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BP boosts oil and gas investment to $10 bln annually

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Cuts transition spending by over $5 billion yearly

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Reviewing Castrol, targets $20 billion in divestment

(Adds share price, analyst comments, share buyback and dividend

plans in paragraphs 9-15, and graphic)

By Arunima Kumar

Feb 26 (Reuters) - BP slashed planned investment

in renewable energy and said on Wednesday it would increase

annual oil and gas spending to $10 billion, in a major strategy

shift aimed at boosting earnings and shareholder returns.

The oil major cut planned annual investment in energy

transition businesses by more than $5 billion, from its previous

forecast, to between $1.5 billion and $2 billion per year.

"We will grow upstream investment and production to allow us

to produce high margin energy for years to come. We will focus

our downstream on markets where we have leading integrated

positions," CEO Murray Auchincloss said in a statement.

Under Auchincloss' predecessor, Bernard Looney, BP pledged

in 2020 to cut oil and gas output by 40% while rapidly growing

renewables by 2030. BP lowered the reduction target to 25% in

2023.

BP now aims to grow oil and gas production to between 2.3

million and 2.5 million barrels of oil equivalent per day

(boepd) in 2030.

Across the energy sector, major companies that shifted their

position in response to the need to lower carbon emissions and

curb climate change have returned the focus to oil and gas,

where returns have become easier as fossil fuel prices have

rebounded from COVID-19 pandemic lows.

"We will be very selective in our investment in the

transition, including through innovative capital-light

platforms. This is a reset BP, with an unwavering focus on

growing long-term shareholder value," Auchincloss said.

BP is seeking to regain investor confidence after

underperforming its peers and has come under added pressure to

make transformative changes after activist investor Elliott

Investment Management built a stake in the company.

Its shares were down 1% by 1151 GMT.

"The refocus on hydrocarbons is positive for BP as is the

overall lower spending, which is driven by lower renewable

spending," said Allen Good, director of equity research at

Morningstar.

"Along with the asset divestitures it should improve the

balance sheet and returns. However, there still is little, if

any, production growth, and BP's repurchase rate has been

reduced materially," Good said.

BP plans to raise its dividend by at least 4% per share

annually and expects first-quarter share buybacks of $750

million to $1 billion, a downward revision from its previous

$1.75 billion forecast.

It said it was reviewing its lubricants business, Castrol,

and targeting $20 billion in divestments by 2027.

BP plans to spend between $13 billion and $15 billion

annually through 2027, trimming $1 billion to $3 billion from

2024 levels, with 2025 capital expenditure expected at around

$15 billion.