Energy giant BP has announced lower-than-expected profits amid lower energy prices and weaker refining margins than last year.

The London Stock Exchange-listed company also announced plans to achieve further cost savings of two billion dollars (1.6 billion pounds) by 2026.

BP said underlying profit on a replacement cost basis, its preferred metric, was $2.7 billion (£2.2 billion) in the first quarter, up from $4.9 billion (£3.9 billion) a year earlier.

Profit for the period fell short of expectations of nearly $2.9 billion.

The lower earnings were attributed to lower oil and gas prices, the impact of an outage at the Whiting refinery and weaker fuel margins.

However, it said this effect was partially offset by lower restructuring activities and stronger oil trading.

BP said on Monday that it would push ahead with further cost reductions, aiming to reduce costs by two billion dollars (1.6 billion pounds) by 2026 compared to 2023.

The company’s management said it would look for ways to save money by improving digitalization and the supply chain.

The company said it would continue to pay out more cash to shareholders despite the drop in profits and announced a new share buyback worth $1.75 billion (£1.4 billion).

Murray Auchincloss, BP’s chief executive, said: “We have delivered another financially solid quarter and are making further progress in executing our strategy.”

“Oil production has increased and our Ace (Azeri Central East) platform in the Caspian Sea is now in production.

“We are simplifying and reducing complexity at BP and plan to deliver at least $2 billion in cash cost savings by the end of 2026 through portfolio enhancement, digital transformation, supply chain efficiency and global centers of excellence.”

Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “As with Shell last week, investors were looking to BP for assurances on production volumes and capital discipline.

“However, BP missed earnings expectations due to lower gas prices, weaker margins and operational outages.

“The extension of the share buyback program and the maintenance of the dividend will nevertheless provide some consolation to shareholders.”

Alice Harrison, head of fossil fuel campaigns at Global Witness, said: “Instead of helping to rebuild Ukraine, easing the burden of high bills or supporting countries suffering from the climate crisis, BP is making the rich richer.

“And it will stay that way until we make the urgently needed transition to a clean energy system.”

This came a week after rival Shell reported better-than-expected earnings for the first quarter of the year.

In the energy sector, Saudi Arabian oil giant Aramco also reported a drop in profits for the last quarter on Monday.