<PAGE>

                       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 September 30, 2002

                                       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)

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)

     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 November 14, 2002, there were 37,939,624 outstanding shares of the
registrant's ordinary shares (also called "common shares"), par value $0.001 per
share.


<PAGE>

                            SEVEN SEAS PETROLEUM INC.

                                      INDEX

<Table>
<Caption>
                                                                                                           PAGE
                                                                                                           ----
<S>         <C>                                                                                            <C>
PART I. FINANCIAL INFORMATION

    Item 1. Financial Statements
            Condensed Consolidated Balance Sheets as of September 30, 2002
            (Unaudited) and December 31, 2001.......................................................         3

            Condensed Consolidated Statements of Operations
            for the three months and nine months ended September 30, 2002 and 2001 (Unaudited)......         4

            Condensed  Consolidated  Statements of Cash Flows for the nine
            months ended September 30, 2002 and 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...................................................................        16

    Item 3. Quantitative and Qualitative Disclosures about Market Risk..............................        22

    Item 4. Controls and Procedures.................................................................        22

PART II. OTHER INFORMATION

    Item 6. Exhibits and Reports on Form 8-K........................................................        22
</Table>


                                       2
<PAGE>

                                     PART I.
                              FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<Table>
<Caption>
                                                                                  SEPTEMBER 30,     DECEMBER 31,
                                                                                      2002              2001
                                                                                  -------------     ------------
                                                                                   (UNAUDITED)
<S>                                                                               <C>               <C>
                                      ASSETS
CURRENT ASSETS
    Cash and cash equivalents                                                      $   9,588         $  18,638
    Restricted cash and cash equivalents                                               6,035             6,041
    Short-term investments                                                                --               121
    Restricted short-term investments                                                     --            10,563
    Accounts receivable, net of $267 and $749 allowance, respectively                    501             5,603
    Inventory                                                                            809             1,052
    Prepaids and other                                                                 1,688             2,064
                                                                                   ---------         ---------
Total Current Assets                                                                  18,621            44,082

Note receivable from related party                                                       200               200
Long term investments                                                                     --               283
Prepaid taxes                                                                             --             2,482
Land                                                                                     945               945
Evaluated oil and gas properties, full-cost method, net of
       accumulated depletion of $139,031 at September 30, 2002
       and $5,014 at December 31, 2001                                               117,949           183,021
Unevaluated oil and gas properties, full-cost method                                  39,323            70,616
Fixed assets, net of accumulated depreciation of $1,589 at
    September 30, 2002 and $1,336 at December 31, 2001                                   523               754
Other assets, net of accumulated amortization of $3,267 at
    September 30, 2002 and $2,442 at December 31, 2001                                 2,652             3,469
Deferred tax asset                                                                       176             1,042
                                                                                   ---------         ---------
TOTAL ASSETS                                                                       $ 180,389         $ 306,894
                                                                                   =========         =========

                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                               $   9,825         $  11,211
    Interest payable                                                                   5,156             1,719
    Other accrued liabilities                                                          2,719             3,264
                                                                                   ---------         ---------
Total Current Liabilities                                                             17,700            16,194

Long-term debt                                                                       153,599           153,102
Long term interest payable                                                             6,809             2,355
Deferred tax liability                                                                 7,862            27,040

COMMITMENTS AND CONTINGENCIES (NOTE 10)

STOCKHOLDERS' EQUITY/DEFICIT
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 are designated as Series A Junior Preferred shares;
    and 37,939,624 and 37,858,530 issued and outstanding common
    shares at September 30, 2002 and December 31,
    2001 respectively                                                                225,940           225,866
 Warrants outstanding                                                                  2,189             2,192
 Other comprehensive income (loss)                                                        --               (45)
 Accumulated deficit                                                                (233,710)         (233,686)
 Treasury stock, 29 shares held at September 30, 2002 and December 31, 2001               --                --
                                                                                   ---------         ---------
 Total Stockholders' Equity/Deficit                                                   (5,581)          108,203
                                                                                   ---------         ---------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                        $ 180,389         $ 306,894
                                                                                   =========         =========
</Table>

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


                                       3
<PAGE>

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Unaudited; In thousands, except share data)

<Table>
<Caption>
                                                         THREE MONTHS ENDED SEPTEMBER 30,          NINE MONTHS ENDED SEPTEMBER 30,
                                                        ---------------------------------         ---------------------------------
                                                            2002                 2001                 2002                 2001
                                                        ------------         ------------         ------------         ------------
<S>                                                     <C>                  <C>                  <C>                  <C>
REVENUES
  Crude oil sales ..............................        $      6,112         $      4,621         $     19,572         $      9,232
  Interest income ..............................                  71                  224                  380                  624
                                                        ------------         ------------         ------------         ------------
                                                               6,183                4,845               19,952                9,856
EXPENSES
  Oil and gas operating expenses ...............               1,377                1,472                3,720                3,578
  Depletion, depreciation and amortization .....               2,618                1,298                6,867                2,721
  Interest expense .............................               4,171                1,271                9,735                1,656
  General and administrative ...................                 736                1,097                3,004                4,208
  Other (income) expense .......................                 737                   58                  744                  193
  Ceiling test impairment ......................                  --                   --              128,228                   --
  Loss on legal settlement .....................                  --                1,000                   --                1,000
                                                        ------------         ------------         ------------         ------------
                                                               9,639                6,196              152,298               13,356

NET LOSS BEFORE INCOME TAXES ...................              (3,456)              (1,351)            (132,346)              (3,500)
INCOME TAX EXPENSE (BENEFIT) ...................               2,088                   --              (18,446)                  --
                                                        ------------         ------------         ------------         ------------
NET LOSS .......................................              (5,544)              (1,351)            (113,900)              (3,500)
BASIC AND DILUTED NET LOSS PER COMMON SHARE ....        $       (.15)        $      (0.04)        $      (3.00)        $      (0.09)
                                                        ============         ============         ============         ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .....          37,934,855           37,858,530           37,900,062           37,850,430
</Table>

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


                                       4
<PAGE>

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited; In thousands)

<Table>
<Caption>
                                                                          NINE MONTHS ENDED SEPTEMBER 30
                                                                          -------------------------------
                                                                             2002                  2001
                                                                          ---------             ---------
<S>                                                                       <C>                   <C>
OPERATING ACTIVITIES
     Net loss                                                             $(113,900)            $  (3,500)
     Add (subtract) items not requiring (providing) cash:
     Interest expense non-cash                                                4,915                 1,237
     Depletion, depreciation and amortization                                 6,867                 2,721
     Amortization of investments                                                 --                  (141)
     Deferred tax change                                                    (18,578)                   --
     Ceiling test impairment                                                128,228                    --
     Foreign exchange gain                                                      (15)                   --
     Changes in working capital excluding changes to cash and cash
     equivalents:
          Accounts receivable                                                 5,102                 3,649
          Interest receivable                                                    --                    55
          Inventory                                                             243                  (459)
          Prepaids and other, net                                               659                  (594)
          Accounts payable                                                   (1,386)                2,437
          Interest payable                                                    1,104                    --
          Other accrued liabilities and other                                  (545)                  168
                                                                          ---------             ---------
          Cash flow Provided by Operating Activities                         12,694                 5,573
                                                                          ---------             ---------

INVESTING ACTIVITIES
          Exploration and development of oil and gas properties             (32,390)              (23,614)
          Purchase of Investments                                                --                  (284)
          Proceeds from sale of investments                                  10,684                 8,043
          Other fixed asset additions                                           (44)               (1,610)
                                                                          ---------             ---------
          Cash Flow Used in Investing Activities                            (21,750)              (17,465)
                                                                          ---------             ---------

FINANCING ACTIVITIES
          Proceeds from share capital issued                                     --                    59
          Proceeds from issuance of long-term debt                               --                (3,000)
          Proceeds from issuance of long-term debt and warrants                  --                48,000
                                                                          ---------             ---------
          Cash Flow Provided by Financing Activities                             --                45,059
                                                                          ---------             ---------
NET (DECREASE INCREASE) IN CASH AND CASH EQUIVALENTS                         (9,056)               33,167
Cash and cash equivalents, beginning of period                               24,679                12,128
                                                                          ---------             ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $  15,623             $  45,295
                                                                          =========             =========
</Table>

Supplemental disclosures of cash flow information:

The Company incurred interest costs of $15.4 million and $11.6 million for the
nine-month periods ended September 30, 2002 and 2001, respectively, and $5.8
million and $9.9 million was capitalized during the respective periods.

Cash paid for interest for each of the nine-month periods ended September 30,
2002 and 2001 was $6.9 million and $7.0 million, respectively.

The Company paid zero for income taxes during each of the nine-month periods
ended September 30, 2002 and 2001.

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


                                       5
<PAGE>

                   SEVEN SEAS PETROLEUM INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION:

     The accompanying unaudited consolidated financial statements of Seven Seas
Petroleum Inc. and its Subsidiaries (collectively 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 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 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, 2001.


2. GENERAL:

     Seven Seas is an independent oil and gas company engaged in the exploration
and development of oil and gas properties located in Colombia, South America.
The Company's principal assets are a 57.7% interest in the Dindal and Rio Seco
association contracts and a 100% interest (subject to an obligation to assign
interests to our Guaduas Oil Field partners in the future) in the Deep Dindal
association contract, both interests are before participation by Ecopetrol, the
Colombian national oil company.

     The Company is the operator of the Guaduas Oil Field, which is located in
an area defined by the Rio Seco and Dindal association contracts covering a
total of approximately 89,900 contiguous acres. The Guaduas Oil Field is located
in the capital state of Cundinamarca, approximately 60 miles northwest of
Bogota. The Company's 57.7% working interest is distributed among the following
three wholly owned subsidiaries: 1) Seven Seas Petroleum Colombia ("SSPC"), a
Cayman Islands corporation with a 40.8% working interest, 2) Petrolinson S.A.
("Petrolinson"), a Panamanian corporation with a 6% working interest, and 3) GHK
Company Colombia ("GHK Colombia"), an Oklahoma corporation with a 10.9% working
interest. GHK Colombia is the operator of the Guaduas Oil Field.

     As the operator of the Guaduas Oil Field, GHK Colombia exercises direct
supervision over all field operations, including drilling and production. The
other interest owners are Cimarrona LLC, an Oklahoma-based independent oil and
gas company (9.4%), and Sociedad International Petrolera S.A. ("Sipetrol"), the
international exploration and production subsidiary of the Chilean national oil
company (32.9%). Collectively the Company and the other interest owners are
referred to as the "Associates".

GUADUAS OIL FIELD DEVELOPMENT

     In May 2000, Ecopetrol elected not to participate in the development of the
Guaduas Oil Field. The Associates elected to proceed on a sole-risk basis.
Sole-risk means that the Associates pay 100% of development costs and retain all
revenues from production after the 20% Colombian royalty deduction that is
administered by Ecopetrol on the government's behalf. Ecopetrol has the right to
start participating in the development at any time subject to the Associates'
right to recover 200% of the development costs spent since Ecopetrol's decision
not to participate plus certain exploration costs.

     As of September 30, 2002, the Company has spent $242.2 million to acquire
and $113.5 million to delineate the reserve potential of the Guaduas Oil Field.
The Company has participated in the drilling of fourteen exploratory and seven
development wells within the Dindal and Rio Seco association contract areas.
Fourteen wells have been productive and one well has been converted into a gas
injection well. Of the remaining six wells, five are temporarily abandoned; one
has been plugged and abandoned. As of September 30, 2002, the Guaduas Oil Field
had produced a cumulative volume of approximately 5.4 million (2.5 million net
to Seven Seas) barrels of oil.

     From January 2001 to September 30, 2002, the Company drilled eight
development wells and constructed a 40-mile pipeline that connects the Guaduas
Oil Field to international oil markets via Colombia's existing pipeline
infrastructure. (The Company elected to not participate in the eighth
development well.) Daily production averaged 6,300 barrels of oil per day
("BOPD") gross in the third quarter of 2002. The Guaduas - La Dorada pipeline
has an initial throughput capacity of approximately 25,000 BOPD, expandable to
approximately 40,000 BOPD with additional investment. Seven Seas also
constructed production facilities for production of approximately 25,000 BOPD.


                                       6
<PAGE>

SUBTHRUST DINDAL PROSPECT - DEEP DINDAL ASSOCIATION CONTRACT

     The Subthrust Dindal prospect is located below the producing zones of the
Guaduas Oil Field. In December 2001, the Company commenced drilling of the
Escuela 2 exploratory well to test this prospect. The Escuela 2 was originally
programmed to reach a measured depth of approximately 18,000 feet at a cost to
drill and complete the well of approximately $15 million. Based on updated
geological information, the targeted depth was later extended.

     On November 1, 2002 the Company elected to temporarily suspend Escuela 2
drilling operations subject to securing equipment and additional financing or
finding a partner to participate in the completion and testing of the Subthrust
Dindal prospect. The well has been drilled to a total measured depth of 20,250
feet with estimated cumulative costs to date of $24.3 million.

     All electric logs and formation pressure tests have been completed. The
Company believes the Escuela 2 should produce hydrocarbons from the lower
Cretaceous Utica formation. Independent analyses by industry experts agree that
the well should be tested. Management believes that hydrocarbon shows identified
during drilling operations, log analysis, and formation pressure tests all
support the conclusion that the well should be production tested.

     As a result of a January 2001 farm-out agreement with its partners in the
Guaduas Oil Field, Seven Seas has a 100% working interest in the Deep Dindal
association contract, subject to an obligation to assign a portion of this
interest to its partners after the first well has been drilled. The Company will
pay all of the cost of drilling and testing the Subthrust Dindal prospect.
Should the Escuela 2 be completed as a commercial well, the Company will be
obligated to assign either a collective 25.85% working interest to Cimarrona LLC
and Sipetrol, its partners in the Guaduas Oil Field, or a 9.4% working interest
to Cimarrona LLC and a 4.86% overriding royalty interest to Sipetrol. If the
Escuela 2 is not completed as a commercial oil discovery, but the results do
provide justification for a second Subthrust Dindal prospect test, the Company
will renegotiate the ownership participation in a second test well.

     The Deep Dindal association contract requires that the Company drill an
exploration well during each of the two eighteen-month exploration periods. The
first exploration period has been extended by Ecopetrol for six months from
October 24, 2002 to April 24, 2003. We have asked our Guaduas Oil Field partners
to extend the January 2001 farm-out agreement completion date until April 24,
2003.


3. CAPITAL AVAILABILITY AND LIQUIDITY:

     The late May 2002 commencement of gas injection activities allowed a
resumption of production from several significant wells that had been previously
shut-in or curtailed due to high gas-to-oil ratios. However, when the wells were
opened for production or were no longer curtailed, oil production rates did not
increase as anticipated. Production from the Guaduas Oil Field averaged
approximately 6,300 BOPD gross (2,900 net to Seven Seas) during the third
quarter of 2002. The third quarter daily production volumes represent a
continuing decline from second quarter and first quarter average volumes of
7,500 BOPD gross (3,400 net to Seven Seas) and 10,100 BOPD gross (4,700 net to
Seven Seas), respectively.

   The resulting reduction in cash flows associated with a 38% third quarter vs.
first quarter daily production decline and $11.2 million in additional costs on
the Escuela 2 versus the budgeted dry hole costs through November 11, 2002 have
materially weakened the Company's cash and working capital positions. As of
November 8, 2002, the Company's unrestricted cash balance was $4.9 million. The
Company did not make the $6.9 million interest payment on the $110 Million
Senior Subordinated Notes ("the Senior Notes") on November 15, 2002. The Company
will have 30 days (from November 15, 2002) to make the payment and avoid a
default under the terms of the Senior Notes. The failure to make the
November 15, 2002 interest payment creates a potential default under the terms
of the Chesapeake Note Purchase and Loan Agreement if not cured within 20 days.
The Senior Notes and the $45 Million Notes both have cross-default provisions.
Therefore, any event of default results in all debt becoming immediately due.
The Company will discuss with Chesapeake Energy Corporation ("Chesapeake")
whether it will extend the cure period to 30 days to coincide with the cure
period provided by the Senior Notes. The Company also plans to expand its
dialogue with the holders of the Senior Notes.

    There are significant concerns regarding the Company meeting its existing
commitments. The Company's ability to continue as a going concern will be highly
dependent on the decisions regarding a possible sale of the sale of our interest
in the Guaduas Oil Field and Guaduas La-Dorada pipeline ("Production Assets"),
available financing to complete and test the Escuela 2, and actions by both the
holders of the $45 Million Notes and Senior Notes. Based on bids for the
Production Assets, the net proceeds to be received from a possible sale of the
Production Assets are expected to be insufficient to liquidate the secured $45
Million Notes. Also, since the oil revenues from the Guaduas Oil Field are the
Company's primary source of cash, there can be no assurances that the Company
will be able to retain sufficient post-sale residual cash to continue
operations. In the event that the Production Assets are sold, the value of the
Senior Notes would be dependent on


                                       7
<PAGE>
the Escuela 2 test results. It is uncertain that the Company will be able to
secure financing to complete and test the Escuela 2. Even if financing is
secured, the well's future commercial viability is uncertain.

     The Company is engaged in discussions with several companies concerning a
possible investment in the Escuela 2 and the Deep Dindal association contract.
The Company is cautiously optimistic that it will be able to find a partner to
invest in completing and testing the Escuela 2.

     In conjunction with the material reduction to the Company's December 31,
2001 proved reserves as detailed in the June 30, 2002 Ryder Scott Reserve Report
(See Footnote 4) the Company has held a series of discussions with our secured
debt holders (the Company's $45 Million Notes which are comprised of the $22.5
million CHK Notes and $22.5 million Series A Notes -- See Footnote 9). These
discussions involve the Company's current financial position and various
go-forward scenarios that could include a sale of the Production Assets. One of
the outcomes from these discussions was an agreement on October 31, 2002, to
amend the Chesapeake Note Purchase and Loan Agreement and waive the required
monthly interest escrow payments beginning with the October 10, 2002 monthly
payment. The monthly escrow payment was equal to one-sixth of the semi-annual
$6.9 million interest payment on the Company's Senior Notes. Additionally, the
Company agreed to pay Chesapeake, as the collateral agent for the holders of the
$45 Million Notes, the approximate $4.7 million November 1, 2002 balance in the
escrow account as a pre-payment on the principal and accrued interest.

     In September 2002, the Company engaged CIBC World Markets ("CIBC") to serve
as a financial advisor for the possible sale of the Production Assets. Bids from
prospective buyers were received in early November 2002. The Company is
evaluating these bids and plans to negotiate with various bidders. Concurrent
with the sale evaluation, the Company is also reviewing various restructuring
alternatives. A sale of the Production Assets would eliminate all current
sources of cash.

     In the event a sale is consummated, the Company plans to pay the net
proceeds from the sale of the Production Assets to Chesapeake, as the collateral
agent for the holders of the Company's $45 Million Notes. Any sale would be
contingent upon Chesapeake releasing the Company's pledge of all of the
Company's rights, title and interest in and all of the capital stock of the
Company's three Colombian subsidiaries that own the Production Assets. The net
proceeds are not expected to be sufficient to fully liquidate principal and
accrued interest on the $45 Million Notes, notwithstanding the approximate $4.7
million pre-payment made on November 1, 2002. The holders of the Company's $45
Million Notes would continue to maintain their lien on the Exploration
Subsidiaries (as defined in Footnote 14). See Footnote 14 for additional
information regarding sale activity.

     During the present evaluation period, the Company has elected to conserve
cash and limit expenditures to only those required to support current
operations. Participation in the development-drilling program was suspended at
the beginning of the third quarter 2002. Non-essential workover operations have
ceased. Escuela 2 drilling operations were suspended on November 1, 2002. The
Company has elected not to continue its participation in both the Cristales and
Rosablanca exploration association contracts (See Footnote 4).


4. OIL AND GAS PROPERTY:

     The Company follows the full-cost method of accounting for oil and natural
gas properties. If the net capitalized costs of oil and gas properties exceed an
amount equal to the sum of the present value of estimated future net revenues
from proved oil and gas reserves and the lower of cost or fair value of
properties not being amortized, both adjusted for income tax effects, such
excess is charged to expense (the "Ceiling Test"). Capitalized costs associated
with the acquisition and evaluation of unproved properties, are excluded from
amortization until it is determined whether proved reserves can be assigned to
such properties or until the value of the properties is impaired.

EVALUATED OIL AND GAS PROPERTY IMPAIRMENT

     As of June 30, 2002, the Company recorded an impairment to oil and gas
properties of $128.2 million before tax, and $101.2 million net of tax effects.
This impairment was caused primarily by a 66% volumetric downward revision in
the Company's proved oil reserves, but was partially offset by a favorable
realized crude oil price as of June 30, 2002 versus December 31, 2001, the date
of the previous reserve report.


                                       8
<PAGE>

     Based on Ryder Scott Company Petroleum Consultants' ("Ryder Scott") report
as of June 30, 2002, the Company's proved reserves are approximately 16.3
million barrels of oil. This represents a 31.3 million barrel reduction (66%)
compared with the previously reported 47.6 million barrels of oil as of December
31, 2001. The present value, discounted continually over the expected life of
the production at 10% per annum, (the "SEC PV10") is approximately $136.3
million or $136.0 million less (50%) than the December 31, 2001 SEC PV10 of
$272.3 million.

     The June 30, 2002 66% net proved reserve reduction is attributable to lower
oil production rates, lower production pressures, and the occurrence of rapid
gas encroachment in structurally higher wells in the Guaduas Oil Field. Ryder
Scott eliminated proved reserves located in the structurally higher portion of
the producing reservoir.

UNEVALUATED OIL AND GAS PROPERTIES

     As of September 30, 2002, Unevaluated Oil and Gas properties amounted to
$39.3 million and consisted of $15 million of Deep Dindal association contract
acquisition costs and $24.3 million of Escuela 2 drilling costs and associated
capitalized interest. The unevaluated costs are $31.3 million lower than the
$70.6 million reported as of December 31, 2001. $52.5 million of unevaluated
acquisition costs and associated capital interest costs related to the
development of Dindal and Rio Seco probable reserves were transferred to
Evaluated Oil and Gas Properties on June 30, 2002. Based on the revised second
quarter reserve report, declining production and the Company's weakened
financial position, it is no longer likely the Company will drill the wells to
test the areas of unproved reserves.

     This year's reduction in unevaluated costs also includes $2.3 million
attributable to two exploration association contracts - Cristales, $0.1 million
and Rosablanca, $2.2 million. In October 2002, the Company relinquished its
rights under the Cristales association contract. The Company has notified
Ecopetrol that it does not plan to drill a well as required under the third year
of the Rosablanca Association Contract. Failure to drill a well will result in a
forfeiture of the Rosablanca association contract in early January 2003. See
Recent Developments under Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, for additional information on the
Cristales and Rosablanca association contracts. The decreases in unevaluated
costs related to the Rio Seco, Dindal, Cristales and Rosablanca association
contracts from year-end 2001 were partially offset by increased Escuela 2
expenditures and capitalized interest totaling $20.2 million.

RECLASSIFICATION OF VALUE ADDED TAX CREDITS

     Value added tax ("VAT") credits of $3.1 million have been reclassified from
Prepaid Tax Assets to Evaluated Oil and Gas Properties. Colombian tax law
allowed certain VAT payments in 1997 ($0.7 million) and 1998 ($2.4 million) to
be used as tax credits for the succeeding five year period after the transaction
year. The VAT credits expire in 2002 and 2003, respectively. The Company does
not believe it will be able to use the tax credits in either year, because the
Company plans to use its Net Operating Losses ("NOLs") to reduce its income tax
liability to zero.


5. INCOME TAXES:

     Seven Seas changed its domicile from Canada to the Cayman Islands in early
2001. The Company does not believe there is any further tax liability in Canada
or the US. All remaining deferred tax liabilities relate to Colombia.

     As of June 30, 2002, the Company incurred a Ceiling Test impairment
totaling $128.2 million, or $101.2 million net of the tax effects. All $27.0
million in deferred taxes were reversed as part of the ceiling test impairment.

     The Company recognized $9.4 million in additional deferred net tax
liabilities, inclusive of deferred assets comprised mostly of $4.5 million in
Colombian NOLs, for the first nine months of 2002. This was the result of
temporary differences created between the book basis and tax basis of the
Company's assets and liabilities. The deferred tax assets (relating to Colombia)
are netted against the deferred tax liabilities (relating to Colombia). This
results in a September 30, 2002 deferred tax liability of $7.9 million.



                                       9
<PAGE>
     The Company believes that the $4.5 million in Colombian NOLs are fully
realizable. The Company's subsidiaries operating in Colombia are projected to
show profits from a Colombian subsidiaries' tax perspective in 2003 and forward.
The Colombian subsidiaries' books do not reflect significant costs associated
with the parent entities' books. These costs are primarily the interest on the
Company's debt, corporate G&A, and acquisition costs.

     Of our three operating subsidiaries, GHK Colombia, a US company, is the
only entity that could potentially have a tax obligation outside of Colombia.
GHK Colombia receives a US tax credit for taxes paid in Colombia, however timing
differences could possibly occur that could create a US tax payment obligation.
For purposes of the deferred tax presentation, we have estimated that GHK
Colombia does not have any US deferred tax liabilities, and we have also
estimated that any US deferred tax assets and any NOLs have a full valuation
allowance.

     Of the Company's two other operating subsidiaries, one is domiciled in the
Cayman Islands and one in Panama. Both jurisdictions are tax free, thus the
Company has recognized no tax liabilities related to either jurisdiction.

     The Company capitalizes interest costs related to its Unevaluated Oil & Gas
Properties. The debt and associated interest costs are held by the parent; a
Cayman Islands entity. The interest costs are not pushed down to the Colombian
subsidiaries books, thus no deferred tax liability related to capitalized
interest costs are created.


OTHER TAXES

     Under Colombian laws, an entity must pay a tax on their income tax returns
of at least 6% of the entity's net equity. Certain entities can be exempted from
paying this minimum tax during the first four operating years as defined by
Colombian law. Seven Seas' believes that its subsidiaries operating in Colombia
qualify under the aforementioned exemption. Accordingly, Seven Seas has not
recorded a liability related to the presumptive tax in 2002.

     Colombian law provides for a tax on foreign entities that repatriate
profits from Colombia. The tax is referred to as a remittance tax and is
assessed at 7% on all profits withdrawn from the country. An entity can avoid
paying the tax by reinvesting profits in Colombia for five years. The Company's
subsidiaries operating in Colombia have generated substantially no commercial
profits to date and thus no liability has been created on the books. The Company
has used the income tax rate of 35% to calculate any deferred tax liability, and
has assumed no remittance tax effect on any deferred tax calculation.


6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

DEVELOPMENT STAGE OPERATIONS

     Since the Company's inception through the second quarter of 2001, Seven
Seas was considered a development stage enterprise. The financial statements as
of December 31, 2000 were presented including all necessary disclosures to
identify the Company as a "Development Stage Enterprise". In July 2001, the
Company began regular oil deliveries into the newly constructed Guaduas - La
Dorada Pipeline. Accordingly, the development stage enterprise classification
and related financial statement disclosures were no longer required beginning
with the third quarter 2001 interim reporting period.

CAPITALIZED COSTS

     The Company follows the full-cost method of accounting for oil and natural
gas properties. Under this method, all costs incurred in the acquisition,
exploration and development, including unproductive wells, are capitalized for
each country. Such capitalized costs include association contract and
concession, acquisition, geological, geophysical and other exploration work,
drilling, completing and equipping oil and gas wells, constructing production
facilities and pipelines, certain general and administrative expenses, and
interest applicable to unevaluated property costs and other related costs.


                                       10
<PAGE>


     Capitalized general and administrative ("G&A") and interest costs are as
follows (in $ million):

<Table>
<Caption>
                                                  THREE-MONTHS ENDED                        NINE-MONTHS ENDED
                                              ---------------------------               --------------------------
                                              9/30/02             9/30/01               9/30/02            9/30/01
                                              -------             -------               -------            -------
<S>                                           <C>                 <C>                   <C>                <C>
           G&A.......................           0.1                 0.1                    0.8                0.5
           Interest..................           1.1                 3.3                    5.7                9.8
</Table>

OTHER ASSETS

     Included in other assets are costs associated with the issuance of
long-term debt. These costs are being amortized ratably over the life of the
notes. Total debt issuance costs for the Senior Notes amounted to $4.2 million,
of which $1.6 million has not been amortized as of September 30, 2002. Total
debt issuance costs for the $45 Million Notes amounted to $1.7 million, of which
$1.0 million remains unamortized as of September 30, 2002. See Footnote 9 for
additional information on the notes.

PREPAIDS AND OTHER

     Prepaids and other include $1.3 million of Colombian income tax
withholdings as of September 30, 2002.

REVENUE RECOGNITION

     The Company records revenue using the entitlement method or, simply stated,
presents only its share of revenues. Any oil received and sold by the Company in
excess of its share is recorded as a liability. As of September 30, 2001, the
Company and its partners began to make up 261,987 barrels owed to Ecopetrol
(151,166 net to Seven Seas valued at $3.4 million). During the first quarter of
2002, the Company and its partners satisfied all make up obligations by
delivering to Ecopetrol the remaining 104,821 barrels (60,482 barrels net to
Seven Seas valued at $1.2 million) owed to them.

     The Company recorded a $0.7 million liability in Accounts Payable for
29,200 barrels of oil relating to pipeline sales in excess of the Company's
entitled volumes. During the third quarter, 19,800 barrels were made up. The
Company expects that the remaining pipeline imbalance will be settled in the
fourth quarter of 2002.

     The Company sells substantially all of its production to Hocol, S.A.


7. CASH AND CASH EQUIVALENTS:

     The Company considers highly liquid investments with maturity of three
months or less as cash equivalents. The following table sets forth the Company's
cash and cash equivalents (in thousands of dollars):

<Table>
<Caption>
                                                          SEPTEMBER 30            DECEMBER 31
                                                             2002                     2001
                                                          ------------            -----------
<S>                                                       <C>                     <C>
Cash.........................................                6,419                   14,549
Cash Equivalents.............................                9,204                   10,130
                                                            ------                   ------
Total Cash and Cash Equivalents..............               15,623                   24,679
</Table>

     As of September 30, 2002, the Company had working capital of $0.9 million.
This amount includes unrestricted cash and cash equivalents of $9.6 million. The
restricted cash balances total $6.0 million and are comprised of the following:
interest escrow - $4.6 million, El Segundo 2 - S well partner advances - $1.3
million, Colombian reforestation - $0.1 million. The restricted interest escrow
balance and the El Segundo 2 - S well partner advances are offset by current
liabilities. On November 1, 2002, the restricted interest escrow balance of
approximately $4.7 million was released to Chesapeake. See additional comments
in Footnote 3.

     During the third quarter of 2002, working capital decreased by $6.0 million
primarily because of Escuela 2 drilling expenditures. The only remaining
non-discretionary cash commitment for 2002 is the $6.9 million November 15
semi-annual interest payment on the


                                       11
<PAGE>

Senior Notes. The Trust Indenture for the CHK Notes limits additional
indebtedness to $1.0 million (See Footnote 9). Continuing operations and
drilling activities for the year must be funded from operating cash flows.


8. DERIVATIVE INSTRUMENTS:

     Effective January 1, 2001, Seven Seas adopted Statement of Financial
Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and
Hedging Activities". SFAS 133 establishes accounting and reporting standards
requiring that all derivative instruments be recorded on the balance sheet as
either an asset or liability measured at fair value and requires that changes in
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. Hedge accounting treatment allows unrealized gains and losses
on cash flow hedges to be deferred into other comprehensive income (for the
effective portion of the hedge) until such time as the forecasted transaction
occurs. Effectiveness is monitored quarterly and any ineffectiveness is reported
in revenues in the statement of consolidated operations.

     On November 9, 2001, the Company acquired financial put options that
established a monthly average WTI floor price of $20.00 per barrel on 3,750
barrels of crude oil per day beginning January 1, 2002, and continuing for six
months. The put options were acquired for $1,161,000 from a major commercial
bank as a cash flow hedge to ensure the required funds would be available to
fully execute the Company's 2002 exploration and development program in the
event of a further oil price decline. As of June 30, 2002, all of the put
options had been settled. Revenues for the first nine months reflect a
$1,161,000 reduction related to the cash flow hedges settled in the first six
months of 2002 and a $30,000 gain related to the settlement of the January put
options.


<Table>
<S>                                                                           <C>
ROLL-FORWARD OF OTHER COMPREHENSIVE INCOME (IN THOUSANDS):

  Balance at December 31, 2001..........................................      $       (45)
  Change in fair value of derivate instruments..........................           (1,116)
  Realization of losses on hedging instruments..........................            1,161
                                                                              -----------
  Balance at September 30, 2002.........................................      $        --
                                                                              -----------
</Table>


9. DEBT AND LONG-TERM OBLIGATIONS:

$45 MILLION FINANCING

CHESAPEAKE SENIOR NOTE ISSUANCE

     On July 23, 2001, Chesapeake purchased $22.5 million of senior secured
notes ("CHK Notes") with detachable warrants to purchase 12,619,500 shares of
Seven Seas common stock at approximately $1.78 per share. The CHK Notes bear
interest at 12% per annum, compounded quarterly, and interest will be accrued
for the first two years.

SHAREHOLDER RIGHTS OFFERING

     The Company offered its non-Canadian shareholders of record as of October
8, 2001, in the form of a shareholder rights offering ("Rights Offering"), $22.5
million of Series A senior secured notes ("Series A Notes") with detachable
warrants to purchase 12,619,500 shares at approximately $1.78 per share. The
Series A Notes bear interest at 12% annum, compounded quarterly, and interest
will accrue for the first two years. As of September 30, 2002, the combined
accrued interest on the CHK Notes and Series A Notes is $6.8 million and the
balance is classified as long-term interest payable. Accrued interest will be
due at maturity on November 7, 2004. Shareholders purchased approximately $2
million of Series A Notes with warrants to purchase approximately 1.1 million
shares at an exercise price of $1.78. The remainder of the Series A Notes was
purchased by a group of qualified investors led by Robert A. Hefner III, the
Company's Chairman and Chief Executive Officer.


                                       12
<PAGE>

CHESAPEAKE NOTE COVENANTS

     Pursuant to the Company's agreement under the CHK Notes, $15 million of the
total proceeds from the $45 million financing were escrowed for the drilling of
the Escuela 2 exploration well to test the Subthrust Dindal Prospect, located
below the Guaduas Oil Field. Additionally, for the first two years or until the
CHK Notes are redeemed, if the redemption occurs before July 23, 2003, the
Company will escrow monthly 1/6 of its semi-annual $6.9 million interest payment
on its $110 million Senior Notes. On October 31, 2002, Chesapeake and the
Company amended the Chesapeake Note Purchase and Loan Agreement to waive the
requirement for monthly interest escrow payments beginning with the October 10,
2002 monthly payment. The Company agreed to pay Chesapeake, as the collateral
agent for the holders of the $45 Million Notes, the approximate $4.7 million
balance in the escrow account as a pre-payment on the principal and accrued
interest.

     The CHK Note covenants preclude the Company from incurring additional
indebtedness in excess of $1 million excluding trade debt incurred in the
ordinary course of business. Also, the Company agreed to secure payment of the
CHK Notes and the Series A Notes by pledging to Chesapeake, as collateral agent,
all of the Company's right, title and interest in and all of the capital stock
and equity of the subsidiaries of the Company and all dividends, distributions,
proceeds and products thereof or therefrom.

DISCOUNT ON $45 MILLION NOTES

     The $22.5 million CHK Notes and the $22.5 million Series A Notes are
collectively referred to as the "$45 Million Notes". The $45 Million Notes were
issued along with detachable warrants to purchase shares of common stock. Based
on an independent valuation, the fair market valuation of the detachable
warrants at the date of issuance was determined to be $2.2 million, and the $45
Million Notes were valued at $42.8 million, representing a $2.2 million
discount. The discount is amortized to interest expense over the life of the $45
Million Notes in order to reduce the discount to zero by the due date of the $45
Million Notes. During the first nine months of 2002, $0.5 million of imputed
interest expense was recognized in the Consolidated Statements of Operations.
Cumulative imputed interest from inception amounts to $0.8 million as of
September 30, 2002.

$110 MILLION SENIOR NOTES

     The Company issued $110 million aggregate principal amount of 12-1/2% notes
due 2005 ("Senior Notes") in a private transaction on May 7, 1998 that was not
subject to registration requirements of the Securities Act of 1933. The Senior
Notes mature May 15, 2005. Interest payments of approximately $6.9 million are
due on May 15 and November 15 of each year. (See Footnote 3 regarding the $6.9
million semi-annual interest payment on the Senior Notes).


10. COMMITMENTS AND CONTINGENCIES:

POPULAR ACTION SUIT

     In February 2002, the Company was served notice of a popular action suit
before the Guaduas Equity Court. The Peoples' Committee for the Environmental
Protection of Guaduas, a local, non-governmental organization, filed this claim.
The plaintiffs are requesting that the courts take the following actions: a)
suspend oil activity on the upper part of the San Francisco River Basin because
that area is a forest reserve and b) suspend the underground waters concession
GHK Colombia has over the El Hoyon aquifer. If the court decided in favor of the
plaintiff's claims, the Company's Escuela 2 drilling operations could be
suspended indefinitely.

     On April 29, 2002, the Company appeared before the Guaduas Equity Court
stating that the Company has obtained a environmental license from the
environmental authority to conduct oil exploration activities, drill the Escuela
2 well in the San Francisco River Basin and use the aquifer water. The Company
also contends that the drilling activities do not affect the basin, which is an
argument that is supported by independent third party studies and served as the
basis to obtain the environmental permit to drill the Escuela 2 well in that
area. The Guaduas Equity Court took no action and the evidence gathering stage
continues.

     On July 29, 2002, a court ordered inspection of the Escuela 2 drilling
operations was completed by a court-appointed panel of three experts. The
experts' findings were presented to the court on September 30, 2002. GHK
Colombia requested clarification on several report findings. A response to GHK
Colombia's request is pending.

     The Company's management and Colombian counsel believe that it is unlikely
the Court will render an adverse ruling.


                                       13
<PAGE>

HEIRS OF NICOLAS BELTRAN FRANCO

     Two of the Company's subsidiaries, Petrolinson and GHK Colombia, along with
the former owner of Petrolinson, Norman Rowlinson and the heirs of Howard Thomas
Corrigan, are defendants in a lawsuit that was filed in Santa Fe de Bogota,
Colombia in 1998. The plaintiffs, who are the heirs of Nicolas Beltran Franco,
have two claims. First, the plaintiffs claim that a de facto company existed
between Nicolas Beltran Franco and the defendants concerning the Dindal and Rio
Seco association contract areas. Second, the plaintiffs claim that before the
Dindal and Rio Seco association contracts were executed, the de facto company
conducted exploration activities in the Dindal and Rio Seco association contract
areas. The plaintiffs claim they have the right to participate in income earned
from the Dindal and Rio Seco association contract areas. None of the plaintiffs
are party to the association contracts. However, they are seeking 50% of the
income generated by the de facto company they claim existed. It is not clear
what percentage of the Dindal and Rio Seco association contract areas are
covered by the plaintiffs' claims.

     The Company's management and Colombian counsel believe that it is unlikely
the Court will render an adverse ruling.


11. NEW ACCOUNTING PRONOUNCEMENTS:

     SFAS 143, Accounting for Asset Retirement Obligations, requires entities to
record the fair value of a liability for an assets retirement obligation in the
period in which it is incurred and a corresponding increase in the carrying
amount of the related long-lived asset and is effective for fiscal years
beginning after June 15, 2002. We do not expect the adoption of SFAS 143 to have
a material impact on our financial position, results of operations or cash
flows.

     In April 2002 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 145, "Rescission of FASB Statements No. 4, No. 44, and No. 64, Amendment to
FASB Statement No. 13 and Technical Corrections." SFAS 145 streamlines the
reporting of debt extinguishments and requires that only gains and loses from
extinguishments meeting the criteria in Accounting Policies Board Opinion 30
would be classified as extraordinary. Thus, gains and losses arising from
extinguishments that are part of a company's recurring operations would not be
reported as an extraordinary item. SFAS 145 is effective for fiscal years
beginning after May 15, 2002 with earlier adoption encouraged. We do not expect
the adoption of SFAS 145 to have a material impact on our financial position,
results of operations or cash flows.

     SFAS 146, "Accounting for Costs Associated with Exit or Disposal
Activities" was issued in June 2002 and addresses accounting and processing for
costs associated with exit or disposal activities and nullifies Emerging Issues
Task Force ("EITF") Issue 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit and Activity (including Certain
Costs Incurred in a Restructuring)." SFAS 146 requires that a liability for a
cost associated with an exit or disposal liability be recognized when the
liability is incurred. Under Issue 94-3, a liability for an exit cost was
recognized at the date of an entity's commitment to an exit plan. Under SFAS
146, fair value is the objective for initial measurement of the liability. SFAS
146 is effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. We do not expect the
adoption of SFAS 146 to have a material impact on our financial position,
results of operations or cash flows.

     The FASB is currently considering numerous proposals for the adoption of
new accounting pronouncements. We cannot predict whether any of these proposals
will be adopted, and if adopted what effect these proposals, including the
proposal to require the reporting of stock options grants as a compensation
expense, may have on our financial statements.


12. RELATED PARTY TRANSACTIONS:

     On March 31, 2002, the Company amended a $200,000 unsecured loan to Larry
A. Ray, President and Chief Operating Officer. The new terms provide for an
interest rate of 2.69% with a due date of September 3, 2003. The original
$200,000 loan was made on November 1, 1997 at a 6.06% interest rate with a due
date of November 1, 2002. The recently enacted Sarbanes-Oxley Act of 2002
prohibits any further renewal of the loan.


                                       14
<PAGE>

13. OTHER INCOME/EXPENSE - WAR TAX:

     On August 11, 2002, the Government of Colombia declared a "state of
emergency" for 90 days, extendable for another 90 days thereafter. In order to
finance a military build-up to combat ongoing guerrilla activity, the Government
placed a 1.2% tax (the "War Tax") on all businesses with net assets greater than
$60,000. The Company's War Tax assessment was approximately $780,000. Payments
are due in four equal installments in September 2002, November 2002, February
2003 and June 2003. The War Tax is classified as Other Income/Expense.


14. SUBSEQUENT EVENTS:

AUDIT COMMITTEE COMPOSITION

     The Company has been unsuccessful in several attempts to find a replacement
for Mr. Robert B. Panero who served as an independent director and a member of
our audit committee until his death in November 2001. The American Stock
Exchange requires the Company to have an audit committee of at least three
members, comprised solely of independent directors. The Company has not been in
compliance since November 2001. The present uncertainties surrounding the
Company have severely hampered our search for an independent director; however,
we continue to seek out qualified candidates.

     As an interim solution until a new independent director can be recruited,
the AMEX rules allow Mr. Gary F. Fuller, one of our current board members, to
serve on the audit committee. Mr. Fuller's law firm, McAfee & Taft, is the
primary provider of legal services to the Company, and accordingly would not be
considered independent under AMEX rules. Our board of directors has determined
that the best interests of the Company and its shareholders require Mr. Fuller's
membership of the audit committee.

SALE OF PRODUCTION ASSETS

     On September 30, 2002, the Company hired CIBC to serve as a financial
advisor for the sale of the Company's Production Assets, our interest in the
Guaduas Oil Field and the Guaduas - La Dorada Pipeline. Initial bids were
received in early November 2002. The Company is evaluating the bids and plans
to negotiate with various bidders. Concurrent with the sale evaluation, the
Company is also reviewing various restructuring alternatives.

     The contemplated sale of the three Colombian subsidiaries that own the
Production Assets will require pre-sale separation of the Rosablanca, Cristales
and Deep Dindal association contracts ("Exploration Assets"). The Company is in
the process of completing Colombian tax-free spin-offs of each of the three
Colombian subsidiary's share of the Exploration Assets to three separate
existing dormant subsidiaries (the "Exploration Subsidiaries"). In addition to
facilitating the sale of the Production Assets, the transfer of the Exploration
Assets to the Exploration Subsidiaries will benefit the financing efforts
related to the Escuela 2 and the Deep Dindal association contract. Ecopetrol's
approval is required and may be impacted by negotiations surrounding the
Company's decision to not drill an exploratory well on the continued Aguachica
Prospect. See comments below relating to the Rosablanca Association Contract.

AMERICAN STOCK EXCHANGE

     Seven Seas has been notified by the American Stock Exchange ("AMEX") that
the Company currently fails to meet specific listing standards, primarily that
the Company has reported shareholders' equity of less than $2,000,000 and has
sustained net losses in two of the last three most recent fiscal years.
Additionally, under AMEX listing guidelines, a sale of the Production Assets,
the Company's sole source of operating cash flows, would likely lead to a
decision to delist.

     In order to continue listing on the AMEX, the Company has submitted a plan
that details its efforts to remedy these deficiencies within the next 18
months. The Company expects a decision by the AMEX to accept or reject the plan
within the next 30 days.

ROSABLANCA ASSOCIATION CONTRACT

     In August 2002, Ecopetrol granted a final two-month extension until October
31, 2002 for purposes of completing an exploration well on the Aguachica
Prospect to satisfy the terms of the Rosablanca association contract. The
Company requested the extension because of delays related to political
uncertainty and security issues in the surrounding area. In October 2002, the
Company notified Ecopetrol that it will not drill the Santa Fe #1 well because
further drilling commitment extensions could not be provided and


                                       15
<PAGE>

the Company's continued concern over security issues in the area. The Company
had previously budgeted $1.0 million to drill a well, all of which would have
been incurred by the Company. The Rosablanca association contract will be
forfeited in early January 2003 in the event the Company does not drill a well
or cause a well to be drilled. In the event of forfeit, Ecopetrol may elect to
seek, through legal action, specific performance goals or a cash settlement.

     On November 6, 2002, Ecopetrol informed Seven Seas that the Company has an
obligation to drill the well. Furthermore, Ecopetrol stated that failure to
comply obligates Seven Seas to indemnify Ecopetrol in connection with loss of
profits and consequential damages. Any sale of the Production Assets or
negotiations with a financing partner to fund Escuela 2 completion and testing
could be impeded as a result of this dispute. Seven Seas intends to negotiate
with Ecopetrol for a satisfactory resolution on this matter. At this time, the
Company is unable to estimate the cost, if any, to settle this matter.
Additionally, the Company continues to have discussions with companies
concerning a possible farm-out of the Company's interest in the Rosablanca
Association Contract.

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 consolidated financial statements included elsewhere and with the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.


                                    OVERVIEW

     Our principal assets are a 57.7% interest (before participation by
Ecopetrol, the Colombian national oil company) in the Dindal and Rio Seco
association contracts which cover the area in which the Guaduas Oil Field is
located and a 100% interest (subject to an obligation to assign interests to our
Guaduas Oil Field partners in the future) in the Deep Dindal association
contract. As of June 30, 2002, Ryder Scott Company Petroleum Consultants ("Ryder
Scott") estimated that Seven Seas' net proved reserves attributable to the
delineation of 7,445 acres of the Guaduas Oil Field were 16.3 million barrels of
oil with a present value discounted continually over the expected life of the
production at 10% per annum (the "SEC PV10") of $136.3 million based upon second
quarter ending oil prices.

     As the operator of the Guaduas Oil Field, the Company exercises direct
supervision over all field operations, including drilling and production. The
other interest owners are Cimarrona (9.4%), and Sipetrol (32.9%). In May 2000,
Ecopetrol elected not to participate in the development of the Guaduas Oil
Field. Together with our partners, we elected to proceed with field development
on a sole-risk basis, meaning we pay 100% of the costs and receive 100% of the
revenues from production less a fixed 20% Colombian government royalty. After we
have recovered 200% of the development costs and certain exploration costs,
Ecopetrol will have the right to become a 50% working interest partner in the
project.


                               RECENT DEVELOPMENTS

PROVED RESERVES

     Ryder Scott's report on the Guaduas Oil Field's proved reserves, as of June
30, 2002, estimates proved reserves at 16.3 million barrels of oil. This
represents an approximate 31.3 million barrel reduction (66%) compared to Ryder
Scott's December 31, 2001 report, which estimated proved reserves of 47.6
million barrels of oil. The SEC PV10 is approximately $136.3 million, or $136.0
million less (50%) than the December 31, 2001 SEC PV10 of $272.3 million. The
SEC PV10 decline was partially offset by higher oil prices as of June 30, 2002.

     The 66% reduction in net proved reserve volume is attributable to lower oil
production rates, lower production pressures, and the occurrence of rapid gas
encroachment in structurally higher wells in the Guaduas Oil Field. Ryder Scott
eliminated proved reserves located in the structurally higher portion of the
producing reservoir in the report as of June 30, 2002.

     The Company's proved reserves as of June 30, 2002, and December 31, 2001,
are listed in the below table. These reserves consist entirely of crude oil in
Colombia.


                                       16
<PAGE>


     Proved developed and undeveloped reserves (in barrels):

<Table>
<Caption>
                                JUNE 30, 2002      DECEMBER 31, 2001
                                -------------      -----------------
<S>                             <C>                <C>
Beginning of year .......         47,587,599          47,991,956
Production ..............           (735,200)           (938,969)
Revision of estimate ....        (30,601,342)            534,612
                                 -----------         -----------
End of period ...........         16,251,057          47,587,599
                                 ===========         ===========
Proved undeveloped ......          2,007,052          20,121,866
                                 -----------         -----------
Proved developed ........         14,244,005          27,465,733
                                 -----------         -----------
Total proved ............         16,251,057          47,587,599
                                 ===========         ===========
</Table>

DEVELOPMENT DRILLING PROGRAM

     At the beginning of the third quarter, the Company elected to suspend
further development drilling in the Guaduas Oil Field pending a reassessment of
recently drilled wells, current production data, and the results of planned
production enhancement efforts on existing wells. The last three development
wells, excluding the El Segundo 2-S, have average initial production rates of
approximately 700 BOPD.

     Sipetrol proposed drilling an eighth development well, the El Segundo 2-S.
Because a drilling rig was currently on location, the Company had limited time
to evaluate the proposal and ultimately declined to participate. The well was
completed at a total cost of approximately $3.9 million and is producing
approximately 180 BOPD. The Company's future participation in the revenues from
the El Segundo 2-S will be subject to our Guaduas Oil Field operating partners
recovering 300% of our share of drilling costs from net operating revenues from
the well.

     A recap of initial and September 2002 production rates for the eight wells
completed as part of our 2001/2002 development drilling program is as follows
(all numbers in BOPD):

<Table>
<Caption>
                                                             INITIAL                   PRODUCTION RATE
        WELL               COMPLETION DATE                PRODUCTION TEST              (SEPTEMBER 2002)
----------------------     ---------------                ---------------              ----------------
<S>                        <C>                            <C>                          <C>
El Segundo 5-S........     May 2001                         1,800-2,900                    Shut-in
Tres Pasos 5-W........     September 2001                     700-1,000                        350
El Segundo 5-E........     October 2001                           2,400                      1,300
Tres Pasos 6-N........     January 2002                           3,000                        550
Tres Pasos 6-E........     March 2002                             1,000                        200
Tres Pasos 7-W........     May 2002                                 600                        800
El Segundo 5-N........     June 2002                                500                        550
El Segundo 2-S.........    October 2002                             200                         --
</Table>

PRODUCTION OPERATIONS

     At the end of May 2002 the Company commenced gas injection operations and a
study to optimize oil production primarily through electric submersible pump
improvements. The Company also implemented a workover program to enhance
production from existing wells consisting of hydraulic fracture treatments and
cement squeezes to curtail water and/or gas production. The Company's workover
program has had varied results. As of September 30, 2002, the Company had
performed workovers on four wells, at a total gross cost of approximately $1.1
million. The workovers resulted in increased total production from the four
wells of approximately 500 BOPD gross (230 net to Seven Seas) in October 2002.

     The Company's average daily gas injection rate for the third quarter was
2,160 MCF. Daily injection capacity of 6,000 MCF has not been reached because of
high water content in the gas stream and shale from the wellbore wall falling
into the hole. A dehydration unit, which has been installed to minimize the
water content of the injected gas, is in the final stages of testing. Workover
operations are now being conducted to eliminate hole problems. Even with
increased gas injection, the Company believes that current production rates will
not be improved due to gas encroachment in structurally higher parts of the
reservoir. Oil production averaged approximately 6,300 BOPD gross (2,900 net to
Seven Seas) for the third quarter. October 2002 production averaged
approximately 6,000 BOPD gross (2,780 net to Seven Seas).


                                       17
<PAGE>

EXPLORATION DRILLING

     The Subthrust Dindal prospect is located below the producing zones of the
Guaduas Oil Field. In December 2001, the Company commenced drilling of the
Escuela 2 exploratory well to test this prospect. The Escuela 2 well was
originally programmed to reach a total measured depth of approximately 18,000
feet at total cost of approximately $15 million. Based on updated geological
information, the targeted depth was later extended.

     On November 1, 2002, the Company elected to temporarily suspend Escuela 2
drilling operations subject to securing equipment and additional financing or
finding a partner to participate in the completion and testing of the Subthrust
Dindal prospect. The well has been drilled to a total measured depth of 20,250
feet with estimated cumulative costs to date of approximately $24.3 million.

     All electric logs and formation pressure tests have been completed. The
Company believes the Escuela 2 should produce hydrocarbons from the lower
Cretaceous Utica formation. Independent analyses by industry experts agree that
the well should be tested. Management believes that hydrocarbon shows
identified during drilling operations, log analysis, and formation pressure
tests all support the conclusion that the well should be production tested.

ASSOCIATION CONTRACTS

     In August 2002, Ecopetrol granted a final two-month extension until October
31, 2002 for purposes of completing an exploration well on the Aguachica
Prospect to satisfy the terms of the Rosablanca association contract. The
Company requested the extension because of delays related to political
uncertainty and security issues in the surrounding area. In October, the Company
notified Ecopetrol that it will not drill the Santa Fe #1 well because further
drilling commitment extensions could not be provided and the Company's continued
concern over security issues in the area. The Company had previously budgeted
$1.0 million to drill a well, all of which would be incurred by the Company.
The Rosablanca association contract will be forfeited in early January 2003 in
the event the Company does not drill a well or cause a well to be drilled. In
the event of forfeit, Ecopetrol may elect to seek, through legal action,
specific performance goals or a cash settlement.

     On November 6, 2002, Ecopetrol informed Seven Seas that the Company has an
obligation to drill the well. Furthermore, Ecopetrol stated that failure to
comply obligates Seven Seas to indemnify Ecopetrol in connection with loss of
profits and consequential damages. Any sale of the Production Assets or
negotiations with a financing partner to fund Escuela 2 completion and testing
could be impeded as a result of this dispute. Seven Seas intends to negotiate
with Ecopetrol for a satisfactory resolution on this matter. At this time the
Company is unable to estimate the cost, if any, to settle this matter.
Additionally, the Company continues to have discussions with companies
concerning a possible farm-out of the Company's interest in the Rosablanca
Association Contract.

     In August 2002, Ecopetrol granted a final two-month extension until October
31, 2002 for the Company to comply with its obligations under the first year of
the Cristales association contract exploration period. The Company has satisfied
its first year work program expenditure requirements. However, based on the
analysis of the first year's work and the approximate $2.5 million commitment
required to continue the Cristales association contract into the second year,
the Company advised Ecopetrol of its decision to relinquish its rights under the
contract.


                              OUR CURRENT STRATEGY

     Our strategy for 2002 has been changed to reflect our current financial
situation. We are pursuing a possible sale of the Guaduas Oil Field and Guaduas
La-Dorada Pipeline ("Production Assets"), and seeking to secure additional
financing or to find a partner to participate in the completion of the Escuela 2
exploration well and test the commercial potential of the Deep Dindal prospect.
Beginning in the second quarter and continuing forward, Guaduas Oil Field
production has been declining. The resulting reduction in operating cash flows
and the $11.2 million in additional costs to date on the Escuela 2 compared to
the budgeted dry hole costs have materially weakened the Company's cash and
working capital positions. As of November 8, 2002, the Company's unrestricted
cash balance was $4.9 million. The Company did not make the $6.9 million
interest payment on the $110 Million Senior Subordinated Notes ("the Senior
Notes") on November 15, 2002. The Company will have 30 days (from November 15,
2002) to make the payment and avoid a default under the terms of the Senior
Notes. The failure to make the November 15, 2002 interest payment creates a
potential default under the terms of the Chesapeake Note Purchase and Loan
Agreement if not cured within 20 days. The Senior Notes and the $45 Million
Notes both have cross-default provisions. Therefore, any event of default
results in all debt becoming immediately due. The Company will discuss with
Chesapeake Energy Corporation ("Chesapeake") whether it will extend the cure
period to 30 days to coincide with the cure period provided by the Senior Notes.
The Company also plans to expand its dialogue with the holders of the Senior
Notes.

     There are significant concerns regarding the Company's ability to meet its
existing commitments. The Company's ability to continue as a going concern will
be highly dependent on the decisions regarding a possible sale of the Production
Assets, available financing to complete and test the Escuela 2, and actions by
holders of both the $45 Million Notes and the Senior Notes. Based on bids for
the Production Assets, the net proceeds to be received from a possible sale of
the Production Assets are expected to be insufficient to liquidate the secured
$45 Million Notes. Also, since the oil revenues from Guaduas oil field are the
Company's primary source of cash, there can be no assurances that the Company
will be able to retain sufficient post-sale residual cash to continue
operations. In the event that the Production Assets are sold, the value of the
Senior Notes would be dependent on Escuela 2 test results. It is uncertain that
the Company will be able to secure financing to complete and test the Escuela 2.
Even if financing is secured, the well's future commercially viability is
uncertain.

     The Company is engaged in discussions with several companies concerning a
possible investment in the Escuela 2 and the Deep Dindal association contract.
The Company is cautiously optimistic that it will be able to find a partner to
invest in completing and testing the Escuela 2.

     The Company has held a series of discussions with our secured debt holders
(the Company's $45 Million Notes which are comprised of $22.5 million CHK Notes
and $22.5 million Series A Notes -- See Notes to Consolidated Financial
Statements - Footnote 9). These discussions involve the Company's current
financial position and various go-forward scenarios that could include a


                                       18
<PAGE>
sale of our interest in the Production Assets. One of the outcomes from these
discussions was an agreement on October 31, 2002, to amend the Company's Note
Purchase and Loan Agreement with Chesapeake and waive the required monthly
interest escrow payments beginning with the October 10, 2002 payment. The
monthly escrow payment was equal to one-sixth of the semi-annual $6.9 million
interest payment on the Company's Senior Notes. Additionally, the Company agreed
to pay Chesapeake, as the collateral agent for the holders of the $45 Million
Notes, the approximate $4.7 million balance in the escrow account as a
pre-payment on the principal and accrued interest.

     The Company has focused its search for additional financing for completing
and testing the Escuela 2 among companies currently operating in Colombia. By
completing the tax-free spin-off of the Exploration Assets (See Notes to
Consolidated Financial Statements - Footnote 14), we believe that Colombian tax
deductions of up to the $24.3 million of estimated expenditures can be
transferred to a financing partner. If the Escuela 2 is ultimately commercially
unsuccessful, existing tax deductions could be used by the financing partner to
recover completion and testing expenditures. This assumption is predicated on
the financing partner having taxable Colombian net income that could be reduced
by the Escuela 2 tax deductions.

     In September 2002, the Company engaged CIBC World Markets ("CIBC") to serve
as a financial advisor for the possible sale of the Production Assets. Bids from
prospective buyers were received in early November 2002. The Company is
evaluating these bids and plans to negotiate with various bidders. Concurrent
with the sale evaluations, the Company is also reviewing various restructuring
alternatives. A sale of the Production Assets would eliminate all current
sources of cash.

     In the event a sale is consummated, the Company plans to pay the net
proceeds from the sale of the Production Assets to Chesapeake, as the collateral
agent for the holders of the Company's $45 Million Notes. Any sale would be
contingent on Chesapeake releasing the Company's pledge of all of the Company's
rights, title and interest in and all of the capital stock of the three
Colombian subsidiaries of the Company that own the Production Assets. The net
proceeds are not expected to be sufficient to fully liquidate principal and
accrued interest on the $45 Million Notes, notwithstanding the approximate $4.7
million prepayment on November 1, 2002. The holders of the Company's $45 Million
Notes would continue to maintain their lien on the Exploration Subsidiaries (as
defined in Footnote 14 of the Footnotes to the Consolidated Financials). See
Notes to Consolidated Financial Statements - Footnote 14 for additional
information regarding sale activity.

      During the present evaluation period, the Company has elected to conserve
cash and limit expenditures to only those required to support current
operations. Participation in the development-drilling program was suspended at
the beginning of the third quarter. Non-essential workover operations have
ceased. Escuela 2 drilling operations were suspended on November 1, 2002. The
Company has elected not to continue its participation in both the Cristales and
Rosablanca exploration association contracts.


                         LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL

     As of September 30, 2002, the Company had working capital of $0.9 million.
This amount includes unrestricted cash and cash equivalents of $9.6 million. The
restricted cash balances total $6.0 million and are comprised of the following:
interest escrow - $4.6 million, El Segundo 2-S well partner advances - $1.3
million, Colombian reforestation - $0.1 million. The restricted interest escrow
balance and the El Segundo 2-S well partner advances are offset by current
liabilities. On November 1, 2002, the restricted interest escrow balance of
approximately $4.7 million was released to Chesapeake. During the third quarter
of 2002, working capital decreased by $6.0 million primarily because of Escuela
2 drilling operations. Our only remaining non-discretionary cash commitment for
2002 is limited to the November 15 $6.9 million semi-annual interest payment
on the Senior Notes. The CHK Notes limit additional indebtedness to $1.0
million. Continuing operations for the year must be funded from operational cash
flows.

     During the nine-month periods ending September 30, 2002 and 2001, cash
flows provided by operating activities were $12.7 million and $5.6 million,
respectively.

EQUITY AND FINANCING ACTIVITIES

     As of November 14, 2002, we had 37,939,624 outstanding common shares, par
value of $0.001 per share, of which none are restricted. The Company currently
has no sources of credit other than normal trade payables.


                                       19
<PAGE>

                              RESULTS OF OPERATIONS


THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

     For the three months ended September 30, 2002 (the "Current Quarter"), we
incurred a net loss of $5.5 million or $0.15 per common share. This compares to
a net loss of $1.4 million, or $0.04 per common share during the three months
ended September 30, 2001 (the "Prior Quarter").

     Crude oil sales in the Current Quarter increased by $1.5 million to $6.1
million as compared to the Prior Quarter. The Current Quarter had total sales of
239,000 barrels at an average price of $23.85 per barrel. The Prior Quarter had
total sales of 222,000 barrels at an average price of $18.95 per barrel.

     Oil production in the Current Quarter and Prior Quarter was 269,339
barrels and 297,000 barrels respectively.

     Depletion, depreciation and amortization costs increased by $1.3 million to
$2.6 million in the Current Quarter as compared to $1.3 million in the Prior
Quarter. The $1.3 million increase is primarily attributable to an increase in
depletion rates. The depletion rate increased in the Current Quarter because of
the 66% reduction in proved reserves as of June 30, 2002.

     Oil and gas operating expenses in the Current Quarter and Prior Quarter
were $1.4 million and $1.5 million, respectively.

     General and administrative costs were $0.7 million and $1.1 million for the
Current Quarter and Prior Quarter respectively. The decrease reflects lower
legal expenses and reduced salaries in the Current Quarter over the Prior
Quarter.

     Interest expense increased by $2.9 million to $4.2 million in the Current
Quarter as compared to Prior Quarter. The $2.9 million increase is the result of
$0.6 million of additional interest expense associated with the $45 Million
Notes and $2.3 million related to a reduction in capitalized interest on
unevaluated property costs.

     Other income/expense increased by $0.7 million in the Current Quarter over
the Prior Quarter. The increase was largely attributable to the $0.8 million War
Tax expense recognized in the Current Quarter. See Notes to Consolidated
Financial Statements - Footnote 13 for additional information on the War Tax.

     Income tax expense of $2.1 million was recorded in the Current Quarter
relating to changes in the Company's net deferred tax liability. There was no
income tax expense in the Prior Quarter.

NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

     For the nine-month period ended September 30, 2002 (the "Current Period"),
we incurred a net loss of $113.9 million, or $3.00 per common share, including a
second quarter non-cash impairment of oil and gas properties of $128.2 million
before tax, or $101.2 million net of tax. This compares to a net loss of $3.5
million, or $0.09 per common share during the nine-month period ended September
30, 2001 (the "Prior Period").

     Crude oil sales in the Current Period increased by $10.3 million to $19.6
million as compared to the Prior Period. The Current Period had total sales of
951,398 barrels at an average price of $21.06 per barrel. The Prior Period had
total sales of 458,000 barrels at an average price of $19.68 per barrel. The
effect of the put option settlement during the second quarter 2002 resulted in a
$1.1 million reduction in net income.

     Oil production in the Current Period and Prior Period was 1,004,500 barrels
and 576,000 barrels respectively. The Guaduas-La-Dorada Pipeline was not fully
operational until mid-2001 resulting in less production in the Prior Period over
the Current Period.

     Depletion, depreciation and amortization costs increased by $4.2 million to
$6.9 million in the Current Period as compared to $2.7 million in the Prior
Period. The increase is primarily the result of increased production, the
amortization on the $45 Million Notes, and increased depletion rates due to the
66% reduction in proved reserves as of June 30, 2002

     Oil and gas operating expenses in the Current Period and Prior Period were
$3.7 million and $3.6 million, respectively. The $0.1 million increase is
related to increased production. The Current Period increase of $0.1 million is
disproportionately low relative to


                                       20
<PAGE>

the 74% Current Period increase in oil production. This is caused primarily by
new leasing arrangements for generators and electronic submersible pumps that
were previously treated as operating leases.

     General and administrative costs were $3.0 million and $4.2 million for the
Current Period and Prior Period respectively. The $1.2 million decrease is
largely attributable to significant legal and consulting expenses relating to
the Company's change in domicile from Canada to the Cayman Islands incurred in
the Prior Period, as well as the result of management's cost reduction efforts
in the Current Period.

     Interest expense increased by $8.1 million to $9.7 million in the Current
Period compared to Prior Period. The $8.1 million increase is the result of $3.6
million of additional interest expense associated with the $45 Million Notes,
$4.1 million related to a reduction in capitalized interest on unevaluated
property costs and $0.4 million of imputed interest on warrants.

     Other income/expense increased by $0.5 million in the Current Period over
the Prior Period. The increase was largely attributable to the $0.8 million War
Tax expense recognized in the Current Period. See Notes to Consolidated
Financial Statements - Footnote 13 for additional information on the War Tax.

     Income tax expense of $18.4 million was recognized for the Current Period.
An income tax benefit of $27.0 million was recognized as a result of the
reversal of the deferred tax liability in association with the writedown of oil
and gas property. Approximately $8.6 million in income tax expense was recorded
in the Current Period relating to changes in the Company's net deferred tax
liability. There was no income tax expense in the Prior Period.


                           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.


                                       21
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk, including adverse changes in commodity
prices, interest rates and foreign currency exchange rates as discussed below.
For a more thorough discussion of risks, refer to the Annual Report 10-K for the
year ended December 31, 2001.

COMMODITY RISK

     The market prices for oil and natural gas historically have been volatile
and are likely to continue to be volatile in the future. Oil and natural gas
prices may fluctuate in response to relatively minor changes in supply of and
demand for oil and natural gas, market uncertainty and a variety of additional
factors that are beyond our control. Decreases in oil and natural gas prices
will adversely affect our future revenues, results of operations and cash flows.
Additionally, decreases in oil and natural gas prices may impede our ability to
raise additional capital.


INTEREST RATE RISK

We consider our interest rate risk exposure to be minimal as a result of a fixed
interest rate on the $110 million 12 1/2% Senior Notes and 12% Chesapeake Note
and Series A Notes. We currently have no open interest rate swap agreements.

FOREIGN CURRENCY EXCHANGE RATE RISK

     We conduct business in a foreign currency and are subject to foreign
currency exchange rate risk on cash flows related to certain sales, expenses and
capital expenditures. However, because predominately all transactions in our
existing foreign operations are denominated in U.S. dollars, the U.S. dollar is
the functional currency for all operations.


ITEM 4. CONTROLS AND PROCEDURES.

     Our principal executive officer and principal financial officer have
participated in and supervised the evaluation of Seven Seas' disclosure controls
and procedures that are designed to ensure that information required to be
disclosed by the issuer in the reports it files is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include controls and procedures designed to ensure that the information required
to be disclosed in the reports that it files is accumulated and communicated to
the management, including our principal executive officer or officers and
principal financial officer to allow timely decisions regarding required
disclosure. Based on their evaluation of those controls and procedures as of a
date within 90 days of the date of this filing, our CEO and CFO determined that
the controls and procedures are adequate and effective. The evaluation resulted
in no significant changes in those controls or in other factors that could
significantly affect the controls, and no corrective actions with regard to
significant deficiencies and material weaknesses.


ITEM 6. EXHIBITS & REPORTS ON FORM 8-K

       (a)    Exhibits

              EXHIBIT
              NUMBER                            DESCRIPTION

              (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

              (4)             Instruments Defining the Rights of Security
                              Holders, Including Indentures

                     (A)      Resolution of Board of Directors authorizing
                              Series A Junior Participating Preferred Stock of
                              the Company, incorporated by reference to Exhibit
                              4 in the Company's current report on Form 8-K
                              filed March 19, 2002

                     (B)      Form of Stock Certificate of the Company,
                              incorporated by reference to Exhibit 4(A) in the
                              Company's annual report on Form 10-K for the year
                              ended December 31, 2001


                                       22
<PAGE>

                     (C)      Description of Capital Stock of the Company,
                              incorporated by reference to Exhibit 4(B) in the
                              Company's annual report on Form 10-K for the year
                              ended December 31, 2001

              (10)            Material Contracts

                     (A)      Current Report on Form 8-K. Limited Consent and
                              Second Amendment to Note Purchase and Loan
                              Agreement dated October 31, 2002 among Seven Seas
                              Petroleum Inc., all of the Subsidiaries of Seven
                              Seas Petroleum Inc. and Chesapeake Energy
                              Corporation

              (b) Reports on Form 8-K. The Company filed the following:

              (1)             Current Report on Form 8-K dated July 3, 2002
                              announcing the suspension of further development
                              drilling in the Guaduas Oil Field pending certain
                              reassessments.

              (2)             Current Report on Form 8-K dated July 19, 2002
                              reporting a change in independent public
                              accountants from Arthur Andersen LLP to Deloitte &
                              Touche LLP.

              (3)             Current Report on Form 8-K dated July 24, 2002
                              announcing a re-evaluation of the Guaduas Oil
                              Field's proved reserves resulting in a material
                              downward revision in the Company's net proved
                              reserves of 47.6 million barrels of oil as of
                              December 31, 2001.

              (4)             Current Report on Form 8-K dated August 1, 2002
                              announcing resumption of drilling on the Escuela 2
                              exploration well.

              (5)             Current Report on Form 8-K dated November 1, 2002
                              announcing amendment of Note Purchase and Loan
                              Agreement with Chesapeake Energy Corporation.


SIGNATURES

                                           SEVEN SEAS PETROLEUM INC.




Date: November 19, 2002                By: /s/ Larry A. Ray
                                           -------------------------------------
                                           Larry A. Ray,
                                           President and Chief Operating Officer



                                       By: /s/ Ronald A. Lefaive
                                           -------------------------------------
                                           Ronald A. Lefaive,
                                           Chief Financial Officer and
                                           Vice President-Finance


                                       23
<PAGE>

                           CERTIFICATION FOR FORM 10-Q

I, Robert A. Hefner, III, Chairman and Chief Executive Officer, certify that:


1.   I have reviewed this quarterly report on Form 10-Q Seven Seas Petroleum,
     Inc. (the "registrant");

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

     The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                       Seven Seas Petroleum


Date: November 19, 2002                By: /s/ Robert A. Hefner, III
      -------------------------            -------------------------------------
                                           Robert A. Hefner, III
                                           Chairman and Chief Executive Officer


                                       24
<PAGE>

                           CERTIFICATION FOR FORM 10-Q

I, Ronald A. Lefaive, Chief Financial Officer and Vice President- Finance,
certify that:

1.   I have reviewed this quarterly report on Form 10-Q Seven Seas Petroleum,
     Inc. (the "registrant");

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this quarterly
          report is being prepared;

     (b)  evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented in this quarterly report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

     (a)  all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

     The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                       Seven Seas Petroleum


Date: November 19, 2002                By: /s/ Ronald A. Lefaive
      -------------------------            -------------------------------------
                                           Ronald A. Lefaive
                                           Chief Financial Officer and
                                           Vice President-Finance


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