ROYAL Dutch Shell has reported an 8 per cent fall in full-year profits to $3.5 billion (£2.7 billion)
The oil giant's figures came in below analysts' expectations and compare with a $3.8 billion (£2.6 billion) profit last year.
The results were dragged down by a lacklustre fourth quarter, which saw profits fall 44 per cent to $1 billion (£789 million).
The results come despite oil prices recovering from around 27 dollars a barrel last January to more than 55 dollars a barrel.
Chief executive Ben van Beurden said: "We are reshaping Shell and delivered a good cash flow performance this quarter with over $9 billion (£7.1 billion) in cash flow from operations.
"Debt has been reduced and, for the second consecutive quarter, free cash flow more than covered our cash dividend."
Excluding exceptional items, profits fell 37 per cent to $7.18 billion (£5.6 billion) for the year.
Shell, which completed a $52.6 billion (£36.4 billion) acquisition of BG Group last year, is embarking on an ambitious cost-cutting drive and a $30 billion (£24.6 billion) divestment initiative.
Earlier this week Shell announced it will sell off a package of North Sea assets for up to $3.8 billion (£3 billion) to smaller rival Chrysaor.
Mr van Beurden said: "We are operating the company at an underlying cost level that is $10 billion (£7.9 billion) lower than Shell and BG combined only 24 months ago.
"We are gaining momentum on divestments, with some 15 billion US dollars (£11.8 billion) completed in 2016, announced, or in progress, and we are on track to complete our overall 30 billion US dollars (£23.6 billion) divestment programme as planned."
The results show that Shell's integrated gas division saw earnings fall to $3.7 billion (£2.9 billion) compared with $5 billion (£3.9 billion) last year.
Its upstream oil and gas producing unit booked losses of $2.7 billion (£2.1 billion) while downstream profit fell from $9.7 billion (£7.6 billion) to $7.2 billion (£5.6 billion).
The company said it plans to pump $25 billion (£19.7 billion) into "high-quality, resilient projects" in 2017.
Shares in Shell rose 1.8 per cent in morning trading.
AJ Bell Investment director Russ Mould said: "Royal Dutch Shell's shares were up in early trading despite a fall in earnings.
"The group has been hit by a combination of low oil prices and restructuring costs and investors were encouraged by the oil giant's good cash flow performance.
"Shell has reduced its debt and, for the second consecutive quarter, free cash flow more than covered its cash dividend.
"A $30 billionsell-off programme is also on course with most of the proceeds being put into high-quality, resilient projects."
