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February 21, 2005

To the Shareholders of Biloxi Marsh Lands Corporation:

While we are pleased to report that 2004 was the ninth consecutive profitable year for your company, we are even more pleased with the level of revenue and earnings which represents the Company’s best annual financial performance since its founding in 1936. Total revenue for the year 2004 was $22,226,700 compared to total revenue of $6,704,557 in 2003. The revenue breakdown is as follows: 2004 revenue from oil and gas activity was $21,267,614 compared to revenue of $6,262,704 in 2003. Dividend and interest income for 2004 was $114,065 compared to $96,549 for 2003. In 2004 gains from the sale of investment securities were $802,846 as compared to a net gain of $327,846 in 2003. Meanwhile, net earnings increased to $13,821,040 or $5.02 in 2004 from $4,015,568 or $1.46 per share in 2003 (split adjusted).

The Meridian Resource and Exploration, LLC (Meridian) continued its 3D seismic program which is planned to be completed in five (V) Phases. In prior years Meridian completed Phase I & II of its 3D seismic survey covering approximately 85 square miles of our acreage. During 2004 Phase III of Meridian’s 3D seismic survey was completed. Due to the physical layout of the 3D seismic program, Phase III covered only approximately 4 square miles of Company property. This brings the total amount of Company property surveyed during Phase I, II and III to approximately 89 square miles, leaving approximately 48 square miles to survey. Meridian commenced shooting Phase IV of its 3D seismic survey during the first quarter of 2005. Phase IV is currently planned to cover the approximately 48 square miles of Company property left to survey. As provided for in the lease agreement between the Company and Meridian during 2004 the Company took delivery of the 3D seismic data which was collected during Phase II covering Company property with one mile offsets in every direction. It should be noted that during 2003 we took delivery of the 3D seismic data which was collected during Phase I. Management believes that 3D data sets which Meridian has already delivered to the Company and the seismic data acquired as the result of the completion of subsequent Phases will prove to be valuable corporate assets and we are taking steps to proactively use the data to our strategic advantage.

Meridian added significantly to the pipeline infrastructure running through Company acreage by completing its 8 mile – 12 inch diameter pipeline during the third quarter of 2004 and building a 1 mile spur onto this pipeline during the fourth quarter. The completion of these pipelines enabled Meridian to put 8 additional wells on production during the year. As provided for in the pipeline right of way agreements the Company has the right to use excess capacity in the pipeline for a fee and has the option, not the obligation, to take over the pipeline if Meridian chooses to abandon it. Management is very pleased with the development of the pipeline infrastructure throughout our property and believes that the right to use excess capacity and take over the pipeline after abandonment may prove to be valuable for the future development of our mineral interests.

During the year Meridian successfully completed 11 wells in which the Company owns an interest with 1 additional well successfully logged awaiting a work over rig and 4 wells which were unsuccessful being plugged and abandoned as dry holes. The Meridian – BML 5-1, 6-3, 7-2, 7-3, 8-1, 19-1, 22-1, 24-1, 31-1, and State Lease (S/L) 17598-1(formerly Ducros et al No. 32-1) wells were placed on production during the year. The Company owns an interest in each of the producing units that have been or will be formed to produce each of these wells. On December 31, 2004 each of these wells were producing natural gas as were Meridian’s BML 1-2 and 18-1 wells. Meanwhile the BML 6-1, and 6-2 wells were producing natural gas on compression. After several unsuccessful attempts to re-complete its BML 7-1 well, Meridian side tracked out of the bore hole to successfully complete its BML 6-3 well. It appears that the BML 6-3 is completed in the same reservoir as the BML 6-1 and 6-2 wells and was also being produced on compression as of December 31, 2004. According to Meridian the BML 7-4 well has been successfully logged and is awaiting a work over rig due to initial completion problems. In addition to the Meridian wells, on December 31, 2004 the Manti Jambi, Inc.-BML 1 and 3 wells continued to produce natural gas on compression. As of December 31, 2004 the combined gross daily production rate from all of these 16 wells was approximately 81 million cubic feet (mmcf) with net daily production accruing to the Company of approximately 9.9 mmcf.

On January 30, 2005, Meridian commenced drilling its Biloxi Marsh Lands (BML) 21-1 well. If this well is successfully completed the Company will own a percentage of the producing unit. Unlike the majority of our wells producing natural gas from the CRIS I sand interval, the BML 21-1 well is being drilled to develop the shallower BIG HUM sand interval, which is producing natural gas and condensate nearby from Meridian’s BML 28-1 well and its S/L 18041-1 well. During January of 2005 Meridian successfully placed its BML 28-1 and S/L 18041-1 on production at a combined gross daily rate of approximately 7.0 mmcf of natural gas and 120 barrels of condensate. The Company will own a percentage of the producing units that are in the process of being formed to produce each of these two wells. It should be noted that in the BML 28-1 well Meridian logged proved non-producing (PDNP) reserves in the shallower TEX W sand interval.

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 6 years with slightly less then 50% of the proved reserves depleting by the end of 2005. The same reserve study estimates that as of December 31, 2004 the Company’s “Developed Producing” proved reserves are 4.772 billion cubic feet (bcf) of natural gas and estimates that the “Developed Non-Producing” proved reserves are 1.021 bcf, totaling 5.792 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 10 producing units covering approximately 3,400 acres of Company property, with the Company owning an additional 84,500 +/- acres. The reserve study does not cover or attempt to estimate un-proven reserves under any of these 84,500 +/- acres. As of this time, we offer no guidance as to quantities of reserves, if any, under any of these 84,500 +/- acres. Please find the following table showing the Company’s proved reserves as of December 31, 2004:

Proved Reserves as of December 31, 2004 (3) ___________ _____

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

Natural Gas (BCF)…………………… 4.772 1.021 5.792

Estimated Future Net Revenues (before income taxes) (2) :…………………. $ 36,323

Estimated Discounted Future Net Revenues (before income taxes) (2):……. $ 31,542
______________
(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, 2004 which was $6.38 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 (i) 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, 2004 the Company’s potential share of the funds deposited in the various concursus accounts is close to 23 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.

Historically the company has declared and paid a dividend once each year. While we have not formally changed our dividend policy, due to the company’s strong financial performance, during 2004 we declared the following dividends:

Date Declared Date Paid Type $ per share
April 16, 2004 May 5, 2004 Cash .625
July 7, 2004 July 21, 2004 Cash 1.00
October 5, 2004 October 27, 2004 Cash 1.00
December 20, 2004 January 17, 2005 Cash 1.50
Total Declared: 4.125

While we are hopeful that our current major Lessee will continue to successfully develop the relatively shallow TEX W, BIG HUM and CRIS I sand intervals, we believe that the development of the deeper TUSCALOOSA and CRETACEOUS intervals could prove to represent significant value for the Company and its shareholders. Management believes that it has a duty to use a portion of our current strong cash flow to perpetuate cash flows over the long term. This should allow us to work with our current Lessee or seek other business relationships for the future exploration and development of shallow reserves that may be left behind or to explore deeper sand intervals. While there is no guarantee that we will be successful in finding opportunities to maximize shareholder value, we have set this as a goal for the future.

Sincerely,

William B. Rudolf
President and Chief Executive Officer
Metairie, Louisiana
Email: wrbiloxi@bellsouth.net

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