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UPDATE 1-Occidental Petroleum to spin off California assets

* Expects to complete spin off by 2014-end or early 2015

* Says unit will be state's largest natural gas producer

* Says Chazen asked to remain as President, CEO through 2016

* Shares up 3 pct before the bell

Feb 14 (Reuters) - Oil and gas producer Occidental Petroleum Corp said it would spin off its California assets into a separately traded company, creating the state's largest natural gas producer.

Occidental shares were up about 3 percent at $94.60 in trading before the bell on Friday.

The California unit has been deemed to be a drag on the company due to elusive growth in oil production. It earned about $1.5 billion on a pre-tax basis in 2013.

Analysts at Credit Suisse valued the unit at around $22 billion in October.

Occidental, which also has plans to sell a minority stake in its Middle East and North African operations, is focusing on increasing production from fields in Texas and New Mexico's Permian basin, home to the company's largest U.S. operations.

"Creating two separate energy companies will result in more focused businesses that will be competitive industry leaders," Chief Executive Stephen Chazen said on Friday.

Occidental said Chazen would remain as president and CEO through 2016, extending his tenure which was scheduled to end this year.

Occidental said last February it was looking to replace Chazen, but in April extended his tenure. Chazen has been in the role since mid-2011.

The company also said the unit will produce oil and gas across 2.1 million net acres in California's high-potential basins in places such as Los Angeles, San Joaquin, Ventura and Sacramento.

Occidental expects to complete the separation of the California unit by the end of 2014 or the early part of 2015.

Occidental said on Thursday it would increase its share repurchase authorization by 30 million shares, which would be funded in part with proceed from the sale of natural gas assets in central United States.

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