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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                    FORM 10-Q


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

          For the quarterly period ended September 30, 1997
                                         ------------------
                OR

-----
          TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
-----     EXCHANGE ACT OF 1934
          For the transition period        to       .
                                    ------    ------
          Commission File Number 0-14488



                                  SEITEL, INC.
               (Exact name of registrant as specified in charter)

           DELAWARE                                             76-0025431
           --------                                             ----------
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                            Identification Number)

     50 Briar Hollow Lane
   West Building, 7th Floor
        HOUSTON, TEXAS                                             77027
        --------------                                             -----
     (Address of principal                                      (Zip Code)
      executive offices)

                                 (713) 881-8900
                                 --------------
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
                                 --------------
               Former name, former address and former fiscal year,
                          if changed since last report.

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
                              ----                  ----

As of November 13, 1997 there were  11,076,069  shares of the  Company's  common
stock, par value $.01 per share, outstanding.


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

<PAGE>


                                      INDEX



PART I.     FINANCIAL INFORMATION                                         Page
                                                                        --------

            Item 1.  Financial Statements

            Consolidated Balance Sheets as of
            September 30, 1997 (Unaudited) 
            and December 31, 1996..........................................3

            Consolidated Statements of Operations 
            (Unaudited) for the Three Months Ended 
            September 30, 1997 and 1996....................................4

            Consolidated Statements of Operations 
            (Unaudited) for the Nine Months Ended 
            September 30, 1997 and 1996....................................5

            Consolidated Statements of Stockholders' 
            Equity (Unaudited) for the Nine Months 
            Ended September 30, 1997.......................................6

            Consolidated Statements of Cash Flows 
            (Unaudited) for the Nine Months Ended 
            September 30, 1997 and 1996....................................7

            Notes to Consolidated Interim 
            Financial Statements...........................................9

            Item 2.  Management's Discussion and 
            Analysis of Financial Condition and 
            Results of Operations.........................................11


PART II.    OTHER INFORMATION.............................................15


<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<CAPTION>
                                                                (Unaudited)
                                                                September 30,       December 31,
                                                                    1997                1996
                                                                -------------       -------------
<S>                                                               <C>                 <C>      
ASSETS

   Cash and equivalents                                           $  14,187           $   3,340
   Receivables
     Trade                                                           43,462              52,509
     Notes and other                                                  1,348               6,618
   Net data bank                                                    164,855             126,998
   Net oil and gas properties                                       113,647              86,572
   Net geophysical and other property and equipment                   2,283              14,022
   Investment in affiliate                                           14,840                 914
   Advances to oil and gas operators                                  1,677               1,235
   Prepaid expenses, deferred charges and other assets                2,244               2,471
                                                                  ---------           ---------
TOTAL ASSETS                                                      $ 358,543           $ 294,679
                                                                  =========           =========

LIABILITIES AND STOCKHOLDERS' EQUITY

   Accounts payable and accrued liabilities                       $  51,950           $  25,130
   Income taxes payable                                               3,058                 302
   Debt
     Senior Notes                                                    75,000              75,000
     Term Loans                                                         566               9,025
   Obligations under capital leases                                     106               2,463
   Contingent payables                                                  274                 274
   Deferred income taxes                                             17,567               9,793
   Deferred revenue                                                   7,524              17,051
                                                                  ---------           ---------
TOTAL LIABILITIES                                                   156,045             139,038
                                                                  ---------           ---------

CONTINGENCIES AND COMMITMENTS

STOCKHOLDERS' EQUITY
   Preferred stock, par value $.01 per share; authorized                 --                  --
     5,000,000 shares; none issued
   Common stock, par value $.01 per share;
     authorized 20,000,000 shares; issued
     and outstanding 11,015,730 and 10,362,102 at
     September 30, 1997 and December 31, 1996,
     respectively                                                       110                 104
   Additional paid-in capital                                       121,169             105,544
   Retained earnings                                                 82,369              51,185
   Treasury stock, 409 shares at cost at September
     30, 1997 and December 31, 1996                                      (4)                 (4)
   Notes receivable from officers and employees                      (1,109)             (1,205)
   Cumulative translation adjustment                                    (37)                 17
                                                                  ---------           ---------
TOTAL STOCKHOLDERS' EQUITY                                          202,498             155,641
                                                                  ---------           ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 358,543           $ 294,679
                                                                  =========           =========
</TABLE>

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

<PAGE>


<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<CAPTION>
                                                                      Three Months Ended September 30,
                                                                      --------------------------------
                                                                           1997               1996
                                                                      ------------         -----------

<S>                                                                      <C>                <C>     
REVENUE                                                                  $ 30,793           $ 30,307

EXPENSES:
   Depreciation, depletion and amortization                                12,653             10,824
   Cost of sales                                                            3,382              5,873
   Selling, general and administrative expenses                             5,377              5,187
                                                                         --------           --------
                                                                           21,412             21,884
                                                                         --------           --------

INCOME FROM OPERATIONS                                                      9,381              8,423

Interest expense, net                                                        (691)              (761)
Equity in earnings (loss) of affiliates                                       (58)                 3
Gain on sale of subsidiary stock                                           18,449                 --
Gain on increase in underlying equity of affiliate                         10,750                 --
Extinguishment of volumetric production payment                            (4,133)                --
                                                                         --------           --------

Income before provision for income taxes                                   33,698              7,665

Provision for income taxes                                                 12,002              2,836
                                                                         --------           --------

NET INCOME                                                               $ 21,696           $  4,829
                                                                         ========           ========

Earnings per share:
   Primary                                                               $   1.95           $    .45
                                                                         ========           ========
   Assuming full dilution                                                $   1.94           $    .44
                                                                         ========           ========

Weighted average number of common and common 
   equivalent shares:
   Primary                                                                 11,103             10,825
                                                                         ========           ========
   Assuming full dilution                                                  11,166             10,893
                                                                         ========           ========
</TABLE>


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



<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<CAPTION>
                                                                       Nine Months Ended September 30,
                                                                       -------------------------------
                                                                           1997               1996
                                                                       ------------       ------------

<S>                                                                      <C>                <C>     
REVENUE                                                                  $ 92,685           $ 77,753

EXPENSES:
   Depreciation, depletion and amortization                                34,321             28,981
   Cost of sales                                                           15,813             13,542
   Selling, general and administrative expenses                            16,391             14,036
                                                                         --------           --------
                                                                           66,525             56,559
                                                                         --------           --------

INCOME FROM OPERATIONS                                                     26,160             21,194

Interest expense, net                                                      (2,714)            (2,072)
Equity in earnings (loss) of affiliates                                       (58)                 3
Gain on sale of subsidiary stock                                           18,449                 --
Gain on increase in underlying equity of affiliate                         10,750                 --
Extinguishment of volumetric production payment                            (4,133)                --
                                                                         --------           --------

Income from continuing operations before provision for
   income taxes                                                            48,454             19,125

Provision for income taxes                                                 17,270              7,076
                                                                         --------           --------

Income from continuing operations                                          31,184             12,049

Loss on disposal of discontinued operations, net
   of income tax benefit of $580                                               --               (988)
                                                                         --------           --------

NET INCOME                                                               $ 31,184           $ 11,061
                                                                         ========           ========

Earnings per share:
   Primary
     Income from continuing operations                                   $   2.86           $   1.16
     Loss on disposal of discontinued operations                               --               (.09)
                                                                         --------           --------
     Net income                                                          $   2.86           $   1.07
                                                                         ========           ========
   Assuming full dilution
     Income from continuing operations                                   $   2.82           $   1.12
     Loss on disposal of discontinued operations                               --               (.09)
                                                                         --------           --------
     Net income                                                          $   2.82           $   1.03
                                                                         ========           ========

Weighted average number of common and common
   equivalent shares:
   Primary                                                                 10,911             10,382
                                                                         ========           ========
   Assuming full dilution                                                  11,061             10,705
                                                                         ========           ========
</TABLE>

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

<PAGE>
<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<CAPTION>
                                                                                                                                   
                                                                                                                Notes              
                                                     Common Stock   Additional           Treasury Stock   Receivable   Cumulative
                                                  -----------------   Paid-In  Retained  -------------- from Officers Translation
                                                   Shares    Amount   Capital  Earnings  Shares  Amount  & Employees  Adjustments
                                                  ---------  ------   -------  --------  ------  ------  -----------  -----------

<S>                                               <C>        <C>     <C>       <C>        <C>    <C>       <C>             <C>   
Balance, December 31, 1995                        9,436,854  $  94   $ 85,821  $ 35,936   (414)  $  (4)    $ (1,395)       $ (74)
   Net proceeds from issuance of common stock       578,869      7     11,142         -      5       -            -            -
   Acquisition of equity interest in affiliate      132,075      1      3,499         -      -       -            -            -
   Tax reduction from exercise of stock options           -      -      3,204         -      -       -            -            -
   Conversions and exchanges of subordinated        214,304      2      1,878         -      -       -            -            -
     debentures
   Payments received on notes receivable from
     officers and employees                               -      -          -         -      -       -          190            -
   Foreign currency translation adjustment                -      -          -         -      -       -            -           91
   Net income                                             -      -          -    15,249      -       -            -            -
                                                 ----------   ----    -------   -------   ----    ----      -------         ----
Balance, December 31, 1996                       10,362,102    104    105,544    51,185   (409)     (4)      (1,205)          17
   Net proceeds from issuance of common stock       653,628      6     11,152         -      -       -            -            -
   Tax reduction from exercise of stock options           -      -      4,473         -      -       -            -            -
   Payments received on notes receivable
     from officers and employees                          -      -          -         -      -       -           96            - 
   Foreign currency translation adjustment                -      -          -         -      -       -            -          (54)
   Net income                                             -      -          -    31,184      -       -            -            -
                                                 ----------   ----    -------   -------   ----    ----      -------         ----

Balance, September 30, 1997 (unaudited)          11,015,730  $ 110   $121,169  $ 82,369   (409)  $  (4)    $ (1,109)       $ (37)
                                                 ==========   ====    =======   =======   ====    ====      =======         ====
</TABLE>



                   The accompanying notes are an integral part
                   of these consolidated financial statements.
<PAGE>


<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<CAPTION>
                                                              Nine Months Ended September 30,
                                                              -------------------------------
                                                                 1997                 1996
                                                              ----------           ----------
<S>                                                             <C>                <C>     
Cash flows from operating activities:
   Cash received from customers                                 $ 90,783           $ 75,366
   Proceeds from volumetric production payment                        --             19,000
   Cash paid to suppliers and employees                          (31,378)           (30,590)
   Extinguishment of volumetric production payment               (11,720)                --
   Interest paid                                                  (2,936)            (2,031)
   Interest received                                                 863                810
   Income taxes paid                                                 (40)            (1,500)
                                                                --------           --------
     Net cash provided by operating activities                    45,572             61,055
                                                                --------           --------

Cash flows from investing activities:
   Cash invested in seismic data                                 (42,979)           (28,420)
   Cash invested in oil and gas properties                       (31,189)           (41,215)
   Cash paid to acquire property and equipment                    (8,500)            (8,070)
   Cash from disposal of property and equipment                       28                 59
   Proceeds from sale of stock of subsidiary                      29,723                 --
   Costs related to sale of stock subsidiary                      (5,435)                --
   Cash received from affiliate for advances                       2,094                 --
   Loan made to unconsolidated affiliate                              --             (2,000)
   Cost of investment made in unconsolidated affiliate                --               (109)
   Collections on loans made                                       5,385                208
                                                                --------           --------
     Net cash used in investing activities                       (50,873)           (79,547)
                                                                --------           --------

Cash flows from financing activities:
   Borrowings under line of credit agreements                     41,500                 --
   Principal payments under line of credit                       (41,500)                --
   Borrowings under term loans                                     7,925              7,697
   Principal payments on term loans                               (2,212)            (1,044)
   Principal payments on capital lease obligations                  (811)              (970)
   Proceeds from issuance of senior notes                             --             22,500
   Proceeds from issuance of common stock                         11,164              4,134
   Costs of debt and equity transactions                              (6)              (851)
   Payments on receivables from officers and employees                96                190
                                                                --------           --------
     Net cash provided by financing activities                    16,156             31,656
                                                                --------           --------

Effect of exchange rate changes                                       (8)                81
                                                                --------           --------

Net increase in cash and equivalents                              10,847             13,245

Cash and cash equivalents at beginning of period:
   Continuing operations                                           3,340              6,242
   Discontinued operations                                            --                234
                                                                --------           --------
     Total cash and equivalents at beginning of period             3,340              6,476
                                                                --------           --------

Cash and cash equivalents at end of period:
   Continuing operations                                          14,187             19,721
   Discontinued operations                                            --                 --
                                                                --------           --------
     Total cash and equivalents at end of period                $ 14,187           $ 19,721
                                                                ========           ========
</TABLE>

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


<PAGE>


<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In thousands)
<CAPTION>
                                                                                Nine Months Ended September 30,
                                                                                -------------------------------
                                                                                     1997             1996
                                                                                --------------     ------------
<S>                                                                                 <C>              <C>    
Reconciliation of net income to net cash provided by 
   operating activities:
Net income                                                                          $31,184          $11,061
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Gain on sale of subsidiary stock                                                 (18,449)              --
   Gain on increase in underlying equity of affiliate                               (10,750)              --
   Loss from discontinued operations, net of tax                                         --              988
   Equity in loss (earnings) of affiliate                                                58               (3)
   Depreciation, depletion and amortization                                          35,346           29,713
   Deferred income tax provision                                                      8,635            3,538
   Amortization of deferred revenue                                                  (4,079)          (2,925)
   Discount on note receivable                                                         (198)              --
   Gain on sale of property and equipment                                               (16)             (22)
   Increase in receivables                                                             (778)          (3,000)
   Decrease (increase) in other assets                                               (1,986)             378
   Proceeds from volumetric production payment                                           --           19,000
   Increase in other liabilities                                                      6,605            5,818
                                                                                    -------          -------
     Total adjustments                                                               14,388           53,485

Net cash provided by (used in) operating activities of:
   Continuing operations                                                             45,572           64,546
   Discontinued operations                                                               --           (3,491)
                                                                                    -------          -------
                                                                                    $45,572          $61,055
                                                                                    =======          =======
</TABLE>

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


<PAGE>


                                                                                
SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997

NOTE A-BASIS OF PRESENTATION

         The accompanying  unaudited financial  statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions of Regulation S-X.  Accordingly,  they do
not include all of the  information  and notes  required by  generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Certain reclassifications
have been  made to the  amounts  in the prior  year's  financial  statements  to
conform to the  current  year's  presentation.  Operating  results  for the nine
months ended  September 30, 1997 are not  necessarily  indicative of the results
that  may be  expected  for the year  ending  December  31,  1997.  For  further
information,  refer to the financial  statements  and notes thereto for the year
ended December 31, 1996.

NOTE B-EARNINGS PER SHARE

         Earnings  per  share  is  based  on  the  weighted  average  number  of
outstanding  shares of common stock  during the  respective  periods,  including
common  equivalent  shares  applicable to assumed  exercise of stock options and
warrants  when such common stock  equivalents  are  dilutive,  and the Company's
other potentially dilutive securities.  The following is a reconciliation of the
weighted average number of shares used in the earnings per share computation (in
thousands):
<TABLE>
<CAPTION>
                                               Three Months Ended              Nine Months Ended
                                                 September 30,                   September 30,
                                             ----------------------          ----------------------
                                              1997            1996            1997            1996
                                             ------          ------          ------          ------
<S>                                          <C>              <C>            <C>              <C>  
Primary:
Weighted average shares outstanding          10,829           9,960          10,547           9,717
Common stock equivalents                        274             865             364             665
                                             ------          ------          ------          ------
Weighted average shares used
    for earnings per share                   11,103          10,825          10,911          10,382
                                             ======          ======          ======          ======

Fully Diluted:
Weighted average shares outstanding          10,829           9,960          10,547           9,717
Common stock equivalents                        337             933             514             988
                                             ------          ------          ------          ------
Weighted average shares used
    for earnings per share                   11,166          10,893          11,061          10,705
                                             ======          ======          ======          ======
</TABLE>

         In February 1997,  the Financial  Accounting  Standards  Board ("FASB")
issued Statement of Financial  Accounting Standards ("SFAS") No. 128 - "Earnings
per Share"  effective for interim and annual  periods  after  December 15, 1997.
This statement  replaces primary earnings per share ("EPS") with a newly defined
basic EPS and modifies the computation of diluted EPS. Basic earnings per common
share is computed  by  dividing  net income by the  weighted  average  number of
shares of common  stock  outstanding  during the period.  Diluted  earnings  per
common share is computed by dividing net income by the weighted  average  number
of shares  of  common  stock  during  the  period  plus the  effect of  dilutive
potential  common shares.  If the provisions of SFAS No. 128 had been adopted in
the third quarter of 1997 and 1996,  the pro forma EPS would have been $2.00 and
$2.96 per share  for  basic  and $1.95 and $2.86 per share for  diluted  for the
three-month and nine-month periods ended September 30, 1997,  respectively,  and
$.48 and $1.14 per share for basic and $.45 and $1.07 per share for  diluted for
the three-month and nine-month periods ended September 30, 1996, respectively.



<PAGE>


NOTE C-DATA BANK

         Costs incurred in the creation of proprietary  seismic data,  including
the  direct  and  incremental  costs of  Company  personnel  engaged  in project
management  and design,  are  capitalized.  Seismic data costs are amortized for
each  project  in the  proportion  that  its  revenue  for a period  relates  to
management's  estimate of ultimate  revenue.  Since  inception,  management  has
established guidelines regarding its annual charge for amortization. Under these
guidelines, 90% of the cost incurred in the creation of proprietary seismic data
is amortized within five years of inception for two-dimensional seismic data and
within seven years of inception  for  three-dimensional  seismic  data,  and the
final 10% is amortized  on a  straight-line  basis over the next fifteen  years.
Costs of existing  seismic  data  libraries  purchased  by the Company are fully
amortized  within ten years from date of  purchase.  On a  periodic  basis,  the
carrying value of seismic data is compared to its estimated  future revenue and,
if appropriate, is reduced to its estimated net realizable value.

NOTE D-OIL AND GAS PROPERTIES

         The Company  accounts for its oil and gas  exploration  and  production
activities  using the full-cost  method of  accounting.  Under this method,  all
costs  associated with  acquisition,  exploration and development of oil and gas
reserves,  including  directly related overhead costs and interest costs related
to its unevaluated properties and certain properties under development which are
not  currently  being  amortized,  are  capitalized.  For the nine months  ended
September 30, 1997 and 1996, general and administrative  costs of $1,017,000 and
$800,000, respectively, have been capitalized to oil and gas properties. For the
nine months ended September 30, 1997 and 1996,  interest costs of $1,535,000 and
$1,074,000, respectively, have been capitalized to oil and gas properties.

NOTE E-VOLUMETRIC PRODUCTION PAYMENT

         During the third quarter of 1997, the Company entered into an agreement
to extinguish  its  volumetric  production  payment which was effective  July 1,
1997. The cost to acquire the  production  payment  liability  exceeded its book
value. As a result of this  transaction,  the Company recorded a pre-tax loss of
$4,133,000 in the  accompanying  consolidated  statement of  operations  for the
three and nine months ended September 30, 1997.

NOTE F-USE OF DERIVATIVES

         The  Company  has  a  price  risk  management   program  that  utilizes
derivative financial  instruments,  principally natural gas swaps, to reduce the
price risks associated with fluctuations in natural gas prices.  These financial
instruments are designated as hedges and accounted for on the accrual basis with
gains and losses  being  recognized  based on the type of contract  and exposure
being hedged. Realized gains or losses on natural gas swaps designated as hedges
of anticipated  transactions  related to  anticipated  production are treated as
deferred  credits or charges  and are  included  in other  liabilities  or other
assets  on the  balance  sheet.  Net  gains  and  losses  on  natural  gas swaps
designated as hedges of  anticipated  transactions,  including  accrued gains or
losses upon maturity or termination of the contract, are deferred and recognized
in income when the associated hedged commodities are produced.
         In order for natural gas swaps to qualify as a hedge of an  anticipated
transaction,  the  derivative  contract  must  identify the expected date of the
transaction,  the commodity involved,  and the expected quantity to be purchased
or sold. In the event that a hedged transaction does not occur, future gains and
losses,  including  termination  gains or  losses,  are  included  in the income
statement when incurred.
         In the  statement of cash flows,  cash  receipts or payment  related to
financial  instruments  are classified  consistent  with the cash flows from the
transaction being hedged.

NOTE G-ACCOUNTING FOR SALES OF STOCK BY SUBSIDIARY COMPANIES

         The  Company  recognizes  gains  or  losses  on  sales  of stock by its
subsidiary  companies  when such sales are not made as part of a larger  plan of
corporate  reorganization.  Such gains or losses  are based upon the  difference
between the book value of the Company's investment in the subsidiary immediately
after  the sale  and the  historical  book  value  of the  Company's  investment
immediately prior to the sale.

         On August 11, 1997 and September 5, 1997,  the  Company's  wholly-owned
seismic data acquisition crew subsidiary,  Eagle  Geophysical,  Inc.  ("Eagle"),

<PAGE>

completed an initial public offering of 4,644,000  shares of its common stock to
the public at a price of $17 per share (including 180,000 shares sold by certain
selling  stockholders)  resulting in net proceeds of  $69,208,000 to Eagle after
deducting  offering  related  expenses.  The Company also sold  1,880,000 of its
3,400,000 shares of Eagle common stock in the offering as a selling stockholder.
As a result of the  offering,  the  Company now owns  1,520,000  shares of Eagle
common  stock,  or 17.9% of the  outstanding  shares of Eagle.  In  addition  to
certain  debt  repayments  by  Eagle,  the  Company  received  net  proceeds  of
$29,722,800 from its participation in the offering, resulting in a pre-tax gain,
net of costs,  on the sale of Eagle common stock of  $18,449,000.  Additionally,
the Company  recorded a pre-tax gain, net of costs, of $10,750,000  representing
an increase in the Company's  underlying  equity of Eagle as a result of Eagle's
issuance of stock in connection with the offering.

         In  connection  with the  Eagle  offering,  in May  1997,  the  Company
contributed  its 19%  ownership  interest in Energy  Research  International  to
Eagle.  Contemporaneously with the offering, Eagle acquired the remaining 81% of
Energy  Research  International  in exchange for 600,000  shares of Eagle common
stock.

NOTE H-SUPPLEMENTAL CASH FLOW INFORMATION

     Significant non-cash investing and financing activities are as follows:

     1.   During the first nine months of 1997, the Company recorded an increase
          in the  underlying  equity  of Eagle  of  $13,031,000  as a result  of
          Eagle's issuance of stock in connection with their offering.

     2.   During  the first  nine  months  of 1997,  capital  lease  obligations
          totaling  $374,000 were incurred when the Company  entered into leases
          for property and equipment.

     3.   During the first  nine  months of 1996,  the  Company  issued  214,304
          shares  of its  common  stock  upon the  conversion  and  exchange  of
          $1,989,000  of  its  9%  convertible   subordinated   debentures.   In
          connection  with these  conversions  and exchanges,  unamortized  bond
          issue  costs  totaling  $109,000  during the first nine months of 1996
          were charged to additional paid-in-capital.

     4.   During the first  nine  months of 1996,  the  Company  issued  132,075
          shares of its common stock in exchange for a 50% equity  interest in a
          marine seismic company.


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

OVERVIEW
--------

         The Company's income after taxes, before a gain related to the spin-off
of its seismic crew subsidiary and a charge related to the extinguishment of its
volumetric  production  payment  (see  discussion  below),  was  $5,553,000  and
$15,041,000   for  the  three  and  nine  months  ended   September   30,  1997,
respectively, as compared to income from continuing operations of $4,829,000 and
$12,049,000   for  the  three  and  nine  months  ended   September   30,  1996,
respectively.

         During the third quarter of 1997,  the Company's  wholly-owned  seismic
crew subsidiary, Eagle Geophysical, Inc. ("Eagle"),  completed an initial public
offering of its stock,  leaving the Company  with a 17.9%  equity  ownership  in
Eagle. As a result of this  transaction,  the financial  results of Eagle are no
longer consolidated in the Company's financial  statements  beginning August 11,
1997;  however,  the  Company's  equity  interest  in Eagle is  included  in the
Company's consolidated financial statements.

RESULTS OF OPERATIONS
---------------------

         Total revenue  increased from  $30,307,000  during the third quarter of
1996 to  $30,793,000  during the third  quarter  of 1997.  During the first nine
months total revenue  increased from $77,753,000 in 1996 to $92,685,000 in 1997.
Revenue  primarily  consists of revenue  generated from the marketing of seismic
data,  proprietary  seismic data acquisition (until August 11, 1997) and oil and
gas production.
<PAGE>

         Revenue from the marketing of seismic data increased  from  $17,827,000
during the third quarter of 1996 to $21,955,000 during the third quarter of 1997
and  increased  from  $50,986,000  during  the  first  nine  months  of  1996 to
$57,013,000  during the first nine months of 1997. These increases are primarily
attributable to an increase in demand for high-resolution  seismic data which is
being  used  increasingly  in oil and  gas  development  as well as  exploration
efforts.

         Revenue from the  acquisition of proprietary  seismic data performed by
Eagle was $2,762,000  during the third quarter of 1997 as compared to $6,263,000
during the third quarter of 1996. This decrease is primarily a result of Eagle's
revenue no longer being consolidated with the Company's revenue beginning August
11, 1997, due to the spin-off of Eagle.  Revenue from Eagle was  $16,316,000 for
the nine months ended  September  30, 1997, as compared to  $14,404,000  for the
nine months ended September 30, 1996.

         Oil and gas revenue  was  $6,076,000  during the third  quarter of 1997
compared to $6,217,000  during the third  quarter of 1996.  The 1997 quarter had
higher natural gas  production  and lower crude oil and  condensate  production.
Both  gas and  oil  production  were  affected  by new  wells  not yet  reaching
anticipated  production  rates.  Oil and gas revenue  increased from $12,363,000
during the first nine months of 1996 to $19,356,000 during the first nine months
of 1997. This increase is primarily due to higher production resulting from more
wells  being on line in the 1997  period (124 wells at  September  30,  1997) as
compared to the 1996 period (87 wells at  September  30,  1996).  Net volume and
price information for the Company's oil and gas production for the third quarter
and first nine months of 1997 and 1996 is summarized in the following table:
<TABLE>
<CAPTION>
                                                        Quarter Ended                    Nine Months Ended
                                                        September 30,                      September 30,
                                                 ----------------------------       ----------------------------
                                                     1997           1996                1997           1996
                                                 -------------  -------------       -------------  -------------

<S>                                                   <C>            <C>                 <C>            <C>  
Natural gas volumes (mmcf)                            1,918          1,813               5,551          3,310
Average natural gas price ($/mcf)                     $2.18          $2.13               $2.49          $2.16
Crude oil/condensate volumes (mbbl)                      98            129                 313            261
Average crude oil/condensate price ($/bbl)           $18.27         $17.49              $16.62         $18.91
</TABLE>

         Depreciation,  depletion and  amortization  consists  primarily of data
bank  amortization.  Refer  to  Note  C  for  a  description  of  the  Company's
amortization policy. Data bank amortization increased from $8,220,000 during the
third  quarter  of 1996 to  $9,268,000  during  the  third  quarter  of 1997 and
decreased from  $23,708,000 to $23,452,000 for the first nine months of 1996 and
1997, respectively. As a percentage of revenue from licensing seismic data, data
bank  amortization  was 47% and 43% for the  third  quarters  of 1996 and  1997,
respectively,  and 48% and 42% for the  first  nine  months  of 1996  and  1997,
respectively.  These  changes are primarily due to the mix of sales of 2D and 3D
data amortized at varying  percentages  based on each data program's current and
expected  future  revenue  stream.  The  remaining  depreciation,  depletion and
amortization  of $2,604,000  and  $3,385,000  for the third quarters of 1996 and
1997, respectively,  and $5,273,000 and $10,869,000 for the first nine months of
1996 and 1997, respectively,  relates to depletion of oil and gas property costs
and depreciation of fixed assets.  The increases  between the periods are due to
increased oil and gas production and property and equipment additions.

         Cost of sales consists of expenses  associated  with the acquisition of
seismic data for non-affiliated  parties through August 11, 1997, seismic resale
support  services,  and oil and gas  production.  Cost of sales  decreased  from
$5,873,000 to $3,382,000 for the third quarters of 1996 and 1997,  respectively,
and increased from  $13,542,000 to $15,813,000 for the first nine months of 1996
and  1997,  respectively.  These  fluctuations  are  due  to  the  corresponding
fluctuation  in revenue from these areas  primarily  due to the Eagle  spin-off.
Revenue from these areas  decreased from  $12,511,000  to $9,046,000  during the
third quarters of 1996 and 1997, respectively, and increased from $27,547,000 to
$35,582,000 during the first nine months of 1996 and 1997, respectively.

         The Company's selling,  general and  administrative  expenses increased
during the 1997 periods as compared to the 1996 periods primarily as a result of
variable  expenses related to the increased volume of business.  As a percentage
of total  revenue,  these  expenses were 17% for the third  quarters of 1996 and
1997, and were 18% for the first nine months of 1996 and 1997.
<PAGE>

         Net interest  expense  increased from $2,072,000  during the first nine
months of 1996 to $2,714,000  during the first nine months of 1997 primarily due
to  borrowings  made under the Company's  revolving  line of credit during 1997.
Additionally,  $75 million was outstanding on the Company's Senior Notes for all
of the first nine months of 1997, whereas in 1996, $52.5 million was outstanding
until April 9, 1996 when the amount increased to $75 million.

         On August 11,  1997 and  September  5, 1997,  Eagle  Geophysical,  Inc.
completed an initial  public  offering of  4,644,000  shares of its common stock
(including  180,000 shares sold by certain  selling  stockholders).  The Company
also  sold  1,880,000  of its  3,400,000  shares  of Eagle  common  stock in the
offering as a selling stockholder.  As a result of the offering, the Company now
owns 1,520,000 shares of Eagle common stock, or 17.9% of the outstanding  shares
of  Eagle.   The  Company   received  net  proceeds  of  $29,722,800   from  its
participation in the offering, resulting in a pre-tax gain, net of costs, on the
sale of Eagle common stock of $18,449,000  Additionally,  the Company recorded a
pre-tax  gain,  net of costs,  of  $10,750,000  representing  an increase in the
Company's underlying equity of Eagle as a result of Eagle's issuance of stock in
connection with the offering. The Company's equity interest in Eagle amounted to
a loss of $58,000 for the period from August 11, 1997 to September 30, 1997.

         During the third quarter of 1997, the Company entered into an agreement
to extinguish  its  volumetric  production  payment which was effective  July 1,
1997. The cost to acquire the  production  payment  liability  exceeded its book
value. As a result of this  transaction,  the Company recorded a pre-tax loss of
$4,133,000 for the three and nine months ended September 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

         As a result of its sale of  1,880,000  shares of Eagle  common stock on
August 11, 1997 (see above),  the Company  received net proceeds of $29,722,800.
The value of the Company's  remaining  equity  interest in Eagle is $30,020,000,
based on 1,520,000  shares at the September 30, 1997 closing price of $19.75 per
share as  quoted  by  NASDAQ.  These  shares  are  subject  to  certain  trading
restrictions.

         Because Eagle is no longer  consolidated in the Company's  consolidated
financial  statements,  the amount of the Company's term loans  ($14,889,000  at
June 30, 1997) was reduced to $516,000 as of November  13, 1997,  and the amount
of the Company's  capital lease  obligations  ($2,465,000  at June 30, 1997) was
reduced to $95,000 as of November 13, 1997. The Company also received  repayment
of debts owed directly to it by Eagle, plus advances, amounting to $2,094,000.

         From July 1995 to April 1997,  the Company and two of its  wholly-owned
subsidiaries  obtained four separate three-year term loans totaling  $1,077,000.
Two of the loans bear  interest  at the rate of  8.413%,  and two at the rate of
7.9%. The proceeds were used for the purchase of certain  property and equipment
which  secures  the  debt.   Monthly   principal  and  interest  payments  total
approximately  $34,000.  The balance  outstanding  on the loans at November  13,
1997, was $516,000.

         During 1994, the Company entered into a five year capital lease for the
purchase of seismic data processing  equipment.  Monthly  principal and interest
payments total approximately  $6,000. The balance outstanding under this capital
lease obligation was $95,000 at November 13, 1997.

         On December  28,  1995,  the Company  completed a private  placement of
three  series of  unsecured  Senior  Notes  totaling  $75  million.  The Company
contemporaneously  issued  its Series A Notes and  Series B Notes,  which  total
$52.5 million and bear interest at a fixed rate of 7.17%.  On April 9, 1996, the
Company  issued its Series C Notes,  which total $22.5 million and bear interest
at a fixed rate of 7.48%.  The Series A Notes mature on December  30, 2001,  and
require annual principal payments of $8.333 million beginning December 30, 1999.
The  Series B and  Series C Notes  mature on  December  30,  2002,  and  require
combined annual principal  payments of $10 million beginning  December 30, 1998.
Interest  on all  series of the notes is  payable  semi-annually  on June 30 and
December 30.

         The  Company  filed a  registration  statement  on Form S-3 (the "Shelf
Registration  Statement") in June 1994 to offer from time to time in one or more
series (i) unsecured debt securities, which may be senior or subordinated,  (ii)

<PAGE>

preferred  stock,  par value $0.01 per share,  and (iii) common stock, par value
$.01 per share,  or any  combination of the foregoing,  at an aggregate  initial
offering price not to exceed $75,000,000.  The Shelf Registration  Statement was
declared  effective by the Securities and Exchange  Commission on June 30, 1994.
In August 1994, the Company  completed a public offering of 1,061,200  shares of
its common  stock  priced at $32 per share  pursuant  to the Shelf  Registration
Statement. The net proceeds from the offering (after underwriting commission and
offering  expenses) totaled  $31,917,000.  After this sale of common stock at an
initial  aggregate  offering  price  of  $33,958,400,   the  Company  may  offer
additional  securities  in the future for up to an  aggregate  initial  offering
price of $41,041,600 pursuant to the Shelf Registration Statement.

         On May  1,  1997,  the  Company  increased  its  $25,000,000  unsecured
revolving line of credit facility to $50,000,000. The facility bears interest at
a rate  determined  by the  ratio  of the  Company's  debt  to  cash  flow  from
operations. Pursuant to the interest rate pricing structure, funds can currently
be borrowed at LIBOR plus 3/4%, the bank's  prevailing prime rate, or the sum of
the Federal Funds effective rate for such day plus 1/2%. The facility matures on
July 22, 1999. As of November 13, 1997, the balance outstanding on the revolving
line of credit amounted to $500,000 bearing an interest rate of 8.5%.

         In  June  1996,  a  wholly-owned  subsidiary  of  the  Company  sold  a
volumetric  production payment for $19 million to certain limited  partnerships.
During the third quarter of 1997,  the  subsidiary  extinguished  its volumetric
production payment at a cost of $12,684,000.

         From January 1, 1997 through  November 13, 1997,  the Company  received
$12,973,000 from the exercise of common stock purchase  warrants and options and
the Company's  401(k) stock purchases.  In connection with these exercises,  the
Company will also receive approximately $4,826,000 in tax savings.

         In February 1996, the Company called for the March 31, 1996  redemption
of  its 9%  convertible  subordinated  debentures,  thereby  eliminating  future
interest  and  sinking  fund  payments.  All  remaining  outstanding  debentures
converted to common stock.

         During the nine months of 1997,  gross seismic data bank  additions and
capitalized  oil  and  gas   exploration  and  development   costs  amounted  to
$61,256,000 and $36,309,000 respectively. These capital expenditures, as well as
bank debt repayment,  taxes,  interest  expenses,  cost of sales and general and
administrative  expenses,  were  funded by  operations,  the sale of Eagle stock
discussed  above,  and  proceeds  received  from the  exercise  of common  stock
purchase warrants and options.

         Currently,   the  Company  anticipates  capital  expenditures  for  the
remainder of 1997 to total approximately $32 million.  Such expenditures include
approximately  $24 million for the creation of  proprietary  seismic  data,  and
approximately  $8 million for oil and gas exploration  and development  efforts.
The Company believes its current cash balances,  revenues from operating sources
and proceeds  from the exercise of common stock  purchase  warrants and options,
combined with its available  revolving  line of credit,  should be sufficient to
fund the  remaining  1997  capital  expenditures,  along with  expenditures  for
operating and general and  administrative  expenses.  Additionally,  the Company
could arrange for additional debt or equity financing;  however, there can be no
assurance  that the Company would be able to accomplish  any such debt or equity
financing on terms satisfactory to it.

Information Regarding Forward Looking Statements

         This Quarterly Report on Form 10-Q includes forward looking  statements
within the meaning of Section 27A of the  Securities Act of 1933 and Section 21E
of the Securities  Exchange Act of 1934.  Although the Company believes that its
expectations are based on reasonable assumptions,  it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ  materially from those in the forward looking  statements herein include,
but are not  limited to,  changes in the  exploration  budgets of the  Company's
seismic data and related  services  customers,  actual  customer  demand for the
Company's seismic data and related services, the extent of the Company's success
in acquiring oil and gas properties and in discovering, developing and producing
reserves,  the timing and extent of changes in commodity prices for natural gas,
crude oil and  condensate  and natural gas liquids and conditions in the capital
markets and equity  markets  during the periods  covered by the forward  looking
statements.
<PAGE>


                           PART II - OTHER INFORMATION


Items 1., 2., 3., 4., and 5. Not applicable.

Item 6.  Exhibits and Reports on Form 8-K.

(a)      Not applicable.

(b)      Reports on Form 8-K

         The  Registrant  filed  a Form  8-K on  June 3,  1997,  disclosing  the
         offering of stock of Eagle Geophysical, Inc., a wholly-owned subsidiary
         of the Registrant, in an initial public offering.



<PAGE>



                                   SIGNATURES


     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                             SEITEL, INC.




Dated:  November 13, 1997                    /s/ Paul A. Frame
                                             -----------------------------------
                                             Paul A. Frame
                                             President




Dated:  November 13, 1997                    /s/ Debra D. Valice
                                             -----------------------------------
                                             Debra D. Valice
                                             Chief Financial Officer




Dated:  November 13, 1997                    /s/ Marcia H. Kendrick
                                             -----------------------------------
                                             Marcia H. Kendrick
                                             Chief Accounting Officer