(FORTUNE Magazine) – BLEND THE ATTRIBUTES of a corporation and a limited partnership and what do you come up with? A master limited partnership (MLP), one of the hottest hybrids blossoming in the oil patch. While T. Boone Pickens plans to roll 100% of Mesa Petroleum assets into such an entity (see News/Trends), the most popular approach is to go partway. Dallas-based Diamond Shamrock is the latest among more than a dozen corporations to spin off a portion of its oil and gas fields into an MLP. Diamond Shamrock and others -- Enserch, Lear Petroleum, and Unocal -- want to keep some producing wells to finance such operations as refining and petrochemicals. They also want the boost in stock prices that generally accompanies a partial spinoff. ''Our major consideration is to enhance the value of the corporation's stock,'' says J. L. Jackson, Diamond Shamrock's president. ''The best route was a combination of an MLP and retaining most of the ongoing operations in the corporation.'' The stock hasn't responded yet. Since July, when Diamond Shamrock announced the formation of an MLP, it has declined a bit, to $16.75 a share. An MLP is a partnership whose units, unlike those of an ordinary limited partnership, trade publicly like stock. Apache Petroleum Co. created the first hybrid in 1981 by folding its smaller oil and gas partnerships into a master one (hence the name) and getting it listed on the New York Stock Exchange. Liquidity is one of the major appeals of the hybrids: when Denver-based Petro- Lewis, a packager of oil and gas income partnerships, nearly went bankrupt in 1983, investors had to turn to the courts for relief because there was no public market for their units. Finally, Petro-Lewis created a publicly traded royalty trust early this year. (Royalty trusts typically pay out as much as 90% of their cash flow; MLPs are not that generous.) Like limited partnerships, and unlike corporations, MLPs pay no income taxes. The investor gets the payout, which is taxable, as well as certain deductions -- though the Reagan tax proposals may eliminate some of them. The tax advantages are attractive to corporations generating a big cash flow and hankering to pass it along to investors. Spinning off valuable properties into an MLP can also dim a company's allure to a potential raider. Diamond Shamrock became vulnerable last winter after it abruptly canceled a $3.25-billion merger with Occidental Petroleum. An anticipated quarterly decrease in earnings threatened to reduce the corporate dividend and provided another reason to restructure assets. The restructuring package included an $810-million write-down in assets, the repurchase of up to 10% of the stock, and the creation of an MLP, Diamond Shamrock Offshore Partners. The MLP owns some $550 million of oil and gas properties -- 35% of Diamond Shamrock's U.S. production. Like other MLPs, it can buy more properties and hunt for hydrocarbons. Diamond Shamrock, which now owns 88% of the partnership, sold off the rest -- five million units at $20.50 each -- in a public offering in early September. It plans to distribute fractional units to stockholders as a supplement to a reduced dividend and eventually whittle down its share of the partnership to 50% or so. MLPs have pitfalls. Catherine W. Montgomery, a security analyst with Merrill Lynch, acknowledges that they are ''a sexy vehicle to bring an upward appreciation for oil and gas stocks.'' But she cautions that partners can be tempted to pay out ''a disproportionate amount of their cash flow.'' That could leave them strapped if oil prices plunge or, alternatively, rise; the partnership wouldn't have the money to buy or hunt for new reserves.