Investing.com -- BP (NYSE: BP ) announced a significant change in strategy on Wednesday, cutting planned investment in renewable energy while increasing annual oil and gas spending to $10 billion. The move is aimed at driving higher earnings and boosting shareholder returns.

The company reduced its planned annual spending on energy transition businesses by over $5 billion from previous forecasts, setting a new target of $1.5 billion to $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.

BP initially pledged in 2020 under former CEO Bernard Looney to cut oil and gas production by 40% while expanding its renewable energy portfolio. In 2023, the company revised that target to a 25% reduction. Now, BP plans to increase oil and gas output to between 2.3 million and 2.5 million barrels of oil equivalent per day (boepd) by 2030.

The shift comes as major energy firms that had committed to lowering carbon emissions and investing in cleaner energy sources refocus on oil and gas. Rising fossil fuel prices after the pandemic have made traditional energy investments more financially attractive.

"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 intends to raise its dividend by at least 4% per share annually and expects first-quarter share buybacks of $750 million to $1 billion, down from its earlier forecast of $1.75 billion.

“The discussed $0.75-1bn buyback level of 1Q is probably lower than expected, especially in the context of the increased level of expectations following the recent news of Elliott's involvement,” Jefferies analysts commented.

The company is also reviewing its Castrol lubricants business and has set a target of $20 billion in asset sales by 2027.

BP plans to allocate between $13 billion and $15 billion annually through 2027, cutting $1 billion to $3 billion from 2024 spending levels. Capital expenditure (capex) for 2025 is expected to be around $15 billion.

“Given BP had left a number of breadcrumbs for investors over recent months on the strategy change, the updated guidance directionally all looks in line with expectations,” RBC Capital Markets analysts said.

“However we think the capex cut was less material than many investors were suggesting to us, while in the near term, shareholder returns for BP are now lower than peers,” they added.

“To us, much of the release looks to be BP making the right calls for the long term, but it may not please investors today.”

BP shares fell more than 1% in London trading Wednesday.