The Anglo-Dutch company said it was reducing its proven petroleum reserves by 1.4 billion barrels — substantially more than the 900 million barrels expected by analysts.

Associated Press says this latest cut ends a year-long probe that had already seen reserves reduced by almost 25%, after Shell overstated them, the group fined almost US$150 million by US and British regulators, the sacking of three senior executives and subsequent legal challenges from irate investor groups.

Shell reported net income for the three months ended December 31 of US$4.5 billion, up from US$1.9 billion in the same period a year ago. Adjusted earnings on a current cost of supplies basis — a measurement that strips out the fluctuating value of Shell's oil and gas inventories — rose to US$5.1 billion from $1.7 billion.

Shell attributed the results to strong refining margins and high oil prices during the quarter. Full-year net profit was US$18.5 billion, up from US$12.5 billion in 2003. Sales increased 28% to US$337 billion from US$264 billion.

However, the group said its reserves replacement ratio was only 15-25% in 2004. Rivals such as Britain's BP plc and US giant ExxonMobil have reserves replacement ratios over 100%.

Shell added that it expected to pay at least US$10 billion in dividends in 2005 and will use strong levels of cash generation to restart its share buyback program, with an anticipated return to shareholders of up to Us$5 billion.

Shell has announced a string of initiatives to improve accountability and performance in the wake of the reserves scandal - including plans to merge its British and Dutch holding companies after nearly 100 years of separate operations and the hiring of over 1000 engineers to strengthen the unit at the centre of the reserves crisis.