UPDATE 2-Occidental profit misses, Phibro's quarter "lousy"

* Q2 EPS $1.31 vs. Street forecast $1.33

* Phibro loss 7 cent per share, exposure curtailed

* Q2 output below guidance, revenue up 29 pct on prices

* Shares down 3.5 pct

(Adds comments from CFO, share price, byline)

By Braden Reddall

SAN FRANCISCO, July 27 (Reuters) - Occidental Petroleum Corp (OXY.N) posted a 57 percent increase in quarterly profit that fell short of Wall Street estimates, hit by weak output and a bad quarter at recently acquired oil trader Phibro.

Occidental bought the high-profile trading outfit from Citigroup (C.N) late last year, and Stephen Chazen, president and chief financial officer of the fourth-largest U.S. oil company, said Phibro's exposure had been cut to curb volatility.

"You can't say that its trading results in the quarter were anything but lousy," Chazen told analysts on a conference call on Tuesday to discuss second-quarter results, which led to a 3.5 percent drop in Occidental's stock price to $80.

Occidental's net income rose to $1.07 billion, or $1.31 per share, from $682 million, or 84 cents per share, a year before. But that was short of the $1.33 per share expected by analysts, according to Thomson Reuters I/B/E/S.

Phibro alone made an after-tax loss of 7 cents per share, though most of that was paper losses realized by marking its quarter-end position to market.

Chazen said star trader Andrew Hall was "feeling the pain disproportionately" because he has an equity stake in the unit and his salary and bonus are tied to Phibro's performance.

Chazen had assured investors last October that Phibro would not be a big boost to Occidental's volatility. [ID:nN0985908]

Oxy's second-quarter production rose 3.6 percent to 743,000 barrels of oil equivalent per day, short of guidance, though it expects a return to the 750,000 to 760,000 range this quarter.

PAID IN FULL

Ray Irani, the Lebanon-born chief executive who has presided over a dramatic turnaround of Oxy in his two decades at the helm, made the front page of the Wall Street Journal on Tuesday for earning $857 million in the past decade, ahead of Apple Inc's (AAPL.O) Steve Jobs and third on the list of best-paid executives of public companies during the past decade.

In May, Irani had said Occidental's board would look closely at its compensation policy after a majority of shareholders voted against it in an advisory vote.

Also at that May analysts meeting, the Los Angeles-based company laid out plans to grow output by 6 to 9 percent a year through 2014, from a 2010 average of 756,000 BoE a day.[ID:nN19221320]

That will be helped by about $1.5 billion worth of acquisitions that Oxy has negotiated in the gassier parts of the Permian Basin, which straddles Texas and New Mexico, and it expects them to start adding to overall production next year.

Second-quarter sales rose 29 percent to $4.76 billion, helped by higher prices. Benchmark U.S. crude oil prices CLc1 averaged $78 per barrel, down a dollar from the prior quarter but well above the $60 average of the same quarter in 2009.

Asked about his concerns given the stabilization of energy prices, Chazen reminded analysts that Occidental had growing natural gas interests and gas prices remain stuck at relatively low levels.

"We would hope that the price of gas would be less stable and more up," he said. (Reporting by Braden Reddall in San Francisco and Ernest Scheyder in New York; Editing by Phil Berlowitz)