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


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

          For the quarterly period ended March 31, 1999
                                         --------------
                OR

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


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

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

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

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

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

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

                              ----                  ----
                       Yes     X               No
                              ----                  ----

As of May 13, 1999 there were 28,311,013  shares of the Company's  common stock,
par value $.01 per share, outstanding.


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<PAGE>


                                      INDEX

                                                                           Page
                                                                           ----
PART I.            FINANCIAL INFORMATION

           Item 1.  Financial Statements

           Consolidated Balance Sheets as of
           March 31, 1999 (Unaudited) and December 31, 1998................  3

           Consolidated Statements of Operations  (Unaudited) for the
           Three Months Ended March 31, 1999 and 1998......................  4

           Consolidated Statements of Stockholders' Equity (Unaudited)
           for the Three Months Ended March 31, 1999.......................  5

           Consolidated Statements of Cash Flows (Unaudited)
           for the Three Months Ended March 31, 1999 and 1998..............  6

           Notes to Consolidated Interim Financial Statements..............  8

          Item 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations........... 10

          Item 3.  Quantitative and Qualitative Disclosures
                   about Market Risk....................................... 14

PART II.   OTHER INFORMATION............................................... 15
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                 (Unaudited)
                                                                   March 31,        December 31,
                                                                      1999              1998
                                                                   --------           --------
<S>                                                              <C>                <C>       
ASSETS

   Cash and equivalents                                          $    9,432         $    3,161
   Receivables
     Trade (net)                                                     46,520             59,244
     Notes and other                                                    605                581
   Net data bank                                                    303,404            262,950
   Net oil and gas properties                                       156,516            148,977
   Net other property and equipment                                   2,206              2,294
   Investment in affiliate                                            6,365             15,544
   Prepaid expenses, deferred charges and other assets                4,442              3,016
                                                                   --------           --------
   TOTAL ASSETS                                                  $  529,490         $  495,767
                                                                   ========           ========
LIABILITIES AND STOCKHOLDERS' EQUITY
   Accounts payable and accrued liabilities                      $   32,119         $   44,438
   Payable to affiliate                                              23,257             27,117
   Dividends payable                                                  6,365                  -
   Income taxes payable                                               3,728              1,056
   Debt
     Senior Notes                                                   203,000             65,000
     Line of credit                                                       -             85,500
     Term loans                                                         131                172
   Obligations under capital leases                                       -                 18
   Contingent payables                                                  274                274
   Deferred income taxes                                             25,732             28,039
   Deferred revenue                                                   2,591              6,566
                                                                   --------           --------
TOTAL LIABILITIES                                                   297,197            258,180
                                                                   --------           --------
CONTINGENCIES AND COMMITMENTS

STOCKHOLDERS' EQUITY
   Preferred stock, par value $.01 per share; authorized
     5,000,000 shares; none issued                                        -                  -
   Common stock, par value $.01 per share; authorized
     50,000,000 shares; issued and outstanding
     23,811,013 and 23,804,508 at March 31, 1999
     and December 31,1998, respectively                                 238                238
   Additional paid-in capital                                       141,870            141,826
   Retained earnings                                                101,487            107,102
   Treasury stock, 175,818 shares at cost at
     March 31, 1999 and December 31, 1998                            (2,977)            (2,977)
   Notes receivable from officers and employees                      (8,312)            (8,651)
   Accumulated other comprehensive income (loss)                        (13)                49
                                                                   --------           --------
TOTAL STOCKHOLDERS' EQUITY                                          232,293            237,587
                                                                   --------           --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $  529,490         $  495,767
                                                                   ========           ========
</TABLE>
<PAGE>


SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                      Three Months Ended March 31,
                                                                      ----------------------------
                                                                         1999               1998
                                                                      ---------           --------
<S>                                                                 <C>                 <C>       
REVENUE                                                             $    37,881         $   30,927

EXPENSES

   Depreciation, depletion and amortization                              17,739             15,156
   Cost of sales                                                          1,292              1,129
   Selling, general and administrative expenses                           7,204              5,950
                                                                      ---------           --------
                                                                         26,235             22,235
                                                                      ---------           --------

INCOME FROM OPERATIONS                                                   11,646              8,692

Interest expense, net                                                    (2,163)              (995)
Equity in earnings (loss) of affiliate                                      (91)                41
Impairment due to dividend distribution
   of affiliate stock                                                    (7,794)                 -
                                                                      ---------           --------

Income before provision for income taxes                                  1,598              7,738
Provision for income taxes                                                  848              2,873
                                                                      ---------           --------

NET INCOME                                                          $       750         $    4,865
                                                                      =========           ========

Net income per share:

   Basic                                                            $       .03         $      .22
                                                                      =========           ========
   Diluted                                                          $       .03         $      .21
                                                                      =========           ========

Weighted average number of common and common equivalent shares:

   Basic                                                                 23,635             22,552
                                                                      =========           ========
   Diluted                                                               23,945             22,968
                                                                      =========           ========
</TABLE>

<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                     Notes
                                                                                                  Receivable  Accumulated
                                        Common Stock       Additional            Treasury Stock      from        Other
                         Comprehensive------------------    Paid-In   Retained   ---------------  Officers &  Comprehensive
                             Income     Shares    Amount    Capital   Earnings   Shares   Amount   Employees    Income
                            --------  ----------  ------    -------    -------   -------  ------   --------   ----------
<S>                        <C>        <C>        <C>       <C>        <C>       <C>       <C>     <C>        <C>

Balance, December 31, 1997            22,548,408     225    128,406     82,742  (175,818) (2,977)    (1,109)         (14)

   Net proceeds from
     issuance
     of common stock                     106,067       1        983          -         -       -          -            -
   Tax reduction from
     exercise
     of stock options                          -       -        344          -         -       -          -            -
   Sale of common stock to
     officers and employees              794,300       8      8,183          -         -       -     (8,191)           -
   Acquisition of oil and
     gas properties                      355,733       4      3,910          -         -       -          -            -
   Payments received on
     notes receivable from
     officers and employees                    -       -          -          -         -       -        649            -
   Net income              $  24,360           -       -          -     24,360         -       -          -            -
   Foreign currency
     translation
     adjustments net of
     income tax expense
     of $67                       63           -       -          -          -         -       -          -           63
                            --------
   Comprehensive income    $  24,423
                            ========  ----------  ------    -------    -------   -------  ------   --------   ----------

Balance, December 31, 1998            23,804,508 $   238   $141,826   $107,102  (175,818)$(2,977) $  (8,651) $        49

   Net proceeds from
     issuance
     of common stock                       6,505       -         29          -         -       -          -            -
   Tax reduction from
     exercise
     of stock options                          -       -         15          -         -       -          -            -
   Payments received on
     notes receivable from
     officers and employees                    -       -          -          -         -       -        339            -
   Distribution of Eagle
     Geophysical, Inc.
     shares                                    -       -          -     (6,365)        -       -          -            -
   Net income              $     750           -       -          -        750         -       -          -            -
   Foreign currency
     translation
     adjustments net of
     income tax expense
     of $34                      (62)          -       -          -          -         -       -          -          (62)
                            --------
   Comprehensive income    $     688
                            ========  ----------  ------    -------    -------   -------  ------   --------   ----------
Balance, March 31, 1999
     (unaudited)                      23,811,013 $   238   $141,870   $101,487  (175,818)$(2,977) $  (8,312) $       (13)
                                      ==========  ======    =======    =======   =======  ======   ========   ==========
</TABLE>
<PAGE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 Three Months Ended March 31,
                                                                  ------------------------
                                                                     1999           1998
                                                                   --------       --------
<S>                                                              <C>            <C>       
Cash flows from operating activities:

   Cash received from customers                                  $   42,579     $   33,809
   Cash paid to suppliers and employees                             (12,426)        (2,651)
   Interest paid                                                       (840)          (298)
   Interest received                                                    199             33
   Income taxes paid                                                   (466)          (646)
                                                                   --------       --------
     Net cash provided by operating activities                       29,046         30,247
                                                                   --------       --------
Cash flows from investing activities:

   Cash invested in seismic data                                    (62,623)       (23,435)
   Cash invested in oil and gas properties                          (10,786)       (11,593)
   Cash paid to acquire property and equipment                         (143)          (299)
                                                                   --------       --------
     Net cash used in investing activities                          (73,552)       (35,327)
                                                                   --------       --------
Cash flows from financing activities:

   Borrowings under line of credit agreement                         18,323          6,000
   Principal payments under line of credit                         (103,823)        (3,000)
   Principal payments on term loans                                     (41)          (102)
   Principal payments under capital lease obligations                   (18)           (23)
   Proceeds from issuance of senior notes                           138,000              -
   Proceeds from issuance of common stock                                45             84
   Costs of debt and equity transactions                             (2,018)            (1)
   Payments on notes receivable from officers and employees             339              -
                                                                   --------       --------
     Net cash provided by financing activities                       50,807          2,958
                                                                   --------       --------
Effect of exchange rate changes                                         (30)           (30)
                                                                   --------       --------
Net increase (decrease) in cash and equivalents                       6,271         (2,152)

Cash and cash equivalents at beginning of period                      3,161          4,881
                                                                   --------       --------
Cash and equivalents at end of period                            $    9,432     $    2,729
                                                                   ========       ========
</TABLE>
<PAGE>


SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31,
                                                                               -----------------------
                                                                                 1999           1998
                                                                               --------       --------
<S>                                                                          <C>            <C>       
Reconciliation of net income to net cash provided by operating
   activities:

Net income                                                                   $      750     $    4,865
Adjustments to reconcile net income to net cash provided by
     operating activities:

   Impairment due to dividend distribution of affiliate stock                     7,794              -
   Depreciation, depletion and amortization                                      17,739         15,156
   Deferred income tax provision (benefit)                                       (2,307)         1,356
   Non-cash sales                                                                (4,035)             -
   Equity in loss (earnings) of affiliate                                            91            (41)
   Decrease (increase) in receivables                                            12,684           (113)
   Decrease (increase) in other assets                                              486           (350)
   Increase (decrease) in accounts payable and other liabilities                 (4,156)         9,374
                                                                               --------       --------
     Total adjustments                                                           28,296         25,382
                                                                               --------       --------

Net cash provided by operating activities                                    $   29,046     $   30,247
                                                                               ========       ========


Supplemental schedule of non-cash investing and
   financing activities:
   Dividend payable of affiliate stock                                       $    6,365     $        -
                                                                               ========       ========
</TABLE>
<PAGE>


SEITEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1999

NOTE A-BASIS OF PRESENTATION

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions of Regulation S-X.  Accordingly,  they do
not include all of the  information  and notes  required by  generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Certain reclassifications
have been  made to the  amounts  in the prior  year's  financial  statements  to
conform to the  current  year's  presentation.  Operating  results for the three
months ended March 31, 1999 are not  necessarily  indicative of the results that
may be expected for the year ending December 31, 1999. For further  information,
refer to the financial  statements and notes thereto for the year ended December
31, 1998.

NOTE B-EARNINGS PER SHARE

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
128,  "Earnings  per Share," basic  earnings per share is computed  based on the
weighted average shares of common stock outstanding during the periods.  Diluted
earnings per share is computed  based on the weighted  average  shares of common
stock plus the assumed  issuance  of common  stock for all  potentially  diluted
securities.  Earnings per share  computations to reconcile basic and diluted net
income  for the three  months  ended  March  31,  1999 and 1998  consist  of the
following (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                                        Three Months Ended March 31,
                                                         -------------------------
                                                           1999             1998
                                                         --------         --------
<S>                                                    <C>              <C>       
Net income                                             $      750       $    4,865
                                                         ========         ========
Basic weighted average shares                              23,635           22,552
Effect of dilutive securities: (1)<F1>
   Options and warrants                                       310              416
                                                         --------         --------
Diluted weighted average shares                            23,945           22,968
                                                         ========         ========
Per share income:
   Basic                                               $      .03       $      .22
   Diluted                                             $      .03       $      .21
-------------------
<FN>
(1)<F1>  A weighted  average  quarter-to-date  number of options and warrants to
         purchase   4,758,000  and   2,468,000   shares  of  common  stock  were
         outstanding  during the first  quarter of 1999 and 1998,  respectively,
         but were not  included in the  computation  of diluted per share income
         because  their  exercise  prices were greater  than the average  market
         price of the common shares.
</FN>
</TABLE>

NOTE C-DATA BANK

     Costs incurred in the creation of proprietary  seismic data,  including the
direct and incremental costs of Company personnel engaged in project  management
and design,  are capitalized.  Substantially all (greater than 87%) of the costs
incurred to develop the  Company's  data bank have been for programs  created by
the Company.  The Company uses the income  forecast method to amortize the costs
of seismic data programs it creates.  Under the income forecast method,  seismic
data costs are amortized in the proportion  that revenue for a period relates to
management's  estimate of ultimate  revenues.  Since  inception,  management has
established guidelines regarding its annual charge for amortization. Under these
guidelines,  seismic data created by the Company is amortized in a set period of
time based on historical  experience with both the timing and amount of revenue.

<PAGE>

Management  estimates  that 90% of the costs incurred in the creation of seismic
data is amortized  within five years of such data becoming  available for resale
for  two-dimensional  seismic data and within seven years of such data  becoming
available for resale for  three-dimensional  seismic data. If anticipated  sales
fall below the benchmark guidelines,  amortization is accelerated.  Depending on
actual  sales  performance,  the costs of the  Company's  seismic data are fully
amortized  within 20 years or less. The Company also purchases  existing seismic
data programs from other companies. The costs of purchased seismic data programs
are generally  amortized on a straight-line basis over ten years;  however,  the
costs of a  significant  purchase  (greater than 5% of the net book value of the
data bank),  are amortized  using the greater of the income  forecast  method or
ten-year straight-line method.

     In certain cases,  the Company grants seismic licenses to third parties for
data to be used in their  operations  (not for resale) in exchange for exclusive
ownership of seismic data from the third party. The Company  recognizes  revenue
for the licenses  granted and records a data library  asset for the seismic data
acquired. These transactions are accounted for as non-monetary exchanges and are
valued at the fair market  value of such  licenses  based on values  realized in
cash  transactions to other parties for similar  seismic data.  During the first
quarter of 1999,  the Company  licensed  seismic  data valued at  $4,035,000  in
exchange for the purchase of seismic data for its library.

NOTE D-OIL AND GAS PROPERTIES

     The  Company  accounts  for  its oil and  gas  exploration  and  production
activities  using the full-cost  method of  accounting.  Under this method,  all
costs  associated with  acquisition,  exploration and development of oil and gas
reserves  are  capitalized,  including  directly  related  overhead  costs,  and
interest  costs related to its  unevaluated  properties  and certain  properties
under development which are not currently being amortized.  For the three months
ended March 31, 1999 and 1998,  exploration  and  development  related  overhead
costs of $479,000 and $421,000,  respectively,  have been capitalized to oil and
gas  properties.  For the three months  ended March 31, 1999 and 1998,  interest
costs of $775,000 and $608,000,  respectively,  have been capitalized to oil and
gas properties.

NOTE E-INDUSTRY SEGMENTS

     SFAS NO. 131,  "Disclosures  About  Segments of an  Enterprise  and Related
Information,"  established  standards for reporting  information about operating
segments in annual  financial  statements and requires  selected  information in
interim financial reports.  Selected financial  information for the three months
ended March 31, 1999 and 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                   Exploration
                                                                                       and               Total
                                                                 Seismic           Production           Segments
                                                                --------            ---------           ---------
<S>                                                           <C>                 <C>                 <C>        
Three Months Ended March 31, 1999
---------------------------------
Revenue from external purchasers                              $   33,922          $     3,959         $    37,881
Depreciation, depletion
  and amortization                                                15,378                2,081              17,459
Cost of sales                                                         65                1,227               1,292
Segment operating income                                          18,479                  651              19,130
Capital expenditures (a)<F1>                                      55,789                9,699              65,488
Assets                                                           347,358              161,947             509,305

Three Months Ended March 31, 1998
---------------------------------
Revenue from external purchasers                              $   26,316          $     4,611         $    30,927
Depreciation, depletion
  and amortization                                                11,972                2,975              14,947
Cost of sales                                                         81                1,048               1,129
Segment operating income                                          14,263                  588              14,851
Capital expenditures                                              25,386               10,451              35,837
Assets (b)<F2>                                                   317,292              156,623             473,915

<FN>
(a)<F1>  Includes other ancillary equipment.
(b)<F2>  Balance as of December 31, 1998.
</FN>
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                           Three months ended March 31,
                                                                           ---------------------------
                                                                             1999                1998
                                                                           --------            -------
<S>                                                                      <C>                 <C>      
Income from continuing operations before income taxes:
     Total reportable segment operating income                           $   19,130          $  14,851
     Selling general and administrative expense                              (7,204)            (5,950)
     Interest expense, net                                                   (2,163)              (995)
     Equity in earnings (loss) of affiliate                                     (91)                41
     Impairment due to dividend distribution of affiliate stock              (7,794)                 -
     Eliminations and other                                                    (280)              (209)
                                                                           --------            -------
     Income from continuing operations before income taxes               $    1,598          $   7,738
                                                                           ========            =======
</TABLE>

NOTE F-INVESTMENT IN EAGLE GEOPHYSICAL, INC.

     On April 22, 1999, the Board of Directors of Seitel,  Inc.  declared to its
common  stockholders a dividend consisting of the 1,520,000 shares of the common
stock of Eagle Geophysical,  Inc. ("Eagle") currently owned by the Company.  The
dividend was declared at the rate of approximately  0.064 shares of Eagle common
stock for each  share of  Seitel,  Inc.  common  stock  owned as of the close of
business on the record date of May 18, 1999.

     The fair market  value of the common  stock of Eagle held by the Company on
the date this  dividend was  declared  was lower than the carrying  value of the
stock on the Company's  balance  sheet;  therefore,  a non-cash,  non-recurring,
pre-tax impairment, net of bonus effect, of $7,794,000 was recorded at March 31,
1999.  The dividend  payable has been reflected on the balance sheet as of March
31, 1999.

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

     The  Company's  income from core  seismic  marketing  and  exploration  and
production  operations  was $5,875,000 for the first quarter of 1999 as compared
to $4,838,000 for the first quarter of 1998. Additionally,  in the first quarter
of 1999,  the Company  recorded a non-cash,  non-operating  loss on the dividend
distribution  of affiliate  stock  totaling  $5,066,000,  net of tax, along with
equity in loss of affiliate of $59,000,  net of tax, bringing first quarter 1999
net income to $750,000.  In the first quarter of 1998, the Company  recorded its
equity in the  earnings of  affiliate  of $27,000,  net of tax,  bringing  first
quarter 1998 net income to $4,865,000.

RESULTS OF OPERATIONS

     Total revenue was $37,881,000 and $30,927,000 in the first quarters of 1999
and 1998,  respectively,  representing  an  increase of 22%.  Revenue  primarily
consists of revenue generated from the marketing of seismic data and oil and gas
production.

     Revenue  from the  marketing  of seismic data  increased  from  $26,316,000
during the first  quarter  of 1998 to  $33,922,000  during the first  quarter of
1999.  The increase is primarily due to more data being  available for licensing
because of the increased size of the Company's data library.  The Company's data
library has increased  significantly  since the first quarter of 1998 due to the
creation  of  seismic  data  during  1998 and the first  quarter of 1999 and the
purchase of the Amoco Canada data library in February 1999.
<PAGE>


     Oil and gas revenue  decreased from $4,611,000  during the first quarter of
1998 to $3,959,000 during the first quarter of 1999. The decrease in oil and gas
revenue was  primarily  caused by lower oil and gas prices in the 1999  quarter.
Net volume and price  information  for the Company's oil and gas  production for
the first quarters of 1999 and 1998 is summarized in the following table:

<TABLE>
<CAPTION>
                                                                    Quarter Ended
                                                                      March 31,
                                                          ----------------------------------
                                                            1999                     1998
                                                          ----------              ----------
<S>                                                         <C>                      <C>  
Natural gas volumes (mmcf)                                  1,630                    1,357
Average natural gas price ($/mcf)                       $    1.85               $     2.40
Crude oil/condensate volumes (mbbl)                            84                       93
Average crude oil/condensate price ($/bbl)              $   10.12               $    13.67
</TABLE>

     Depreciation,  depletion and amortization  consists  primarily of data bank
amortization  and depletion of oil and gas  properties.  Data bank  amortization
increased  from  $11,972,000  during the first  quarter  of 1998 to  $15,378,000
during  the  first  quarter  of 1999 as a  result  of the  increase  in  seismic
marketing revenue.  As a percentage of revenue from licensing seismic data, data
bank  amortization  was 46% for the first  quarters of 1999 and 1998. See Note C
for a discussion of the Company's seismic data amortization policy.

     Depletion of oil and gas properties was $2,975,000 for the first quarter of
1998 compared to $2,081,000  for the first  quarter of 1999,  which  amounted to
$1.55 and $.98, respectively,  per mcfe of gas produced during such periods. The
decrease in the rate is due to the significant  increase in the Company's proved
reserves  as of  January  1, 1999 as  determined  by the  Company's  independent
reserve  engineers  resulting  from both new  discoveries  in 1998 and  positive
revisions to previous reserve estimates.

     Cost of sales consists of expenses  associated  with oil and gas production
and seismic resale support  services.  Oil and gas production  costs amounted to
$.57 per mcfe of gas produced in the first  quarter of 1999 compared to $.55 per
mcfe in 1998.  The  increase in this rate is  primarily  due to higher  workover
costs in the first quarter of 1999 as compared to 1998.

     The Company's selling,  general and administrative  expenses increased from
$5,950,000  during  the first  quarter  of 1998 to  $7,204,000  during the first
quarter  of 1999  primarily  as a result of  variable  expenses  related  to the
increased volume of business.  As a percentage of total revenue,  these expenses
were 19% in both the first quarter of 1998 and the first quarter of 1999.

     Net interest  expense  increased from $995,000 in the first quarter of 1998
to $2,163,000 in the first quarter of 1999. The increase is primarily due to the
addition  of $138  million of senior  notes on  February  12, 1999 at an average
interest  rate of 7.3% and  increased  borrowings  under the  Company's  line of
credit during  January and early  February 1999 as compared to the first quarter
of 1998.

     On April 22, 1999, the Board of Directors of Seitel,  Inc.  declared to its
common  stockholders a dividend consisting of the 1,520,000 shares of the common
stock of Eagle Geophysical, Inc. currently owned by the Company. The fair market
value of the common stock of Eagle held by the Company on the date this dividend
was  declared was lower than the  carrying  value of the stock on the  Company's
balance sheet; therefore, a non-cash, non-recurring,  pre-tax impairment, net of
bonus effect, of $7,794,000 was recorded at March 31, 1999.

     The  Company's  effective  income tax rate was 53% for the first quarter of
1999  compared to 37% for the first  quarter of 1998.  Income tax expense in the
first  quarter of 1999  consists of two items:  (1) income tax expense on income
from core operations at the Company's estimated annual tax rate of 38% offset by
(2) income tax benefit on the  non-recurring  loss on dividend  distribution  of
affiliate  stock at the tax rate of 35%.  The net of these two items  results in
the  higher  effective  tax  rate.  The  Company's  effective  tax  rate for the
remainder of 1999 is estimated to be approximately 38%.
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     The Company's cash flow from  operations was  $29,046,000,  and $30,247,000
for the three months ended March 31, 1999 and 1998,  respectively.  The decrease
from 1998 to 1999 was primarily due to an increase in collections from customers
offset by an increase in payments to suppliers and employees.

     The Company has a $75 million  unsecured  revolving line of credit facility
that matures on March 16, 2001. The facility bears interest at a rate determined
by the ratio of the Company's debt to cash flow from operations. Pursuant to the
interest rate pricing  structure,  funds can currently be borrowed at LIBOR plus
3/4%,  the  bank's  prevailing  prime  rate,  or the  sum of the  Federal  Funds
effective  rate  for  such  day  plus  1/2%.  As of May 13,  1999,  the  balance
outstanding  on the revolving line of credit  amounted to $7,196,000  bearing an
interest rate of 6.03%.

     On December 28, 1995,  the Company  completed a private  placement of three
series  of   unsecured   Senior  Notes   totaling   $75  million.   The  Company
contemporaneously  issued  its Series A Notes and  Series B Notes,  which  total
$52.5 million and bear interest at a fixed rate of 7.17%.  On April 9, 1996, the
Company  issued its Series C Notes,  which total $22.5 million and bear interest
at a fixed rate of 7.48%.  The Series A Notes mature on December  30, 2001,  and
require annual principal  payments of $8.3 million beginning  December 30, 1999.
The  Series B and  Series C Notes  mature on  December  30,  2002,  and  require
combined  annual  principal  payments of $10 million which began on December 30,
1998.  Interest on all series of the notes is payable  semi-annually  on June 30
and December 30.

     On February 12, 1999,  the Company  completed a private  placement of three
series of unsecured Senior Notes totaling $138 million. The Series D Notes total
$20 million,  bear  interest at a fixed rate of 7.03% and mature on February 15,
2004, with no principal  payments due until  maturity.  The Series E Notes total
$75 million,  bear  interest at a fixed rate of 7.28% and mature on February 15,
2009, with annual  principal  payments of $12.5 million  beginning  February 15,
2004.  The Series F Notes total $43  million,  bear  interest at a fixed rate of
7.43% and mature on February  15,  2009,  with no  principal  payments due until
maturity. Interest on all series of the notes is payable semi-annually beginning
on August 15, 1999. The Company used a majority of the proceeds to repay amounts
outstanding  under its  revolving  lines of credit and the remainder for capital
expenditures.

     The Company may offer from time to time in one or more series (i) unsecured
debt securities, which may be senior or subordinated,  (ii) preferred stock, par
value $0.01 per share,  and (iii) common stock, par value $.01 per share, or any
combination of the foregoing,  up to an aggregate of $41,041,600  pursuant to an
effective "shelf" registration  statement filed with the Securities and Exchange
Commission.

     From January 1, 1999,  through May 13, 1999, the Company  received  $45,000
from the exercise of common stock purchase  warrants and options.  In connection
with these exercises, the Company will also receive approximately $15,000 in tax
savings.

     During December 1997, the Company  repurchased 175,000 shares of its common
stock in the open market at a cost of $2,973,000, pursuant to a stock repurchase
program authorized by the Board of Directors on December 12, 1997. The Board has
authorized  expenditures  of up to $25  million  towards the  repurchase  of its
common stock.

     During the first three months of 1999,  gross  seismic data bank  additions
and  capitalized  oil and gas  exploration  and  development  costs  amounted to
$55,789,000 and $9,619,000 respectively.  These capital expenditures, as well as
taxes, interest expenses, cost of sales and general and administrative expenses,
were funded by  operations,  borrowings  under the Company's  revolving  line of
credit and proceeds from the issuance of senior notes.

     Currently,  the Company anticipates capital  expenditures for the remainder
of  1999  to  total  approximately  $105  million.   Such  expenditures  include
approximately  $93 million for the creation of  proprietary  seismic  data,  and
approximately  $12 million for oil and gas exploration and development  efforts.
The Company believes its current cash balances,  revenues from operating sources

<PAGE>

and proceeds  from the exercise of common stock  purchase  warrants and options,
combined with its available  revolving  line of credit,  should be sufficient to
fund the 1999 capital  expenditures,  along with  expenditures for operating and
general and  administrative  expenses.  If these  sources are not  sufficient to
cover the Company's anticipated  expenditures or if the Company were to increase
its  planned  capital  expenditures  for 1999,  the  Company  could  arrange for
additional  debt or  equity  financing  during  1999;  however,  there can be no
assurance  that the Company would be able to accomplish  any such debt or equity
financing  on  satisfactory  terms.  If such  debt or  equity  financing  is not
available on  satisfactory  terms,  the Company could reduce its current capital
budget or any proposed  increases to its capital budget,  and fund  expenditures
with cash flow generated from operating sources.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities."  The Statement
establishes  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  The  Statement  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge  accounting  criteria are met.  Special  accounting for qualifying  hedges
allows a derivative's  gains and losses to offset related  results on the hedged
item  in the  income  statement,  and  requires  that a  company  must  formally
document,  designate,  and assess the effectiveness of transactions that receive
hedge  accounting.  Statement 133 is effective for fiscal years  beginning after
June 15, 1999 and cannot be applied retroactively. Statement 133 must be applied
to (a) derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued,  acquired,  or  substantively  modified after
December 31, 1997 (and, at the Company's election,  before January 1, 1998). The
Company has not yet  quantified the impact of adopting  Statement 133.  However,
the  Company  anticipates  that  application  of the  statement  will not have a
material effect on its consolidated financial statements.

YEAR 2000

     Many currently  installed  computer systems and software products are coded
to accept only two-digit  entries in the date code field.  Beginning in the year
2000,  these  date  code  fields  will  need to  accept  four-digit  entries  to
distinguish  21st century dates from 20th century dates.  As a result,  computer
systems and software  used by many  companies  may need to be upgraded to comply
with such "Year 2000"  requirements.  Significant  uncertainty exists concerning
the potential effects  associated with such compliance,  but systems that do not
properly  recognize such  information  could generate  erroneous data or cause a
system to fail.

     Compliance  Program.  In order to address the Year 2000 issue,  the Company
appointed  the Chief  Operating  Officer  ("COO") to assure  that key  automated
systems and related  processors would remain  functional  through the year 2000.
The COO and the Company's  Information  Systems Manager addressed the project by
reviewing  the  information  technology  ("IT") and  non-information  technology
systems to determine whether they were Year 2000 compliant.  Also, they prepared
a formal  questionnaire for all significant  suppliers,  customers,  and service
providers to determine  the extent to which the Company was  vulnerable to those
third parties' failure to remediate the Year 2000 problem.

     Company's  State of Readiness.  A review and assessment of the  information
technology and  non-information  technology  systems was completed as of January
31,  1999 and did not  identify  any  material  systems  which are not Year 2000
compliant.  The Company has prepared a formal  questionnaire for all significant
suppliers,  customers and service providers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate the Year 2000
problem.  This  questionnaire  has  been  sent  to  all  significant  suppliers,
customers and service providers.  The Company has requested that these companies
respond no later than June 30, 1999. The Company has received oral assurances of
Year  2000  compliance  from  many  of  the  third  parties  with  whom  it  has
relationships.   The  Company   believes  that  its   operations   will  not  be
significantly  disrupted  even if  third  parties  with  whom  the  Company  has
relationships are not Year 2000 compliant.

     Costs to Address Year 2000 Compliance  Issues. The Company believes that it
will not be required to make any material  expenditures to address the Year 2000
problem  as it relates to its  existing  systems.  To date,  costs  incurred  to
address Year 2000  compliance have been internal in nature and have been charged
to income as  incurred.  Such  costs  have been  funded  from cash  provided  by
operating activities. However, uncertainty exists concerning the potential costs
and effects associated with any Year 2000 compliance, and the Company intends to
continue  to  make  efforts  to  ensure  that  third  parties  with  whom it has
relationships  are Year  2000  compliant.  The  Company  is not  aware of any IT
projects that have been delayed due to the Year 2000 compliance program.
<PAGE>

     Risk of  Non-Compliance  and  Contingency  Plan.  The goal of the Year 2000
project has been to ensure that all of the critical systems and processes, which
are under the direct control of the Company, remain functional. However, because
certain  systems and processes may be  interrelated  with systems outside of the
control of the Company,  there can be no assurance that all implementations will
be  successful.  The principal  area of risk to the Company is thought to be the
contracting  of  seismic  acquisition  crews and  vessels.  A likely  worst case
scenario is that despite the Company's efforts,  there could be a failure of the
global positioning system used by seismic acquisition crews and vessels that the
Company  contracts  which  could  result  in  the  temporary  cessation  of  the
acquisition of seismic data. However, the Company believes that the risk of such
occurrence is low based upon its  discussions  concerning  Year 2000  compliance
with  third  party  seismic  contractors.  As part  of the  Year  2000  project,
contingency plans will be developed to respond to any potential failures as they
may  be  identified.  There  can  be no  assurance  that  unexpected  Year  2000
compliance problems of either the Company or its vendors,  customers and service
providers  would not  materially  and adversely  affect the Company's  business,
financial  condition or operating results.  The Company will continue throughout
1999 to consider the likelihood of a material  business  interruption due to the
Year 2000 issue.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

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

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------
     The  Company  is  exposed  to market  risk,  including  adverse  changes in
commodity prices,  interest rates and foreign currency exchange rates.  Refer to
the  Company's  Form 10-K for the year ended  December  31,  1998 for a detailed
discussion of these risks. The following  information  discusses  changes in the
Company's market risk exposures since December 31, 1998.

COMMODITY PRICE RISK

     Subsequent to March 31, 1999, the Company entered into natural gas swaps in
order to hedge a portion of anticipated  natural gas  production.  As of May 13,
1999, the Company had open commodity price hedges  totaling  974,000 mmbtu at an
average price of $2.26 per mmbtu.

INTEREST RATE RISK

     In February 1999, the Company completed a private placement of three series
of unsecured  Senior Notes totaling $138 million at an average  interest rate of
7.3%.  The Series D Notes total $20  million,  bear  interest at a fixed rate of
7.03% and mature on February  15,  2004,  with no  principal  payments due until
maturity. The Series E Notes total $75 million, bear interest at a fixed rate of
7.28% and mature on February 15, 2009, with annual  principal  payments of $12.5
million beginning February 15, 2004. The Series F Notes total $43 million,  bear
interest  at a fixed  rate of 7.43% and mature on  February  15,  2009,  with no
principal payments due until maturity. The carrying value and fair value of this
debt are the same.
<PAGE>


                           PART II - OTHER INFORMATION

ITEMS 1., 2., 3., 4., AND 5. Not applicable.
---------------------------

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------

          (a)  Exhibits
               --------

               10.1 Amendment To Note  Purchase  Agreement  dated as of February
                    12, 1999  between the Company and Senior  Noteholders  as of
                    December 28, 1995.

          (b)  Not applicable
<PAGE>

                                   SIGNATURES

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

                                        SEITEL, INC.

Dated:  May 17, 1999                /s/ Paul A. Frame
                                        -------------------------------------
                                        Paul A. Frame
                                        President

Dated:  May 17, 1999                /s/ Debra D. Valice
                                        -------------------------------------
                                        Debra D. Valice
                                        Chief Financial Officer

Dated:  May 17, 1999                /s/ Marcia H. Kendrick
                                        -------------------------------------
                                        Marcia H. Kendrick
                                        Chief Accounting Officer


<PAGE>





                                     EXHIBIT
                                      INDEX

--------------------------------------------------------------------------------
                                                                           Page
Exhibit    Title                                                          Number
--------------------------------------------------------------------------------

10.1       Amendment To Note  Purchase  Agreement  dated as of February     18
           12, 1999  between the Company and Senior  Noteholders  as of
           December 28, 1995