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* To cut capital spending by 14 pct this year
* Production in Libya close to 300,000 bpd
* Cash flow hits 6-year record high in Q4
* Q4 adj net falls 64 pct, hit by fair value charges
* Shares outperform sector (Recasts lead, adds management comments, fund manager)
By Stephen Jewkes
MILAN, Feb 18 (Reuters) - Italy's Eni raised itsdividend on Wednesday despite a slump in fourth-quarter profitsand like its rivals pledged to cut investment this year in theface of lower oil prices.
Eni posted a 64 percent drop in fourth quarter adjusted netprofit and said it would cut investment in 2015 by about 14percent, mainly at its exploration and production business.
Oil companies across the globe have announced spending cutsand asset sales worth billions of dollars to strengthen theirbalance sheets and offset falling crude prices.
Larger energy firms such as BP and Total have said they do not intend to cut dividends, a key attractionfor investors, even if oil prices remain low.
Eni CEO Claudio Descalzi said 100,000 square kilometres ofnew acreage had been discovered in 2014 and he confirmed thefirms's oil and gas output would grow by 3 percent a year.
While analysts welcomed the forecast, some were concernedthe reduction in capital expenditure may curb expansion furtherout, and others sounded a note of caution on Libya.
"I'm a bit worried cutting capex might mean curtailingfuture growth," Ifigest fund manager Roberto Lottici said.
Eni, which has had a reserves replacement ratio of 127percent in the last five years, has one of the best discoveryrecords amongst large oil firms and analysts said it had scopeto ease back on some of its activity.
The company is the biggest foreign oil producer in Libyawhere escalating violence has seriously hit production.
"In the last quarter we were close to 275,000 barrels perday (bpd)," Descalzi said. He said current production in theconflict-torn country was close to 300,000 bpd, in contrast toLibyan energy officials who put output at below 200,000 bpd.
DIVIDEND DOUBTS
State-controlled Eni said it would pay an annual dividend of1.12 euros for 2014, up from 1.10 euros a year ago.
"The dividend is higher than 2013 and there was no scripdividend which had been a worry. Cash flow was very good despitethe oil price," a Milan-based analyst said.
Eni shares closed up 3.4 percent while the European oilindex was up 1.5 percent.
Cash flow for the fourth quarter was at a six-year high,boosted by asset sales, including 3.7 billion euros ($4 billion)from Arctic Russia.
Pressed on future dividend policy, Descalzi declined tocomment but said "we are in a strong position". Eni has adividend yield of 7.1 percent versus a peer average of 5.3percent.
But some analysts are worried lower oil prices and thedifficulty in selling assets might challenge the company'spolicy in the future.
In December, Eni was forced to pull the sale of part of itsstake in oil contractor Saipem due to marketconditions. It still needs to raise about six billion eurosunder an 11 billion euro programme through 2017.
The sale of a 10 percent stake in the giant Rovuma gas fieldin Mozambique was still on the agenda, Descalzi told analysts.He also said Eni was looking at options to extract value fromits retail gas business.
Sources recently told Reuters that Eni was working withGoldman Sachs on a possible spinoff of assets in itspower and gas unit. ($1 = 0.8821 euros) (Editing by Keith Weir and David Clarke)
