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Shell has seen its fourth-quarter earnings hit by the slump in oil pricesReuters

Oil giant Royal Dutch Shell posted a sharp decline in full-year profit, as the ongoing slump in crude prices hit the FTSE 100 group hard, leading the company to implement more cost-cutting measures.

In the final three months of its financial year, Shell saw earnings on a current cost of supplies (CCS) basis tumble to $1.8bn (£1.24bn, €1.63bn) compared with $4.2bn for the same quarter in 2014, while full-year profit plummeted 80% to $3.8bn

Fourth-quarter earnings excluding identified items fell 44% year-on-year to $1.8bn, a decline bigger than the 37% analysts had expected, while full-year earnings excluding identified items more than halved to $10.7bn.

Compared with the corresponding period a year ago, earnings excluding identified items benefited from a strong performance in the downstream business, Shell said, although in the upstream, earnings were impacted by the significant decline in oil and gas prices, which was partly offset by lower costs.

The fourth-quarter results were the Anglo-Dutch company's last before it completes its £35bn takeover of sector peer BG group later in February, a deal which will see the group cut approximately 10,000 jobs across the two companies once the merger is completed.

"The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company, and improving shareholder returns," said group chief executive Ben van Beurden.

"We are making substantial changes in the company, reorganising our Upstream, and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices.

Shell, which forecast its full-year dividend to remain unchanged, has sought to cut costs across its operations to balance the order books following the decline in oil prices and confirmed it has exited the Bab sour gas project in Abu Dhabi and is postponing final investment decisions on LNG Canada and Bonga South West in deep-water Nigeria.

The group said operating costs and capital investment have been reduced by $12.5bn compared to 2014 and the group expects further reductions in 2016.

"As a result of our actions in 2015, we have retained a strong balance-sheet position, with 14% gearing," said van Beurden.

"Shell will take further impactful decisions to manage through the oil price downturn, should conditions warrant that."

Oil prices have fallen by a quarter since the start of the year and have fallen 75% over the past 18 months amid growing concerns over a slowdown in the Chinese economy and concerns over a global oversupply, which has been exacerbated by Iran's return to the global scene.

Earlier this week, fellow oil producer BP reported a sharp decline in underlying operating profit for the full year and for the fourth quarter as a result of impairment costs related to its upstream assets and the decline in crude prices, while US-based Exxon and Chevron also suffered a similar fate.