Updates throughout, adds Citi comments

July 23 (Reuters) - Santos STO.AX missed market estimates for second-quarter revenue on Thursday due to lower output at its Barossa facility, and lowered its annual production forecast to reflect what it called commissioning-related disruptions and at the site.

Annual production is now expected between 99 million barrels of oil equivalent (boe) and 105 million boe, Santos said in a statement. That is nearly 4% below the midpoint of the previous forecast of between 101 million and 111 million boe, according to Reuters calculations.

"Our initial production guidance had a large band of uncertainty ... However, with Barossa's ramp-up nearing completion and Pikka's first wells online, we have narrowed our production guidance," Chief Executive Kevin Gallagher said in the statement.

Santos commenced continuous production at its Pikka Phase 1 project in Alaska last month, while the Barossa gas field and related liquefied natural gas facility in Australia's Northern Territory are now producing at 97% of planned rates after delays.

Santos reported second-quarter sales revenue of $1.35 billion, compared with $1.29 billion a year earlier, missing Visible Alpha's consensus estimate of $1.57 billion.

Shares of Australia's second-largest independent oil and gas producer pared earlier gains and fell as much as 2% to A$7.69 by 0444 GMT, while the broader benchmark .AXJO was up 0.6%.

OPERATIONAL PERFORMANCE

However, with Barossa commissioning nearly complete, analysts at Citi were more positive about the future.

"Given investor concerns around potential commissioning and ramp-up challenges at Barossa, we believe the market is likely to focus on the improving operational performance and de-risking towards nameplate capacity," the Citi analysts said.

Santos said production has resumed at all its Western Australia oil and gas assets after Tropical Cyclone Narelle disrupted production at sites on the country's west coast and the Cooper Basin earlier this year.

One-off Barossa and Pikka commissioning costs weighed on the company's operating cash flow, which was $378 million for the first half. The two facilities together recorded a combined free cash flow from operations loss of about $151 million.

Cash flow was further affected by cargo movements timed near the half-year reporting date, and by delayed revenue from about 1.3 million boe of Papua New Guinea production.

Santos expects higher realised LNG pricing combined with expected production uplift to drive free cash flow in the second half of the year.

In the second quarter, Santos realised an average crude oil price of $120.33 per barrel, nearly 70% up from a year earlier.

Second-quarter production was 23.1 million boe, higher than last year's 22.2 million boe but missing Visible Alpha's estimate of 24.3 million boe.