* Capital spending to fall to $37 bln from $46 bln
* Sets disposal target of $15 billion for 2014-15
* Cancels 2014 plans for oil exploration off Alaska
* Plans 4 pct rise in Q1 dividend to $0.47 per share
* Shares up 1.3 pct
By Sarah Young
LONDON, Jan 30 (Reuters) - Anglo-Dutch oil company RoyalDutch Shell has suspended its controversial Arcticdrilling programme as part of a wider drive to cut spending andstreamline operations following a major profit warning.
Just a month into the top job, Chief Executive Ben vanBeurden set out plans to make the world's No.3 investor-ownedoil company leaner, with a new focus on growing cash.
The planned changes follow a profit warning for the quarterto the end of December that revealed across-the-board problemsat Shell, which was also hit by industry-wide challenges ofdelivering attractive returns to shareholders in the face offlat oil prices and rising costs.
"Our overall strategy remains robust, but 2014 will be ayear where we are changing emphasis, to improve our returns andcash flow performance," van Beurden said.
Those improvements would be driven by cutting capitalspending to $37 billion this year from $46 billion in 2013,while at the same time, increasing disposals, with a target tosell $15 billion worth of assets in 2014-15.
To keep investors happy, Shell said it would raise its firstquarter dividend by 4 percent to $0.47 per share, in a move ittouted as a sign of its ability to grow free cash flow.
Van Beurden, the company's former head of refining who hasbeen on the company's board for just a year, said Shell wouldnow abandon its previously set cash flow and spending targets.
"You can see how our returns are growing and then you canjudge for yourself whether it's a good story or not," he said,appearing confident as he make his public debut as CEO at amedia event in London.
Other big oil companies are also struggling.
Exxon Mobil Corp, the world's largest publiclytraded oil company by market value, posted lower-than-expectedquarterly profit on Thursday while Chevron Corp issued aprofit warning earlier in January.
Shares in Shell traded 1.3 percent higher at 2,154 pence at1527, paring earlier gains of as much as 3.4 percent.
"This is a good start, they're saying the right things, moreloudly and more quantified than we had expected," Royal Bank ofCanada analyst Peter Hutton said, adding that the increase inthe dividend was "confident" and ahead of his expectations.
Shell's warning came two weeks after van Beurden replacedformer boss Peter Voser, who had always insisted that an oilmajor needed to continue to invest throughout an economic cycle.
CHANGING TACK
The most high profile cancellation is this year's plannedcontroversial and costly hunt for oil in Alaska's Arctic seas,reversing plans made as recently as December.
Divestments are also possible in U.S. shale interests,global oil products and onshore Nigeria, said van Beurden, asShell looks to make "hard choices" across its portfolio in orderto improve its capital efficiency.
Shell has over the last eight years spent around $5 billionsearching for oil in Alaska's Arctic seas, but the company saidrecent legal difficulties in addition to costs made the exercise"impossible to justify".
The company was forced to cancel last year's Arctic offshoredrill after the grounding of a drillship in a storm in 2012 andagainst a backdrop of significant environmental opposition.
"Improving profitability in oil products and North Americaupstream will be a particular priority for us. We arerestructuring both these two portfolios with asset sales andpotentially further write-downs," van Beurden said.
The $15 billion of disposals targeted for this year and nextwould be equivalent to around 6.5 percent of Shell's current$228 billion market capitalisation and compared to proceeds fromdivestments of $1.7 billion in 2013.
Amongst the assets Shell could put up for sale is its 23.1percent stake in Woodside Petroleum, which it owns froman abortive attempt to acquire the Australian oil and gas firmin 2001. Long viewed as non-core to Shell, the stake is worthabout $6.5 billion.
Van Beurden declined to comment on specific sell-offs,promising more information at a strategy day on Mar. 13.
Shell had already said last October that it would acceleratedisposals, and the process started this month with $2.14 billionraised from selling stakes in projects in Australia and Brazil.
FOCUS ON RETURNS
Shell's new focus on return on capital employed is such thatit will be included in management remuneration package targetsstarting this year. "Our returns are at this point in time toolow to be considered competitive," he said.
RBC's Hutton said that on a return on average capitalemployed basis, Shell was in line with peers at about 11 to 12percent, but van Beurden said the company had slipped recently.
Shell had more opportunity than others to improve thatmetric, Hutton said, given that a high proportion of its capitalwas employed in projects yet to come onstream or in U.S. shalegas, where it is eyeing disposals.
Fourth-quarter earnings, excluding identified items and on acurrent cost of supply basis, came in at $2.9 billion, 48percent lower than the same quarter last year but in line with adowngraded forecast Shell gave on Jan. 17, making the quarterits least profitable for five years.
Chief financial officer Simon Henry flagged that like thefourth quarter, Shell's first quarter production would be lowerdue to maintenance and the expiry of a licence in Abu Dhabi,with Bernstein analysts calling the first quarter resultsoutlook "weak".
