<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

    (Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                  For the quarterly period ended March 31, 2001

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

              For the transition period from _________to__________

    Commission File No. 0-22483
                               -------------

                                 ---------------

                            SEVEN SEAS PETROLEUM INC.
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                                                                        <C>
CAYMAN ISLANDS                                                                                73-1468669
(State or other jurisdiction of                                                            (I.R.S. Employer
incorporation or organization)                                                             Identification No.)


SUITE 1700, 5555 SAN FELIPE HOUSTON, TEXAS                                                        77056
(Address of principal executive offices)                                                        (Zip Code)
</TABLE>

    Registrant's telephone number, including area code: (713) 622-8218

                                 ---------------

    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

    Yes  [X]   No  [ ]

    Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

    As of May 15, 2001, there were 37,858,501 outstanding shares of the
registrant's ordinary shares (also called "common shares"), par value $0.001 per
share.




                                       1
<PAGE>   2
                            SEVEN SEAS PETROLEUM INC.


                                      INDEX
 <TABLE>
 <CAPTION>
 PART I. FINANCIAL INFORMATION                                                     PAGE
<S>                                                                                <C>
 Item 1. Financial  Statements
         Condensed Consolidated Balance Sheets as of March  31, 2001
         (Unaudited) and December 31, 2000......................................     3

         Condensed Consolidated Statements of  Operations and Accumulated
         Deficit for the three months ended March 31, 2001 and 2000 and the
         Cumulative Total from Inception (February 3, 1995) to March 31, 2001
         (Unaudited)............................................................     4

         Condensed Consolidated Statements of  Cash Flows for the three months
         ended March 31, 2001 and 2000 and the Cumulative Total from Inception
         (February 3, 1995) to March 31, 2001 (Unaudited).......................     5

         Notes to Condensed Consolidated Financial Statements (Unaudited).......     6

 Item 2. Management's Discussion and Analysis of Financial Condition and
         Results of Operations..................................................     8

 Item 3. Quantitative and Qualitative Disclosures about Market Risk.............    13

 PART II. OTHER INFORMATION

 Item 6. Exhibits and Reports on Form 8-K.......................................    13
 </TABLE>




                                       2
<PAGE>   3
                  PART I.  FINANCIAL INFORMATION
                  Item 1.  FINANCIAL STATEMENTS


                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                            MARCH 31,      DECEMBER 31,
                                                                              2001             2000
                                                                         --------------  --------------
                                ASSETS                                     (UNAUDITED)
<S>                                                                         <C>             <C>
CURRENT ASSETS
     Cash and cash equivalents                                              $  11,754       $   12,128
     Short-term investments                                                        --            1,168
     Restricted short-term investments                                          6,818            6,734
     Accounts receivable                                                        2,700            7,297
     Interest receivable                                                            3               55
     Inventory                                                                    563              563
     Prepaids and other                                                           230              181
                                                                            ---------       ----------
Total Current Assets                                                           22,068           28,126

Note receivable from related party                                                215              215
Land                                                                            1,071            1,071
Evaluated oil and gas properties, full-cost method, net of accumulated
depletion of $2,163 at March 31, 2001 and $1,497 at December 31, 2000         126,175          115,609
Unevaluated oil and gas properties, full-cost method                          105,583          105,535
Fixed assets, net of accumulated depreciation of $1,151 at March 31,
2001 and $1,054 at December 31, 2000                                              780              840
Other assets, net of accumulated amortization of $1,826 at March 31, 2001
     and $1,675 at December 31, 2000                                            2,529            2,680
                                                                            ---------       ----------
TOTAL ASSETS                                                                $ 258,421       $  254,076
                                                                            =========       ==========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                       $   4,935       $    6,896
     Interest payable                                                           5,180            1,719
     Other accrued liabilities                                                     --               89
                                                                            ---------       ----------
Total Current Liabilities                                                      10,115            8,704

Long-term debt                                                                113,000          110,000
Deferred income taxes                                                          24,703           24,703

STOCKHOLDERS' EQUITY
Share capital -
   Authorized 200,000,000 shares par value $0.001 per share, of which
   150,000,000 shares are designated as ordinary shares and 50,000,000
   may be designated by the board of directors; 37,836,420 ordinary s
   hares issued and outstanding at March 31, 2001 and December 31, 2000       225,807          225,807
Deficit accumulated during development stage                                 (115,204)        (115,138)
Treasury stock; 29 shares held at March 31, 2001 and December 31, 2000             --               --
                                                                            ---------       ----------
Total Stockholders' Equity                                                    110,603          110,669
                                                                            ---------       ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 258,421       $  254,076
                                                                            =========       ==========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.




                                       3
<PAGE>   4
                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                        (A DEVELOPMENT STAGE ENTERPRISE)
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                  (Unaudited; In thousands, except share data)
<TABLE>
<CAPTION>

                                                                                                           TOTAL FROM
                                                                                                            INCEPTION
                                                                                                          (FEBRUARY 3,
                                                                     THREE MONTHS ENDED MARCH, 31           1995) TO
                                                                -------------------------------------       MARCH 31,
                                                                       2001                2000               2001
                                                                ------------------  ------------------ ---------------
<S>                                                                 <C>                 <C>                <C>
         REVENUES
           Crude oil sales..................................      $     3,394         $        16        $    11,316
           Interest income..................................              242                 552             10,158
                                                                  -----------         -----------        -----------
                                                                        3,636                 568             21,474
         EXPENSES
           Oil and gas operating expenses...................            1,032                 602              8,237
           Depletion, depreciation and amortization.........              914                 261              5,439
           Interest expense.................................              184                  --                742
           General and administrative.......................            1,503               2,453             38,443
           Writedown of proved oil & gas properties.........               --                  --            129,789
           Loss on sale of exploration properties...........               --                  --                124
           Dry hole and abandonment costs...................               --                  --              1,145
           Geological and geophysical.......................               --                  --                 47
           Other expense....................................               69                  57                 57
                                                                  -----------         -----------        -----------
                                                                        3,702               3,373            184,023
         NET LOSS BEFORE INCOME TAXES
           AND MINORITY INTEREST............................              (66)             (2,805)          (162,549)
         INCOME TAX BENEFIT.................................               --                  --             45,616
                                                                  -----------         -----------        -----------
         NET LOSS BEFORE MINORITY INTEREST..................              (66)             (2,805)          (116,933)
         MINORITY INTEREST..................................               --                  --              1,729
                                                                  -----------         -----------        -----------
         NET LOSS...........................................              (66)             (2,805)          (115,204)
                                                                  ------------        -----------        -----------
         DEFICIT ACCUMULATED DURING THE
           DEVELOPMENT STAGE, beginning of
           period...........................................         (115,138)           (109,231)                --
                                                                  ------------        ------------       -----------
         DEFICIT ACCUMULATED DURING THE
           DEVELOPMENT STAGE, end of period.................      $  (115,204)        $  (112,036)       $  (115,204)
                                                                  ===========         ===========        ===========
         BASIC AND DILUTED NET LOSS PER
           COMMON SHARE.....................................      $       .00         $     (0.07)       $     (4.05)
                                                                  ===========         ===========        ===========
         WEIGHTED AVERAGE COMMON SHARES
           OUTSTANDING......................................       37,836,420          37,833,420         28,444,803
                                                                  ===========         ===========        ===========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.




                                       4
<PAGE>   5

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited; In thousands)
<TABLE>
<CAPTION>
                                                                                                                    CUMULATIVE
                                                                                                                    TOTAL FROM
                                                                                                                     INCEPTION
                                                                                                                   (FEBRUARY 3,
                                                                                                                     1995) TO
                                                                            THREE MONTHS ENDED MARCH 31,             MARCH 31,
                                                                      ---------------------------------------
                                                                              2001                2000                 2001
                                                                      ------------------- -------------------  ------------------
<S>                                                                         <C>                <C>                  <C>
    OPERATING ACTIVITIES
         Net loss                                                           $   (66)           $  (2,805)           $(115,204)
         Add (subtract) items not requiring (providing) cash:
         Compensation expense                                                    --                   --                2,140
         Minority interest                                                       --                   --               (1,729)
         Common stock contribution to 401(k) retirement plan                     --                   --                   79
         Depletion, depreciation and amortization                               914                  261                5,444
         Writedown of proved oil & gas properties                                --                   --              129,789
         Loss on sale of exploration properties                                  --                   --                  124
         Dry hole and abandonment costs                                          --                   --                1,140
         Gain on sale of marketable securities                                   --                   --                   (6)
         Loss on sale of fixed assets                                            --                   --                    2
         Deferred income tax benefit                                             --                   --              (45,756)
         Amortization of investments                                            (84)                (260)              (2,222)
         Changes in working capital excluding changes to cash and cash
          equivalents:
            Accounts receivable                                               4,597                2,584                 (438)
            Interest receivable                                                  52                  175                   (3)
            Inventory                                                            --                   --                 (767)
            Prepaids and other, net                                             (49)                  58                 (230)
            Accounts payable                                                 (2,218)              (3,499)               2,385
           Other accrued liabilities and other                                   73                  698                  969
                                                                            -------            ---------            ---------
    Cash Flow Provided by (Used in) Operating Activities                      3,219               (2,788)             (24,283)
                                                                            -------            ---------            ---------
    INVESTING ACTIVITIES
         Exploration of oil and gas properties                               (7,724)              (2,369)            (129,027)
         Purchase of land                                                        --                   --               (1,264)
         Purchase of investments                                                 --                   --              (39,469)
         Proceeds from acquisition                                               --                   --                  630
         Net proceeds from sale of property                                      --                   --                  997
         Proceeds from sale of marketable securities                             --                   --                   50
         Proceeds from sale of investments                                    1,168                   --               34,873
         Notes receivable from employees                                         --                  120                 (215)
         Other asset additions                                                  (37)                 (30)              (2,202)
                                                                            -------            ---------            ---------
    Cash Flow Used in Investing Activities                                   (6,593)              (2,279)            (135,627)
                                                                            -------            ---------            ---------
    FINANCING ACTIVITIES
         Proceeds from special warrants issued                                   --                   --               12,393
         Proceeds from share capital issued                                      --                   --               15,468
         Proceeds from additional paid-in capital contributed                    --                   --                    1
         Proceeds from issuance of long-term debt                             3,000                   --              138,000
         Costs of issuing long-term debt                                         --                   --               (5,821)
         Contributions by minority interest                                      --                   --               11,623
                                                                            -------            ---------            ---------
    Cash Flow Provided by Financing Activities                                3,000                   --              171,664
                                                                            -------            ---------            ---------
    NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       (374)              (5,067)              11,754
    Cash and cash equivalents, beginning of period                           12,128              22,447                    --
                                                                            -------             -------             ---------
    CASH AND CASH EQUIVALENTS, END OF PERIOD                                $11,754            $  17,380            $  11,754
                                                                            =======            =========            =========
</TABLE>

Supplemental disclosures of cash flow information:

    The Company incurred interest costs of $3.4 million and $3.4 million for the
three-month periods ended March 31, 2001 and 2000, respectively, and $3.3
million and $3.4 million was capitalized during the respective periods.

    Cash paid for interest for each of the three-month periods ended March 31,
2001 and 2000 was zero.

    The Company paid zero for estimated income taxes during each of the
three-month periods ended March 31, 2001 and 2000.


The accompanying notes are an integral part of these condensed consolidated
                             financial statements.



                                       5
<PAGE>   6

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                        (A DEVELOPMENT STAGE ENTERPRISE)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION:

     The accompanying unaudited condensed consolidated financial statements of
Seven Seas Petroleum Inc. (the "Parent") and Subsidiaries (collectively with the
Parent, the "Company" or "Seven Seas") have been prepared in accordance with
instructions to Form 10-Q as prescribed by the United States Securities and
Exchange Commission. In the opinion of management, all adjustments, consisting
of normal recurring accruals, necessary to present fairly the information in the
accompanying unaudited condensed consolidated financial statements have been
included. Interim period results are not necessarily indicative of the results
of operations or cash flows for a full year period. The unaudited condensed
consolidated financial statements included herein should be read in conjunction
with the audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.


2.   DEVELOPMENT STAGE OPERATIONS:

     Seven Seas Petroleum Inc. (a Cayman Islands exempted company limited by
shares, formerly a Yukon Territory, Canada corporation) was formed on February
3, 1995. Seven Seas is a development stage enterprise engaged in the
exploration, development and production of oil and natural gas in Colombia.
Accumulated losses are presented on the condensed consolidated balance sheets as
"Deficit accumulated during development stage." The condensed consolidated
statements of operations and accumulated deficit present revenues and expenses
for each period presented as well as cumulative totals from inception.
Period-to-period comparisons of such results and certain financial data may not
be meaningful or indicative of future results. In this regard, future results of
Seven Seas will be highly dependent upon the success of its Guaduas Oil Field
operations. The condensed consolidated statements of cash flows shows inflows
and outflows for each period presented and from inception. In addition, these
notes to the condensed consolidated financial statements are required to
identify the Company as a development stage enterprise.

     The Company is the operator of an oil discovery, known as the "Guaduas Oil
Field," which is located in an area defined by the Rio Seco and Dindal
association contracts covering a total of approximately 109,000 contiguous acres
in central Colombia. The Company owns a 57.7% working interest in these two
association contracts before participation by Empresa Colombiana de Petroleos
("Ecopetrol"), the Colombian national oil company. The Company's principal
assets, its interests in the association contracts, are in the early stage of
exploration and development.

     As of March 31, 2001, the Company has spent $242.2 million to acquire and
$88.2 million to delineate the reserve potential of the Guaduas Oil Field. The
Company has participated in the drilling of twelve exploratory wells within the
Dindal and Rio Seco association contract areas, seven of which are classified as
oil and gas wells. Four of the twelve did not produce commercial amounts of oil
and gas during testing and one remains to be tested. As of March 31, 2001, the
Guaduas Oil Field had produced a cumulative volume of approximately 1.6 million
(0.6 million net to Seven Seas) barrels of oil.

     Since inception through March 31, 2001, the Company incurred cumulative
losses of $115.2 million and, because of its continued exploration and
development activities, expects that it will continue to incur losses and that
its accumulated deficit will increase until commencement of production from the
Guaduas Oil Field occurs in quantities sufficient to cover expenses.

3.   CAPITAL AVAILABILITY AND LIQUIDITY:

     The Company's sources of cash for the remainder of 2001 will come from net
unrestricted working capital of $10.3 million, $7.0 million of available credit
under the $10.0 million Stillwater National Bank loan and operating cash flows
from production in the Guaduas Oil Field. Production from the Guaduas Oil Field
has a short history and is subject to all the normal risks of oil and gas
operations. Further, to increase current production rates, the Guaduas - La
Dorada pipeline and related production facilities (currently under construction)
will need to be completed and in operation by mid-2001.

     The Company's cash requirements for the remainder of 2001 include
commitments under existing oil and gas agreements of approximately $11.8 million
(not including a potential obligation of $2.1 million on the Tapir association
contract), the November



                                       6
<PAGE>   7

2001 interest payment of $6.9 million on the $110 million senior notes and
general and administrative expenses.

     The Company's ability to meet its existing commitments and operating needs
is highly dependent on production from the Guaduas Oil Field. The Company's
dependence on production is such that (i) if it is interrupted for an extended
period of time, (ii) if the prices received or the costs incurred fail to meet
expectations or (iii) if the pipeline and related production facilities are not
completed and in operation as planned, then the Company will likely not be able
to meet 2001 cash requirements. For these reasons, the Company will have to seek
additional financing to meet its existing commitments and operating needs in
2001.

     Failure to obtain additional financing would raise substantial doubt about
the Company's ability to continue as a going concern. The condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

     Under the terms of the Company's $110 million senior notes, it is permitted
to incur general indebtedness that can be senior to its senior notes not
exceeding the greater of (i) $25 million, or (ii) the sum of 100% of its cash
and cash equivalents, plus 100% of its receivables from Ecopetrol, and plus 30%
of its discounted future net revenues from proved oil and gas reserves prepared
in accordance with the rules of the United States Securities and Exchange
Commission. As of December 31, 2000, the permitted amount was approximately
$130.3 million. The Company is also allowed to borrow an additional $10 million
for project financing, e.g., pipeline and production facilities.

     Any additional financing obtained by the Company to execute its business
plans may result in a dilution of current stakeholder interests. Seven Seas
cannot be certain that additional sources of financing will be available when
needed or will be available on acceptable terms. The Company has suffered
recurring losses from operations, has an accumulated deficit, until recently has
not generated positive cash flows from operations, has significant unproved
property balances, is nearing the end of the exploration phase of its
association contracts, is highly dependant on the actions of Ecopetrol, and will
likely require additional capital to fully execute its business plans.

     See Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for additional comments on 2001 sources and uses of
capital.

4.   REVENUE RECOGNITION:

     The Company records as revenue only that portion of production sold and
allocable to its ownership interest in the related property. Beginning late in
the fourth quarter of 2000, Ecopetrol elected to not take their 20% royalty
share of crude oil production. During the three-month period ended March 31,
2001, the Company recorded an $850,000 liability related to the sale of
approximately 40,700 barrels of Ecopetrol crude oil entitlement. The Accounts
Payable balance reflects a cumulative liability of $1,018,000, representing
approximately 47,800 barrels.

5.   LONG-TERM DEBT:

     In December 2000, the Company entered into a $10 million loan agreement
with Stillwater National Bank and Trust Company, N.A. On March 30, 2001, the
loan's maturity date was extended from December 31, 2001 to April 1, 2002. The
Stillwater National Bank loan is secured by all of the stock of the operating
subsidiaries of Seven Seas and is guaranteed by Robert A. Hefner III, chairman
and chief executive officer of Seven Seas. Mr. Hefner received remuneration of
$62,500 for his guarantee. The loan bears interest at an annual rate of the
Prime Rate plus .75%, and interest is payable monthly until the loan is due in
full on April 1, 2002. Seven Seas intends to use these funds for working capital
and plans to replace, without penalty, this non-convertible loan with the
proceeds from a larger financing planned for 2001. As of the date of issuance of
these financial statements, the Company had drawn $3 million on this loan.

6.   COMMITMENTS AND CONTINGENCIES:

     A lawsuit was filed by the landowner of the El Segundo 1 surface location
to cancel the Company's surface lease. The Company responded to this claim on
November 4, 1999, and has vigorously defended this claim. Examinations regarding
the claim were held in September 2000, and the probatory stage of the matter was
closed on March 21, 2001. Final allegations were presented on April 16, 2001.
The Company's Colombian legal counsel, Gamba, Barrera, Arriaga y Asociados, has
advised the Company that, on the basis of the claims asserted, it is unlikely
that it will lose the lawsuit.




                                       7
<PAGE>   8

     Seven Seas and one of its officers and directors, Robert A. Hefner III, has
been sued by four former Seven Seas officers and directors in DeCort, et al. v.
Seven Seas Petroleum Inc., et al., Cause No. 2000-50498, District Court of
Harris County, Texas, 133rd Judicial District. Plaintiffs recently dismissed
from the case Larry A. Ray, a current officer and director, and Breene M. Kerr,
a former director. Plaintiffs allege that Seven Seas failed to obtain extensions
of time in which plaintiffs could exercise certain stock options granted to
them, and that the defendants induced them to enter into separation agreements
with Seven Seas that they would not have entered into but for Seven Seas'
agreement to obtain an extension of the time for plaintiffs to exercise their
stock options. The plaintiffs filed the case October 2, 2000, seeking damages in
excess of $13 million. The Company has responded, denying plaintiffs'
allegations and the case is in the early stages of discovery. A mediation
occurred on May 1, 2001, but no settlement was reached. A preliminary trial date
has been set for June, but likely will be postponed. Seven Seas intends to
vigorously defend the case.

 7.  NEW ACCOUNTING PRONOUNCEMENTS:

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement, as amended by SFAS 137 and
SFAS 138, establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. The adoption of SFAS 133 as of January 1, 2001, did not have
any significant effect on the Company's financial statements.

8.   OPERATIONS BY GEOGRAPHIC AREA:

     The Company has one operating and reporting segment. Information about the
Company's operations for the quarters ended March 31, 2001 and 2000 by
geographic area is shown below (In thousands):

<TABLE>
<CAPTION>
                                                                                        OTHER
                                                              UNITED                   FOREIGN
                                                    CANADA    STATES      COLOMBIA      AREAS      TOTAL
                                                   --------   -------     ---------    -------   ---------
<S>                                                <C>        <C>         <C>          <C>       <C>
             Three months ended March 31,
              2001
               Revenues.......................     $    144   $     3     $   3,489     $  --    $   3,636
               Operating Income (Loss)........         (826)     (583)        1,356       (13)         (66)
               Capital Expenditures...........           --        37         7,979        --        8,016
               Identifiable Assets............       51,090       751       206,517        63      258,421
               Depletion, Depreciation and
                 Amortization.................          152        70           692        --          914
             Three months ended March 31,
              2000
               Revenues.......................     $    531   $     3     $      34     $  --    $     568
               Operating Income (Loss)........            2      (778)       (2,017)      (12)      (2,805)
               Capital Expenditures...........           --        30         1,092        --        1,122
               Identifiable Assets............       67,300       958       189,300        81      257,639
               Depreciation and Amortization..          152        82            27        --          261
</TABLE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
the unaudited condensed consolidated financial statements included elsewhere and
with the Company's Annual Report on Form 10-K for the year ended December 31,
2000.

GENERAL

     Our principal asset is a 57.7% interest, before participation by Ecopetrol,
in the Dindal and Rio Seco association contracts, which cover the area in which
the Guaduas Oil Field is located. As the operator of the field, we exercise
direct supervision over all field operations, including drilling and production.
The other interest owners are Cimarrona LLC (9.4%), an Oklahoma independent oil
and gas company and Sociedad International Petrolera S.A., known as Sipetrol,
the international exploration and production subsidiary of the Chilean national
oil company (32.9%). As of December 31, 2000, the Ryder Scott Company Petroleum
Consultants estimated Seven Seas' net proved reserves attributable to the
delineation of 12,821 acres of the Guaduas Oil Field were 47.9 million barrels
with a present value (discounted continually over the expected life of the
production at 10% per annum) of $394.1 million.

                                       8
<PAGE>   9

RECENT DEVELOPMENTS

     In late-January 2001, we successfully completed negotiations with our
Guaduas Oil Field partners regarding their participation in the pipeline and the
subthrust Dindal prospect. Key aspects of the global partner agreement are as
follows:

     o  Sipetrol and Cimarrona LLC elected to participate in the construction of
        the Guaduas - La Dorada pipeline.

     o  Sipetrol and Cimarrona LLC agreed to provide Seven Seas with the
        opportunity to earn certain of their interests in the subthrust Dindal
        prospect by drilling a subthrust exploration well and paying Sipetrol
        and Cimarrona's share of the costs of drilling and testing the well.

     Additional information on our global partner agreement is available in a
Form 8-K filed with the U.S. Securities and Exchange Commission on January 31,
2001.

     In February of this year, we executed the Deep Dindal and Cristales
association contracts. The Deep Dindal association contract, which is
generically referred to as an "on top" contract because it originated from the
Dindal association contract, covers the subthrust Dindal prospect located below
the Guaduas Oil Field. The Deep Dindal contract provides better economic terms
than the original Dindal association contract. The Cristales association
contract covers approximately 200,000 acres immediately to the east of the
Guaduas Oil Field and the subthrust Dindal prospect.

     Also in the first quarter, the Company changed its domicile from the Yukon
Territory, Canada to the Cayman Islands principally to lower its future
worldwide effective corporate tax rate. Other considerations were that most of
our shareholders are not Canadian and all of our oil and gas revenues are from
non-Canadian operations. On February 28, 2001, we received shareholder approval
for the continuation, and effective March 1, 2001 we continued as a Cayman
Islands company.

     On May 7, 2001, the Company commenced the drilling of the El Segundo
5-South well with a targeted total measured depth of 8,230 feet. This well is
the first in a series of nine development wells planned for 2001 - 2002. The
surface location of this well is approximately 2.9 kilometers north of the
surface location of the El Segundo 1-E discovery well.

LIQUIDITY AND CAPITAL RESORCES

     Our strategy for 2001 and 2002 includes the continued development of the
Guaduas Oil Field and new exploration. A summary of our strategy follows:

Development

     o  Pipeline and Production Facilities - We expect to complete the 36-mile
        Guaduas - La Dorada pipeline that will connect the Guaduas Oil Field to
        international oil markets via Colombia's existing pipeline
        infrastructure by mid-2001. The pipeline will have an initial capacity
        of approximately 25,000 barrels of oil per day (BOPD), but can be
        increased to 40,000 BOPD with additional investment. We are also
        constructing production facilities for production of approximately
        25,000 BOPD. Both the pipeline and production facilities are scheduled
        for completion in mid-2001. The gross cost of constructing the pipeline
        and production facilities is approximately $24 million, our share of
        which is approximately $13.8 million.

     o  Development Wells - We agreed with our Guaduas Oil Field partners to a
        two-year development program that provides for the drilling of nine
        development wells and one injector well for gas disposal and field
        pressure maintenance over the course of 2001 and 2002. We believe these
        wells will increase pipeline production of the Guaduas Oil Field from
        its initial rate of 5,000 - 8,000 BOPD to approximately 18,000 - 25,000
        BOPD; however, actual production will depend on the results of the
        development wells. The gross costs of this development well drilling
        program is estimated to be $44 million, our share of which is
        approximately $25 million. In 2001, four development wells and one
        injector well are scheduled at a gross cost of $22 million, our share of
        which is approximately $13 million. Continuation of this development
        program beyond the initial El Segundo 5 - South well will depend on our
        ability to finance our share of the costs.

     In summary, our 2001-2002 development strategy includes completing the
Guaduas - La Dorada pipeline and production facilities for pipeline production
and drilling nine development wells and one injector well at a gross cost of $68
million, our share of which is approximately $40 million. In 2001, we expect to
complete the pipeline and production facilities and drill four of the nine

                                       9
<PAGE>   10

development wells and the one injector well. The gross cost of 2001 development
operations, including the pipeline and production facilities is expected to be
approximately $46 million, our share of which is approximately $27 million.

Exploration

     Subthrust Dindal Prospect - In 2001, we plan to drill an exploration well
to test the high potential subthrust Dindal prospect, located below the Guaduas
Oil Field. As of February 2001, this prospect is covered by the Deep Dindal
association contract that originated from the Dindal association contract. This
new contract provides more favorable fiscal terms than the original Dindal
association contract. Under the Deep Dindal association contract, our working
interest after Ecopetrol elects to participate in the development of an oil and
gas discovery starts at 70%, as compared to 50% under the Dindal contract.
Additionally, as oil production increases, our working interest will gradually
decrease to a minimum of 35%, as compared to 30% under the Dindal contract. As a
result of an exploration agreement with our Guaduas Oil Field partners, we now
have a 100% interest in the Deep Dindal association contract, subject to an
obligation to assign between approximately 14% and 26% to our partners after the
first well has been drilled and tested.

     In our 2000 Form 10-K, we estimated the gross costs of drilling and
completing this well would be approximately $18 million. This estimate was based
on the assumption that we would have to drill the well outside of an area that
the Municipality of Guaduas had declared a forest reserve prohibiting oil and
gas operations. The Municipality has subsequently revoked that forest reserve
and adopted a previously created national forest reserve as the only existing
reserve. The existing forest reserve does not prohibit oil and gas activities,
and in fact, the Escuela 1, the first well drilled on the Dindal association
contract by our subsidiary GHK Company Colombia, was drilled from a surface
location within the existing forest reserve. Although we must still receive a
new environmental permit from the Colombian Ministry of Environment, we plan to
re-use the Escuela location for the subthrust exploration well. As a result, we
now estimate the cost of drilling and completing this well to be $15 million.
Because we have a 100% working interest in the Deep Dindal association contract,
we will be responsible for the entire cost of drilling and testing the well. Our
ability to commence drilling of this well in 2001 is subject to 1) securing
financing for the costs of the well, 2) timely receiving the required
environmental permit, and 3) contracting a drilling rig. We plan to commence
drilling this well as soon as possible after these three conditions have been
satisfied, which we expect will occur in the second half of this year.

     Rosablanca exploration well - We plan to drill an exploration well on the
Rosablanca association contract located in Colombia's Magdalena Valley,
approximately 350 kilometers north of the Guaduas Oil Field. This well was
scheduled to commence before February 28, 2001 to satisfy certain obligations
under the Rosablanca contract. However, we have not received the required
environmental permit from the Colombian Ministry of Environment. Ecopetrol
recently granted a 6-month extension on our obligation as a result of this
delay. This well, to be called the Santa Fe - 1 well, will be drilled to an
estimated total depth of 3,400 feet at an estimated gross cost of $1.0 million,
of which we are responsible for 100%.

     Tres Pasos 16 exploration well - Difficulties in obtaining a surface lease
have resulted in a delay to our plan to commence drilling in the third quarter
of 2001. We will request Ecopetrol to grant us an extension beyond August 2001
to meet the sixth-year exploration obligation under the Rio Seco association
contract. The Tres Pasos 16 exploration well will test the west side of the
Guaduas Oil Field structure. We estimate the gross cost of this well will be
$5.5 million, or $3.0 million net to Seven Seas.

     In summary, our planned exploration strategy in 2001 provides for the
drilling of three exploration wells at a gross cost of approximately $22
million, our share of which is approximately $19 million. Coupled with our
development strategy, the gross total of planned capital expenditures in 2001 is
approximately $68 million, our share of which is approximately $46 million. Our
ability to fully implement our exploration and development strategy is subject
to 1) securing financing for our share of costs, 2) timely receiving required
environmental permits, 3) contracting the required oil and gas services and
equipment, and 4) completing the Guaduas - La Dorada pipeline and commencing
pipeline production.

FINANCING

     In December 2000, we entered into a $10 million loan agreement with
Stillwater National Bank and Trust Company, N.A. On March 30, 2001, the loan's
maturity date was extended from December 31, 2001 to April 1, 2002. The
Stillwater National Bank loan is secured by all of the stock of the operating
subsidiaries of Seven Seas and is guaranteed by Robert A. Hefner III, chairman
and chief executive officer of Seven Seas. Mr. Hefner received remuneration of
$62,500 for his guarantee. The loan carries a coupon of the Prime Rate plus
 .75%, and interest is payable monthly until the loan is due in full on April 1,
2002. Seven Seas intends to use these funds for working capital and plans to
replace, without penalty, this non-convertible loan with the proceeds from a
larger financing planned for 2001. Proceeds from the financing could also be
used to finance the $6.9 million interest payment that will be due on November
15, 2001 on our $110 million senior notes.

                                       11
<PAGE>   11

     Furthermore, we believe that once the pipeline is built and is actually
transporting oil, additional funds could be borrowed from the same or other
lender(s) to finance a portion of the development costs necessary to bring
production up to 25,000 BOPD. At this time, we do not know what percent or how
much of our revenue will have to be dedicated to service the pipeline debt.
However, we would arrange this financing in such a way that loan proceeds and
cash flow reserves will be sufficient to meet our $6.9 million interest payment
due on November 15, 2001 for our $110 million senior notes.

     Non-discretionary capital commitments for 2001 are pipeline construction
costs, drilling an exploratory well on the Rio Seco block, drilling an
exploratory well on the Rosablanca block and the November 15, 2001 interest
obligation for the $110 million senior notes. In the event we are unable to
assign our interest in the Tapir association contract, we may be responsible for
our proportionate share of all or a portion of the costs of the 2001 work
program. The following table reflects our currently planned 2001 capital
expenditures.

<TABLE>
<CAPTION>
                                                                     2001 ESTIMATED COST
                                                                -----------------------------
             DESCRIPTION OF PROJECT/EXPENDITURE                  GROSS              NET TO US           STATUS
             ----------------------------------                 --------            ---------       --------------
                                                                       (In thousands)
<S>                                                             <C>                 <C>             <C>
         Pipeline and production facilities...........          $ 24,000             $ 13,848       Construction underway.
         Exploratory well - Rosablanca block..........             1,000                1,000       Obligation
         Exploratory well - Tres Pasos 16.............             5,500                3,025       Obligation
         Senior Note 11/15/01 Interest Payment........             6,875                6,875       Due 11/15/01
         Tapir working program (2)....................             2,129                2,129       Potential obligation
                                                                --------             --------
                    Non-Discretionary Sub-Total.......            39,504               26,877
                                                                ========             ========


         2001 Development Drilling Program(1)                                                       Discretionary expenditure
         (4 development wells, 1 injector well).......            22,000               12,694       subject to financing
         Subthrust exploration well...................            15,000               15,000       Discretionary expenditure
                                                                                                    subject to financing
                                                                --------             --------
                    Discretionary Sub-Total...........            37,000               27,694
                                                                ========             ========

                    Grand Total.......................          $ 76,504             $ 54,571
                                                                ========             ========
</TABLE>

----------

(1) 2001 development drilling program is part of a two-year plan that has
    Guaduas Oil Field partner approval to increase pipeline production from its
    initial rate of 5,000 - 8,000 BOPD to 18,000 - 25,000 BOPD. Under this plan,
    we will drill an additional 5 development wells in 2002 at a gross cost of
    approximately $22 million, or $12.7 net to Seven Seas.

(2) In the event we are unable to assign our interest in the Tapir association
    contract, we may be obligated to participate in all or a portion of the 2001
    work program.

    Possible sources of financing include:

o   commercial bank borrowing;

o   industry joint ventures or similar arrangement with industry service and
    supplies companies;

o   forward sales of oil; and

o   debt and equity financing.

     All debt financing will be on a secured basis. Under the terms of our $110
million senior notes, we are permitted to incur general indebtedness that can be
senior to our senior notes not exceeding the greater of (i) $25 million, or (ii)
the sum of 100% of our cash and cash equivalents, plus 100% of our receivables
from Ecopetrol, and plus 30% of our discounted future net revenues from proved
oil and gas reserves prepared in accordance with the rules of the United States
Securities and Exchange Commission. As of December 31, 2000, the maximum
permitted amount of secured borrowing was approximately $130.3 million. We are
also authorized under the terms of the senior notes to borrow an additional $10
million for project financing; such as to pay the purchase price or construction
costs of the pipeline and production facilities. We have plans to seek
approximately $45 million in new financing. The Company is optimistic that a
financing will be completed by the end of the second quarter of 2001; however,
there are no assurances that we will be successful.

                                       11
<PAGE>   12

RESULTS OF DEVELOPMENT STAGE OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001
AND 2000

    As of March 31, 2001, we had working capital net of restricted investments
equal to approximately $10.3 million, inclusive of unrestricted cash and cash
equivalents of $11.8 million. Our non-discretionary capital commitments
remaining for 2001 are approximately $11.8 million, not including a potential
obligation on the Tapir association contract discussed above. Additionally, we
have a $6.9 million interest payment due on November 15, 2001.

    Seven Seas recorded a net loss of $0.1 million and $2.8 million for the
quarters ended March 31, 2001 and 2000, respectively.

    Revenues from oil sales were $3.3 million and $16,000 for the quarters ended
March 31, 2001 and 2000, respectively. Lease operating expenses were $1.0
million and $0.6 million for the quarters ended March 31, 2001 and 2000,
respectively. This $0.4 million increase relates to the commencement of
post-exploration production of the Guaduas Oil Field on August 9, 2000.

    Oil production in Colombia (net to Seven Seas) of 162,981 barrels and 1,185
barrels for the quarters ended March 31, 2001 and 2000, respectively, was sold
to either Ecopetrol or Refinerie del Nare at an average price of $20.83 per
barrel in 2001 and $13.76 per barrel in 2000. Production volumes in 2001 relate
to post-exploration phase production of the Guaduas Oil Field, while volumes for
the first quarter of 2000 related to the exploration phase production testing of
one well, the Tres Pasos 1-W.

    Interest income was $0.2 million and $0.6 million for the quarters ended
March 31, 2001 and 2000, respectively. The decrease from 2000 to 2001 was the
consequence of lower cash and investment balances resulting from the use of
funds from the issuance of the senior notes in May 1998.

    General and administrative costs were $1.5 million and $2.5 million for the
quarters ended March 31, 2001 and 2000, respectively. The $1.0 million decrease
from 2000 to 2001 stemmed primarily from $0.8 million in severance payments,
which were made in the 2000 period in conjunction with personnel reductions
associated with the Company's cost reduction plan that began in May 1999.

    Depletion, depreciation and amortization totaled $0.9 million and $0.3
million for the quarters ended March 31, 2001 and 2000, respectively. The
increase is due to depletion related to the Guaduas Oil Field, which began
post-exploration production in August 2000.

FORWARD-LOOKING INFORMATION

    From time to time, Seven Seas may make certain statements that provide
shareholders and the investing public with "forward-looking" information as
defined by the federal securities laws. Words such as "anticipate," "assume,"
"believe," "estimate," "project," and similar expressions are intended to
identify such forward-looking statements. Forward-looking statements may be made
by management orally or in writing, including, but not limited to, in press
releases, as part of this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section and as part of other sections of
Seven Seas' filings with the U.S. Securities and Exchange Commission. Such
forward-looking statements may include, but not be limited to, statements
concerning estimates of current and future results of operations, financial
position, reserves, the timing and commencement of wells and development plans,
drilling results as indicated by log analysis, core samples, examination of
cuttings, hydrocarbons shows while drilling and production estimates from wells
drilled based upon drill stem tests and other test data, future capacity under
credit arrangements, future capital expenditures, liquidity requirements and
liquidity sufficiency.

    Such forward-looking statements are subject to certain risks, uncertainties
and assumptions, including without limitation, those defined below. Should one
or more of these risks or uncertainties materialize, or should any of the
underlying assumptions prove incorrect, actual results of current and future
operations may vary materially from those anticipated, estimated or projected.

    Among the factors that have a direct bearing on Seven Seas' results of
operations and the oil and gas industry in which it operates are uncertainties
inherent in estimating oil and gas reserves and future hydrocarbon production
and cash flows, particularly with respect to wells that have not been fully
tested and with wells having limited production testing histories; access to
additional capital; changes in the price of oil and natural gas, services and
equipment; the limited exploration of the concessions; the status of existing
and future contractual relationships with Ecopetrol; foreign currency
fluctuation risks; Seven Seas' substantial indebtedness, the presence of
competitors with greater financial resources and capacity; and difficulties and
risks associated with operating in Colombia.

                                       12
<PAGE>   13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Seven Seas is subject to several categories of risk associated with its
development stage activities. Oil and gas exploration and development is a
speculative business and involves a high degree of risk. Among the factors that
have a direct bearing on Seven Seas' prospects are uncertainties inherent in
estimating oil and gas reserves and future hydrocarbon production and cash
flows, particularly with respect to wells that have not been fully tested and
with wells having limited production testing histories; access to additional
capital; changes in the price of oil and natural gas, services and equipment;
the limited exploration of the association contracts; the status of existing and
future contractual relationships with Ecopetrol; regulation in Colombia lack of
significant income producing property; foreign currency fluctuation risks;
Seven Seas' substantial indebtedness, the presence of competitors with greater
financial resources and capacity; and difficulties and risks associated with
operating in Colombia.

PART II. OTHER INFORMATION

     Item 1.  Legal Proceedings - NA
     Item 2.  Changes in Securities and Use of Proceeds - N/A
     Item 3.  Defaults Upon Senior Securities - N/A
     Item 4.  Submission of Matters to a Vote of Security Holders

              The Company held an annual and special meeting of its shareholders
         on February 28, 2001. Matters voted on were as follows:

               Continuation from the Yukon Territory to the Cayman Islands -
         Shareholders approved the Company's change of its place of domicile
         from the Yukon Territory, Canada to the Cayman Islands.

               Re-election of directors - Robert A. Hefner III, Larry A. Ray, R.
         Randolph Devening, Brian F. Egolf, Gary F. Fuller, Robert B. Panero and
         Dr. James R. Schlesinger were each re-elected as members of the Board
         of Directors.

               Ratification of independent auditors - Shareholders ratified the
         appointment of Arthur Andersen LLP as independent auditors for 2000.

               The number of votes cast was as follows:
<TABLE>
<CAPTION>
              PROPOSAL                               FOR                        AGAINST
              --------                               ---                        -------
<S>                                                  <C>                        <C>
              Continuation                           15,418,370                 2,783,747

              PROPOSAL                               FOR                        WITHHOLD
              --------                               ---                        --------
              Re-Election of Directors
              Robert A. Hefner III                   30,654,558                 582,998
              R. Randolph Devening                   30,669,936                 567,620
              Larry A. Ray                           30,647,202                 590,354
              Brian F. Egolf                         30,645,311                 592,245
              Gary F. Fuller                         30,681,394                 556,162
              Robert B. Panero                       30,685,882                 551,674
              Dr. James R. Schlesinger               30,694,236                 543,320
</TABLE>

                                       13
<PAGE>   14

<TABLE>
<CAPTION>
           PROPOSAL                                  FOR                        AGAINST          ABSTAIN
           --------                                  ---                        -------          -------
<S>                                                  <C>                        <C>              <C>
           Ratification of Independent Auditors      30,998,742                 75,683           171,931
</TABLE>

     Item 5.  Other Information - N/A
     Item 6.  Exhibits & Reports on Form 8-K
(a)      Exhibits

<TABLE>
<CAPTION>

                      EXHIBIT
                      NUMBER                          DESCRIPTION
                      -------                         -----------
<S>                              <C>      <C>
                  (3)                     Articles of Incorporation and By-laws
                                 (A)      Certificate of Continuance to the
                                          Cayman Islands, incorporated by
                                          reference to Exhibit 3(A) in the
                                          Company's annual report on Form
                                          10-K for the year ended December 31,
                                          2000
                                 (B)      Memorandum of Association,
                                          incorporated by reference to Exhibit
                                          3(B) in the Company's annual report on
                                          Form 10-K for the year ended December
                                          31, 2000
                                 (C)      Articles of Association, incorporated
                                          by reference to Exhibit 3(C) in the
                                          Company's annual report on Form 10-K
                                          for the year ended December 31, 2000
</TABLE>


(b)      Reports on Form 8-K filed during the quarter ended March 31, 2001 - N/A



SIGNATURES

                                              SEVEN SEAS PETROLEUM INC.




Date: May 15, 2001
                                              ----------------------------------
                                         By:  Ronald A. Lefaive, Chief Financial
                                              Officer - Finance and Secretary



                                         By:
                                              ----------------------------------
                                              Larry A. Ray, President

                                       14