HOUSTON--(BUSINESS WIRE)--May 21, 1999--PANACO Inc. (the "Company") (Nasdaq:PANA) announced today that its 1999 Annual Meeting of Shareholders will be held next Thursday, May 27th, at 9:00 a.m. (EST). The meeting is being held at the Sheraton New York Hotel and Towers, 811 Seventh Avenue at 52nd Street, New York, New York. The Company also announced today that total production for the first quarter of 1999 remained flat compared to the first quarter of 1998, despite reduced production from two of the Company's larger fields. With the low prices and reduced production, the Company incurred a net loss for the quarter of $5.6 million, or $0.24 per share, compared to a loss of $2.4 million, or $0.10 per share in 1998. While production remained flat, near record-low oil prices and historically low natural gas prices produced an 18% decrease in revenues. Average oil prices (before hedging activities) decreased 11% in 1999 to $12.10 per barrel, as compared to $13.59 per barrel for the same period in 1998. Beginning in May and continuing through December, PANACO has 1,000 barrels of oil per day hedged at a NYMEX equivalent floor price of $15.00 with the price cap being $17.50. From June through December, the Company has added an additional 1,000 barrels of oil per day with a NYMEX equivalent floor price of $15.00 and a cap price of $19.12. PANACO has also implemented a new marketing strategy for its oil production which adds $1.00 to $1.50 per barrel over its previous marketing agreements. Average natural gas prices decreased 20% in 1999 to $1.72 per Mcf, from $2.14 in 1998. The Company has hedged approximately 60% of its 1999 annual gas production at a NYMEX equivalent price of $2.14 per MMbtu. Production from the High Island 309 field was reduced during the first quarter of 1999 while repairs and modifications were being made to the production facilities. Production from this field has begun to be brought back on-line and is currently at 24 MMcfe per day. Production from the West Delta fields was shut-in for the majority of the first quarter while repairs were being made to Tennessee Gas Pipeline's pipeline. Production was brought on May 18th and is continuing to be optimized. Depletion, depreciation and amortization decreased primarily due to a cost per unit of production decrease from $1.41 per Mcf equivalent in 1998 to $1.34 in 1999. This amount includes $1 million of unproved property cost amortization, which was not included in first quarter 1998. "With the recent turnaround in prices for both oil and natural gas and the increased production in the High Island 309 and West Delta fields, I am optimistic that we can begin improving our results for the remainder of the year," commented President and CEO, Larry M. Wright. "Positive results from two developmental wells in process at this time could also add to improved conditions. The results for those wells should be available early next week." Production and Price(1) Data: First Quarter 1999 1998 ---------- ---------- Oil production (Bbl) 261,919 115,276 Average price per Bbl $12.10 $13.59 Natural gas production (Mcf) 3,359,087 4,257,494 Average price per Mcf $1.72 $2.14 Total production (Mcfe) 4,930,601 4,949,150 Average price per Mcfe $1.82 $2.16 (1) Prices before the impact of hedging activity. First Quarter 1999 1998 ------------ ------------ REVENUE Oil and natural gas sales $9,171,000 $11,195,000 COSTS AND EXPENSES Lease operating expense 4,120,000 3,836,000 Depreciation, depletion & amortization 6,630,000 6,974,000 General & administrative expense 794,000 516,000 Production and ad valorem taxes 154,000 200,000 Geological & geophysical expense 387,000 252,000 Exploratory dry hole expense -- 1,013,000 ------------ ------------ Total 12,085,000 12,791,000 NET OPERATING INCOME (LOSS) (2,914,000) (1,596,000) OTHER INCOME (EXPENSE) Interest income 12,000 424,000 Interest expense (2,723,000) (2,514,000) ------------ ------------ Total (2,711,000) (2,090,000) INCOME (LOSS) BEFORE INCOME TAXES (5,625,000) (3,686,000) INCOME TAX BENEFIT -- (1,273,000) ------------ ------------ NET INCOME (LOSS) $(5,625,000) $(2,413,000) ============ ============ Net loss per share $(0.24) $(0.10) ============ ============ Basic shares outstanding 23,801,734 23,970,962 ============ ============ Diluted shares outstanding 23,801,734 23,970,962 ============ ============ Net cash provided by operating activities $4,186,000 $6,931,000 ============ ============ PANACO Inc. is an independent oil and gas exploration and production Company focused primarily on the Gulf of Mexico and the Gulf Coast Region. The Company acquires producing properties with a view toward further exploitation and development, capitalizing on state-of-the-art 3-D seismic and horizontal drilling technology to recover reserves that were bypassed or previously overlooked. Emphasis is also placed on pipeline and other infrastructure to provide transportation, processing and tieback services to neighboring operators. Forward-looking statements in this press release are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including drilling risks, uncertainties in estimating reserves, risks inherent in oil and gas operations and others set forth in greater detail in the PANACO Form 10-K. No assurances can be given that actual results will not differ materially from those contained in such forward-looking statements.  