounted for $1.6 billion of this profits,implying that Shell's remaining upstream activities weregenerating almost no earnings with Brent still averaging $75 perbarrel in the fourth quarter."
Chief Financial Officer Simon Henry blamed the miss on anumber of one-off items, including forex losses, explorationwrite-offs in North America and increased estimates of futuredecommissioning liabilities worldwide. He said those one-offswere unlikely to be repeated in future quarters.
The $15 billion spending cut, which will involve cancelingand deferring projects through 2017, represents a 14 percent cutper year from 2014 capital investment of $35 billion.
It is a change of course after Shell, which has one of thelargest capital investment programmes in the industry, said inOctober it would keep its 2015 spending unchanged.
"Shell is considering further reductions to capital spendingshould the evolving market outlook warrant that step, but isaiming to retain growth potential for the medium term," it said.
DIVIDEND MAINTAINED
Shell maintained its fourth-quarter dividend unchanged fromthe previous quarter at $0.47 per share and in a rare movepledged to pay the same amount in the first quarter of 2015. Ithas never cut its dividend since 1945.
Oil majors including rivals BP and Total have said they do not intend to cut their dividends, a keyattraction for investors, even if oil prices remain low.
Most have already announced cuts in capital expenditure ofaround 10-15 percent and sold assets worth dozens of billions ofdollars.
But they have warned against cutting too much as it couldderail long-term projects, destroy the value of companies andpotentially even lead to an oil shortage in the future.
Oil prices have fallen to below $50 per barrel because ofweak global demand and a boom in U.S. shale production. OPEC inNovember decided not to cut output as the group of oil producingnations hopes to force other producers to trim production.
Van Beurden said prices should reach a "long-termequilibrium" of $90 per barrel but did not say when he expectedthem to return to those levels.
Lower income from oil and gas production was offset by anear tripling of earnings from the refining and trading divisionto $1.55 billion.
Low borrowing ratio of 12 percent at the end of 2014 leavesroom for raising more debt, placing Shell in a strong positionto deal with the lower oil prices, according to Raymond Jamesanalyst Bertran Hodee.
(Additional reporting and writing by Dmitry Zhdannikov,;editing by Jason Neely and Keith Weir)
