(Adds background, stock performance, quote) July 19 (Reuters) -...

(Adds background, stock performance, quote)

July 19 (Reuters) - Australian oil and gas producer Santos Ltd (STO) said on Thursday it has pared net debt by 4 percent since the start of the second quarter, helped by higher oil prices, and may revive dividends in August.

Second quarter production fell 3.4 percent from a year ago to 14.2 million barrels of oil equivalent (mmboe), said Santos, which in May rejected a $10.8 billion takeover by U.S.-based investor Harbour Energy.

The company said its board would consider a dividend payout in August, which would be the first since early 2016, reflecting a policy adopted late last month to target a payout of between 10 percent and 30 percent of annual free cash flow as ordinary dividends.

"Given the cyclical nature of the industry, the Board will also consider additional returns to shareholders above the ordinary dividend when business conditions permit," the company said on Thursday.

Santos said its average realised oil price in the second quarter rose 48 percent to $78.60 per barrel over the year ago quarter, helping quarterly revenue rise 15.2 percent despite lower production.

The company in April narrowed its 2018 production forecast range to 55-58 mmboe from 55-60 mmboe after an earthquake in Papua New Guinea in February caused an outage at the Exxon Mobil-run PNG LNG operation in which it holds a minority stake.

Santos said in May that the offer from Harbour Energy, which would have been the world's biggest private equity oil and gas buyout deal, was "simply not compelling enough" compared to its own growth plans.

Santos shares have risen 9.4 percent this year to Wednesday's close, supported by a rise of about 9 percent in Brent crude prices LCOc1 .