* Expects to complete spinoff by 2014-end or early 2015
* To move headquarters to Houston from Los Angeles
* Says unit will be state's largest natural gas producer
* Says Chazen asked to remain president, CEO through 2016
* Shares up 3 pct in late morning trading
By Swetha Gopinath
Feb 14 (Reuters) - Occidental Petroleum Corp said it would spin off its oil and gas assets in California into a separately traded company and move its headquarters from Los Angeles to Houston, where it will be closer to its largest U.S. operations.
Wall Street analysts have estimated the underperforming California unit, which Occidental had talked about splitting from for months, could be worth $19 billion to $22 billion.
New York-traded shares of Occidental rose 3.5 percent on Friday to $95.51, giving the fourth-largest U.S. oil company a market capitalization of $72 billion.
Occidental said the California unit generated a pretax profit of about $1.5 billion in 2013.
"Creating two separate energy companies will result in more focused businesses that will be competitive industry leaders," Chief Executive Stephen Chazen said on Friday.
The California unit, the largest natural gas producer in the state, has long been seen as a drag on the company because of its limited oil production. Total production growth averaged 3.6 percent between 2010 and 2013.
The California fields produced an average 261 million cubic feet of gas and 88,000 barrels of oil per day in 2013.
Although natural gas prices have risen recently due to cold weather in North America, prices have been weak over the past few years because of a flood of production from shale fields.
Occidental is increasingly focusing on production from fields in the Permian Basis in Texas and New Mexico, far from Los Angeles where the company was founded nearly a century ago.
The formal migration of Occidental to Texas, a move Reuters flagged as likely late last year, follows several other departures from California to the Lone Star state by big companies in the energy industry.
Texas Governor Rick Perry welcomed the shift, saying it was only fitting that the state's biggest oil producer should be based in "the energy capital of the world."
Perry, a Republican, has run television ads in states that are traditional Democratic strongholds to lure companies to Texas, pitching it as a low-tax, low-regulation environment for "creative renegades."
Fluor Corp, an engineering company now based outside Dallas, had called California's Orange County home until 2006. Calpine Corp, now a Houston-based power company, abandoned San Jose three years later.
After Occidental's move, Chevron Corp. will be the only big oil company with headquarters in California.
The company has also said it will sell a minority stake in its Middle East and North Africa operations.
"We are of the view that the Mid-East/North Africa monetization should be even more needle-moving... reflecting the fact that these assets are perceived by the market as particularly idiosyncratic," Raymond James analyst Pavel Molchanov said in an email.
Occidental said it expected to complete the separation of the unit, which will likely carry debt of $4 billion to $5 billion, by the end of 2014 or early 2015.
The California unit produces oil and gas on holdings covering 2.1 million net acres.
Occidental also said on Friday that it would reduce proprietary trading in crude oil and other commodities, which analysts have said create volatility in quarterly earnings.
The company did not say how this would affect Phibro, its proprietary business.
U.S. oil and gas producers such as Hess Corp and Chesapeake Energy Corp are streamlining their operations and investing more in the most profitable shale fields in North America to increase shareholder returns.
Occidental said on Thursday that it would sell $1.4 billion of natural gas assets in the central United States and use part of the funds to buy back another 30 million shares. The company also raised its dividend.
The company said Chazen would remain president and CEO through 2016, extending his tenure by two years.
It also said that Chairman Edward Djerejian, who was elected last May after the ousting of predecessor Ray Irani, had been asked to remain in the role for another year.