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LONDON (AFX) - UK gas producer BG Group PLC reported an 18 pct fall in fourth-quarter earnings, but still better than analysts' estimates, and reaffirmed its production targets through 2012.To support its growth ambitions, BG upgraded planned capital spending in the coming years, mainly to take into account the industry-wide cost inflation and accelerated project implementation.Despite the increased capex, BG is extending its share buyback programme in 2007, when it hopes to repurchase a further 750 mln stg, on top of the 1 bln stg in shares it bought back in 2006.BG's earnings before disposals and other one-off items in the three months to December, though down 18 pct to 410 mln stg from 503 mln last time, were still ahead of the forecast range of 348-406 mln stg and the consensus figure of 384 mln.Operating profit dropped 12 pct 760 mln stg from 860 mln previously, also above the forecast range of 660-755 mln stg and the consensus figure of 722 mln.Quarterly output rose 5 pct to 622,000 barrels of oil equivalent per day from 590,000 boepd previously, lifting the total for the year by 19 pct to 601,000 boepd from 504,000 boepd, ahead of the group's target of 600,000 boepd.BG reaffirmed its production growth guidance of 5-7 pct from 2006 to 2009, and is confident of achieving its 6-10 pct target to 2012.Its three-year average proved reserve replacement rate reached 108 pct, with around 1 bln boe added to its overall resource base."BG continues to see a strong outlook for earnings potential to 2009 and beyond," driven largely by strong output and margin growth at its liquefied natural gas (LNG) business, the group said in a strategy update published alongside the annual results.The assets that produced 590,000 boepd in 2006 will "still be producing 500,000 boepd right out to 2015," it added.Frank Chapman, the chief executive, told reporters in a conference call the group won't have to resort to acquisitions to achieve its targets."We're quite happy with our organic plans," he said, adding the group's "fundamental belief" is to drive the business through organic investments.The projected rise in volumes "won't be linear", said Chapman, noting it expects volumes to improve further this year.The rising output will allow BG to take fill in part of the LNG shortage, which it expects to persist for at least five years. The tight supply bodes well for the group's future, encouraging it to raise its EBITDA margin guidance to 16 pct in 2007 and 18 pct in 2008, assuming contracted supply of 12.3 mln tonnes per annum in 2007 and 13.5 mtpa in 2009.They were also based on BG's expectations that average LNG supply will rise 21-24 pct per annum to 2009 and 16-20 pct per annum from 2005 to 2012.BG said its reserves and resources now amount to over 8 bln boe and can deliver 37 years of production. Its proved and probable reserves are equivalent to 16 years of production.To achieve its growth ambitions, BG is setting aside 2.2 bln stg for capital spending for 2007. Capex for 2007-09, however, will reach 5.3 bln stg, higher than its previous guidance of 4.8 bln.A further 2.2 bln stg will be spent during the three-year period to 2009 on projects due to come on stream after 2009, resulting in a total spend of 7.5 bln stg, excluding 500 mln stg in acquisitions it has announced but has yet to complete.Responding to concerns over BG's purchase of two power plants in the US, Chapman said the deals were part of the group's aim to build an integrated downstream business."It's not a utility-style investment. We're not approaching it as a utility player," he told reporters.The acquisitions were "not a step-out" of the group's strategy, but "a profitable and stable part" of the business, he stressed.Last year, BG bought the 805-megawatt Lake Road power plant in Connecticut for 685 mln usd and the 170-mw Dighton power facility in Massachusetts for 90 mln usd. Despite the earnings fall, BG raised dividends for the quarter by 3 pct to 4.20 pence a share, and by 20 pct to 7.20 pence for the year.Ashley Almanza, BG chief finance officer, is not ruling out further share buybacks after the 750 mln stg programme it announced today."We will continue to (repurchase shares) as long as it will be for the interest of shareholders," he said during the conference call.At 9.55 am, BG shares were up over 2 pct at 710 pence, reaching a high of 719p earlier.