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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended March 31, 2010

OR



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

Commission File Number: 333-144844





SEITEL, INC.

(Exact name of registrant as specified in its charter)







|                                                                  |  |                                    
|----------------------------------------------------------------- |  | -----------------------------------
|Delaware                                                          |  | 76-0025431                         
|(State or other jurisdiction ofincorporation or organization)     |  | (I.R.S. EmployerIdentification No.)
|                                                                  | 
|10811 S. Westview Circle DriveBuilding C, Suite 100Houston, Texas |  | 77043                              
|(Address of principal executive offices)                          |  | (Zip Code)                         

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





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 by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).

Yes   ̈            
No   ̈

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of
the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ̈            
No  x

As of May 7, 2010, there were 100 shares of the
Companys common stock outstanding, par value $.001 per share.









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INDEX



|         |  |                       |  |                                                                                       |  |     
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                       |  |                                                                                       |  | Page
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                      
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                  |  | 3   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Balance Sheets (Unaudited)                                     |  | 3   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Operations (Unaudited)                           |  | 4   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Comprehensive Loss (Unaudited)                   |  | 5   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statement of Stockholders Equity (Unaudited)                  |  | 6   
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Cash Flows (Unaudited)                           |  | 7   
|         |  |                       | 
|         |  |                       |  | Notes to Condensed Consolidated Interim Financial Statements (Unaudited)              |  | 8   
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 24  
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 31  
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                               |  | 31  
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                      
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                     |  | 32  
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                          |  | 32  
|         |  |                       | 
|         |  | Item 2.               |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 32  
|         |  |                       | 
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 32  
|         |  |                       | 
|         |  | Item 5.               |  | Other Information                                                                     |  | 32  
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                              |  | 32  
|         |  |                      
|         |  | Signatures            |  | 33                                                                                   



2



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PART I - FINANCIAL INFORMATION



|Item 1. | FINANCIAL STATEMENTS
|------- | --------------------

SEITEL, INC. AND SUBSIDIARIES CONDENSED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                                                                                                               |  |                          |          |   |                  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                               |  | (Unaudited)March 31,2010 |          |   | December 31,2009 |  
|ASSETS                                                                                                                         |  |                          |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                      |  | $                        | 26,569   |   |                  | $ | 26,270   |  
|Receivables                                                                                                                    |  |                          |          |   |                  |   |          |  
|Trade, net of allowance for doubtful accounts of $1,110 and $1,108, respectively                                               |  |                          | 22,079   |   |                  |   | 29,498   |  
|Notes and other                                                                                                                |  |                          | 214      |   |                  |   | 286      |  
|Due from Seitel Holdings, Inc.                                                                                                 |  |                          | 149      |   |                  |   | 147      |  
|Net seismic data library, net of accumulated amortization of $486,822 and $446,037, respectively                               |  |                          | 177,084  |   |                  |   | 200,389  |  
|Net property and equipment, net of accumulated depreciation and amortization of $7,973 and $7,290, respectively                |  |                          | 6,596    |   |                  |   | 7,003    |  
|Investment in marketable securities                                                                                            |  |                          | 4,148    |   |                  |   | 3,173    |  
|Prepaid expenses, deferred charges and other                                                                                   |  |                          | 13,523   |   |                  |   | 13,426   |  
|Intangible assets, net of accumulated amortization of $19,024 and $17,276, respectively                                        |  |                          | 37,380   |   |                  |   | 38,440   |  
|Goodwill                                                                                                                       |  |                          | 205,974  |   |                  |   | 203,060  |  
|Deferred income taxes                                                                                                          |  |                          | 327      |   |                  |   | 327      |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|TOTAL ASSETS                                                                                                                   |  | $                        | 494,043  |   |                  | $ | 522,019  |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                           |  |                          |          |   |                  |   |          |  
|LIABILITIES                                                                                                                    |  |                          |          |   |                  |   |          |  
|Accounts payable and accrued liabilities                                                                                       |  | $                        | 27,071   |   |                  | $ | 37,077   |  
|Income taxes payable                                                                                                           |  |                          | 41       |   |                  |   | 9        |  
|Debt                                                                                                                           |  |                          |          |   |                  |   |          |  
|Senior Notes                                                                                                                   |  |                          | 402,130  |   |                  |   | 402,154  |  
|Notes payable                                                                                                                  |  |                          | 195      |   |                  |   | 208      |  
|Obligations under capital leases                                                                                               |  |                          | 3,437    |   |                  |   | 3,370    |  
|Deferred revenue                                                                                                               |  |                          | 25,607   |   |                  |   | 26,722   |  
|Deferred income taxes                                                                                                          |  |                          | 5,683    |   |                  |   | 6,118    |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|TOTAL LIABILITIES                                                                                                              |  |                          | 464,164  |   |                  |   | 475,658  |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|COMMITMENTS AND CONTINGENCIES                                                                                                  |  |                          |          |   |                  |   |          |  
|STOCKHOLDERS EQUITY                                                                                                           |  |                          |          |   |                  |   |          |  
|Common stock, par value $.001 per share; 100 shares authorized, issued and outstanding at March 31, 2010 and
December 31, 2009 |  |                          |         |   |                  |   |         |  
|Additional paid-in capital                                                                                                     |  |                          | 274,862  |   |                  |   | 274,331  |  
|Retained deficit                                                                                                               |  |                          | (270,226 | ) |                  |   | (247,984 | )
|Accumulated other comprehensive income                                                                                         |  |                          | 25,243   |   |                  |   | 20,014   |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                     |  |                          | 29,879   |   |                  |   | 46,361   |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                     |  | $                        | 494,043  |   |                  | $ | 522,019  |  
|                                                                                                                               |  |                          |          |   |                  |   |          |  

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



3



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands)



|                                         |  |                             |         |   |      |   |         |  
|---------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                         |  | Three Months EndedMarch 31, |        
|                                         |  | 2010                        |         |   | 2009 |  
|REVENUE                                  |  | $                           | 32,376  |   |      | $ | 34,722  |  
|EXPENSES:                                |  |                             |         |   |      |   |         |  
|Depreciation and amortization            |  |                             | 38,656  |   |      |   | 39,174  |  
|Cost of sales                            |  |                             | 37      |   |      |   | 14      |  
|Selling, general and administrative      |  |                             | 6,516   |   |      |   | 8,260   |  
|                                         |  |                             |         |   |      |   |         |  
|                                         |  |                             | 45,209  |   |      |   | 47,448  |  
|                                         |  |                             |         |   |      |   |         |  
|LOSS FROM OPERATIONS                     |  |                             | (12,833 | ) |      |   | (12,726 | )
|Interest expense, net                    |  |                             | (10,149 | ) |      |   | (10,116 | )
|Foreign currency exchange gains (losses) |  |                             | 208     |   |      |   | (243    | )
|Gain on sale of marketable securities    |  |                             | 52      |   |      |   |        |  
|Other income                             |  |                             | 55      |   |      |   | 31      |  
|                                         |  |                             |         |   |      |   |         |  
|Loss before income taxes                 |  |                             | (22,667 | ) |      |   | (23,054 | )
|Benefit for income taxes                 |  |                             | (425    | ) |      |   | (562    | )
|                                         |  |                             |         |   |      |   |         |  
|NET LOSS                                 |  | $                           | (22,242 | ) |      | $ | (22,492 | )
|                                         |  |                             |         |   |      |   |         |  

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



4



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Unaudited)

(In thousands)



|                                                                          |  |      |         |   |      |   |         |  
|------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                          |  | 2010 |         |   | 2009 |  
|Net loss                                                                  |  | $    | (22,242 | ) |      | $ | (22,492 | )
|Unrealized gain on securities held as available for sale, net of tax:     |  |      |         |   |      |   |         |  
|Unrealized net holding gain arising during the period                     |  |      | 1,027   |   |      |   | 117     |  
|Less: Reclassification adjustment for realized gains included in earnings |  |      | (52     | ) |      |   |        |  
|Foreign currency translation adjustments                                  |  |      | 4,254   |   |      |   | (4,335  | )
|                                                                          |  |      |         |   |      |   |         |  
|Comprehensive loss                                                        |  | $    | (17,013 | ) |      | $ | (26,710 | )
|                                                                          |  |      |         |   |      |   |         |  

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



5



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY(Unaudited)

(In thousands, except share amounts)



|                                                                                                         |  |              |  |                          |   |                 |   |         |                                     |   |          |   |  |   |        |  
|-------------------------------------------------------------------------------------------------------- |  | ------------ |  | ------------------------ | - | --------------- | - | ------- | ----------------------------------- | - | -------- | - |  | - | ------ | -
|                                                                                                         |  | Common Stock |  | AdditionalPaid-InCapital |   | RetainedDeficit |   |         | AccumulatedOtherComprehensiveIncome |  
|                                                                                                         |  |              |  |                         
|                                                                                                         |  |              |  |                         
|                                                                                                         |  | Shares       |  | Amount                   |   |                 |  
|Balance, December 31, 2009                                                                               |  | 100          |  | $                        |  |                 | $ | 274,331 |                                     | $ | (247,984 | ) |  | $ | 20,014 |  
|Amortization of stock-based compensation costs                                                           |  |             |  |                          |  |                 |   | 531     |                                     |   |         |   |  |   |       |  
|Net loss                                                                                                 |  |             |  |                          |  |                 |   |        |                                     |   | (22,242  | ) |  |   |       |  
|Foreign currency translation adjustments                                                                 |  |             |  |                          |  |                 |   |        |                                     |   |         |   |  |   | 4,254  |  
|Unrealized gain on marketable securities, net of tax                                                     |  |             |  |                          |  |                 |   |        |                                     |   |         |   |  |   | 1,027  |  
|Reclassification adjustment for realized gains on marketable securities included in earnings, net of tax |  |             |  |                          |  |                 |   |        |                                     |   |         |   |  |   | (52    | )
|                                                                                                         |  |              |  |                          |   |                 |   |         |                                     |   |          |   |  |   |        |  
|Balance, March 31, 2010                                                                                  |  | 100          |  | $                        |  |                 | $ | 274,862 |                                     | $ | (270,226 | ) |  | $ | 25,243 |  
|                                                                                                         |  |              |  |                          |   |                 |   |         |                                     |   |          |   |  |   |        |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

(In thousands)



|                                                                         |  |                             |         |   |      |   |         |  
|------------------------------------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                         |  | Three Months EndedMarch 31, |        
|                                                                         |  | 2010                        |         |   | 2009 |  
|Cash flows from operating activities:                                    |  |                             |         |   |      |   |         |  
|Reconciliation of net loss to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Net loss                                                                 |  | $                           | (22,242 | ) |      | $ | (22,492 | )
|Depreciation and amortization                                            |  |                             | 38,656  |   |      |   | 39,174  |  
|Deferred income tax benefit                                              |  |                             | (457    | ) |      |   | (811    | )
|Amortization of deferred financing costs                                 |  |                             | 421     |   |      |   | 434     |  
|Amortization of debt premium                                             |  |                             | (24     | ) |      |   | (23     | )
|Amortization of stock-based compensation                                 |  |                             | 531     |   |      |   | 1,284   |  
|Amortization of favorable facility lease                                 |  |                             | 69      |   |      |   | 57      |  
|Allowance for collection of trade receivables                            |  |                             |        |   |      |   | 152     |  
|Non-cash revenue                                                         |  |                             | (1,728  | ) |      |   | (1,701  | )
|Gain on sale of marketable securities                                    |  |                             | (52     | ) |      |   |        |  
|Loss on sale of subsidiary                                               |  |                             |        |   |      |   | 19      |  
|Decrease in receivables                                                  |  |                             | 7,607   |   |      |   | 23,286  |  
|Decrease in other assets                                                 |  |                             | 42      |   |      |   | 449     |  
|Decrease in deferred revenue                                             |  |                             | (2,163  | ) |      |   | (13,007 | )
|Decrease in accounts payable and other liabilities                       |  |                             | (11,269 | ) |      |   | (11,883 | )
|                                                                         |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                |  |                             | 9,391   |   |      |   | 14,938  |  
|                                                                         |  |                             |         |   |      |   |         |  
|Cash flows from investing activities:                                    |  |                             |         |   |      |   |         |  
|Cash invested in seismic data                                            |  |                             | (8,981  | ) |      |   | (15,308 | )
|Cash paid to acquire property, equipment and other                       |  |                             | (38     | ) |      |   | (108    | )
|Net proceeds from sale of marketable securities                          |  |                             | 52      |   |      |   |        |  
|Advances to Seitel Holdings, Inc.                                        |  |                             | (2      | ) |      |   | (4      | )
|Cash transferred upon sale of subsidiary                                 |  |                             |        |   |      |   | (22     | )
|                                                                         |  |                             |         |   |      |   |         |  
|Net cash used in investing activities                                    |  |                             | (8,969  | ) |      |   | (15,442 | )
|                                                                         |  |                             |         |   |      |   |         |  
|Cash flows from financing activities:                                    |  |                             |         |   |      |   |         |  
|Principal payments on notes payable                                      |  |                             | (13     | ) |      |   | (11     | )
|Principal payments on capital lease obligations                          |  |                             | (35     | ) |      |   | (28     | )
|Payment of financing fees                                                |  |                             | (65     | ) |      |   |        |  
|                                                                         |  |                             |         |   |      |   |         |  
|Net cash used in financing activities                                    |  |                             | (113    | ) |      |   | (39     | )
|                                                                         |  |                             |         |   |      |   |         |  
|Effect of exchange rate changes                                          |  |                             | (10     | ) |      |   | 54      |  
|                                                                         |  |                             |         |   |      |   |         |  
|Net increase (decrease) in cash and equivalents                          |  |                             | 299     |   |      |   | (489    | )
|Cash and cash equivalents at beginning of period                         |  |                             | 26,270  |   |      |   | 42,678  |  
|                                                                         |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                               |  | $                           | 26,569  |   |      | $ | 42,189  |  
|                                                                         |  |                             |         |   |      |   |         |  
|Supplemental disclosure of cash flow information:                        |  |                             |         |   |      |   |         |  
|Cash paid during the period for:                                         |  |                             |         |   |      |   |         |  
|Interest                                                                 |  | $                           | 19,644  |   |      | $ | 19,670  |  
|Supplemental schedule of non-cash investing activities:                  |  |                             |         |   |      |   |         |  
|Additions to seismic data library                                        |  | $                           | 1,952   |   |      | $ | 1,731   |  

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



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SEITEL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS(Unaudited)

March 31, 2010

NOTE A-BASIS OF
PRESENTATION

The accompanying condensed consolidated financial statements of Seitel, Inc. and its subsidiaries (the
Company) 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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have
been included. In preparing the Companys financial statements, a number of estimates and assumptions are made by management that affect the accounting for and recognition of assets, liabilities, revenues and expenses. Operating results for the
three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for any other quarter of 2010 or for the year ending December 31, 2010. The condensed consolidated balance sheet of the Company as of
December 31, 2009 has been derived from the audited balance sheet of the Company as of that date. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2009.

NOTE B-REVENUE RECOGNITION

Revenue from Data Acquisition

The Company generates revenue when it creates a new seismic survey that is initially licensed by one or more of its customers to use the
resulting data. The initial licenses usually provide the customer with a limited exclusivity period, which lasts for a relatively short period of time after final delivery of the processed data. The payments for the initial exclusive licenses are
sometimes referred to as underwriting or prefunding. Customers make periodic payments throughout the creation period, which generally correspond to costs incurred and work performed. These payments are non-refundable.

Revenue from the creation of new seismic data is recognized throughout the creation period using the proportional performance method
based upon costs incurred and work performed to date as a percentage of total estimated costs and work required. Management believes that this method is the most reliable and representative measure of progress for its data creation projects. The
duration of most data creation projects is generally less than one year. Under these contracts, the Company creates new seismic data designed in conjunction with its customers and specifically suited to the geology of the area using the most
appropriate technology available.

The Company outsources the substantial majority of the work required to complete data
acquisition projects to third party contractors. The Companys payments to these third party contractors comprise the substantial majority of the total estimated costs of the project and are paid throughout the creation period. A typical survey
includes specific activities required to complete the survey, each of which has value to the customers. Typical activities, that often occur concurrently, include:



| |  |  | permitting for land access, mineral rights, and regulatory approval;
| | - |  | --------------------------------------------------------------------



| |  |  | surveying;
| | - |  | ----------



| |  |  | drilling for the placement of energy sources;
| | - |  | ---------------------------------------------



| |  |  | recording the data in the field; and
| | - |  | ------------------------------------



| |  |  | processing the data.
| | - |  | --------------------

The customers paying for the initial exclusive licenses receive legally enforceable rights to any resulting product of each activity
described above. The customers also receive access to and use of the newly acquired, processed data.

The customers
access to and use of the results of the work performed and of the newly acquired, processed data is governed by a license agreement, which is a separate agreement from the acquisition contract. The Companys acquisition contracts require the
customer either to have a license agreement in place or to execute one at the time the acquisition contract is signed. The Company maintains sole ownership of the newly acquired data, which is added to its library, and is free to license the data to
other customers when the original customers exclusivity period ends.



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Revenue from Non-Exclusive Data Licenses

The Company recognizes a substantial portion of its revenue from data licenses sold after any exclusive license period. These are
sometimes referred to as resale licensing revenue, post acquisition license sales or shelf sales.

These sales fall under the
following four basic forms of non-exclusive license contracts.



| |  |  | Specific license contract - The customer licenses and selects data from the data library at the time the contract is entered into and holds this
license for a long-term period.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Library card license contract - The customer initially receives only access to data. The customer may then select specific data, from the collection
of data to which it has access, to hold long-term under its license agreement. The length of the selection periods under the library card contracts is limited in time and varies from customer to customer.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Review and possession license contract - The customer obtains the right to review a certain quantity of data for a limited period of time. During
the review period, the customer may select specific data from that available for review to hold long-term under its license agreement. Any data not selected for long-term licensing must be returned to the Company at the end of the review period.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Review only license contract - The customer obtains rights to review a certain quantity of data for a limited period of time, but does not obtain
the right to select specific data to hold long-term.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys non-exclusive license contracts
specify the following:



| |  |  | that all customers must also execute a master license agreement that governs the use of all data received under the Companys non-exclusive
license contracts;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the specific payment terms, generally ranging from 30 days to 12 months, and that such payments are non-cancelable and non-refundable;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the actual data that is accessible to the customer; and
| | - |  | -------------------------------------------------------



| |  |  | that the data is licensed in its present form, where is and as is and the Company is under no obligation to make any enhancements, modifications or
additions to the data unless specific terms to the contrary are included.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue from the non-exclusive
licensing of seismic data is recognized when the following criteria are met:



| |  |  | the Company has an arrangement with the customer that is validated by a signed contract;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the sales price is fixed and determinable;
| | - |  | ------------------------------------------



| |  |  | collection is reasonably assured;
| | - |  | ---------------------------------



| |  |  | the customer has selected the specific data or the contract has expired without full selection;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | the data is currently available for delivery; and
| | - |  | -------------------------------------------------



| |  |  | the license term has begun.
| | - |  | ---------------------------

Copies of the data are available to the customer immediately upon request.

For licenses that have been invoiced for which payment is due or has been received, but have not met the aforementioned criteria, the
revenue is deferred along with the related direct costs (primarily sales commissions). This normally occurs under the library card, review and possession or review only license contracts because the data selection may occur over time. Additionally,
if the contract allows licensing of data that is not currently available or enhancements, modifications or additions to the data are required per the contract, revenue is deferred until such time that the data is available.



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Revenue from Non-Monetary Exchanges

In certain cases, the Company will take ownership of a customers seismic data or revenue interest (collectively referred to as
data) in exchange for a non-exclusive license to selected seismic data from the Companys library. In connection with specific data acquisition contracts, the Company may choose to receive both cash and ownership of seismic data
from the customer as consideration for the underwriting of new data acquisition. In addition, the Company may receive advanced data processing services on selected existing data in exchange for a non-exclusive license to selected data from the
Companys library. These exchanges are referred to as non-monetary exchanges. A non-monetary exchange for data always complies with the following criteria:



| |  |  | the data license delivered is always distinct from the data received;
| | - |  | ---------------------------------------------------------------------



| |  |  | the customer forfeits ownership of its data; and
| | - |  | ------------------------------------------------



| |  |  | the Company retains ownership in its data.
| | - |  | ------------------------------------------

In non-monetary exchange transactions, the Company records a data library asset for the seismic data received or processed at the time
the contract is entered into or the data is completed, as applicable, and recognizes revenue on the transaction in equal value in accordance with its policy on revenue from data licenses, which is, when the data is selected by the customer, or
revenue from data acquisition, as applicable. The data license to the customer is in the form of one of the four basic forms of contracts discussed above. These transactions are valued at the fair value of the data received or delivered, whichever
is more readily determinable.

Fair value of the data exchanged is determined using a multi-step process as follows:



| |  |  | First, the Company considers the value of the data or services received from the customer. In determining the value of the data received, the
Company considers the age, quality, current demand and future marketability of the data and, in the case of 3D seismic data, the cost that would be required to create the data. In addition, the Company applies a limitation on the value it assigns
per square mile on the data received. In determining the value of the services received, the Company considers the cost of such similar services that it could obtain from a third party provider.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, the Company determines the value of the license granted to the customer. Typically, the range of cash transactions by the Company for
licenses of similar data during the prior six months are evaluated. In evaluating the range of cash transactions, the Company does not consider transactions that are disproportionately high or low.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, the Company obtains concurrence from an independent third party on the portfolio of all non-monetary exchanges for data of $750,000 or more
in order to support the Companys valuation of the data received. The Company obtains this concurrence on an annual basis, usually in connection with the preparation of its annual financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to the Companys revenue recognition policies, revenue recognized on non-monetary exchange transactions may not occur at the
same time the seismic data acquired is recorded as an asset. The activity related to non-monetary exchanges was as follows (in thousands):



|                                                                    |  |                             |       |      |   |      
|------------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                                                    |  | Three Months EndedMarch 31,
|                                                                    |  | 2010                        |       | 2009
|Seismic data library additions                                      |  | $                           | 1,952 |      | $ | 1,731
|Revenue recognized on specific data licenses and selections of data |  |                             | 1,674 |      |   | 775  
|Revenue recognized related to acquisition contracts                 |  |                             | 54    |      |   | 926  

Revenue from Seitel Solutions

Revenue from Seitel Solutions (Solutions) is recognized as the services for reproduction and delivery of
seismic data are provided to customers.



10



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##### Table of Contents

NOTE C-SEISMIC DATA LIBRARY

The Companys seismic data library consists of seismic surveys that are offered for license to customers on a non-exclusive basis.
Costs associated with creating, acquiring or purchasing the seismic data library are capitalized and amortized principally on the income forecast method subject to a straight-line amortization period of four years, applied on a quarterly basis at
the individual survey level.



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##### Table of Contents

Costs of Seismic Data Library

For purchased seismic data, the Company capitalizes the purchase price of the acquired data.

For data received through a non-monetary exchange, the Company capitalizes an amount equal to the fair value of the data received by the
Company or the fair value of the license granted to the customer, whichever is more readily determinable. See Note B  Revenue Recognition  Revenue from Non-Monetary Exchanges for discussion of the process used to determine fair value.

For newly created data, the capitalized costs include costs paid to third parties for the acquisition of data and related
permitting, surveying and other activities associated with the data creation activity. In addition, the Company capitalizes certain internal costs related to processing the created data. Such costs include salaries and benefits of the Companys
processing personnel and certain other costs incurred for the benefit of the processing activity. The Company believes that the internal processing costs capitalized are not greater than, and generally are less than, those that would be incurred and
capitalized if such activity were performed by a third party. Capitalized costs for internal data processing were $405,000 and $505,000 for the three months ended March 31, 2010 and 2009, respectively.

Data Library Amortization

The Company amortizes its seismic data library investment using the greater of the amortization that would result from the application of
the income forecast method subject to a minimum amortization rate or a straight-line basis over the useful life of the data. With respect to each survey in the data library, the straight-line policy is applied from the time such survey is available
for licensing to customers on a non-exclusive basis, since some data in the library may not be licensed until an exclusivity period has lapsed.

The Company applies the income forecast method by forecasting the ultimate revenue expected to be derived from a particular data library
component over the estimated useful life of each survey comprising part of such component. This forecast is made by the Company annually and reviewed quarterly. If, during any such review, the Company determines that the ultimate revenue for a
library component is expected to be significantly different than the original estimate of total revenue for such library component, the Company revises the amortization rate attributable to future revenue from each survey in such component. The
lowest amortization rate the Company applies using the income forecast method is 70%. In addition, in connection with the forecast reviews and updates, the Company evaluates the recoverability of its seismic data library investment, and if required,
records an impairment charge with respect to such investment. See discussion on Seismic Data Library Impairment below.

The actual aggregate rate of amortization depends on the specific seismic surveys licensed and selected by the Companys customers
during the period and the amount of straight-line amortization recorded. The income forecast amortization rates can vary by component and, as of April 1, 2010, is 70% for all components. For those seismic surveys which have been fully
amortized, no amortization expense is required on revenue recorded.

The greater of the income forecast or straight-line
amortization policy is applied quarterly on a cumulative basis at the individual survey level. Under this policy, the Company first records amortization using the income forecast method. The cumulative amortization recorded for each survey is then
compared with the cumulative straight-line amortization. If the cumulative straight-line amortization is higher for any specific survey, additional amortization expense is recorded, resulting in accumulated amortization being equal to the cumulative
straight-line amortization for such survey. This requirement is applied regardless of future-year revenue estimates for the library component of which the survey is a part and does not consider the existence of deferred revenue with respect to the
library component or to any survey.

Seismic Data Library Impairment

The Company evaluates its seismic data library investment by grouping individual surveys into components based on its operations and
geological and geographical trends, resulting in the following data library segments for purposes of evaluating impairments: (I) North America 3D onshore comprised of the following components: (a) Texas Gulf Coast, (b) Northern,
Eastern and Western Texas, (c) Haynesville Shale, (d) Southern Louisiana/Mississippi, (e) Northern Louisiana, (f) Rocky Mountains, (g) North Dakota, (h) other United States, (i) Canada and (j) U.S. value-added
products; (II) United States 2D; (III) Canada 2D; (IV) Gulf of Mexico offshore; and (V) international data outside North America. The Company believes that these library components constitute the lowest levels of independently identifiable cash
flows.



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The Company evaluates its seismic data library investment for impairment whenever events or
changes in circumstances indicate that the carrying amounts may not be recoverable. The Company considers the level of sales performance in each component compared to projected sales, as well as industry conditions, among others, to be key factors
in determining when its seismic data investment should be evaluated for impairment. In evaluating sales performance of each component, the Company generally considers five consecutive quarters of actual performance below forecasted sales to be an
indicator of potential impairment.

The impairment evaluation is based first on a comparison of the undiscounted future cash
flows over each components remaining estimated useful life with the carrying value of each library component. If the undiscounted cash flows are equal to or greater than the carrying value of such component, no impairment is recorded. If
undiscounted cash flows are less than the carrying value of any component, the forecast of future cash flows related to such component is discounted to fair value and compared with such components carrying amount. The difference between the
library components carrying amount and the discounted future value of the expected revenue stream is recorded as an impairment charge.

For purposes of evaluating potential impairment losses, the Company estimates the future cash flows attributable to a library component
by evaluating, among other factors, historical and recent revenue trends, oil and gas prospectivity in particular regions, general economic conditions affecting its customer base and expected changes in technology and other factors that the Company
deems relevant. The cash flow estimates exclude expected future revenues attributable to non-monetary data exchanges and future data creation projects.

The estimation of future cash flows and fair value is highly subjective and inherently imprecise. Estimates can change materially from
period to period based on many factors, including those described in the preceding paragraph. Accordingly, if conditions change in the future, the Company may record impairment losses relative to its seismic data library investment, which could be
material to any particular reporting period.

The Company did not have any impairment charges during the three months ended
March 31, 2010 or 2009.

NOTE D-DEBT

The following is a summary of the Companys debt (in thousands):



|                                 |  |               |         |                  |   |        
|-------------------------------- |  | ------------- | ------- | ---------------- | - | -------
|                                 |  | March 31,2010 |         | December 31,2009
|9.75% Senior Notes               |  | $             | 400,000 |                  | $ | 400,000
|11.75% Senior Notes              |  |               | 2,000   |                  |   | 2,000  
|U.S. Credit Facility             |  |               |        |                  |   |       
|Canadian Credit Facility         |  |               |        |                  |   |       
|Note payable to former executive |  |               | 195     |                  |   | 208    
|                                 |  |               |         |                  |   |        
|                                 |  |               | 402,195 |                  |   | 402,208
|Plus: Premium on debt            |  |               | 130     |                  |   | 154    
|                                 |  |               |         |                  |   |        
|                                 |  | $             | 402,325 |                  | $ | 402,362
|                                 |  |               |         |                  |   |        

9.75% Senior Unsecured Notes:On
February 14, 2007, the Company issued, in a private placement, $400.0 million aggregate principal amount of 9.75% senior notes due 2014 (the 9.75% Senior Notes). The proceeds from the 9.75% Senior Notes were used to partially fund
the transactions in connection with the February 14, 2007 merger of Seitel Acquisition Corp. with and into the Company pursuant to a merger agreement between the Company and Seitel Acquisition Corp. and Seitel Holdings, Inc. dated
October 31, 2006 (the Merger). As required by their terms, the 9.75% Senior Notes were exchanged for senior notes of like amounts and terms in a publicly registered exchange offer in August 2007. These notes mature on
February 15, 2014. Interest is payable in cash, semi-annually in arrears on February 15 and August 15 of each year. The 9.75% Senior Notes are unsecured and are guaranteed by substantially all of the Companys domestic
subsidiaries on a senior basis. The 9.75% Senior Notes contain restrictive covenants which limit the Companys ability to, among other things, incur additional indebtedness, pay dividends and complete mergers, acquisitions and sales of assets.



13



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Upon a change of control (as defined in the indenture governing the 9.75% Senior Notes),
each holder of the 9.75% Senior Notes will have the right to require the Company to offer to purchase all of such holders notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest.

11.75% Unsecured Senior Notes:On July 2, 2004, the Company issued, in a private placement, $193.0 million aggregate
principal amount of 11.75% senior notes due 2011 (the 11.75% Senior Notes). As required by their terms, the 11.75% Senior Notes were exchanged for senior notes of like amounts and terms in a publicly registered exchange offer in February
2005. In connection with an excess cash flow offer in March 2005, $4.0 million aggregate principal amount of these notes was tendered and accepted. In connection with the Merger and related transactions, $187.0 million aggregate principal amount of
these notes was tendered and accepted on February 14, 2007. The fair value of these notes was higher than the face value on the date of the Merger; consequently, a premium has been reflected in the financial statements related to these notes.
Interest on the remaining notes is payable semi-annually in arrears on January 15 and July 15 of each year. The remaining $2.0 million of notes mature on July 15, 2011. The 11.75% Senior Notes are unsecured and are guaranteed by
substantially all of the Companys U.S. subsidiaries on a senior basis.

As a result of the tender and consent offer,
effective February 14, 2007, the 11.75% Senior Notes no longer contain any restrictive covenants, other than the requirement to make excess cash flow offers. Subject to certain conditions, if at the end of each fiscal year the Company has
excess cash flow (as defined in the indenture governing the 11.75% Senior Notes) in excess of $5.0 million, the Company is required to use 50% of the excess cash flow to fund an offer to repurchase the 11.75% Senior Notes on a pro rata basis at 100%
of its principal amount, plus accrued and unpaid interest. If the Company has less than $5.0 million in excess cash flow at the end of any fiscal year, such excess cash flow will be carried forward to succeeding years, and such repurchase offer is
required to be made in the first year in which the cumulative excess cash flow for all years in which there has not been an offer is at least $5.0 million. Such repurchase offer is required only if there is no event of default under the
Companys revolving credit facilities prior to and after giving effect to the repurchase payment. The Company was not required to make an excess cash flow offer for the year ended December 31, 2009. Upon a change of control (as defined in
the indenture), each holder of the 11.75% Senior Notes will have the right to require the Company to offer to purchase all of such holders notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest.

U.S. Credit Facility:On December 22, 2009, the Company entered into a secured credit agreement with ValueAct Capital
Management, L.P., as initial lender, and ValueAct Capital Management, L.P., as administrative agent (the U.S. Credit Facility). The U.S. Credit Facility provides the Company with the ability to borrow up to $9.9 million. Borrowings under
the U.S. Credit Facility may be made from the date of the agreement until December 31, 2010, and may be prepaid. In certain circumstances defined in the agreement, mandatory prepayments are required, including the requirement to use 50% of the
Companys annual excess cash flow, as defined in the agreement, to prepay any amounts outstanding beginning with the fiscal year ending December 31, 2011. Prepaid amounts may not be reborrowed. Loans made under the U.S. Credit Facility
bear interest at an annual rate equal to 4% plus the greater of: (a) the prime lending rate as publicly announced from time to time by First Republic Bank, N.A.; (b) the federal funds effective rate in effect, plus 0.5%; and (c) 7%.
All obligations under the U.S. Credit Facility are unconditionally guaranteed by each of the Companys domestic subsidiaries, subject to customary exceptions, exclusions and release mechanisms. The maturity date of the U.S. Credit Facility is
December 22, 2014. The U.S. Credit Facility contains a financial covenant requiring the Company to achieve and maintain a minimum level of cash EBITDA (as defined in the credit agreement governing the U.S. Credit Facility), and restricts, among
other things, the ability to incur additional indebtedness and complete mergers, acquisition and sales of assets. The U.S. Credit Facility requires the payment of an unused line fee of 0.5% per annum, payable in arrears, from the date of the
agreement until December 31, 2010.

Canadian Credit Facility:The Companys wholly owned subsidiary, Olympic
Seismic Ltd. (Olympic) has a revolving credit facility (the Canadian Credit Facility) which allows it to borrow up to $5.0 million (Canadian) subject to an availability formula by way of prime-based loans or letters of
credit. The interest rate applicable to borrowings is the banks prime rate plus 0.75% per annum. Letter of credit fees are based on scheduled rates in effect at the time of issuance. The Canadian Credit Facility is secured by the assets
of Olympic, but is not guaranteed by the Company or any of its other U.S. subsidiaries. Available borrowings under the Canadian



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Credit Facility are equivalent to a maximum of $5.0 million (Canadian), subject to a requirement that such borrowings may not exceed 75% of good accounts receivable (as defined in the credit
agreement governing the Canadian Credit Facility) of Olympic, less prior-ranking claims, if any, relating to inventory or accounts. The Canadian Credit Facility is subject to repayment upon demand and is available from time to time at the
banks sole discretion.

Note Payable to Former Executive:In connection with the settlement of certain
litigation, the Company entered into a note payable to a former executive with remaining payments of $6,000 per month until May 2013. The note is non-interest bearing. The note is guaranteed by Olympic.

NOTE E-FAIR VALUE MEASUREMENTS

Authoritative guidance on fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy
that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
In measuring the fair value of the Companys assets and liabilities, market data or assumptions are used that the Company believes market participants would use in pricing an asset or liability, including assumptions about risk when
appropriate. The Companys assets that are measured at fair value on a recurring basis include the following (in thousands):



|                                                         |  |       |        |                                        |   |                                            |  |                             |     |  |   |  
|-------------------------------------------------------- |  | ----- | ------ | -------------------------------------- | - | ------------------------------------------ |  | --------------------------- | --- |  | - | -
|                                                         |  |       |        | Fair Value Measurements Using         
|                                                         |  | Total |        | Quoted Pricesin ActiveMarkets(Level 1) |   | Significant OtherObservableInputs(Level 2) |  | UnobservableInputs(Level 3)
|At March 31, 2010:                                       |  |       |        |                                        |   |                                            |  |                             |     |  |   |  
|Cash equivalents                                         |  | $     | 26,202 |                                        | $ | 26,202                                     |  | $                           |    |  | $ | 
|Investment in equity securities                          |  |       | 3,686  |                                        |   | 3,686                                      |  |                             |    |  |   | 
|Investment in stock options related to equity securities |  |       | 462    |                                        |   |                                           |  |                             | 462 |  |   | 
|At December 31, 2009:                                    |  |       |        |                                        |   |                                            |  |                             |     |  |   |  
|Cash equivalents                                         |  | $     | 26,099 |                                        |   | 26,099                                     |  | $                           |    |  | $ | 
|Investment in equity securities                          |  |       | 2,873  |                                        |   | 2,873                                      |  |                             |    |  |   | 
|Investment in stock options related to equity securities |  |       | 300    |                                        |   |                                           |  |                             | 300 |  |   | 

The
Company had no transfers of assets between any of the above levels during the three months ended March 31, 2010 or March 31, 2009.

Cash equivalents consist primarily of treasury bills and money market funds that invest in United States government obligations with
original maturities of three months or less. The original costs of these assets approximates fair value due to their short-term maturity.

Investment in equity securities are measured at fair value using closing stock prices from an active international market and are
classified within Level 1 of the valuation hierarchy. Investment in stock options related to equity securities are measured at fair value using the Black-Scholes option pricing model based on observable market inputs such as stock prices, interest
rates and expected volatility assumptions. Based on these inputs, these assets are classified within Level 2 of the valuation hierarchy.

During the three months ended March 31, 2010, the Company sold a portion of its investment in equity securities for proceeds
totaling $52,000. Total realized gains were equal to proceeds received.



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Other Financial Instruments:



| |  |  | Debt  Based upon the rates available to the Company, the fair value of the 9.75% Senior Notes, the 11.75% Senior Notes and the note payable to
a former executive approximated $321.5 million as of March 31, 2010, compared to the book value of $402.3 million. The quoted market price of the 9.75% Senior Notes was $319.5 million at March 31, 2010. The fair value of the 9.75% Senior
Notes, the 11.75% Senior Notes and the note payable to a former executive approximated $314.6 million as of December 31, 2009, compared to the book value of $402.4 million. The quoted market price of the 9.75% Senior Notes was $312.6 million at
December 31, 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Accounts Receivable and Accounts Payable  The fair values of accounts receivable and accounts payable approximated carrying value due to the
short-term maturity of these instruments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE F-STATEMENT OF CASH FLOW INFORMATION

Cash and cash equivalents at March 31, 2010 and December 31, 2009 includes $113,000 of restricted cash related to collateral on
a seismic operations bond.

The Company had non-cash additions to its seismic data library comprised of the following for the
periods indicated (in thousands):



|                                                                 |  |                             |       |      |   |      
|---------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                                                 |  | Three Months EndedMarch 31,
|                                                                 |  | 2010                        |       | 2009
|Non-monetary exchanges related to resale licensing revenue       |  | $                           | 1,174 |      | $ | 7    
|Non-monetary exchanges from underwriting of new data acquisition |  |                             | 778   |      |   |     
|Completion of data in progress from prior non-monetary exchanges |  |                             |      |      |   | 1,724
|                                                                 |  |                             |       |      |   |      
|Total non-cash additions to seismic data library                 |  | $                           | 1,952 |      | $ | 1,731
|                                                                 |  |                             |       |      |   |      

Non-cash revenue consisted of the following for the periods indicated
(in thousands):



|                                                                                                |  |                             |       |      |   |      
|----------------------------------------------------------------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                                                                                |  | Three Months EndedMarch 31,
|                                                                                                |  | 2010                        |       | 2009
|Acquisition revenue on underwriting from non-monetary exchange contracts                        |  | $                           | 54    |      | $ | 926  
|Licensing revenue from specific data licenses and selections on non-monetary exchange contracts |  |                             | 1,674 |      |   | 775  
|                                                                                                |  |                             |       |      |   |      
|Total non-cash revenue                                                                          |  | $                           | 1,728 |      | $ | 1,701
|                                                                                                |  |                             |       |      |   |      

NOTE G-COMMITMENTS AND CONTINGENCIES

The Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business. In the opinion of
management, uninsured losses, if any, resulting from the ultimate resolutions of these matters should not be material to the Companys financial position or results of operation. However, it is not possible to predict or determine the outcomes
of the legal actions brought against it or by it, or to provide an estimate of all additional losses, if any, that may arise. At March 31, 2010, the Company did not have any amounts accrued related to litigation and claims, as the Company
believes it is not probable that any amounts will be paid relative to such litigation and claims.

NOTE H-RECENT ACCOUNTING PRONOUNCEMENTS

In October 2009, the Financial Accounting Standards Update (FASB) issued Accounting Standards Update
(ASU) 2009-13 on Topic 605, Revenue Recognition Multiple Deliverable Revenue Arrangements  a consensus of the FASB Emerging Issues Task Force. The ASU provides guidance on accounting for products or
services (deliverables) separately rather than as a combined unit utilizing a selling price hierarchy to determine the selling price of a deliverable. The selling price is based on vendor-specific evidence, third-party evidence or



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estimated selling price. The Company will be required to apply the standard prospectively to any contracts that may contain multiple-element arrangements entered into or materially modified
on or after January 1, 2011; however, earlier application is permitted. The Company does not currently expect the adoption of this new accounting update to have a material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair
Value Measurements, which requires new disclosures regarding transfers in and out of Level 1 and 2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for Level 2 and 3 fair
value measurements. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. This ASU was effective for annual and interim reporting periods beginning after
December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The Company has applied the
new disclosure requirements as of January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be applied effective January 1, 2011. The adoption of this guidance
has not had and is not expected to have a material impact on the Companys consolidated financial position, results of operation or cash flows.

NOTE I-SUPPLEMENTAL GUARANTORS CONSOLIDATING CONDENSED FINANCIAL INFORMATION

On February 14, 2007, the Company completed a private placement of 9.75% Senior Notes in the aggregate principal amount of $400.0
million. The Companys payment obligations under the 9.75% Senior Notes are jointly and severally guaranteed by certain of its 100% owned U.S. subsidiaries (Guarantor Subsidiaries). All subsidiaries of the Company that do not
guaranty the 9.75% Senior Notes are referred to as Non-Guarantor Subsidiaries.

The consolidating condensed financial
statements are presented below and should be read in connection with the Condensed Consolidated Financial Statements of the Company. Separate financial statements of the Guarantor Subsidiaries are not presented because (i) the Guarantor
Subsidiaries are wholly-owned and have fully and unconditionally guaranteed the 9.75% Senior Notes on a joint and several basis, and (ii) the Companys management has determined such separate financial statements are not material to
investors.

The following consolidating condensed financial information presents the consolidating condensed balance sheets as
of March 31, 2010 and December 31, 2009, and the consolidating condensed statements of operations and statements of cash flows for the three months ended March 31, 2010 and March 31, 2009 of (a) the Company; (b) the
Guarantor Subsidiaries; (c) the Non-Guarantor Subsidiaries; (d) elimination entries; and (e) the Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis.

Investments in subsidiaries are accounted for on the equity method. The principal elimination entries eliminate investments in
subsidiaries, intercompany balances, intercompany transactions and intercompany sales.



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CONSOLIDATING CONDENSED BALANCE SHEET

As of March 31, 2010

(In thousands)



|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|-------------------------------------------- |  | ------ | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | -------- | - |  | - | -------- | -
|                                             |  | Parent |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |         
|ASSETS                                       |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Cash and cash equivalents                    |  | $      |         |   |                       | $ | 21,650   |                           |  | $ | 4,919                     |   |  | $                 |         |   |  | $ | 26,569   |  
|Receivables                                  |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Trade, net                                   |  |        |         |   |                       |   | 14,194   |                           |  |   | 7,885                     |   |  |                   |         |   |  |   | 22,079   |  
|Notes and other                              |  |        | 40       |   |                       |   | 89       |                           |  |   | 85                        |   |  |                   |         |   |  |   | 214      |  
|Due from Seitel Holdings, Inc.               |  |        |         |   |                       |   | 149      |                           |  |   |                          |   |  |                   |          |   |  |   | 149      |  
|Intercompany receivables (payables)          |  |        | 132,929  |   |                       |   | (130,685 | )                         |  |   | (2,244                    | ) |  |                   |         |   |  |   |         |  
|Investment in subsidiaries                   |  |        | 270,112  |   |                       |   | 423,385  |                           |  |   | 1,679                     |   |  |                   | (695,176 | ) |  |   |         |  
|Net seismic data library                     |  |        |         |   |                       |   | 129,386  |                           |  |   | 47,698                    |   |  |                   |         |   |  |   | 177,084  |  
|Net property and equipment                   |  |        |         |   |                       |   | 1,938    |                           |  |   | 4,658                     |   |  |                   |         |   |  |   | 6,596    |  
|Investment in marketable securities          |  |        |         |   |                       |   | 4,148    |                           |  |   |                          |   |  |                   |         |   |  |   | 4,148    |  
|Prepaid expenses, deferred charges and other |  |        | 8,319    |   |                       |   | 4,803    |                           |  |   | 401                       |   |  |                   |         |   |  |   | 13,523   |  
|Intangible assets, net                       |  |        | 900      |   |                       |   | 22,083   |                           |  |   | 14,397                    |   |  |                   |         |   |  |   | 37,380   |  
|Goodwill                                     |  |        |         |   |                       |   | 107,688  |                           |  |   | 98,286                    |   |  |                   |         |   |  |   | 205,974  |  
|Deferred income taxes                        |  |        |         |   |                       |   | 327      |                           |  |   |                          |   |  |                   |         |   |  |   | 327      |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL ASSETS                                 |  | $      | 412,300  |   |                       | $ | 599,155  |                           |  | $ | 177,764                   |   |  | $                 | (695,176 | ) |  | $ | 494,043  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Accounts payable and accrued liabilities     |  | $      | 5,301    |   |                       | $ | 4,445    |                           |  | $ | 17,325                    |   |  | $                 |         |   |  | $ | 27,071   |  
|Income taxes payable                         |  |        | 38       |   |                       |   |         |                           |  |   | 3                         |   |  |                   |         |   |  |   | 41       |  
|Senior Notes                                 |  |        | 402,130  |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 402,130  |  
|Notes payable                                |  |        | 195      |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 195      |  
|Obligations under capital leases             |  |        |         |   |                       |   |         |                           |  |   | 3,437                     |   |  |                   |         |   |  |   | 3,437    |  
|Deferred revenue                             |  |        |         |   |                       |   | 21,628   |                           |  |   | 3,979                     |   |  |                   |         |   |  |   | 25,607   |  
|Deferred income taxes                        |  |        |         |   |                       |   |         |                           |  |   | 5,683                     |   |  |                   |         |   |  |   | 5,683    |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES                            |  |        | 407,664  |   |                       |   | 26,073   |                           |  |   | 30,427                    |   |  |                   |         |   |  |   | 464,164  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|STOCKHOLDERS EQUITY                         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Common stock                                 |  |        |         |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   |         |  
|Additional paid-in capital                   |  |        | 274,862  |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 274,862  |  
|Parent investment                            |  |        |         |   |                       |   | 764,753  |                           |  |   | 156,921                   |   |  |                   | (921,674 | ) |  |   |         |  
|Retained deficit                             |  |        | (270,226 | ) |                       |   | (195,821 | )                         |  |   | (30,677                   | ) |  |                   | 226,498  |   |  |   | (270,226 | )
|Accumulated other comprehensive income       |  |        |         |   |                       |   | 4,150    |                           |  |   | 21,093                    |   |  |                   |         |   |  |   | 25,243   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                   |  |        | 4,636    |   |                       |   | 573,082  |                           |  |   | 147,337                   |   |  |                   | (695,176 | ) |  |   | 29,879   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY   |  | $      | 412,300  |   |                       | $ | 599,155  |                           |  | $ | 177,764                   |   |  | $                 | (695,176 | ) |  | $ | 494,043  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  



18



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##### Table of Contents

CONSOLIDATING CONDENSED BALANCE SHEET

As of December 31, 2009

(In thousands)



|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|-------------------------------------------- |  | ------ | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | -------- | - |  | - | -------- | -
|                                             |  | Parent |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |         
|ASSETS                                       |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Cash and cash equivalents                    |  | $      |         |   |                       | $ | 24,221   |                           |  | $ | 2,049                     |   |  | $                 |         |   |  | $ | 26,270   |  
|Receivables                                  |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Trade, net                                   |  |        |         |   |                       |   | 15,652   |                           |  |   | 13,846                    |   |  |                   |         |   |  |   | 29,498   |  
|Notes and other                              |  |        | 40       |   |                       |   | 87       |                           |  |   | 159                       |   |  |                   |         |   |  |   | 286      |  
|Due from Seitel Holdings, Inc.               |  |        |         |   |                       |   | 147      |                           |  |   |                          |   |  |                   |         |   |  |   | 147      |  
|Intercompany receivables (payables)          |  |        | 147,022  |   |                       |   | (145,814 | )                         |  |   | (1,208                    | ) |  |                   |         |   |  |   |         |  
|Investment in subsidiaries                   |  |        | 287,245  |   |                       |   | 428,995  |                           |  |   | 876                       |   |  |                   | (717,116 | ) |  |   |         |  
|Net seismic data library                     |  |        |         |   |                       |   | 148,636  |                           |  |   | 51,753                    |   |  |                   |         |   |  |   | 200,389  |  
|Net property and equipment                   |  |        |         |   |                       |   | 2,238    |                           |  |   | 4,765                     |   |  |                   |         |   |  |   | 7,003    |  
|Investment in marketable securities          |  |        |         |   |                       |   | 3,173    |                           |  |   |                          |   |  |                   |         |   |  |   | 3,173    |  
|Prepaid expenses, deferred charges and other |  |        | 8,610    |   |                       |   | 4,368    |                           |  |   | 448                       |   |  |                   |         |   |  |   | 13,426   |  
|Intangible assets, net                       |  |        | 900      |   |                       |   | 22,886   |                           |  |   | 14,654                    |   |  |                   |         |   |  |   | 38,440   |  
|Goodwill                                     |  |        |         |   |                       |   | 107,688  |                           |  |   | 95,372                    |   |  |                   |         |   |  |   | 203,060  |  
|Deferred income taxes                        |  |        |         |   |                       |   | 327      |                           |  |   |                          |   |  |                   |         |   |  |   | 327      |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL ASSETS                                 |  | $      | 443,817  |   |                       | $ | 612,604  |                           |  | $ | 182,714                   |   |  | $                 | (717,116 | ) |  | $ | 522,019  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Accounts payable and accrued liabilities     |  | $      | 15,099   |   |                       | $ | 5,456    |                           |  | $ | 16,522                    |   |  | $                 |         |   |  | $ | 37,077   |  
|Income taxes payable                         |  |        | 9        |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 9        |  
|Senior Notes                                 |  |        | 402,154  |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 402,154  |  
|Notes payable                                |  |        | 208      |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 208      |  
|Obligations under capital leases             |  |        |         |   |                       |   |         |                           |  |   | 3,370                     |   |  |                   |         |   |  |   | 3,370    |  
|Deferred revenue                             |  |        |         |   |                       |   | 18,188   |                           |  |   | 8,534                     |   |  |                   |         |   |  |   | 26,722   |  
|Deferred income taxes                        |  |        |         |   |                       |   |         |                           |  |   | 6,118                     |   |  |                   |         |   |  |   | 6,118    |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES                            |  |        | 417,470  |   |                       |   | 23,644   |                           |  |   | 34,544                    |   |  |                   |         |   |  |   | 475,658  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|STOCKHOLDERS EQUITY                         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Common stock                                 |  |        |         |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   |         |  
|Additional paid-in capital                   |  |        | 274,331  |   |                       |   |         |                           |  |   |                          |   |  |                   |         |   |  |   | 274,331  |  
|Parent investment                            |  |        |         |   |                       |   | 764,752  |                           |  |   | 161,422                   |   |  |                   | (926,174 | ) |  |   |         |  
|Retained deficit                             |  |        | (247,984 | ) |                       |   | (178,965 | )                         |  |   | (30,093                   | ) |  |                   | 209,058  |   |  |   | (247,984 | )
|Accumulated other comprehensive income       |  |        |         |   |                       |   | 3,173    |                           |  |   | 16,841                    |   |  |                   |         |   |  |   | 20,014   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                   |  |        | 26,347   |   |                       |   | 588,960  |                           |  |   | 148,170                   |   |  |                   | (717,116 | ) |  |   | 46,361   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY   |  | $      | 443,817  |   |                       | $ | 612,604  |                           |  | $ | 182,714                   |   |  | $                 | (717,116 | ) |  | $ | 522,019  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  



19



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##### Table of Contents

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2010

(In thousands)



|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|----------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | ------ | - |  | - | ------- | -
|                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |       
|REVENUE                                                     |  | $      |        |   |                       | $ | 17,878  |                           |  | $ | 15,502                    |   |  | $                 | (1,004 | ) |  | $ | 32,376  |  
|EXPENSES:                                                   |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Depreciation and amortization                               |  |        |        |   |                       |   | 25,060  |                           |  |   | 13,596                    |   |  |                   |       |   |  |   | 38,656  |  
|Cost of sales                                               |  |        |        |   |                       |   | 35      |                           |  |   | 2                         |   |  |                   |       |   |  |   | 37      |  
|Selling, general and administrative                         |  |        | 530     |   |                       |   | 3,842   |                           |  |   | 3,148                     |   |  |                   | (1,004 | ) |  |   | 6,516   |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        | 530     |   |                       |   | 28,937  |                           |  |   | 16,746                    |   |  |                   | (1,004 | ) |  |   | 45,209  |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|LOSS FROM OPERATIONS                                        |  |        | (530    | ) |                       |   | (11,059 | )                         |  |   | (1,244                    | ) |  |                   |       |   |  |   | (12,833 | )
|Interest expense, net                                       |  |        | (4,856  | ) |                       |   | (5,248  | )                         |  |   | (45                       | ) |  |                   |       |   |  |   | (10,149 | )
|Foreign currency exchange gains                             |  |        |        |   |                       |   |        |                           |  |   | 208                       |   |  |                   |       |   |  |   | 208     |  
|Gain on sale of marketable securities                       |  |        |        |   |                       |   | 52      |                           |  |   |                          |   |  |                   |       |   |  |   | 52      |  
|Other income                                                |  |        |        |   |                       |   | 55      |                           |  |   |                          |   |  |                   |       |   |  |   | 55      |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Loss before income taxes and equity in loss of subsidiaries |  |        | (5,386  | ) |                       |   | (16,200 | )                         |  |   | (1,081                    | ) |  |                   |       |   |  |   | (22,667 | )
|Provision (benefit) for income taxes                        |  |        |        |   |                       |   | 72      |                           |  |   | (497                      | ) |  |                   |       |   |  |   | (425    | )
|Equity in loss of subsidiaries                              |  |        | (16,856 | ) |                       |   | (584    | )                         |  |   |                          |   |  |                   | 17,440 |   |  |   |        |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|NET LOSS                                                    |  | $      | (22,242 | ) |                       | $ | (16,856 | )                         |  | $ | (584                      | ) |  | $                 | 17,440 |   |  | $ | (22,242 | )
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  



20



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##### Table of Contents

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Three Months Ended March 31, 2009

(In thousands)



|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|----------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | ------ | - |  | - | ------- | -
|                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |       
|REVENUE                                                     |  | $      |        |   |                       | $ | 22,191  |                           |  | $ | 13,531                    |   |  | $                 | (1,000 | ) |  | $ | 34,722  |  
|EXPENSES:                                                   |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Depreciation and amortization                               |  |        |        |   |                       |   | 26,057  |                           |  |   | 13,117                    |   |  |                   |       |   |  |   | 39,174  |  
|Cost of sales                                               |  |        |        |   |                       |   | 9       |                           |  |   | 5                         |   |  |                   |       |   |  |   | 14      |  
|Selling, general and administrative                         |  |        | 1,301   |   |                       |   | 4,576   |                           |  |   | 3,383                     |   |  |                   | (1,000 | ) |  |   | 8,260   |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        | 1,301   |   |                       |   | 30,642  |                           |  |   | 16,505                    |   |  |                   | (1,000 | ) |  |   | 47,448  |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|LOSS FROM OPERATIONS                                        |  |        | (1,301  | ) |                       |   | (8,451  | )                         |  |   | (2,974                    | ) |  |                   |       |   |  |   | (12,726 | )
|Interest expense, net                                       |  |        | (2,985  | ) |                       |   | (7,073  | )                         |  |   | (58                       | ) |  |                   |       |   |  |   | (10,116 | )
|Foreign currency exchange losses                            |  |        |        |   |                       |   |        |                           |  |   | (243                      | ) |  |                   |       |   |  |   | (243    | )
|Other income (loss)                                         |  |        |        |   |                       |   | 50      |                           |  |   | (19                       | ) |  |                   |       |   |  |   | 31      |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Loss before income taxes and equity in loss of subsidiaries |  |        | (4,286  | ) |                       |   | (15,474 | )                         |  |   | (3,294                    | ) |  |                   |       |   |  |   | (23,054 | )
|Provision (benefit) for income taxes                        |  |        |        |   |                       |   | 165     |                           |  |   | (727                      | ) |  |                   |       |   |  |   | (562    | )
|Equity in loss of subsidiaries                              |  |        | (18,206 | ) |                       |   | (2,567  | )                         |  |   |                          |   |  |                   | 20,773 |   |  |   |        |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|NET LOSS                                                    |  | $      | (22,492 | ) |                       | $ | (18,206 | )                         |  | $ | (2,567                    | ) |  | $                 | 20,773 |   |  | $ | (22,492 | )
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  



21



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##### Table of Contents

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2010

(In thousands)



|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|---------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - | ----------------- | - | - |  | - | ------ | -
|                                                     |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   | ConsolidatedTotal |  
|Cash flows from operating activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Net cash provided by (used in) operating activities  |  | $      | (19,677 | ) |                       | $ | 16,856  |                           |  | $ | 12,212                    |   |                   | $ |  |  | $ | 9,391  |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Cash flows from investing activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Cash invested in seismic data                        |  |        |        |   |                       |   | (4,221  | )                         |  |   | (4,760                    | ) |                   |   |  |  |   | (8,981 | )
|Cash paid to acquire property, equipment and other   |  |        |        |   |                       |   | (4      | )                         |  |   | (34                       | ) |                   |   |  |  |   | (38    | )
|Net proceeds from sale of marketable securities      |  |        |        |   |                       |   | 52      |                           |  |   |                          |   |                   |   |  |  |   | 52     |  
|Return of capital from subsidiary                    |  |        |        |   |                       |   | 4,501   |                           |  |   | (4,501                    | ) |                   |   |  |  |   |       |  
|Advances to Seitel Holdings, Inc.                    |  |        |        |   |                       |   | (2      | )                         |  |   |                          |   |                   |   |  |  |   | (2     | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Net cash provided by (used in) investing activities  |  |        |        |   |                       |   | 326     |                           |  |   | (9,295                    | ) |                   |   |  |  |   | (8,969 | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Cash flows from financing activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Principal payments on notes payable                  |  |        | (13     | ) |                       |   |        |                           |  |   |                          |   |                   |   |  |  |   | (13    | )
|Principal payments on capital lease obligations      |  |        |        |   |                       |   |        |                           |  |   | (35                       | ) |                   |   |  |  |   | (35    | )
|Payment of financing fees                            |  |        | (65     | ) |                       |   |        |                           |  |   |                          |   |                   |   |  |  |   | (65    | )
|Intercompany transfers                               |  |        | 19,755  |   |                       |   | (19,755 | )                         |  |   |                          |   |                   |   |  |  |   |       |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Net cash provided by (used in) financing activities  |  |        | 19,677  |   |                       |   | (19,755 | )                         |  |   | (35                       | ) |                   |   |  |  |   | (113   | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Effect of exchange rate changes                      |  |        |        |   |                       |   | 2       |                           |  |   | (12                       | ) |                   |   |  |  |   | (10    | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Net increase (decrease) in cash and cash equivalents |  |        |        |   |                       |   | (2,571  | )                         |  |   | 2,870                     |   |                   |   |  |  |   | 299    |  
|Cash and cash equivalents at beginning of period     |  |        |        |   |                       |   | 24,221  |                           |  |   | 2,049                     |   |                   |   |  |  |   | 26,270 |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  
|Cash and cash equivalents at end of period           |  | $      |        |   |                       | $ | 21,650  |                           |  | $ | 4,919                     |   |                   | $ |  |  | $ | 26,569 |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |        |  



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CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Three Months Ended March 31, 2009

(In thousands)



|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|---------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - | ----------------- | - | - |  | - | ------- | -
|                                                     |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   | ConsolidatedTotal |  
|Cash flows from operating activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) operating activities  |  | $      | (18,214 | ) |                       | $ | 20,870  |                           |  | $ | 12,282                    |   |                   | $ |  |  | $ | 14,938  |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash flows from investing activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash invested in seismic data                        |  |        |        |   |                       |   | (11,507 | )                         |  |   | (3,801                    | ) |                   |   |  |  |   | (15,308 | )
|Cash paid to acquire property, equipment and other   |  |        |        |   |                       |   | (63     | )                         |  |   | (45                       | ) |                   |   |  |  |   | (108    | )
|Advances to Seitel Holdings, Inc.                    |  |        |        |   |                       |   | (4      | )                         |  |   |                          |   |                   |   |  |  |   | (4      | )
|Cash transferred upon sale of subsidiary             |  |        |        |   |                       |   |        |                           |  |   | (22                       | ) |                   |   |  |  |   | (22     | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash used in investing activities                |  |        |        |   |                       |   | (11,574 | )                         |  |   | (3,868                    | ) |                   |   |  |  |   | (15,442 | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash flows from financing activities:                |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Principal payments on notes payable                  |  |        | (11     | ) |                       |   |        |                           |  |   |                          |   |                   |   |  |  |   | (11     | )
|Principal payments on capital lease obligations      |  |        |        |   |                       |   |        |                           |  |   | (28                       | ) |                   |   |  |  |   | (28     | )
|Intercompany transfers                               |  |        | 18,225  |   |                       |   | (8,225  | )                         |  |   | (10,000                   | ) |                   |   |  |  |   |        |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) financing activities  |  |        | 18,214  |   |                       |   | (8,225  | )                         |  |   | (10,028                   | ) |                   |   |  |  |   | (39     | )
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Effect of exchange rate changes                      |  |        |        |   |                       |   |        |                           |  |   | 54                        |   |                   |   |  |  |   | 54      |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents |  |        |        |   |                       |   | 1,071   |                           |  |   | (1,560                    | ) |                   |   |  |  |   | (489    | )
|Cash and cash equivalents at beginning of period     |  |        |        |   |                       |   | 33,034  |                           |  |   | 9,644                     |   |                   |   |  |  |   | 42,678  |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash and cash equivalents at end of period           |  | $      |        |   |                       | $ | 34,105  |                           |  | $ | 8,084                     |   |                   | $ |  |  | $ | 42,189  |  
|                                                     |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  



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|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion should be read in conjunction with our consolidated financial statements and the related notes to the
financial statements included elsewhere in this document.

CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this Quarterly Report) contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Statements contained in this report about our future outlook, prospects,
strategies and plans, and about industry conditions, demand for seismic services and the future economic life of our seismic data are forward-looking. All statements that express belief, expectation, estimates or intentions, as well as those that
are not statements of historical fact, are forward looking. The words proposed, anticipates, will, would, should, estimates and similar expressions are intended to identify
forward-looking statements. Forward-looking statements represent our present belief and are based on our current expectations and assumptions with respect to future events. While we believe our expectations and assumptions are reasonable, they
involve risks and uncertainties beyond our control that could cause the actual results or outcome to differ materially from the expected results or outcome reflected in our forward-looking statements. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this Quarterly Report may not occur. Such risks and uncertainties include, without limitation, actual customer demand for our seismic data and related services, the timing and extent of changes in
commodity prices for natural gas, crude oil and condensate and natural gas liquids, conditions in the capital markets during the periods covered by the forward-looking statements, the effect of the duration of the economic downturn on our business,
our ability to obtain financing on satisfactory terms if internally generated funds and our current credit facilities are insufficient to fund our capital needs, the impact on our financial condition as a result of our debt and our debt service, our
ability to obtain and maintain normal terms with our vendors and service providers, our ability to maintain contracts that are critical to our operations, changes in the oil and gas industry or the economy generally, changes in the exploration
budgets of our customers, and our ability to comply with the terms of our final judgment of permanent injunction by the Securities and Exchange Commission (SEC). The foregoing and other risk factors are identified in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC.

The forward-looking statements contained in
this report speak only as of the date hereof. Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
any other reason. All forward-looking statements attributable to Seitel, Inc. or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in our Annual Report filed on Form 10-K
for the fiscal year ended December 31, 2009 filed with the SEC and in our future periodic reports filed with the SEC.

Overview

General

Our products and services are used by oil and gas companies to assist in oil and gas exploration and development and
management of hydrocarbon reserves. We own an extensive library of onshore and offshore seismic data that we offer for license to oil and gas companies. Oil and gas companies use seismic data in oil and gas exploration and development efforts to
increase the probability of drilling success. We believe that our library of onshore seismic data is the largest available for licensing in the United States and Canada. We generate revenue primarily by licensing data from our data library and from
new data creation products, which are substantially underwritten or paid for by clients. By participating in underwritten, nonexclusive surveys or purchasing licenses to existing data, oil and gas companies can obtain access to surveys at reduced
costs as compared to acquiring seismic data on a proprietary basis.

Our primary areas of focus are onshore United States and
Canada and, to a lesser extent, offshore U.S. Gulf of Mexico. These markets continue to experience major changes. Having spent several years increasing their focus on international exploration opportunities, several major oil companies have become
more active in the U.S. market than in the past few years. Independent oil and gas companies continue to be responsible for a



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significant portion of current U.S. drilling activity. Although exploration activity in North America declined in 2009 as a result of economic uncertainty and low commodity prices, we expect
demand recovery for natural gas over the medium term to lead to renewed growth exploration activity in the U.S. and Canada.

Principal
Factors Affecting Our Business

Our business is dependent upon a variety of factors, many of which are beyond our
control. The following are those that we consider to be principal factors affecting our business.

Demand for Seismic
Data: Demand for our products and services is cyclical due to the nature of the oil and gas industry. In particular, demand for our seismic data services depends upon exploration, production, development and field management spending by oil
and gas companies and, in the case of new data creation, the willingness of these companies to forgo ownership in the seismic data. Capital expenditures by oil and gas companies depend upon several factors, including actual and forecasted oil and
natural gas commodity prices, prospect availability and the companies own short-term and strategic plans. These capital expenditures may also be affected by worldwide economic or industry-wide conditions. Demand for our seismic data is more
likely to be influenced by natural gas prices rather than crude oil prices due to the geographic location of our seismic data. The 2009 economic downturn resulted in lower commodity prices and reduced exploration capital expenditures, which, in
turn, caused demand for seismic data to decline. Although we have seen some improvement in the demand for seismic data since year-end 2009, primarily in the unconventional resource plays, there continues to be uncertainty as to the ongoing recovery
from the economic downturn and the impact on demand for seismic data in conventional areas.

Availability of Capital for
Our Customers: Many of our customers consist of independent oil and gas companies and private prospect-generating companies that rely primarily on private capital markets to fund their exploration, production, development and field
management activities. The reduction in cash flows being experienced by our customers resulting from the declines in commodity prices, along with the reduced availability of credit and increased costs of borrowing due to the tightening of the credit
markets, could have a material impact on the ability of such companies to obtain funding necessary to purchase our seismic data.

Merger and Acquisition Activity:Merger and acquisition activity continues to occur within our client base. This activity
could have a negative impact on seismic companies that operate in markets with a limited number of participating clients. However, we believe that, over time, this activity could have a positive impact on our business, as it should generate
re-licensing fees, result in increased vitality in the trading of mineral interests and result in the creation of new independent customers through the rationalization of staff within those companies affected by this activity.

North America Drilling Activity: The 2009 economic downturn in North America resulted in reduced demand for natural gas due
to an imbalance between supply and demand that led to lower hydrocarbon prices resulting in a decrease in drilling activity in the first part of 2009 with land rig counts in North America reaching a low in May 2009. North America land drilling
activity has been recovering since then, with drilling activity continuing to show improvement in the first quarter of 2010, primarily driven by domestic shale activity. Drilling activity in 2010 is currently expected to increase moderately over
2009 levels; however, weaker than expected natural gas prices and continued low domestic natural gas demand continue to cause uncertainty as to full recovery of conventional gas exploration.

Government Regulation: Our operations are subject to a variety of federal, provincial, state, foreign and local laws and
regulations, including environmental and health and safety laws. We invest financial and managerial resources to comply with these laws and related permit requirements. Modification of existing laws or regulations and the adoption of new laws or
regulations limiting or increasing exploration or production activities by oil and gas companies may have a material effect on our business operations.



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Non-GAAP Key Performance Measures

Management considers certain performance measures in evaluating and managing our financial condition and operating performance at various
times and from time to time. Some of these performance measures are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a companys performance, financial position or cash flows that either excludes or
includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles, or GAAP. These non-GAAP measures are not in
accordance with, nor are they a substitute for, GAAP measures. These non-GAAP measures are intended to supplement our presentation of our financial results that are prepared in accordance with GAAP.

The following are the key performance measures considered by management.

Cash Resales:Cash resales represent new contracts for data licenses from our library, payable in cash. We believe this measure is
important in gauging new business activity. We expect cash resales to generally follow a consistent trend over several quarters, while considering our normal seasonality. Volatility in this trend over several consecutive quarters could indicate
changing market conditions.

The following is a reconciliation of this non-GAAP financial measure to the most directly
comparable GAAP financial measure, total revenue (in thousands):



|                                           |  |                             |         |   |      |   |        |  
|------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                           |  | Three Months EndedMarch 31, |        
|                                           |  | 2010                        |         |   | 2009 |  
|Cash resales                               |  | $                           | 20,811  |   |      | $ | 10,012 |  
|Other revenue components:                  |  |                             |         |   |      |   |        |  
|Acquisition revenue                        |  |                             | 8,100   |   |      |   | 18,026 |  
|Non-monetary exchanges                     |  |                             | 1,852   |   |      |   | 7      |  
|Revenue deferred                           |  |                             | (12,299 | ) |      |   | (5,434 | )
|Recognition of revenue previously deferred |  |                             | 12,787  |   |      |   | 10,760 |  
|Solutions and other                        |  |                             | 1,125   |   |      |   | 1,351  |  
|                                           |  |                             |         |   |      |   |        |  
|Total revenue                              |  | $                           | 32,376  |   |      | $ | 34,722 |  
|                                           |  |                             |         |   |      |   |        |  

Cash EBITDA:Cash EBITDA represents cash generated from licensing data from our data library net of
recurring cash operating expenses. We believe this measure is helpful in determining the level of cash from operations we have available for debt service and funding of capital expenditures (net of the portion funded or underwritten by our
customers). Cash EBITDA includes cash resales plus all other cash revenues other than from data acquisitions, less cash selling, general and administrative expenses (excluding non-recurring corporate expenses such as severance costs) and cost of
goods sold.

The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable
GAAP financial measure, operating loss (in thousands):



|                                                                     |  |                             |         |   |      |   |         |  
|-------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                     |  | Three Months EndedMarch 31, |        
|                                                                     |  | 2010                        |         |   | 2009 |  
|Cash EBITDA                                                          |  | $                           | 16,059  |   |      | $ | 5,230   |  
|Add (subtract) other revenue components not included in cash EBITDA: |  |                             |         |   |      |   |         |  
|Acquisition revenue                                                  |  |                             | 8,100   |   |      |   | 18,026  |  
|Non-monetary exchanges                                               |  |                             | 1,852   |   |      |   | 7       |  
|Revenue deferred                                                     |  |                             | (12,299 | ) |      |   | (5,434  | )
|Recognition of revenue previously deferred                           |  |                             | 12,787  |   |      |   | 10,760  |  
|Less:                                                                |  |                             |         |   |      |   |         |  
|Depreciation and amortization                                        |  |                             | (38,656 | ) |      |   | (39,174 | )
|One-time costs associated with cost reduction measures               |  |                             | (76     | ) |      |   | (800    | )
|Non-cash operating expenses                                          |  |                             | (600    | ) |      |   | (1,341  | )
|                                                                     |  |                             |         |   |      |   |         |  
|Operating loss                                                       |  | $                           | (12,833 | ) |      | $ | (12,726 | )
|                                                                     |  |                             |         |   |      |   |         |  



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Growth of Our Seismic Data Library: We regularly add to our seismic data library
through four different methods: (1) recording new data; (2) buying ownership of existing data for cash; (3) obtaining ownership of existing data sets through non-monetary exchanges; and (4) creating new value-added products from
existing data within our library. For the period from January 1, 2010 to March 31, 2010, we completed the addition of approximately 250 square miles of seismic data to our library. As of March 31, 2010, we had approximately 630 square
miles of seismic data in progress.

Critical Accounting Policies

We operate in one business segment, which is made up of seismic data acquisition, seismic data licensing, seismic data processing and
seismic reproduction services. There have not been any changes in our critical accounting policies since December 31, 2009.

Results of Operations

Revenue

The
following table summarizes the components of our revenue for the three months ended March 31, 2010 and 2009 (in thousands):



|                                           |  |                             |         |   |      |   |        |  
|------------------------------------------ |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                           |  | Three Months EndedMarch 31, |        
|                                           |  | 2010                        |         |   | 2009 |  
|Acquisition revenue:                       |  |                             |         |   |      |   |        |  
|Cash underwriting                          |  | $                           | 8,046   |   |      | $ | 17,100 |  
|Underwriting from non-monetary exchanges   |  |                             | 54      |   |      |   | 926    |  
|                                           |  |                             |         |   |      |   |        |  
|Total acquisition revenue                  |  |                             | 8,100   |   |      |   | 18,026 |  
|                                           |  |                             |         |   |      |   |        |  
|Resale licensing revenue:                  |  |                             |         |   |      |   |        |  
|Cash resales                               |  |                             | 20,811  |   |      |   | 10,012 |  
|Non-monetary exchanges                     |  |                             | 1,852   |   |      |   | 7      |  
|Revenue deferred                           |  |                             | (12,299 | ) |      |   | (5,434 | )
|Recognition of revenue previously deferred |  |                             | 12,787  |   |      |   | 10,760 |  
|                                           |  |                             |         |   |      |   |        |  
|Total resale licensing revenue             |  |                             | 23,151  |   |      |   | 15,345 |  
|                                           |  |                             |         |   |      |   |        |  
|Total seismic revenue                      |  |                             | 31,251  |   |      |   | 33,371 |  
|                                           |  |                             |         |   |      |   |        |  
|Solutions and other                        |  |                             | 1,125   |   |      |   | 1,351  |  
|                                           |  |                             |         |   |      |   |        |  
|Total revenue                              |  | $                           | 32,376  |   |      | $ | 34,722 |  
|                                           |  |                             |         |   |      |   |        |  

Total revenue decreased $2.3 million to $32.4 million in the first quarter of 2010 from $34.7 million in the
first quarter of 2009 primarily due to a decrease in acquisition revenue of $9.9 million partially offset by an increase in total resale licensing revenue of $7.8 million. Acquisition revenue decreased between quarters due to our decision to scale
back acquisition programs in 2009 and new 2010 programs starting later in the quarter. Acquisition revenue in the first quarter of 2010 related to resource plays in the Horn River and Montney areas in British Columbia as well as the Haynesville area
in East Texas. Total resale licensing revenue was $23.2 million in the first quarter of 2010 compared to $15.3 million in the first quarter of 2009. Resale licensing revenue increased in the first quarter of 2010 from 2009 as a result of increased
activity by our clients in licensing data related to both resource and conventional plays. Cash resales for the first quarter of 2010 were $20.8 million compared to $10.0 million in the first quarter of 2009. For the first quarter of 2010, core cash
resales (onshore 3D and Canadian 2D data) were $19.8 million, up 122% from the first quarter of 2009 core cash resales of $8.9 million. Non-core cash resales (U.S. 2D and offshore data) were $1.0 million in the first quarter of 2010 compared to $1.1
million in the first quarter of 2009. Non-monetary exchanges increased $1.8 million from 2009 to 2010; these transactions fluctuate quarter to quarter depending upon the data available for trade. Clients entered into more library card contracts in
the first quarter of 2010, resulting in the increase in revenue deferred. Recognition of previously deferred revenue, primarily selections, increased as customers made more selections due to the higher level of open library cards. Solutions and
other revenue decreased $0.2 million between quarters primarily due to completion of a data management project in 2009.



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Depreciation and Amortization

Depreciation and amortization was composed of the following (in thousands):



|                                       |  |                             |        |      |   |       
|-------------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                       |  | Three Months EndedMarch 31,
|                                       |  | 2010                        |        | 2009
|Amortization of seismic data:          |  |                             |        |      |   |       
|Income forecast                        |  | $                           | 17,220 |      | $ | 20,905
|Straight-line                          |  |                             | 19,472 |      |   | 16,400
|                                       |  |                             |        |      |   |       
|Total amortization of seismic data     |  |                             | 36,692 |      |   | 37,305
|Depreciation of property and equipment |  |                             | 544    |      |   | 553   
|Amortization of acquired intangibles   |  |                             | 1,420  |      |   | 1,316 
|                                       |  |                             |        |      |   |       
|Total                                  |  | $                           | 38,656 |      | $ | 39,174
|                                       |  |                             |        |      |   |       

Total seismic data library amortization amounted to
$36.7 million in the first quarter of 2010 compared to $37.3 million in the first quarter of 2009. The amount of seismic data library amortization fluctuates based on the level and location of specific seismic surveys licensed (including licensing
resulting from new data acquisition) and selected by our customers during any period as well as the amount of straight-line amortization required under our accounting policy.

Seismic data amortization as of percentage of total seismic revenue is summarized as follows:



|                           |  |                             |   |  |       |  
|-------------------------- |  | --------------------------- | - |  | ----- | -
|                           |  | Three Months EndedMarch 31, |  
|Components of Amortization |  | 2010                        |   |  | 2009  |  
|Income forecast            |  | 55.1                        | % |  | 62.6  | %
|Straight-line              |  | 62.3                        | % |  | 49.1  | %
|                           |  |                             |   |  |       |  
|Total                      |  | 117.4                       | % |  | 111.8 | %
|                           |  |                             |   |  |       |  

The percentage of income forecast amortization to total seismic revenue decreased between the first quarters
of 2010 and 2009. In both periods, we had resale revenue recognized which was from data whose costs were fully amortized. In the first quarter of 2010, 29% of resale revenue recognized was from data whose costs were fully amortized as compared to
21% in the first quarter of 2009. Additionally, amortization expense related to new data acquisition decreased between the periods due to the lower level of acquisition revenue. Straight-line amortization represents the expense required under our
accounting policy to ensure our data value is fully amortized within four years of when the data becomes available for sale. The amount of straight-line amortization increased $3.1 million between the first quarters of 2009 and 2010 due to the
distribution of revenue among the various seismic surveys, resulting in more straight-line amortization in the first quarter of 2010.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses were $6.5 million in the first quarter of 2010 compared to $8.3
million in the first quarter of 2009. SG&A expenses are made up of the following cash and non-cash expenses (in thousands):



|                              |  |                             |       |      |   |      
|----------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                              |  | Three Months EndedMarch 31,
|                              |  | 2010                        |       | 2009
|Cash SG&A expenses            |  | $                           | 5,916 |      | $ | 6,919
|Non-cash compensation expense |  |                             | 531   |      |   | 1,284
|Non-cash rent expense         |  |                             | 69    |      |   | 57   
|                              |  |                             |       |      |   |      
|Total                         |  | $                           | 6,516 |      | $ | 8,260
|                              |  |                             |       |      |   |      



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The decrease in cash SG&A expenses of $1.0 million from the first quarter of 2009 to the
first quarter of 2010 was primarily due to (1) a decrease of $0.4 million in personnel costs resulting from workforce reductions and reductions in employee benefits implemented in the first and second quarters of 2009, (2) a decrease of
$0.7 million in one-time costs associated with cost reduction measures, and (3) a decrease of $0.6 million in various other expenses primarily resulting from cost cutting measures implemented in 2009. These decreases were partially offset by
$0.7 million of performance incentive accruals recorded in 2010.

The decrease in non-cash compensation expense between
quarters was due to our using graded vesting to amortize the compensation expense related to our stock option issuances, thus recognizing more expense in the earlier periods and gradually reducing in later years. There have been no additional option
issuances since the second quarter of 2008.

Income Taxes

Tax benefit was $0.4 million in the first quarter of 2010 compared to $0.6 million in the first quarter of 2009. The benefit in the first
quarter of 2010 was comprised of (i) a benefit of $0.6 million related to our Canadian operations, (ii) an expense of $0.1 million related to principal and interest on uncertain tax positions and (iii) $0.1 million in U.S. state tax
expense. The benefit in the first quarter of 2009 was comprised of (i) a benefit of $0.9 million related to our Canadian operations, (ii) an expense of $0.2 million related to principal and interest on uncertain tax positions and
(iii) $0.1 million expense related to U.S. state tax expense. The Federal tax benefit in both the first quarter of 2010 and 2009 resulting from our U.S. operations was offset by a valuation allowance because it was more likely than not that the
deferred tax asset would not be realized.

Liquidity and Capital Resources

As of March 31, 2010, we had $26.6 million in consolidated cash, cash equivalents and short-term investments. Included in this
balance is restricted cash of $113,000. Other sources of liquidity include our credit facilities described below.

U.S.
Credit Facility: On December 22, 2009, we entered into a secured credit agreement which provides us with the ability to borrow up to $9.9 million (the U.S. Credit Facility). Borrowings under the U.S. Credit Facility may be made
from date of the agreement until December 31, 2010. Borrowings may be prepaid and, in certain circumstances as defined in the agreement, mandatory prepayments are required. However, such prepaid amounts may not be reborrowed. The maturity date
of the U.S Credit Facility is December 22, 2014. The U.S. Credit Facility contains financial covenants, including a covenant requiring us to achieve and maintain a minimum level of cash EBITDA (as defined in the credit agreement governing the
U.S. Credit Facility). At March 31, 2010, there was no outstanding balance under the U.S. Credit Facility and there was $9.9 million of availability.

Canadian Credit Facility: Our wholly owned subsidiary, Olympic Seismic Ltd. (Olympic), has a revolving credit facility
(the Canadian Credit Facility) which allows it to borrow up to $5.0 million (Canadian), subject to an availability formula, by way of prime-based loans or letters of credit. Available borrowings under the Canadian Credit Facility are
equivalent to a maximum of $5.0 million (Canadian), subject to a requirement that such borrowings may not exceed 75% of good accounts receivable (as defined in the credit agreement governing the Canadian Credit Facility) of Olympic, less
prior-ranking claims, if any, relating to inventory or accounts. As of March 31, 2010, no amounts were outstanding on the Canadian Credit Facility and $4.0 million (Canadian) was available on the line of credit.

9.75% Senior Unsecured Notes: On February 14, 2007, we issued in a private placement $400.0 million aggregate principal
amount of our 9.75% Senior Notes. Interest on these senior notes is payable in cash, semi-annually in arrears on February 15 and August 15.

11.75% Senior Unsecured Notes: On July 2, 2004, we issued in a private placement $193.0 million aggregate principal amount of
our 11.75% Senior Notes. As of March 31, 2010, $2.0 million of the 11.75% Senior Notes remain outstanding. Interest on these senior notes is payable in cash, semi-annually in arrears on January 15 and July 15.

Cash Flows from Operating Activities:Cash flows provided by operating activities were $9.4 million and $14.9 million for the
three months ended March 31, 2010 and 2009, respectively. Operating cash flows for the first quarter of 2010 decreased from the first quarter of 2009 primarily due to decreased collections from our cash license resales in the 2010 period as a
result of the slowdown in activity from the previous year.



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Cash Flows from Investing Activities: Cash flows used in investing activities were
$9.0 million and $15.4 million for the three months ended March 31, 2010 and 2009, respectively. Cash expenditures for seismic data were $9.0 million and $15.3 million for the three months ended March 31, 2010 and 2009, respectively. The
decrease in cash invested in seismic data for the first quarter of 2010 compared to the first quarter of 2009 was primarily due to our decision to scale back acquisition programs in 2009 and new 2010 programs starting later in the quarter.

Cash Flows from Financing Activities: Cash flows used in financing activities were $113,000 and $39,000 for the three
months ended March 31, 2010 and 2009, respectively. The increase in cash used in financing activities is due to the payment of financing fees in 2010 related to the U.S. Credit Facility.

Anticipated Liquidity: Our ability to cover our operating and capital expenses, make required payments of interest on our 9.75%
and 11.75% Senior Notes, incur additional indebtedness, and comply with our various debt covenants will depend primarily on our ability to generate substantial operating cash flows. Over the next 12 months, we expect to obtain the funds necessary to
pay our operating, capital and other expenses and principal and interest on our senior notes and our other indebtedness, from our operating cash flows, cash and cash equivalents on hand and, if required, from additional borrowings (to the extent
available under our credit facilities and otherwise subject to the borrowing base). Our ability to satisfy our payment obligations depends substantially on our future operating and financial performance, which necessarily will be affected by, and
subject to, industry, market, economic and other factors. If necessary, we could choose to reduce our spending on capital projects and operating expenses to ensure we operate within the cash flow generated from our operations. We will not be able to
predict or control many of these factors, such as economic conditions in the markets where we operate and competitive pressures.

Deferred Taxes

As of March 31, 2010, we had a net deferred tax liability of $5.7 million attributable to our Canadian operations and a $0.3 deferred
tax asset attributable to U.S. state deferred taxes. In the U.S., we had a Federal deferred tax asset of $95.8 million, all of which was fully offset by a valuation allowance. The recognition of the U.S. Federal deferred tax asset will not occur
until such time that it is more likely than not that some portion or all of the U.S. Federal deferred tax asset will be realized. As of March 31, 2010, it was more likely than not that all of the U.S. Federal deferred tax asset will not be
realized.

Off-Balance Sheet Transactions

Other than operating leases, we do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with
unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenue or expense, results of operations, liquidity, capital expenditures or
capital resources.

Capital Expenditures

During the three months ended March 31, 2010, capital expenditures for seismic data and other property and equipment amounted to
$11.9 million. Our capital expenditures for the remainder of 2010 are presently estimated to be $55.1 million. The first quarter 2010 actual and 2010 estimated remaining capital expenditures are comprised of the following (in thousands):



|                                            |  |                                 |        |   |                              |   |        |                       |  |   |         |  
|------------------------------------------- |  | ------------------------------- | ------ | - | ---------------------------- | - | ------ | --------------------- |  | - | ------- | -
|                                            |  | Three MonthsEndedMarch 31, 2010 |        |   | Estimate forRemainderof 2010 |   |        | TotalEstimatefor 2010 | 
|New data acquisition                        |  | $                               | 9,589  |   |                              | $ | 46,411 |                       |  | $ | 56,000  |  
|Cash purchases and data processing          |  |                                 | 295    |   |                              |   | 205    |                       |  |   | 500     |  
|Non-monetary exchanges                      |  |                                 | 1,952  |   |                              |   | 8,048  |                       |  |   | 10,000  |  
|Property and equipment and other            |  |                                 | 38     |   |                              |   | 462    |                       |  |   | 500     |  
|                                            |  |                                 |        |   |                              |   |        |                       |  |   |         |  
|Total capital expenditures                  |  |                                 | 11,874 |   |                              |   | 55,126 |                       |  |   | 67,000  |  
|Less: Non-monetary exchanges                |  |                                 | (1,952 | ) |                              |   | (8,048 | )                     |  |   | (10,000 | )
|Changes in working capital                  |  |                                 | (903   | ) |                              |   |       |                       |  |   | (903    | )
|                                            |  |                                 |        |   |                              |   |        |                       |  |   |         |  
|Cash investment per statement of cash flows |  | $                               | 9,019  |   |                              | $ | 47,078 |                       |  | $ | 56,097  |  
|                                            |  |                                 |        |   |                              |   |        |                       |  |   |         |  



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##### Table of Contents

Capital expenditures funded from operating cash flow are as follows (in thousands):



|                                                     |  |                                 |        |   |                              |   |         |                       |  |   |         |  
|---------------------------------------------------- |  | ------------------------------- | ------ | - | ---------------------------- | - | ------- | --------------------- |  | - | ------- | -
|                                                     |  | Three MonthsEndedMarch 31, 2010 |        |   | Estimate forRemainderof 2010 |   |         | TotalEstimatefor 2010 | 
|Total capital expenditures                           |  | $                               | 11,874 |   |                              | $ | 55,126  |                       |  | $ | 67,000  |  
|Less: Non-cash additions                             |  |                                 | (1,952 | ) |                              |   | (8,048  | )                     |  |   | (10,000 | )
|Cash underwriting                                    |  |                                 | (8,046 | ) |                              |   | (33,954 | )                     |  |   | (42,000 | )
|                                                     |  |                                 |        |   |                              |   |         |                       |  |   |         |  
|Capital expenditures funded from operating cash flow |  | $                               | 1,876  |   |                              | $ | 13,124  |                       |  | $ | 15,000  |  
|                                                     |  |                                 |        |   |                              |   |         |                       |  |   |         |  

As of May 7, 2010, we had capital expenditure commitments related to data acquisition projects of
approximately $29.1 million, of which we have obtained approximately $19.1 million of cash underwriting and $0.7 million of underwriting for non-monetary exchanges.



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

We are exposed to market risk, including adverse changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

We
may enter into various financial instruments, such as interest rate swaps or interest rate lock agreements, to manage the impact of changes in interest rates. As of March 31, 2010, we did not have any open interest rate swap or interest rate
lock agreements. Therefore, our exposure to changes in interest rates primarily results from our short-term and long-term debt with both fixed and floating interest rates.

Foreign Currency Exchange Rate Risk

Our Canadian subsidiaries conduct business in the Canadian dollar and are therefore subject to foreign currency exchange rate risk on cash
flows related to sales, expenses, financing and investing transactions in currencies other than the U.S. dollar. Currently, we do not have any open forward exchange contracts.

We have not had any significant changes in our market risk exposures during the quarter ended March 31, 2010.



|Item 4T. | CONTROLS AND PROCEDURES
|-------- | -----------------------



|a) | Evaluation of Disclosure Controls and Procedures
|-- | ------------------------------------------------

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and
with the participation of our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act), pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our President and Chief Executive Officer along with our Chief Financial Officer concluded that the Companys disclosure controls
and procedures as of March 31, 2010 are effective in ensuring that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified
in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosures.



|b) | Changes in Internal Control Over Financial Reporting
|-- | ----------------------------------------------------

There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2010
that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



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##### Table of Contents

PART II - OTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS
|------- | -----------------

See Part I, Item 1, Note G to Consolidated Financial Statements, which is incorporated herein by reference.



|Item 1A. | RISK FACTORS
|-------- | ------------

In
addition to the cautionary information included in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our 2009 Annual Report on Form 10-K, filed with the SEC on March 30, 2010, which could
materially adversely affect our business, financial condition and/or results of operations.



|Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

None.



|Item 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.



|Item 4. | (REMOVED AND RESERVED)
|------- | ----------------------



|Item 5. | OTHER INFORMATION
|------- | -----------------

None.



|Item 6. | EXHIBITS
|------- | --------



|       |  |                                                                                                                                                                                            
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1    |  | Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-4, No. 333-144844, as filed with
the SEC on July 25, 2007).
|       | 
|3.2    |  | Bylaws of Seitel, Inc. (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on July 25,
2007).                     
|       | 
|10.1  |  | Form of Second Amendment to Employment Agreement (incorporated by reference from Exhibit 10.1 to the Seitel, Inc. current report on Form 8-K, as filed with the
SEC on January 27, 2010).  
|       | 
|31.1*  |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of
2002.                                     
|       | 
|31.2*  |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of
2002.                                     
|       | 
|32.1** |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                     
|       | 
|32.2** |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                     



| | Management contract, compensation plan or arrangement.
|- | ------------------------------------------------------

|* | Filed herewith.
|- | ---------------

|** | Furnished, not filed, pursuant to 601(b)(32) of Regulation S-K.
|-- | ---------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities 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: May 12, 2010 |  |  |  | /s/ Robert D. Monson                 
|                    |  |  |  | Robert D. Monson                     
|                    |  |  |  | Chief Executive Officer and President
|                    |  | 
|Dated: May 12, 2010 |  |  |  | /s/ Marcia H. Kendrick               
|                    |  |  |  | Marcia H. Kendrick                   
|                    |  |  |  | Chief Financial Officer              



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##### Table of Contents

EXHIBIT

INDEX



|        |  |                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Title                                                                                                                                                                                      
|        | 
|3.1     |  | Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-4, No. 333-144844, as filed with
the SEC on July 25, 2007).
|        | 
|3.2     |  | Bylaws of Seitel, Inc. (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on July 25,
2007).                     
|        | 
|10.1   |  | Form of Second Amendment to Employment Agreement (incorporated by reference from Exhibit 10.1 to the Seitel, Inc. current report on Form 8-K, as filed with the
SEC on January 27, 2010).  
|        | 
|31.1*   |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of
2002.                                     
|        | 
|31.2*   |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of
2002.                                     
|        | 
|32.1**  |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of
2002.                                     
|        | 
|32.2**  |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of
2002.                                     



| | Management contract, compensation plan or arrangement.
|- | ------------------------------------------------------

|* | Filed herewith.
|- | ---------------

|** | Furnished, not filed, pursuant to Item 601(b)(32) of Regulation S-K.
|-- | --------------------------------------------------------------------



34