PANACO Provides Operational Update

The State Tract 73 No. 6 well in Umbrella Point field, Galveston County, Texas is currently drilling below 11,100 feet where a drilling liner has been run and set. This well has a targeted total depth of 15,722 feet to test the prolific Vicksburg formation. Based on current drilling information, total depth should be reached around the end of November. If successful, the Vicksburg play will establish additional drilling opportunities for the Company during 2002. PANACO, Inc. is the operator of the field and owns a 40% working interest and a 33.4% net revenue interest in the well.

The North White Lake State Lease 16854 No. 1 well in Vermillion Parish, Louisiana, is currently drilling at 13,420 feet. Targeted total depth is 14,560 feet. This well will test a series of updip lower Miocene sands. PANACO, Inc. is the operator of the prospect and holds a 50% working interest and a 39% net revenue interest.

The Price Lake D.T. Sturlese No. 3 recompletion to the MA-23 Sand is approximately 50% concluded. Within the next three weeks the well should be reconfigured for perforation of the new zone. The well will then be tested and production put to sales. PANACO, Inc. operates the D.T. Sturlese No. 3 and holds a working interest of 51% and a net revenue interest of 37%. At East Breaks Block 161 Unocal, the operator, is projecting a sales date on or about the 15th of December for the Corona Project. Targeted flow rates are 2,000 barrels of oil per day and 2,000 Mcf of natural gas per day. PANACO, Inc. has a 25% working interest and a 20.825% net revenue interest in both the Corona Project and the Pilsner Project.

PANACO's Snapper platform in East Breaks Block 165 is now processing initial production from Forest Oil's East Breaks Block 164. 15,000 Mcf per day and 20 barrels of oil per day is currently being processed by PANACO from East Breaks Block 164.

In other related processing news, PANACO and Samedan have signed a definitive Production Handling Agreement that covers the processing of Samedan and its partner's production from East Breaks Block 420. PANACO's Tequila platform in East Breaks Block 110 will be handling approximately 40,000-45,000 Mcf per day under the agreement with a turn on date expected to be sometime during the summer of 2002. Revenues for PANACO over the next two to three years are in the range of $1.1 to $1.6 million.

The State Lease 14645 No. 1 well was successfully recompleted and went on line this past Wednesday, October 17th at a rate of 600 Mcf of natural gas per day with a flowing pressure of 2,580 psi. PANACO, Inc. operates this Plaquimines Parish well and holds a working interest of approximately 44%, and a net revenue interest of 33%.

Robert G. Wonish, President and COO, stated, "We are focusing on the drill bit at this time in our committed process of growing and replacing produced reserves. The Company is excited about our current drilling project at Umbrella Point, albeit high risk, which has the potential for rewarding results as we move into 2002. In addition, PANACO continues to search for a synergistic fit to our core areas of operation despite the slowdown of acquisition activity in the marketplace. Our team is continuously looking for engineering improvements and geological refinements to improve drilling and workover results as well as cost control measures."