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March 1, 2004

To the Shareholders of Biloxi Marsh Lands Corporation:

We are pleased to report that 2003 was the eighth consecutive profitable year for your company. Total revenue for the year 2003 was $6,704,557 compared to total revenue of $5,961,295 in 2002. The revenue breakdown is as follows: 2003 revenue from oil and gas activity was $6,262,704 compared to revenue of $5,804,495 in 2002. Dividend and interest income for 2003 was $96,549 compared to $122,800 for 2002. In 2003 gains from the sale of investment securities were $327,846 as compared to a net loss of $1,898 in 2002. Meanwhile, net earnings increased to $4,015,568 or $5.83 per share in 2003 from $3,426,377 or $4.98 in 2002.

After the completion of Phase I during the third quarter of 2002, seismic survey operations ceased due to a contractual dispute between The Meridian Resource and Exploration, LLC (Meridian) and its 3D seismic contractor. During 2003, Meridian reached an agreement with a new seismic contractor and completed Phase II of its 3D seismic survey covering approximately 45 square miles of Company property. This brings the total amount of Company property surveyed during Phase I and Phase II to approximately 85 square miles, leaving approximately 52 square miles to survey. Meridian commenced shooting Phase III of its 3D seismic survey during the first quarter of 2004. As provided for in the lease agreement between the Company and Meridian, in October of 2003 the Company took delivery of the complete 3D data set acquired during Phase I of Meridian’s survey. Management believes that the Phase I – 3D data set and the data sets acquired during subsequent phases of the seismic survey, which Meridian is obligated to deliver to the Company, will prove to be valuable corporate assets.

On January 20, 2004, Meridian commenced drilling its Lake Eugenie Land & Development (LL&D) 33-1 well. If this well was successfully completed Biloxi Marsh Lands Corporation (BLM) would have owned a large percentage of the producing unit. Unlike the wells currently producing natural gas from the CRIS I sand stratum, the LL&D 33-1 well was drilled to test the deeper ROB L sand stratum. Unfortunately, on February 16, 2004 this well was plugged and abandoned as a dry hole. Meridian has relocated the drilling rig used to drill the LL&D 33-1 well and has commenced drilling its BLM 19-1. This well’s objective is the CRIS I sand stratum located on Company property. We hope to be able to release news on this well by the end of March 2004.

Meridian successfully completed and placed on production its Biloxi Marsh Lands 6-1, 6-2, 7-1, 1-2 and 18-1 wells during 2003. On December 31, 2003 four of these five wells were producing natural gas at a gross daily rate of approximately 63 million cubic feet (mmcf) with net production of approximately 7.5 mmcf per day accruing to the Company. The BLM 7-1 which was shut-in for reworking as of December 31, 2003 was successfully placed back on production during the first quarter of 2004. Meanwhile as of December 31, 2003, the Manti-BLM 1 and 3 wells continued to produce on compression at a combined gross daily rate of approximately 23.6 mmcf with net production of approximately 1.4 mmcf per day accruing to the Company. This brings the total gross daily production being produced on December 31, 2003 from all six wells to approximately 86.9 mmcf with net daily production accruing to the Company of approximately 8.9 mmcf. The Company recently commissioned T. J. Smith & Company, Inc., independent reservoir engineers, to complete a proved reserve study. Based upon this reserve study the productive life of the wells range from 2 to 5 years, with slightly more the 50% of the proved reserves depleting by the end of 2004. The same reserve study estimates that as of December 31, 2003 the Company’s “Developed Producing” proved reserves are 4.551 billion cubic feet (bcf) and estimates that the “Developed Non-Producing” proved reserves are .799 bcf, totaling 5.35 bcf of proved reserves (see “Appendix A” for definitions of reserve classifications). It should be noted that the current

production and the corresponding proved reserves are being produced from four (4) producing units covering approximately 1,850 acres of Company property, with the Company owning an additional 86,000 +/- acres. The reserve study does not cover or attempt to estimate un-proven reserves under any of these 86,000 +/- acres. As of this time, we offer no guidance as to quantities of reserves, if any, under any of these 86,000 +/- acres. Please find the following table showing the Company’s proved reserves as of December 31, 2003:

Proved Reserves as of December 31, 2003 (3) ___________ _____

Developed Developed
Producing Non-Producing Total
(dollars in thousands)
Net Proved Reserves (1):

Natural Gas (BCF)…………………… 4.551 .799 5.35

Estimated Future Net Revenues (before income taxes) (2) :…………………. $ 30,846

Estimated Discounted Future Net Revenues (before income taxes) (2):……. $ 27,437
(1) In general, our engineers based their estimates of economically recoverable oil and natural gas reserves and of the future net revenues therefrom on a number of variable factors and assumptions, such as historical production from the subject properties, the assumed effects of regulation by governmental agencies and assumptions concerning future oil and natural gas prices, all of which may vary considerably from actual results. All such estimates are to some degree speculative, and classifications of reserves, that are based on the mechanical status of the completion, may also define the degree of speculation involved. For these reasons, estimates of the economically recoverable oil and natural gas reserves attributable to any particular group of wells, classifications of such reserves based on risk of recovery and estimates of the future net revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary substantially. Therefore, the actual production, revenues, and severance taxes with respect to reserves likely will vary from such estimates, and such variances could be material.

Estimates with respect to proved reserves that may be developed and produced in the future are often based on volumetric calculations and by analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history, and subsequent evaluation of the same reserves, based on production history, will result in variations, which may be substantial, in the estimated reserves.

In accordance with applicable requirements of the Commission, the estimated discounted future net revenues from estimated proved reserves are based on prices as of the date of the estimate. Actual future prices may be materially higher or lower. Actual future net revenues also will be affected by factors such as actual production, supply and demand for oil and natural gas, curtailments or increases in consumption by natural gas purchasers, changes in governmental regulations or taxation and the impact of inflation on costs.

(2) The Estimated Discounted Future Net Revenues represents the Estimated Future Net Revenues before income taxes discounted at 10%. For calculating The Estimated Future Net Revenues and the Estimated Discounted Future Net Revenues, we used the price as of December 31, 2003 which was $5.965 per mmcf of natural gas.

(3) The Meridian Resource and Exploration, LLC and Manti Jamba, Ltd. separately operate the various producing wells. The Company has no control over operations and maintains only a landowner’s mineral royalty interest. Please see footnote (1) following the final paragraph of this letter for a warning concerning forward-looking information.

The production and reserves as stated in the foregoing paragraph are accruing and will accrue to the Company, not to the Biloxi Marsh Lands 1 Royalty, LLC or any acreage that is subject to adverse and competing title claims. It should also be noted that since the establishment of the Biloxi Marsh Lands 1 Royalty, LLC on November 29, 2002, the Company and the LLC are separate and distinct entities and operate as such. As previously disclosed, the purchase or sale of Biloxi Marsh Lands Corporation common stock after November 29, 2002 does not include the purchase or sale of ownership units in Biloxi Marsh Lands 1 Royalty, LLC.

As previously reported, there is currently pending a possessory action suit which was filed by the Company on or about November 2, 2001 as the result of disturbances in the Company’s possession of Sections 1, 2 & 3, T13S, R16E due to protective oil, gas & mineral leases granted to Manti Resources, Inc. (Manti) by particular Manuel Molero family members and also to Louis and Gustave Carmedelle family entities. Further disturbance in possession is the result of seismic permit/lease options and protective leases granted by the same parties to The Meridian Resource & Exploration LLC (Meridian) for disputed and productive acreage outside of the Manti lease. The Manuel Molero family members filed a declaratory judgment action with regard to the same acreage, which action was consolidated with the Corporation’s possessory action. Additionally, Manti, which is producing two wells within a geographical unit on the acreage in conflict, filed a concursus proceeding, and deposited funds into the registry of the court representing royalties attributable to the conflict acreage in the producing unit. Meanwhile, Meridian has filed concursus proceedings with respect to additional producing units formed which contain conflict acreage. Consolidation of the concursus proceedings with the possessory action and declaratory judgment action above mentioned is being considered by the court. Management intends to vigorously pursue the Corporations’ possessory action and vigorously defend the Molero family members’ declaratory judgment action.

In addition to the above described competing claims to the subject acreage, there are also competing claims between the Company and the State of Louisiana regarding certain waterbottoms within each producing unit. There is no potential for an adverse judgment declaring the payment of Company funds as the consolidated suits will ultimately determine the possession and ownership of the subject property. As of December 31, 2003 the Company’s potential share of the funds deposited in the various concursus accounts is close to 14 million dollars. As of the date of this report, there is no way to forecast a time table for the conclusion of the litigation and the resolution of the disputes.

Contained in this mailing are two proposed amendments to our Certificate of Incorporation to be voted on by our shareholders during the annual meeting. AMENDMENT A proposes changing the par value of our common stock from “no par value” to a par value of $.001 per share. If approved, AMENDMENT A will reduce the Company’s franchise tax liability and reduce the cost of future filings with the Delaware Secretary of State’s office. We recommend that you vote in favor of AMENDMENT A. AMENDMENT B allows the Company to complete a four (4) for one (1) stock split. Your Board of Directors unanimously supports AMENDMENT B as an important step in management’s effort to boost the price of our common stock. Please refer to the enclosed Proxy Statement for all the details of the proposed amendments. It should be noted that price of our common stock was $40.75 per share as of the close of the PinkSheets market on December 31, 2003 compared to $14.00 on December 31, 2002.

Historically the company has paid a dividend once each year. While we have not formally changed our dividend policy, due to the company’s strong financial performance, during 2003 we paid the following dividends:
Date Paid Type $ per share
March 10, 2003 Cash 1.00
July 11, 2003 Cash 1.50
December 30, 2003 Cash 2.25
Total Paid: 4.75

During 2004, we hope to further develop active management strategies which seek economic opportunities that will allow us to take advantage of our current positive cash flow and, on a different but as important note, formulate strategies that will attempt to protect the company’s property from the adverse effects of the Mississippi River Gulf Outlet (MRGO). With all the current activity, spanning all spectrums of management, 2004 represents another exciting year for your company and should prove to be the ninth consecutive profitable year. Please rest assured that your Board of Directors will continue to work diligently to maximize shareholder value and protect our shareholders interest.(1)


William B. Rudolf
President and Chief Executive Officer
Metairie, Louisiana
Email: [email protected]


(1) This letter contains forward-looking statements regarding oil and gas discoveries, oil and gas exploration, development and production activities and reserves. Accuracy of the forward-looking statements depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. The Company cautions readers that it assumes no obligation to update or publicly release any revisions to the forward-looking statements in this report. Important factors that might cause future results to differ from these forward-looking statements include: variations in the market prices of oil and natural gas; drilling results; unanticipated fluctuations in flow rates of producing wells; oil and natural gas reserves expectations; the ability to satisfy future cash obligations and environmental costs; and general exploration and development risks and hazards. Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of the Company. Each such statement speaks only as of the day it was made. The factors described above cannot be controlled by the Company. When used in this report, the words “believes”, “estimates”, “plans”, “expects”, “should”, “outlook”, and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.