The new financial targets would see profitability boosted to $6bn a year by 2002. John Browne, BP's chief executive, said the target could be achieved even if the oil price stayed at $14 a barrel.
BP has also raised its investment target pledging to spend a gross $8bn a year compared with $6bn at present. Disposals will continue at the current level of $1bn a year.
Mr Browne said the new targets were being introduced because BP had already achieved its so-called "millennium targets" ahead of time. These required it to raise profits by $1.5bn, reduce debt to $7bn-$8bn and achieve annual investment of $6bn.
The buyback will raise gearing from 23 per cent to 25 per cent. Mr Browne said that, subject to gearing not going above 30 per cent, BP would return more surplus cash to shareholders through buybacks.
The new financial targets, spelt out to analysts and institutional investors at a three-hour presentation, were given a broad welcome, even though analysts said they were in line with what they had been expecting. BP shares ended the day 17p higher at 897p.
BP is also planning to increase production of oil and gas by 25 per cent over the next five years. In the last five years, it has produced 2.7 billion barrels.
Exploration and production will contribute $1.1bn of the increased profit target, refining $750m and chemicals $550m before tax and interest charges.
Mr Browne said BP was interested in re-entering Iran and had just opened a "listening post" in Tehran. But he stressed that the group would not do anything that jeopardised its interests in the US, where the Clinton administration remains opposed to Western oil companies doing deals in Iran.
BP is also entering the Japanese petrol retailing market for the first time. It has set up a joint venture with the retail group Iseya Kosan to develop petrol stations at 100 of its supermarket sites. There are 65,000 filling stations in Japan.
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