* Shell stocks rise over 4 percent as it beats estimates
* BP falls over 4 percent as results boosted by one-off gain
* Most oil majors report estimate-beating Q3 earnings
* Graphic http://tmsnrt.rs/2c0eSev (Adds Shell CFO comment, updates shares)
By Ron Bousso and Karolin Schaps
LONDON, Nov 1 (Reuters) - Royal Dutch Shell and BP on Tuesday joined peers in reporting higher than expectedearnings by making further deep cuts in spending to cope with anoil price downturn now in its third year.
The companies said they were well on the way to adapting tothe more than halving in prices. But any new sharper downturnwould test their ability to invest for growth and retain therelatively large dividends their shareholders expect.
Shell's stock rose by over 4 percent as it announced higherquarterly earnings than arch-rival U.S. Exxon Mobil, theworld's largest listed oil company by output and marketcapitalisation.
The Anglo-Dutch major, which acquired rival BG for $54billion earlier this year, had been under pressure to cut costsafter second quarter earnings came in around 50 percent belowforecasts.
By contrast, BP's stock fell by more than 4 percent by 1610GMT as some analysts said its results were boosted by a one-offtax gain, meaning its longer-term profits and ability to paydividends could still be at risk. The oil price was trading flaton the day at around $49 a barrel.
Shell's Chief Executive Officer Ben van Beurden said the oilsector had yet to emerge from troubled waters, but huge costsavings meant oil majors were getting closer to balancing theiroperations at today's oil prices of around $50 a barrel.
The prospects for an oil price recovery are still unclear,van Beurden said, despite attempts by OPEC and other producersto agree a deal to limit output and reduce the global glut whichhas pushed oil prices down by 50 percent since June 2014.
"Lower oil prices continue to be a significant challengeacross the business, and the outlook remains uncertain," vanBeurden said.
FUTURE FOCUS
The world's top oil and gas companies, including Exxon andChevron, reported sharp drops in quarterly results lastweek due to lower oil prices and weaker refiningmargins.
But at the same time, most have shown they were adjusting tothe new environment, with both Exxon and Chevron also beatingearnings expectations. Chevron plans to focus future growth onU.S. onshore shale production, where investments are smaller andproduction starts faster compared to large offshore projects.
Shell also sees shale production as a key future growthengine. Its Chief Financial Officer Simon Henry said theoil-rich Permian Basin in West Texas was a "crown jewel".
Exxon warned it may need to slash proved oil and gasreserves on its books by nearly 20 percent, or some 4.6 billionbarrels, if oil prices stay low for the rest of2016.
French oil major Total also beat third quarter incomeexpectations helped by cost cuts and new projects and only smaller rivals Norway's Statoil and Italy'sENI missed expectations due to lower-than-expectedoutput.
BP Chief Financial Officer Brian Gilvary said the Britishcompany was on track to rebalance cash flows next year at $50 to$55 a barrel and its future focus areas would include Russia andareas where it could bring technology to bear.
"This allow us to sustain our dividend whilst stillinvesting enough to grow long term," he said.
In 2014, the world's top oil companies required an oil priceof $113 a barrel in order to cover their spending and dividends,according to Jefferies analysts. The breakeven dropped to around$60 a barrel in 2016 and is expected to hover at around $50 abarrel next year.
BP benefited from UK fiscal regime changes, resulting an a$164 million tax credit in the third quarter, compared with a$1.16 billion tax bill in the same quarter last year.
"Despite mixed numbers and a modest increase in gearing, theoverall trend in cost and capex savings and cash flows at BPcontinues to head in the right direction," analysts from MorganStanley said in a note.
BP reported a near halving in third-quarter earnings andslashed another $1 billion from its 2016 investment plan, whileShell saw an 18 percent rise in profits and lowered next year'scapital spending to the bottom of the expectedrange.
Both Shell and BP maintained their dividends unchanged asexpected.
At $2.8 billion in the third quarter, Shell's net income wasabove Exxon's third quarter net income of $2.65 billion.
Exxon has not made a big acquisition for more than 5 yearsbut it is still worth more than Shell - its market cap was $345billion as of Tuesday while Shell was worth $205 billion.
As well as slashing spending, oil companies have scrappednew projects, cut tens of thousands of jobs, renegotiated supplycontracts and increased borrowing since prices began a sustainedfall in June 2014.
All the majors apart from Eni have maintained or increasedtheir dividends throughout the downturn to retain shareholderloyalty. Shell has not cut its dividend since World War Two.
(additional reporting by Christoph Steitz in Frankfurt; editingby Philippa Fletcher)
