SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant |X|
Filed by a Party other than the Registrant | |

Check the appropriate box:

PANACO, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction
applies: _____________________________________________________________
2) Aggregate number of securities to which transaction
applies:______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):__________________________________________________________
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5) Total fee paid:____________________________________________________

| | Fee paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount previously paid: ___________________________________________
2) Form, schedule or registration statement no.: _____________________
3) Filing party: _____________________________________________________
4) Dated filed: ______________________________________________________

PANACO, INC.
1100 Louisiana
Suite 5100
Houston, Texas 77002

Annual Meeting - June 7, 2000

Dear Fellow Stockholder:

You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of PANACO, Inc. to be held at 9:00 a.m. CST, Wednesday, June 7, 2000, at the
Doubletree Hotel, 400 Dallas St., Houston, Texas 77002. A complimentary
breakfast will be available to all stockholders beginning at 8:30 a.m. CST. Your
Board of Directors and management look forward to greeting personally those
stockholders able to attend.

At this Annual Meeting, as more fully set forth in the accompanying Notice
of Annual Meeting and Proxy Statement, stockholders are being asked to elect
three directors to serve for three-year terms.

It is very important that your shares are represented and voted at the
Annual Meeting, so we request your cooperation in promptly signing, dating and
mailing the enclosed WHITE proxy card in the envelope provided for your
convenience.

On behalf of your Board of Directors.

Sincerely,

/s/ Larry M. Wright
_____________________________________
Larry M. Wright,
Chief Executive Officer and President

=============================================================================

PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED WHITE PROXY CARD

=============================================================================

PANACO, INC.

1100 Louisiana
Suite 5100
Houston, Texas 77002

NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders:

The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of PANACO,
Inc. (the "Company") will be held at the Doubletree Hotel, 400 Dallas St.,
Houston, Texas 77002, on Wednesday, June 7, 2000, at 9:00 a.m. for the following
purposes:

1. To elect three Class II Directors for three-year terms ending at the
annual meeting of stockholders in the year 2003;

2. To act upon such other matters as may properly come before the Annual
Meeting.

Only stockholders of record at the close of business on April 18, 2000 will
be entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. Please note that attendance at the Annual Meeting will be limited to
stockholders (or their authorized representatives) as of April 18, 2000, the
record date, and to guests of the Company.

YOUR VOTE IS IMPORTANT

The vote of each stockholder is important, regardless of the number of
shares held. Whether or not you plan to attend the Annual Meeting, please sign,
date and mail the accompanying proxy card promptly in the enclosed postage-paid
envelope. PLEASE NOTE THAT YOUR VOTE CANNOT BE COUNTED UNLESS YOU SIGN AND
RETURN THE PROXY CARD OR ATTEND THE MEETING AND VOTE IN PERSON. ACCORDINGLY, YOU
ARE URGED TO RETURN YOUR WHITE PROXY CARD AT YOUR EARLIEST CONVENIENCE.

Thank you for your cooperation and support.

/s/ Todd R. Bart
_______________________________
Todd R. Bart, Secretary
April 28, 2000

PANACO, INC.

1100 Louisiana
Suite 5100
Houston, Texas 77002

PROXY STATEMENT

This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 24, 2000 in connection with the solicitation of
proxies by the Board of Directors of PANACO, Inc. (the "Company") for use at the
2000 Annual Meeting of the Stockholders to be held at 9:00 a.m. on Wednesday,
June 7, 2000, and at any postponement or adjournment thereof (the "Annual
Meeting").

At the Annual Meeting, stockholders will be asked:

1. To elect three Class II Directors for three-year terms ending at the
annual meeting of stockholders in the year 2003;

2. To act upon such other matters as may properly come before the Annual
Meeting.

On the record date, April 18, 2000, the outstanding voting securities of
the Company consisted of 24,323,521 shares of the Company's Common Stock, par
value $.01 per share ("Common Stock"), all of one class. Each share of Common
Stock has one vote on each matter presented for action at the Annual Meeting.

The cost of soliciting proxies will be borne by the Company. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the Company's
Common Stock, and normal handling charges may be paid for such forwarding
service. Solicitation of proxies may be made by mail, personal interview,
telephone and facsimile by officers and other management employees of the
Company, who will receive no additional compensation for their services.

Voting

Shares of Common Stock can be voted at the Annual Meeting only if the
stockholder is represented by proxy or is present in person. A stockholder
giving a proxy in the accompanying form retains the power to revoke it by a
later dated appointment or by giving notice of revocation to the Company in
writing or by voting in open meeting. Any such notices should be directed to
Todd R. Bart, Secretary of the Company, at the address set forth above. Shares
of Common Stock for which proxies are properly executed and returned prior to
the Annual Meeting will be voted in accordance with the instructions contained
therein, or in the absence of contrary instructions, such shares will be voted:
(1) to elect three Class II directors for three-year terms ending at the annual
meeting of stockholders in the year 2003; (2) to act in the proxies' discretion
upon such other matters as may properly come before the Annual Meeting.

Abstentions and broker non-votes are each included in the determination of
the number of shares present and voting for the purposes of determining the
presence of a quorum. A proxy submitted by a stockholder may indicate that all
or a portion of the shares represented by such proxy have not been voted by such
stockholder with respect to a particular matter. This may occur, for example,
when a broker is not permitted to vote stock held in street name on certain
matters in the absence of instruction from the beneficial owner of the stock.
The shares subject to any such proxy which have not been voted with respect to a
particular matter (the "Non-Voted Shares") will be treated as shares not present
and entitled to vote on such matter, although such shares may be considered
present and entitled to vote for other purposes and will count for purposes of
determining the presence of a quorum. Shares voted to abstain as to a particular
matter will not be considered Non-Voting Shares.

The election of directors requires a plurality of the votes. Thus,
abstentions and Non-Voted Shares will not affect the outcome of the election of
directors.

YOUR VOTE IS IMPORTANT. Please sign, date and promptly mail your proxy card
so that a quorum may be represented at the Annual Meeting.

BOARD OF DIRECTORS

General Information

The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance and governance of the
Company, although it is not involved in day-to-day operating details. Directors
are kept informed of the Company's business by various reports and documents, as
well as by operating and financial reports presented at Board and committee
meetings by the Chairman and other officers.

Meetings of the Board of Directors are regularly held each quarter and
following the Annual Meeting. Additional meetings of the Board, including
meetings by telephone conference call, may be called whenever needed. The Board
of Directors of the Company held ten meetings in 1999, six of which were
meetings by telephone conference call. During that period, each incumbent
director attended at least 75% of the total number of meetings of the Board of
Directors that were held after his election to the Board.

ELECTION OF DIRECTORS
(Item 1 on Proxy Card)

The Board of Directors of the Company presently consists of eight members,
seven of whom are independent non-employees of the Company. The Company's
Certificate of Incorporation requires that the directors be divided into three
classes, with an equal number of directors in each class when possible. At each
annual meeting of stockholders, directors constituting a class are elected to
hold office until the third annual meeting of stockholders following their
election. The term of the present Class II Directors expires in 2000. The Board
of Directors has nominated Messrs. Wright, Nortman and First for election as
directors in Class II. The three directors in Class III continue to serve until
the 2001 annual meeting of stockholders and the two directors in Class I
continue to serve until the 2002 annual meeting of stockholders, and until their
respective successors are elected and qualified.

It is intended that shares of Common Stock represented by the accompanying
form of proxy will be voted for the election of the nominees, unless contrary
instructions are indicated as provided on the proxy card. If you do not wish
your shares to be voted for a particular nominee, you may so indicate on the
proxy card. The shares of Common Stock vote as a single class for the election
of directors. If one or more of the nominees should at the time of the meeting,
be unavailable or unable to serve as a candidate, the shares represented by the
proxies will be voted to elect the remaining nominees and any substitute nominee
or nominees designated by the Board of Directors. The Board of Directors knows
of no reason why any of the nominees will be unavailable or unable to serve.

For each director of the Company, including those nominated for election,
following is a brief description of each nominee or director's principal
occupation and business experience during the last five years, directorships of
publicly held companies presently held by any nominee or Director, age and
certain other information. When indicating the tenure with the Company of each
Director, the "Company" means the present corporation (post-August 1992) and Pan
Petroleum MLP ("PAN") (pre-September 1992).

Class II Directors and Nominees

Larry M. Wright, age 55. Mr. Wright, a Director of the Company since 1992,
received his B.S. Degree in Chemical Engineering from the University of Oklahoma
in 1966. From 1966 to 1976 he was with Union Oil Company of California (UNOCAL).
From 1976 to 1980, he was with Texas International Petroleum Corporation,
ultimately as division operations manager. From 1980 to 1981, he was with what
is now Trans Texas Gas Company as Vice President-Exploration and Production.
From 1981-1982, he was Senior Vice President of Operations for Texas
International Petroleum Corporation, and, from 1983 to 1985, he was Executive
Vice President of Funk Fuels Corp., a subsidiary of Funk Exploration. From 1985
to 1993, Mr. Wright was an independent consultant to the Company and its
predecessors. From 1993 to 1997, he served as Executive Vice President of the
Company and from October 1997 to August 1998, he served as President and Chief
Operating Officer. Mr. Wright was elected Chief Executive Officer of the Company
in August 1998.

Stanley Nortman, age 60. The Board appointed Mr. Nortman as a Director of
the Company in September 1999. Mr. Nortman has been the President of Nortman
Associates, a marketing and consulting company from 1988 to the present. From
1988 to 1992 Mr. Nortman was the Chairman of the Galaxy Group, a completion and
bonding company. Mr. Nortman was also the President of the Travel Channel from
1991 until it sale in 1992. In 1968 Mr. Nortman founded Nortman Metals, a metal
distribution company, for which he served as its President and CEO until 1983.
Mr. Nortman received a B.B.A. degree from Hofstra University in 1963.

Harold First, age 63. Mr. First has been a Director of the Company since
September 1997. Since January 1993 he has been an independent financial
consultant. Mr. First became a director of the Cadus Pharmaceutical Corporation
in April 1995. From December 1990 through January 1993, Mr. First served as
Chief Financial Officer of Icahn Holding Corp. a privately held holding company,
and related entities. He has been a director of Taj Mahal Holding Corporation, a
public casino and gaming corporation and a director of Trump Taj Mahal Realty
Corporation, a privately held real estate company, from October 1991 until
September 1996; a member of the Supervisory Board of Directors of Memorex Telex
N.V. a public technology company from February 1992 until February 1997; a
director of Talk.Com, a public long distance telephone service company from
September 1995 to September 1999; and a director of Philip Services Corporation,
a leading integrated provider of industrial and metals service, since November
1998. Mr. First was a director of Trans World Airlines, Inc. a public airline
company from December 1990 through January 1993; a director of ACF Industries,
Inc., a privately held railcar leasing and manufacturing company, from February
1991 through December 1992; Vice Chairman of the Board of Directors of American
Property Investors, Inc., the general partner of American Real Estate Partners,
L.P. a public limited partnership that invests in real estate from March 1991
through December 1992; and a director of both Marvel Entertainment Group, Inc. a
public company that publishes comic books and develops, sells and licences comic
books and the characters, and Toy Biz, Inc. a public company that markets and
sells toys from June 1997 through April 1998. Mr. First is a Certified Public
Accountant. He serves on the Audit Committee and Executive Committee of the
Company.

Class III Directors

Donald W. Chesser, age 61. Mr. Chesser, a Director of the Company since
1992, received his B.B.A. in Accounting from Texas Tech University in 1963 and
has served with several certified public accounting firms since that time,
including eight years with Elmer Fox and Company. From 1977 to 1981, he was with

IMCO Enterprises, Inc. Since 1982 he has been a stockholder and President of
Chesser & Company, P.A., a certified public accounting firm. He is also
President of Financial Advisors, Inc., a registered investment advisor. He
serves on the Audit Committee.

James B. Kreamer, age 61. Mr. Kreamer, a Director of the Company since
1993, received his B.S. Degree in Business from the University of Kansas in 1963
and has been active in investment banking since that time. Since 1982 he has
managed his personal investments. He serves on the Compensation Committee.

Richard J. Lampen, age 46. Mr. Lampen, a Director of the Company since
1999, received a J.D. from Columbia University Law School in 1978 and his B.A.
Degree from Johns Hopkins University in 1975. From 1986 to 1992 he was employed
by Salomon Brothers Inc. From May 1992 through September 1995 he was a partner
in the law firm of Steel Hector & Davis. Since that time he has been Executive
Vice President and General Counsel of New Valley Corporation, an investment
banking and Real Estate development firm, as well as Executive Vice President of
Brooke Group Ltd., a New York Stock Exchange-listed holding company, and BGLS
Inc. (a subsidiary of Brooke Group Ltd.). He has also acted as President and
Chief Executive Officer since November 1998 of CDSI Holdings, Inc., which holds
an interest in an Internet direct marketing firm. Mr. Lampen is also a director
of CDSI Holdings, Inc. and New Valley Corporation. Mr. Lampen was elected to
fill a vacancy on the Board of Directors in February 1999 pursuant to an
agreement between New Valley Corporation and the Company in connection with the
purchase of Common Stock by New Valley Corporation from Mark Licata, formerly a
member of the Board of Directors. He serves on the Audit Committee.

Class I Directors

A. Theodore Stautberg, Jr., age 53. Mr. Stautberg, a Director of the
Company since 1993 has since 1981 been the President and a Director of Triumph
Resources Corporation and its parent company, Triumph Oil and Gas Corporation of
New York. Triumph engages in the oil and natural gas business, assists others in
financing energy transactions, and serves as general partner of Triumph
Production L.P. Mr. Stautberg is also the Chairman and a director of Triumph
Securities Corporation and President of BT Energy Corporation. Prior to forming
Triumph in 1981, Mr. Stautberg was a Vice President of Butcher & Singer, Inc.,
an investment-banking firm, from 1977 to 1981. From 1972 to 1977, Mr. Stautberg
was an attorney with the Securities and Exchange Commission. Mr. Stautberg is a
graduate of the University of Texas and the University of Texas School of Law.
He serves on the Executive Committee.

Felix Pardo, age 62. Mr. Pardo, a Director of the Company since 1999,
received an M.B.A. degree from the Wharton Business School of the University of
Pennsylvania in 1963 and a B.A. in economics from Brown University in 1960. Mr.
Pardo serves as a member of the Board of Directors of Innovative Valve
Technologies, an oil field services company, Newalta Corp., an oil field waste
company, and Philip Services Corp., a metals recycling and industrial services
company. From July 1998 to the present, he has acted as Chairman of Dyckerhoff,
Inc., a cement and building materials company. Prior thereto, he was President
of Philip Services Corp. from March 1998 through November 1998. From May 1992
through March 1998, he served as President of Ruhr American Coal Corporation and
Chairman of Newalta Corp. Mr. Pardo was elected to fill a vacancy on the Board
of Directors pursuant to an agreement between High River Limited Partnership and
the Company in connection with the purchase of Common Stock by High River

Limited Partnershipfrom Leonard Tallerine, formerly a member of the Board of
Directors. He serves on the Compensation Committee.

Committees of the Board

The committees established by the Board of Directors to assist it, in the
discharge of its responsibilities are described below.

Audit Committee. The Audit Committee meets with management to consider the
adequacy the internal controls of the Company and the objectivity of its
financial reporting. The Audit Committee recommends to the Board the appointment
of the independent accountants. The independent accountants periodically meet
alone with the Committee and have unrestricted access to the Committee. Members
of the Audit Committee are Donald Chesser, Richard Lampen and Harold First. The
Audit Committee met two times in 1999.

Compensation Committee. The Compensation Committee makes recommendations to
the Board with respect to the compensation of senior management of the Company
and the PANACO, Inc. Long Term Incentive Plan (the "Long Term Incentive Plan").
Members of the Compensation Committee are Felix Pardo and James B. Kreamer. The
Compensation Committee met two times in 1999.

Executive Committee. The Board established an Executive Committee in August
1998 and restated its Charter in February 1999. The Executive Committee consists
of two members. Members of the Executive Committee are A. Theodore Stautberg,
Jr. and Harold First. The Executive Committee has the authority to approve all
checks in excess of $10,000, expense reports of the Senior Executive Officers of
the Company, reviewing all acquisitions or draws on the Company's line of credit
and making all press releases. In addition, the Committee reviews all financial
statements, budgets, and other financial matters including hedging, drilling and
exploration costs and preparation of reserve reports. The Executive Committee
met twenty times in 1999.

The Company does not have a standing nominating committee.

Compensation of Directors

Non-employee directors are compensated for their services by receiving
$2,000 for attending Board of Directors meetings, $500 for attending committee
meetings (not including Executive Committee meetings) and $500 for participating
in telephone meetings. Officers of the Company who serve as directors do not
receive additional compensation for serving on the Board of Directors or a
committee thereof. Directors are reimbursed for travel expenses incurred in
attending Board of Directors or committee meetings.

Each Director also receives $500 per month for reimbursement of expenses.
Non-employee members of the Executive Committee are paid $3,750 per month plus
reimbursement of reasonable out-of-pocket expenses for their services on such
committee.

EXECUTIVE OFFICERS

The following table provides information regarding the Executive officers
of the Company who are not also Directors. The Executive officers of the Company
serve at the discretion of the Board of Directors of the Company.

Name Age Since Position
---- --- ----- --------

Robert G. Wonish 46 1997 Executive Vice President and COO
Todd R. Bart 35 1995 Chief Financial Officer, Secretary
and Treasurer

Mr. Wonish has been with the Company since January, 1994. He served as Vice
President until his election in April, 1999 to Executive Vice President and
Chief Operating Officer.

Mr. Bart joined the Company as Controller in 1995 and was elected Chief
Financial Officer and Secretary in 1996. From 1992 until 1995 he worked for
Yellow Freight System, Inc., a trucking company, in financial accounting and
reporting. Mr. Bart is a Certified Public Accountant.

None of the companies mentioned in the descriptions of the business
backgrounds above is a parent, subsidiary, or other affiliate of the Company.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth information with respect to beneficial
ownership of the Company's Common Stock by (a) each Executive officer of the
Company listed in the Summary Compensation Table and director of the Company,
(b) all Executive officers and Directors of the Company as a group, and (c) each
person who beneficially owns 5% or more of the Common Stock as of the Record
Date. Except as set forth below, each stockholder has sole voting and sole
investment power over all shares.

Shares Owned Beneficially
Directors and Executive Officers Number Percent
- -------------------------------- ------ -------

Larry M. Wright; President and Chief Executive Officer(a) 1,120,706 4.61%
Robert G. Wonish; Sr. Vice President(b) 142,850 *
Todd R. Bart; Chief Financial Officer and Secretary(c) 70,912 *
Donald W. Chesser; Director(d) 8,043 *
Harold First; Director 11,599 *
James B. Kreamer, Director 410,102 *
Richard J. Lampen; Director(g) 0 *
Stanley Nortman; Director 0 *
Felix Pardo; Director 0 *
A. Theodore Stautberg, Jr.; Director 13,298 *
All Directors and Executive Officers as a group (10 persons)(e) 1,777,510 7.31%

Shares Owned Beneficially
Beneficial Owners of 5% or more (excluding persons named above) Number Percent
- --------------------------------------------------------------- ------ -------

Carl C. Icahn(f) 4,584,921 18.85%
% Icahn Associates Corp.
767 Fifth Avenue, 47th Floor
New York, NY 10153

New Valley Corporation(g) 2,118,479 8.71%
100 S.E. 2nd Street, 32nd Floor
Miami, FL 33131

Dolphin Offshore Partners(h) 1,590,800 6.54%
c/o Dolphin Management
129 East l7th Street
New York, NY 10003
________________
* Less than 1%

(a) Includes 400,000 currently exercisable options to purchase shares at $4.45
per share. These options are exercisable any time before June 20, 2000.
However, the holder may not dispose of the shares acquired upon exercise
for a period of three years and must remain an employee of PANACO during
that three-year period. Otherwise, the shares may be reacquired by PANACO
at the person's cost, thereby denying them the benefit of the option. Also
includes 73,706 shares allocated to the account of Mr. Wright under the
Panaco, Inc. Employee Stock Ownership Plan ("ESOP"). UMB Bank is the sole
trustee of the ESOP and as such has sole voting and investment power with
respect to such shares. Also includes 633,200 shares owned directly by Mr.
Wright, and 13,800 shares owned by Mr. Wright's individual retirement
account, as to which shares Mr. Wright has sole voting and investment
power.

(b) Includes 40,000 currently exercisable options to purchase shares at $4.45
per share, which options are subject to terms similar to those of Mr.
Wright's options. See footnote (a) above. Also includes 67,375 shares
allocated to Mr. Wonish's account in the ESOP. See footnote (a) above. Also
includes 34,300 shares held by Mr. Wonish directly, as to which Mr. Wonish
has sole voting and investment power. Also includes 1,175 shares held in
the individual retirement account of Mr. Wonish's spouse.

(c) Includes 30,000 currently exercisable options to purchase shares at $4.45
per share. See footnote (a) above. Also includes 38,412 shares allocated to
Mr. Bart's account in the ESOP. See footnote (a) above. Mr. Bart owns
directly and has sole voting and investment power over the remaining 2,500
shares.

(d) Such shares are held by Chesser & Company, P.A., which is owned by Mr.
Chesser and his spouse.

(e) Includes 50,383 shares allocated to the accounts of certain Executive
officers not named above under the ESOP. See footnote (a) above.

(f) Mr. Icahn is the sole stockholder of Riverdale Investors Corp. Inc., the
general partner of High River Limited Partnership, the record holder of
these shares. Based on information filed with the Securities and Exchange
Commission on January 11, 1999.

(g) In connection with the purchase of 2,118,479 shares of Common Stock by New
Valley Corporation from Mark Licata, the Company agreed to cause a person
recommended by New Valley Corporation to be elected to the Board of
Directors of the Company. Mr. Richard Lampen, Executive Vice President and
a Director of New Valley Corporation, was elected as a member of the Board
of Directors in February 1999 pursuant to such arrangement. Mr. Lampen
disclaims beneficial ownership of the shares held by New Valley
Corporation.

(h) Based on information filed with the Securities and Exchange Commission on
March 22, 1999.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file initial statements of beneficial ownership (Form 3) and
statements of changes in beneficial ownership (Forms 4 or 5) of Common Stock
with the Securities and Exchange Commission ("SEC"). Officers, directors and
greater than ten-percent stockholders are required by SEC regulation to furnish
the Company with copies of all such forms they file.

Based solely on a review of the copies of the forms that it received, and
on written representations from certain reporting persons that no additional
forms were required, the Company believes that its officers, directors and
greater than ten-percent beneficial owners complied with all of these filing
requirements in 1999.

EXECUTIVE COMPENSATION

Executive Officer Compensation Table

The following table sets forth certain information concerning the annual
compensation paid to each person who served as the Company's Chief Executive
Officer during 1999 and each other Executive officer serving at the end of 1999
whose compensation exceeded $100,000 during 1999.

Long-Term
Annual Compensation Compensation Awards
------------------------------------- --------------------------------
Other
Annual Restricted Securities All Other
Name and Principal Salary Bonus Compensa- Stock Underlying Compensa-
Position Year ($) ($) tion (a)($) Awards ($) Options (#) tion ($)
- ------------------------------------------------------------------------------------------------------------------------

Larry M. Wright 1999 318,900 0 24,000 0 0 0
President and Chief 1998 271,300 35,600 24,000 0 0 0
Executive Officer 1997 205,500 20,500 22,500 0 400,000 0
Robert G. Wonish 1999 193,700 0 24,000 0 0 0
Executive Vice 1998 164,800 21,400 19,500 0 0 0
President and Chief 1997 117,100 12,800 15,500 20,000 40,000 0
Operating Officer
Todd R. Bart 1999 110,100 0 15,600 0 0 0
Chief Financial 1998 90,600 13,200 10,100 0 0 20,000
Officer, Secretary and 1997 60,500 6,500 7,300 10,000 30,000 0
Treasurer

(a) Contributions to the accounts of the employees under the ESOP.

Aggregate Option and Warrant Exercises

The Company did not grant any options in the year ended December 31, 1999
to any of the persons listed in the Summary Compensation Table. The following
table provides information relating to the number and value of Common Stock
subject to options exercised during 1999 or held by the named Executive officers
as of December 31, 1999.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values

Number of Securities
Underlying Unexercised
Shares Acquired Value Options at Fiscal Year End (#)
Name Upon Exercise (#) Realized ($) Exercisable/Unexercisable(a)
- ---- ----------------- ------------ ----------------------------

Larry M. Wright - - 400,000/0
Robert G. Wonish - - 40,000/0
Todd R. Bart - - 30,000/0

(a) All options are exercisable at prices above the closing price of the
Company's Common Stock on December 31, 1999.

Employment Agreements and Change-in-Control Arrangements

Effective September 1, 1998, the Company entered into an Employment
Agreement with Larry M. Wright pursuant to which Mr. Wright serves as President
and Chief Executive Officer of the Company. The Agreement is for a term of three
years and automatically renews for consecutive terms of two years unless
terminated by either party. The Employment Agreement provides that Mr. Wright
will receive a base salary of $285,000, and thereafter, on a monthly basis, a
supplemental payment in an amount equal to the interest accrued during the
preceding month on the Promissory Note described below at "Certain Relationships
and Related Transactions." Mr. Wright is also entitled to participate in the
Company's employee benefit plans, to receive life and disability insurance
coverage, and to reimbursement of reasonable expenses in connection with his
duties. As partial consideration for the Agreement, Mr. Wright has agreed to
keep confidential all information he receives in connection with his duties and
has further agreed not to solicit any employees of the Company for a period of
two years following such employment. Pursuant to the Agreement, Mr. Wright may
be terminated for Cause, as defined in the Agreement, in which case he would not
be entitled to any further payments. He may also be terminated other than for
Cause or upon his death or disability. Mr. Wright is required to give 90 days
prior written notice of any voluntary termination. Upon termination by the
Company other than for Cause or upon death or disability, or upon termination by
Mr. Wright because of a change in conditions, he is entitled to receive his base
salary for a period of 24 months, for the period ending August 31, 2001, and all
options held by Mr. Wright become immediately vested.

The Company has also entered into a letter agreement with Todd R. Bart, the
Chief Financial Officer and Secretary of the Company, providing that Mr. Bart
will be entitled to receive insurance coverage and severance payments equal to
his base salary for a period of one year upon a change in control of the Company
or if Larry M. Wright ceases to serve as Chief Executive Officer of the Company.

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, Felix Pardo and James B. Kreamer served on the
Compensation Committee of the Board of Directors of the Company. Neither of them
has ever served as an officer of the Company.

Compensation Committee Report on Executive Compensation

Objectives and Approach

The overall goals of the Company's Executive compensation program are: (i)
to encourage and provide an incentive to its Executive officers to achieve the
Company's strategic business and financial goals, both short-term and long-term,
and thereby enhance stockholder value, (ii) to attract and retain well-qualified
Executive officers and (iii) to reward individuals for outstanding job
performance in a fair and equitable manner when measured not only with respect
to the Company's internal performance goals but also the Company's performance
in comparison to its peers. The components of the Company's Executive
compensation are salary, incentive bonuses and awards under its Long Term
Incentive Plan and Employee Stock Ownership Plan, each of which assists in
achieving the program's goals.

Long Term Incentive Plan

The Company's Long-Term Incentive Plan provides for the granting, to
certain officers and key employees of the Company and its participating
subsidiaries, of incentive awards in the form of stock options, stock
appreciation rights ("SARS"), stock, and cash awards. The Long-Term Incentive
Plan is administered by a committee of independent members of the Board of
Directors (the "Plan Committee") with respect to awards to certain Executive
officers of the Company but may be administered by the Board of Directors with
respect to any other awards. Except for certain automatic awards, the Plan
Committee has discretion to select the employees to be granted awards, to
determine the type, size, and terms of the awards, to determine when awards will
be granted, and to prescribe the form of the instruments evidencing awards.

Options, which include nonqualified stock options and incentive stock
options, are rights to purchase a specified number of shares of Common Stock at
a price fixed at the time the option is granted. Payment of the option price may
be made with (i) cash, (ii) other Common Stock presently owned by the optionee
valued at the then current market price, or (iii) a combination of both. Options
are exercisable at the time and on the term that the Plan Committee determines.
SARs are rights to receive a payment, in cash or Common Stock or both, based on
the value of the Common Stock. A stock award is an award of Common Stock or
denominated in Common Stock. Cash awards are generally based on the extent to
which pre-established performance goals are achieved over a pre-established
period but may also include individual bonuses paid for previous, exemplary
performance. The Plan Committee determines performance objectives and award
levels before the beginning of each plan year.

The Long-Term Incentive Plan allows for the satisfaction of a participant's
tax withholding with respect to an award by the withholding of Common Stock
issuable pursuant to the award or the delivery by the participant of previously
owned Common Stock, in either case valued at the fair market value, subject to
limitations the Plan Committee may adopt.

Awards granted pursuant to the Long-Term Incentive Plan may provide that,
upon a change of control of the Company, (a) each holder of an option will be
granted a corresponding SAR (b) all outstanding SARs and stock options become
immediately and fully vested and exercisable in full, and (c) the restriction
period on any restricted stock award shall be accelerated and the restriction
shall expire.

The Long-Term Incentive Plan provides for the issuance of a maximum number
of shares of Common Stock equal to 20% of the total number of shares of Common
Stock outstanding from time to time. Unexercised SARs, unexercised options,
restricted stock, and Performance units under the Long-Tenn Incentive Plan are
subject to adjustment in the event of a stock dividend, stock split,
recapitalization or combination of the Company, merger or similar transaction
and are not transferable except by will and by the laws of descent and
distribution. Except when a participant's employment terminates as a result of
death, disability, or retirement under an approved retirement plan or following
a change in control in certain circumstances, an award generally may be
exercised (or the restriction thereon may lapse) only if the participant is an
officer, employee, or director of the Company, or subsidiary at the time of
exercise or lapse or, in certain circumstance, if the exercise or lapse occurs
within 180 days after employment is terminated.

Under the Company's Long-Term Incentive Plan all full time employees may
share a bonus equal to a percentage of the Company's cash flow, in accordance
with GAAP, exclusive of extraordinary and non-recurring items. The bonuses are
paid at the discretion of the Board of Directors and will be paid to all full
time (1,000 + hours) employees at the time of delivery of the independent audit.
The bonuses are allocated to the full time employees based upon their salary at
December 31.

The Long-Term Incentive Plan may be amended by the Board of Directors. No
grants or awards may be made under the Long-Term Incentive Plan after the tenth
anniversary of the Plan. No stockholder approval will be sought for amendments
to the Long-Term Incentive Plan except as required by law (including Rule l6b-3
under the Exchange Act) or the rules of any national securities exchange on
which the Common Stock is then listed.

Employee Stock Ownership Plan

In 1994, the Company adopted the PANACO, Inc. Employee Stock Ownership Plan
("ESOP"). Pursuant to the terms of the ESOP, the Company may contribute up to
fifteen percent (15%) of the participant's annual compensation to the ESOP. ESOP
assets are allocated in accordance with a formula based on participant
compensation. In order to participate in the ESOP, a participant must complete
at least one thousand hours of service to the Company within twelve consecutive
months. A participant's interest in the ESOP becomes one hundred percent vested
after three years of service to the Company. Benefits are distributed from the
ESOP at such time as a participant retires, dies or terminates service with the
Company in accordance with the terms and conditions of the ESOP. Benefits may be
distributed in cash or in shares of Common Stock. No participant contributions
are allowed to be made to the ESOP.

Company contributions to the ESOP may be in the form of Common Stock or
cash. Cash contributions may be used, at the discretion of the Board of
Directors, to purchase Common Stock in the open market or from the Company at
prevailing prices. The allocation of ESOP assets is determined by a formula
based on participant compensation. Participation in the ESOP requires completion

of more than one thousand (1,000) hours of service to the Company. The ESOP is
intended to satisfy any applicable requirements of the Internal Revenue Code of
1986 and the Employee Retirement and Income Security Act of 1974. The Company
has been advised that its contributions to the ESOP will be deductible for
Federal Income Tax purposes, and the participants will not recognize income on
their allocated share of ESOP assets until such assets are distributed. As of
December 31, 1999, the ESOP owned of record 701,725 shares of Common Stock. Such
Common Stock is owned beneficially by the employees of the Company.

CEO Compensation

In establishing the annual compensation of the Chief Executive Officer, the
Compensation Committee considers the performance of the Company and the Chief
Executive Officer, including his leadership and effectiveness in identifying
opportunities for growth and increased profitability and implementing the
Company's strategic plan. While overall corporate performance is considered, the
CEO's compensation is determined by a subjective evaluation of his individual
performance.

In establishing the annual compensation of the current Chief Executive
Officer Larry Wright in 1999, the Compensation Committee took into account Mr.
Wright's contribution to the growth of the Company, the role he played in the
acquisitions made by the Company and the Company's current financial position
and situation.

During 1998, with the approval of the full Board of Directors, the
Committee determined that the interest of the Company and its stockholders would
be best served by the Company entering into a multi-year Employment Agreement
with Mr. Wright. The Committee believes that such multi-year employment
arrangement benefits the Company and its stockholders by permitting the Company
to attract and retain an Executive officer with demonstrated leadership
abilities and to secure the services of such Executive officer at agreed upon
terms over an extended period of time. The compensation payable to Mr. Wright
pursuant to the Employment Agreement is consistent with the compensation
policies of the Company as established by the Compensation Committee. A summary
of the principal terms of the Employment Agreement is included under the caption
"Employment Agreements and Change-in-Control Arrangements."

COMPENSATION COMMITTEE

Felix Pardo
James B. Kreamer

Performance Graphs

The following performance graph compares the annual change of the
cumulative total stockholder return, assuming reinvestment of dividends, of an
assumed $100 investment on January 1, 1994 in (1) Common Stock, (2) the NASDAQ
Market Index and (3) a peer group of all crude petroleum and natural gas
exploration and production companies (SIC Code 1311) listed in NASDAQ.

Fiscal Year Ending
--------------------------------------------------------------------------------------------
Company/Index/Market 12/30/1994 12/29/1995 12/31/1996 12/31/1997 12/31/998 12/31/1999
- -------------------- ---------- ---------- ---------- ---------- --------- ----------

PANACO, Inc. 100.00 110.94 121.88 100.00 22.66 8.59
Peer Group Index 100.00 109.98 146.24 148.22 118.73 145.03
NASDAQ Market Index 100.00 129.71 161.18 197.16 278.08 490.46

Certain Relationships and Related Transactions

From July 14, 1998 to August 24, 1998, the Company advanced to Larry M.
Wright an aggregate of $300,000 to enable Mr. Wright to satisfy margin calls
resulting from the decline in price of Company stock owned by Mr. Wright. Mr.
Wright subsequently executed and delivered a Promissory Note to the Company in
the original principal amount of $300,000 bearing interest at 7% per annum,
payable monthly and maturing on the earlier of the expiration of three years or
the termination of Mr. Wright's employment with the Company. Such Promissory
Note is secured by a pledge of Mr. Wright's stock and securities in the Company,
although all of such securities are subject to prior liens securing other
indebtedness and, at the present time, the aggregate amount of such other
indebtedness may exceed the value of such stock and securities. The Board of
Directors of the Company approved a provision in Mr. Wright's Employment
Agreement for monthly supplemental payments to Mr. Wright equal to the amount of
the interest becoming due on such Promissory Note, with the Company having the
right to offset directly such supplemental payments against amounts becoming due
under the Promissory Note. See also "Employment Agreements and Change-in-Control
Arrangements" under "Executive Compensation" above.

The Company has several procedures, provisions, and plans designed to
reduce the likelihood of a change in the management or voting control of the
Company without the consent of the incumbent Board of Directors. These
provisions may have the effect of strengthening the ability of offices and
directors of the Company to continue as officers and directors of the Company
despite changes in share ownership of the Company.

On January 8, 1999, the Company entered into a Settlement Agreement with
Leonard Tallerine pursuant to the terms of which the Company paid Mr. Tallerine
$150,000 in complete and final settlement of all claims by Mr. Tallerine might
have had against the Company arising from his employment with the Company, his
participation as a Director of the Board of Directors, and for breach of the
Restated Merger Agreement with Goldking Production Company. The Company also
returned to Mr. Tallerine a check in the amount of $32,583.77 which had
previously been tendered for payment of expenses owing to the Company. At that
time, Mr. Tallerine resigned from the Board of Directors.

On January 25, 1999, the Company entered into a Settlement Agreement with
Mark Licata pursuant to the terms of which the Company paid Mr. Licata $150,000
in complete and final settlement of any claim Mr. Licata might have had against
the Company arising out of his employment with the Company, his membership on
the Board of Directors, or for breach of the Restated Merger Agreement with
Goldking Production Company. The Company paid Mr. Licata an additional $15,000
representing unpaid directors fees and expenses. At that time, Mr. Licata
resigned from the Board of Directors.

OTHER MATTERS
Accountants

One or more members of the firm of KPMG LLP, the Company's independent
accountants, will attend the Annual Meeting, will have an opportunity to make a
statement and will be available to answer questions as appropriate.

Changes in Independent Accountants

On June 11, 1998, Arthur Andersen LLP, which had audited the Company's
financial statements for the fiscal years ending December 31, 1996 and December
31, 1997, informed the Company that it declined to stand for re-election as
independent accountants of the Company at its 1998 Annual Meeting. Effective
August 25, 1998, the Company engaged KPMG LLP as independent accountants to
audit the Company's financial statements for the fiscal year 1998. The decision
to engage KPMG LLP was recommended and approved by the Audit Committee. During
the Company's fiscal years ending December 31, 1996 and December 31, 1997 and
the subsequent interim period ending on June 11, 1998, there were no
disagreements with Arthur Anderson LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to the satisfaction of Arthur Anderson LLP, would have caused
Arthur Anderson LLP to make a reference to the subject matter of the
disagreements in connection with its report.

Other

As of the date of this Proxy Statement, the Company knew of no other
matters which might be presented for action at the meeting. If any other matters
properly come before the meeting, it is intended that the Common Stock
represented by proxies solicited hereby with be voted with respect thereto in
accordance with the judgment of the persons voting them.

STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING

The Board of Directors has set the date for the Company's 2001 Annual
Meeting of Stockholders for June 6, 2001. Stockholder proposals intended to be
considered for inclusion in next year's proxy statement should be sent to
Investor Relations, PANACO, Inc., 1100 Louisiana, Suite 5100, Houston, Texas
77002, and must be received by December 31, 2000. Any such proposal, must comply
with Rule l4a-8 promulgated by the SEC pursuant to the Exchange Act.

FINANCIAL STATEMENTS AVAILABLE

Financial statements for the Company were included in the Company's Annual
Report or Form 10-K ("Form 10-K") as filed with the SEC for the year 1999. A
copy of the Form 10-K is being provided to all stockholders as of the record
date together with the Company's proxy materials. Additional copies of the Form
10-K will be furnished without charge and without exhibits, on request directed
to Investor Relations, PANACO, Inc., 1100 Louisiana, Suite 5100, Houston, Texas
77002. The Form 10-K does not form any part of the material for solicitation of
proxies.

By order of the Board of Directors

/s/ Todd R. Bart
__________________________________
Todd R. Bart
Secretary

April 28, 2000