UPDATE 1-EXCO to form master limited partnership unit

(Adds analyst's comments, details)

By Anup Roy

BANGALORE, July 30 (Reuters) - Oil and gas producer EXCO Resources Inc. (XCO.N) on Monday said it plans to form a master limited partnership (MLP) and make an initial public offering of $1.5 billion of common units in the subsidiary.

The company plans to use the MLP as a tax-efficient vehicle to pursue acquisition of additional mature producing properties, either from EXCO or from third parties, the Dallas, Texas-based company said in a statement.

The unit will own a substantial portion of EXCO's mature producing oil and natural-gas properties located in the Appalachian, East Texas/North Louisiana, Mid-Continent and Permian Basin areas, it said.

"The interesting thing is that probably they will use this as a vehicle to drop in other assets over a period of time because this management is acquisition-minded," said KeyBanc Capital Markets analyst Jack Aydin by phone.

The high-growth assets will probably be kept within EXCO, while the mature properties will be dumped in the MLP, Aydin said.

According to Aydin, the company is forming an MLP instead of selling off the matured properties because it probably wants to uplift its reserve value, which will be more beneficial to the shareholders than just selling the assets.

These properties will not require a lot of capital to maintain the production. The company can use a small portion generated from the matured properties to maintain it and will also be able to distribute the larger chunk of the cash flow to the shareholders, said Aydin.

The company said it expects the registration statement for the IPO to be filed in the third quarter.

The MLP intends to use the proceeds to retire debt associated with the contributed assets and to provide working capital.