UPDATE 1-BHP hits full year iron ore guidance, sets higher target

* BHP hits FY17 iron ore target

* Sets higher target this year

* Flags $546 mln exceptional item due to copper strike (Adds quotes, details)

July 19 (Reuters) - BHP Billiton's fiscal fourth quarter iron ore output rose 8 percent from a year ago, enabling the world's third largest producer to meet its full-year guidance and set a bigger target for the current year.

The company's Australian mines produced 70 million tonnes of iron ore in the final quarter of fiscal 2017 taking into account the share of production from of joint-venture partners, sending annual output to 268 million tonnes against guidance of 268 million-272 million tonnes.

"Our people have stepped up to unlock low-cost latent capacity and achieve strong productivity gains across our tier one assets," BHP Chief Executive Andrew Mackenzie said in a statement.

Analysts were estimating fourth quarter output of around 69 million tonnes.

BHP set a fiscal 2018 production target of 275-280 million tonnes.

BHP sells the majority of its iron ore to steel mills in China, where domestic ore typically contains much less iron.

The company also reported a 13 percent decline in full-year petroleum production to 208 million barrels of oil equivalent (MMboe) with production in 2018 forecast to decline between 180 and 190 MMboe.

Output from the company's onshore fields in the United States in decline is set to drop to between 61 and 67 million MMboe in fiscal 2018, BHP said.

BHP is facing pressure from activist shareholders led by Elliott Management over a $20 billion splurge on U.S. shale oil and gas fields six years ago that by its own admission was illtimed.

In metallurgical coal, a cyclone that swept across Australian collieries cut fourth-quarter output by 27 percent.

Annual copper output of 1.326 million tonnes fell just short of guidance, hurt by a strike at the giant Escondida copper mine in Chile but should recover to 1.655-1.790 million tonnes in fiscal 2018, the company said.

BHP expects to record second-half exceptional items of $546 million, it said, rising to $740 million post-tax because of taxes and strike-related costs in Chile. (Reporting by Susan Mathew in Bengaluru; Editing by James Regan and Chris Reese)