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March 25, 2016

To the Shareholders of Biloxi Marsh Lands Corporation:

The following is a discussion of the results of operations of the Company for the year ended December 31, 2015. The annual revenue breakdown is as follows: 2015 revenue from oil and gas production from our fee lands was $285,136 compared to revenue of $558,205 in 2014.

Dividend and interest income for 2015 was $147,311, compared to $202,819 for 2014. In 2015, the Company realized a cumulative gain from the sale of investment securities of $2,195,981 compared to a cumulative gain in the amount of $1,717,041 in 2014. Total revenues for 2015 were $989,665 compared to $1,145,929 during 2014. For the year 2015, total revenues were reduced by $1,682,847 from the Company’s investment in B&L Exploration, LLC (B&L). This compares to a reduction in revenues of $1,371,185 from B&L in the prior year. As an operating oil and gas entity, B&L’s results included deductions for depreciation, depletion and amortization (DD&A) costs relating to its ongoing exploration and production activities. BLMC’s share of these DD&A expenses was $809,513 and $992,684 for 2015 and 2014, respectively. Expenses for the year totaled $932,941, slightly lower than the prior year’s expenses of $969,401.

For the year, the Company had net income of $66,419 or $.03 per share compared to net income of $202,411 or $.08 per share in 2014.

The end of the year proved reserve study commissioned by the Company and completed by an independent reservoir engineering firm estimates that as of December 31, 2015 the Company’s “Developed Producing” (PDP) reserves were .067 billion cubic feet of natural gas (Bcfg) and 700 barrels of oil.

Please find the following table showing the Company’s proved reserves as of December 31, 2015:

Proved Reserves as of December 31, 2015 (3)
Developed Producing (PDP)
(Dollars in thousands)
Net Proved Reserves (1)
Natural Gas (Bcfg):.067
Oil and Condensate, Net MBO: .7
Estimated Future Net Revenues (before income taxes) (2): ………………….$ 174.9 (4)
Estimated Discounted Future Net Revenues (before income taxes) (2): …….$ 152.8 (4)

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(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. 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.

Proved Reserves included herein conform to the definition as set forth in the Securities and Exchange Commission (SEC) Regulation, S-X Part 210.4-10 (a) as revised and adopted effective January 1, 2010. The future net revenues are those revenues attributable to the Company’s interest in the underlying wells less severance taxes. The discounted future net revenue is based on a discount rate of 10 percent per annum. The forecasts assume that no changes in the current economic conditions, sales demand or costs will occur in the future. Estimates of future net revenues and discounted future net revenues are not intended and should not be interpreted to represent fair market values of the estimated reserves.

PDP reserves were estimated for each producing well based on extrapolation of the historical producing trend.

(2) Base product prices were determined based on the 12 month average price calculated as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12 month period prior to December 31, 2015. The oil price of $50.28 per barrel is based on the West Texas Intermediate (WTI), Cushing, Oklahoma spot prices. The natural gas price of $2.58 per MMBtu is based on the Henry Hub gas daily prices. Price differentials were applied as appropriate to adjust these base prices of oil and gas to the specific field market situation.

(3) The Company has no control over operations and maintains only a landowner’s mineral royalty interest. Please see footnote (i) following the final paragraph of this letter for a warning concerning forward-looking information.

(4) The value of the proved reserves “Undiscounted, M$” and “Discounted at 10%, M$” includes a minimal amount of Oil and Condensate as well as Natural Gas Liquids.

As of December 31, 2015, the combined gross daily production rate from 7 wells operated by our mineral lessees was approximately 1.638 million cubic feet of natural gas (Mmcfg) and 109 barrels of oil per day (BOPD) with net daily production accruing to the Company of approximately .264 Mmcfg and 2 BOPD. The foregoing production includes four wells producing from S/L 16158 in which we own a small interest.

In June 2014, the Company announced the completion of its previously announced stock buyback program. On December 14, 2015, the board of directors authorized the additional purchase of up to 30,000 shares of its common stock. The purchases will be made from time to time on the open market at the sole discretion of the Company. All shares purchased will be held as treasury stock.

As previously reported, the Company has filed a claim against the US Army Corps of Engineers (USACE) for property damages and losses caused by the Mississippi River Gulf Outlet (MR-GO). While favorable rulings have been recently rendered in similar cases, it is anticipated that this litigation against the federal government will be a long process. We will continue to aggressively pursue this claim and will keep our shareholders advised as things progress.

Two separate reserve studies have been completed by independent reservoir engineering firms which estimate that B&L’s proved reserves as of December 31, 2015 were approximately 10.0 Bcfg, approximately 184 thousand barrels of oil (Mbbl) and approximately 5,500 Mbbl of natural gas liquids which compared to 9.4 Bcfg and 197 Mbbl of oil as of December 31, 2014. It should be noted that a significant component of B&L’s proved reserves as of December 31, 2015 are Proved Undeveloped (PUD) attributed to B&L’s leasehold interest in a federal offshore block located in shallow water on the intercontinental shelf. As is necessary with all PUD reserves, a well or wells must be drilled and completed to fully develop these PUD reserves prior to the expiration of this leasehold interest.

Additionally, as of December 31, 2015, B&L’s gross daily production was approximately 48.22 Mmcfg and 234 barrels of oil from 7 wells with 2.15 Mmcfg and 32 barrels of oil per day accruing to B&L.
Freeport-McMoRan Oil and Gas (FM O&G), a wholly owned subsidiary of Freeport-McMoRan Copper and Gold Inc. (NSYE:FCX), in its January 26, 2016 news release announced “during November 2015, FM O&G completed the installation of additional processing facilities to accommodate higher flow rates from the Highlander well. In December 2015, gross rates from the Highlander well averaged approximately 44 MMcf per day.”
B&L has been assigned and is contractually entitled to a 1.5% of 8/8ths overriding royalty interest (ORRI) in the Highlander discovery well and in all mineral leases obtained and maintained by FM O&G in its Highlander project area located in Iberia, St. Martin, Assumption and Iberville Parishes, Louisiana.

B&L completed construction of production facilities and flowline for the Welder No. 3 well and placed the well on production November 25, 2015. As of March 2016, the Welder No. 3 well continues to produce natural gas, condensate and natural gas liquids at commercial rates. B&L plans to take steps to rework the Welder No. 3 in an attempt to increase flow rates during the second quarter of 2016. B&L has a 62.5% working interest in the Welder No. 3 well.

B&L was organized as a limited liability Company (LLC) under the laws of Louisiana in July of 2006. B&L’s members are the Company and Lake Eugenie Land & Development, Inc. (LKEU), which have membership percentages of 75% and 25%, respectively.
During its meeting held on December 14, 2015, the board of directors declared a dividend of $.125 per outstanding share of common stock payable on Wednesday, December 30, 2015 to shareholders of record at the close of business on Thursday, December 24, 2015. This represents a total cash dividend payment of $316,879 or $.125 per share in 2015. Since 2002, we have paid approximately $55,223,000 in total dividends. With our fee land based production depleting and no new meaningful wells being drilled on our fee lands, it will be difficult to maintain the level of dividends paid since 2002.

Please remember to visit our website,, to obtain general information about the Company as well as historical annual reports and all press releases. We strongly recommend that all interested parties become familiar with the information available on the Company’s website: .

While B&L’s management continues to be pleased with its net production volumes and the results from its Lago Verde Project, it is keenly aware that the current lower level of commodity prices, particularly natural gas, creates challenges. Tracking and understanding commodity prices is obviously a major component of B&L’s management strategy on a going forward basis. Accordingly, B&L has significantly reduced the number of wells scheduled to be drilled in its drilling program and is adjusting its focus to lower cost or higher volume opportunities. Lower commodity prices decrease revenues from each well, but conversely create opportunities to drill and develop project areas at significantly lower costs due to the fact that the cost of drilling and related services have seen a thirty to forty percent decline since the price of oil was at its peak in 2014. B&L’s management also believes that in time a window will open during which costs remain lower, but commodity prices will rise in the near to midterm. B&L management’s goal and challenge is to correctly identify this window and take advantage of it.

B&L plans to take actions to increase production from the Welder No. 3. If these actions are successful, it could create an opportunity to drill additional wells to fully develop the reservoir discovered by the Welder No. 3. In November 2015, FM O&G completed the installation of additional processing facilities to accommodate higher flow rates from the Highlander well. In December 2015, gross rates from the Highlander well averaged approximately 44 MMcf per day. Due to its role in development of the Highlander prospect, B&L is fully aware of the magnitude of the Highlander discovery which, in its opinion, is truly a world class discovery. Conversely, B&L’s management is also aware of the financial challenges which FM O&G is currently experiencing. B&L’s management is actively developing potential strategies designed to protect its interest within the Highlander Area. While development of the Company’s core minerals located beneath our fee lands continues to prove difficult, we believe the Company will be well positioned to take advantage of improvement in natural gas pricing, if and when this improvement occurs.

2016 will again prove to be a challenging year due to continued low commodity prices. With a strong balance sheet, no debt and significant proved reserves from our investment in B&L, we continued to be well positioned for the upcoming year.


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

i 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; additional drilling, 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 “hopeful”, “believes”, “estimates”, “plans”, “expects”, “could”, “should”, “outlook”, “possibly” and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.