* Income falls to $1.94 bln, in line with forecasts
* Reserves replacement ratio turns negative in 2015
* Capex came to $28.9 billion
* Sold $5.5 bln of assets in 2015
* Dividend held, yield above 8 pct
* Shares outperform sector, rising 6.2 pct (Adds share price, CEO, CFO comments, details)
By Karolin Schaps and Ron Bousso
LONDON, Feb 4 (Reuters) - Royal Dutch Shell,Europe's largest oil company, reported its lowest annual incomein over a decade on Thursday and said it would take furthersteps to cut costs to cope with weak oil prices if needed.
Shell, whose shareholders last week approved its takeover ofrival BG Group, said 2015 income fell 87 percent to $1.94billion, in line with analysts' estimates, as its oil and gasproduction unit took a big hit from slumping oil prices.
Shares in Shell, which offer a dividend yield of above 8percent, were trading up 6.4 percent at 1036 GMT, outperformingthe European oil and gas company index which was up 3.4 percent.
"Most divisions came in towards the top end of management'sguidance range, which we view as positive," said BirajBorkhataria, equity analyst at RBC Capital Markets.
Shell's earnings are the latest demonstration of how badlyoil producers are suffering from a 75 percent fall in oil pricessince mid-2014. The world's largest oil company, ExxonMobil, this week reported its smallest quarterly profit inmore than a decade, while BP's 2015 loss was its biggest ever.
Norway's Statoil said on Thursday it would cut 2016 capitalexpenditure (capex) by $1.7 billion year on year, while U.S.producer ConocoPhilips reduced its quarterly dividend.
"Shell will take further impactful decisions to managethrough the oil price downturn, should conditions warrant that,"Chief Executive Ben van Beurden said in a statement. Shellmaintained its annual dividend payment of $1.88 per share.
Shell is reducing investment, cutting nearly 10,000 jobs andselling assets to cope with the downturn. The CEO told reportershe believed oil prices had reached, or were near, the bottom ofthe cycle, pointing to growing demand.
In order to lower spending, Shell has scrapped multi-billionpound projects over the past year, including a controversialexploration project in the Alaskan Arctic Sea, the Bab sour gasfield in Abu Dhabi and Carmon Creek oil sands project in Canada.
The company approved only four new projects last year andinvestment decisions are expected to remain scarce in 2016.
This strategy has started to drag down Shell's reservereplacement ratio, a metric used to reflect new reserves addedrelative to the amount produced, which was negative in 2015 forthe first time in around 12 years.
"While we're not entirely comfortable with a negativenumber, it's not the most important thing today," Shell ChiefFinancial Officer Simon Henry told reporters.
He said the additions of BG's reserves once the takeovercompletes would help.
Shell maintained its $33 billion combined Shell-BG capitalexpenditure budget for 2016. Capital spending fell to $28.9billion in 2015, down $8.4 billion year on year.
Shell's fourth-quarter current cost of supplies (CCS)earnings excluding identified items, its preferred way ofmeasuring profits, fell 44 percent to $1.83 billion. Itsdownstream business benefited from lower fuel prices,contributing a profit of $1.5 billion in the fourth quarter.
Shell sold $5.5 billion worth of assets in 2015, it said. (Editing by Jason Neely and Elaine Hardcastle)
