BP has set out plans to deliver $2bn (£1.6bn) in savings by the end of 2026, after failing to deliver on profit expectations.

The oil and gas firm revealed that its underlying profits reached $2.7bn (£2.15bn) in the first quarter of 2024, having reached $5bn (£4bn) a year previously.

Analysts had expected BP to reach profits of almost $2.9bn (£2.3bn) in the first three months of 2024.

Chief executive officer at BP, Murray Auchincloss, said: "We've delivered another resilient quarter financially and continued to make progress on our strategy. Oil production was up and our ACE platform in the Caspian is now producing. We are simplifying and reducing complexity across BP and plan to deliver at least $2bn of cash cost savings by the end of 2026 through high grading our portfolio, digital transformation, supply chain efficiencies and global capability hubs."

Despite the drop in profits, BP will continue with the pace of its share buyback programme, in which the oil and gas giant has committed to returning $3.5bn (£2.8bn) to shareholders in the first half of the year.

In the first quarter, $1.75bn (£1.4bn) was given back to shareholders as part of the programme.

Looking forward, BP said that its upstream production is expected to be slightly lower compared with the first quarter.

Investment director at AJ Bell, Russ Mould, added: "BP’s first-quarter profits are down year-on-year and lower than expected thanks in the main to lower gas prices and temporary problems at a refinery in Indiana, USA, although shareholders are unlikely to be too concerned given the company’s ability to return $3bn to them via dividends and buybacks in just three months.

"BP is on course to return the same amount in the next three months of 2024 and if it maintains that pace for the whole year then the oil and gas major will return more than 11% of its stock market valuation to investors, a cash yield that easily exceeds Bank of England base rates, government gilt yields and inflation.

"Income-seekers will want to make sure that such returns are affordable, if indeed BP offers them for all four quarters of 2024, and that the company is not cutting on capital investment or taking on debt to keep up the pace, as either move could weaken the company over the longer term.

"The good news is that free cash flow covered both the dividend and the buyback in the first quarter, although only just, thanks to the dip in profits and a working capital outflow."

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