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March 10, 2006

To the Shareholders of Biloxi Marsh Lands Corporation:

While we are pleased to report that 2005 was the tenth consecutive profitable year for your company, we are even more pleased with the level of revenue and earnings which were slightly better then last year’s earnings which represented the Company’s best annual financial performance since its founding, despite that fact that we did not receive any royalty revenue during the month December due Hurricanes Katrina and Rita. Total revenue for the year 2005 was $22,512,638 compared to total revenue of $22,226,700 in 2004. The revenue breakdown is as follows: 2005 revenue from oil and gas activity was $21,258,425 compared to revenue of $21,267,614 in 2004. Dividend and interest income for 2005 was $289,711 compared to $114,065 for 2004. In 2005 gains from the sale of investment securities were $954,085 as compared to a net gain of $802,846 in 2004. Meanwhile, net earnings increased to $13,882,006 or $5.04 per share from $13,821,040 or $5.02 per share in 2004

In 2005 The Meridian Resource and Exploration, LLC (Meridian) completed the final phase of its 3D seismic program. This 3D seismic survey was completed in four phases and covers approximately 137 square miles of the Company’s +/- 141 square miles of titled acreage. As provided for in the Oil, Gas and Mineral Lease between the Company and Meridian, we have taken delivery of Phase I, II and III of the 3D seismic data which includes company acreage plus adjacent land and water-bottoms extending one mile in every direction beyond the bounds of our acreage. Currently our 3D seismic inventory contains approximately 314 square miles covering Company property and adjacent areas. As per letter agreement with Meridian, we are scheduled to take delivery of Phase IV of the seismic data in April of 2006. After we take delivery of this final phase the Company’s 3D seismic inventory should include approximately 375 to 400 square miles covering Company property and adjacent areas. It should be noted Meridian did not complete Phase V of its seismic survey as they advised us was originally planned. This did not affect any of our property. Management believes that the 3D data sets which Meridian has already delivered to the Company and the seismic data acquired as the result of the completion the final Phase will prove to be valuable corporate assets. Though we were delayed by Hurricane Katrina we are continuing to proactively use the data to our strategic advantage. Toward this end the Company has retained a geophysicist and a geologist who are currently in the process of evaluating the seismic data in order to determine if there are any additional prospects within the area covered by the 3D seismic data. In addition to these efforts the Company recently marketed its acreage and potential prospects during the Gulf Coast Prospects Exposition in Lafayette, Louisiana and National Association of Petroleum Engineers Expositions (NAPE) in Houston,Texas. We are pleased with the response to our marketing effort and are hopeful that it will result in future oil, gas and mineral agreements.

Over the past several years, Meridian has added significantly to the pipeline infrastructure running through Company acreage. As provided for in the pipeline right of way agreements the Company has the right to use excess capacity in the pipelines for a fee and has the option, not the obligation, to take over the pipelines 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.

The primary term of the lease between the Company and Meridian expired on December 15, 2005. As of the date of this letter the Company has approximately 82,000 acres open and available for exploration and development, approximately 3,900 acres are held by production (HBP), and approximately 4,300 acres are under the secondary term of the lease between the Company and Meridian.

During January of 2005 Meridian successfully placed its BML 28-1 and S/L 18041-1 on production. Correspondingly during 2005 Meridian successfully logged its BML 7-4 well, but according to Meridian this well has not been placed on production because of completion problems. During 2005 Meridian plugged and abandoned its BML 21-1 well as a dry hole. In August and September of 2005 Hurricane Katrina and Rita severely impacted all the production facilities supporting production emanating from our property. To Meridian’s credit they began placing wells back on production during the first part of October and completed placing all wells which were producing prior to the hurricanes on production by the first part of November, with the exception of the BML 28-1 well, which according to Meridian, may have to be re-drilled due to severe damage to the Christmas tree. Correspondingly, Manti Jambi, Inc. placed its BML 1 and 3 wells back on production during November of 2005. In addition to the Meridian wells, on December 31, 2005 the Manti Jambi, Inc.-BML 1 and 3 wells continued to produce natural gas on compression. As of December 31, 2005 the combined gross daily production rate from 14 wells was approximately 45 million cubic feet (mmcf) with net daily production accruing to the Company of approximately 5.0 mmcf.

The Company again 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 1 to 7 years with slightly more then 38% of the proved reserves depleting by the end of 2006. The same reserve study estimates that as of December 31, 2005 the Company’s “Developed Producing” proved reserves are 3.393 billion cubic feet (bcf) of natural gas and estimates that the “Developed Non-Producing” proved reserves are .643 bcf, with the “Proved Un-Developed“ being .384 billion cubic feet, totaling 4.421 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 9 producing units and other leased based production covering approximately 3,900 acres of Company property, with the Company owning an additional 85,500 +/- acres. The reserve study does not cover or attempt to estimate un-proven reserves under any of these 85,500 +/- acres. As of this time, we offer no guidance as to quantities of reserves, if any, under any of these 85,500 +/- acres. Please find the following table showing the Company’s proved reserves as of December 31, 2004:

Proved Reserves as of December 31, 2005 (3) ___________ _____

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

Natural Gas (BCF)…………………… 3.393 .643 .384 4.421

Estimated Future Net Revenues (before income taxes) (2) :…………………. $ 54,179

Estimated Discounted Future Net Revenues (before income taxes) (2):……. $ 45,849
______________
(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, 2005 which was $10.05 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 Corporation on or about November 2, 2001 as the result of disturbances in the Corporation’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 has been granted by the court. Management intends to vigorously pursue the Corporations’ possessory action and vigorously defend the Molero family members’ declaratory judgment action.

During 2005, significant legal discovery was taken by the parties and a trial date on the Corporation’s possessory action had been set by the Court. Unfortunately, as a result of Hurricane Katrina, the Courthouse for St. Bernard Parish was severely damaged and the trial date for the Corporation’s possessory action has been indefinitely continued.

The Carmadelle entities continued their strategy of attempting to have the trial court determine an issue related to title. Their latest attempt was their third attempt. The matter was once again appealed and the Corporation’s position was upheld by the Appellate Court and, just recently in early February 2006, the Louisiana Supreme Court upheld the Corporation’s position for a third time.

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 tracts within each producing unit (“Concursus Proceedings”). The object of the Concursus Proceedings is to determine whether the State or the Company is entitled to the royalty on production attributable to the disputed acreage. The judgments ultimately rendered in these proceedings will order the distribution of royalty proceeds currently being deposited into the Registry of the Court. There is no potential in the Concursus Proceedings for rendition of an adverse judgment requiring the payment of Company funds. As of December 31, 2005, the Company’s potential share of the funds deposited in the various concursus’ accounts is in excess of 28 million dollars.

The timing of the resolution of the competing claims in the Concursus Proceedings is being impacted substantially by the effects of Hurricane Katrina on St. Bernard Parish. While the courthouse has been declared open and while judges have returned to their offices, the parish remains without sufficient facilities to support a trial. This is particularly true with respect to trials that may take multiple days to complete as the Concursus Proceedings undoubtedly will. At the present time, there is no way to know how long it will take for the judicial system in St. Bernard Parish to resume normal operations. We are advised that, because the courthouse is formally open for business, the Supreme Court is not likely to consider establishing alternate locations outside of St. Bernard Parish for the trial of cases pending in that parish. For these reasons, as of the date of this report, there is no way to forecast a timetable for the conclusion of the Concursus Proceedings.

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 2005 we declared the following dividends:

Date Declared Date Paid Type $ per share
April 27, 2005 May 11, 2005 Cash .75
June 16, 2005 August 10, 2005 Cash 1.00
December 19, 2005 January 25, 2006 Cash 2.00
Total Declared: 3.75

As of the middle of February our Metairie, Louisiana office has been partially renovated and we have reopened for business with our staff working out of their homes and the office. We hope to have the renovations completed by the end of March. As previously reported we were able to successfully evacuate and save all of our electronic files including all processed and raw 3D seismic data prior to Hurricane Katrina. Unfortunately, most of our paper files were damaged by flood waters. The files have been restored through a freeze drying process and are back in our possession. While the vast majority of the papers contained in each file are readable, all papers must be removed from the file folders and re-filed. During this process we are scanning each paper so that we will have electronic back up for all of our paper files.

Prior to Hurricane Katrina we retained the services of T. Baker Smith, Inc to develop a Restoration and Stabilization Plan for our property. Due to Hurricane Katrina we have extended the scope of this project and retained additional technical experts to assist in formulating the plan. We hope to have the plan finished by mid-year and are going to use the Plan to seek Federal funding for restoration. T. Baker Smith, Inc. is also in the process of determining the extent of the damage to the property caused by Hurricanes Katrina and Rita. This is being done by comparing pre-storm and post-storm satellite imagery. While there was damage to the property, we are encouraged by the preliminary results of this comparison.

In addition to the Restoration and Stabilization Plan the Company is setting up the Biloxi Marsh Disaster Relief Fund Corporation. The Board has approved a donation of $150,000 to set up this fund and we plan to match $.50 of any donation received by the Biloxi Marsh Disaster Relief Fund Corporation up to a total match of $150,000 of funds contributed by third parties, making the Company’s total donation commitment $300,000. The purpose of the fund is to solicit additional funds and provide funding for the rebuilding of St. Bernard Parish which was devastated by Hurricane Katrina. The Biloxi Marsh Disaster Relief Fund Corporation will have a Board of five people with strict governance rules with KPMG providing auditing and accounting services all of which are designed to lend credibility to the Relief Fund and the way it expends funds.

The Company’s large open acreage position combined with its sizeable 3D seismic inventory may represent an opportunity for the company, as previously stated we have retained a geologist and geophysicist, to determine the extent of our opportunities. Senior Management is involved in this process which will help us determine the extent of our remaining potential reserves. Once this process is completed Management will have a better understanding of the strategic course the Company should take and your Board of Directors will take appropriate steps to take advantage of any opportunity that may be identified.

In closing we are glad to have survived Hurricane Katrina with our property in what appears to be a sustainable state and we believe that 2006 will represent an exciting year for the Company.

Sincerely,

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

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