Index



---

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



|
|



| |   |  |  |                                                                             
| | - |  |  | ----------------------------------------------------------------------------
| | X |  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
| |   |  |  |                                                                             
| |   |  |  | ACT OF 1934                                                                 
| |   |  |  | For the quarterly period ended March 31, 2001                               
| |   |  |  |                                                                             
| |   |  |  | OR                                                                          
| |   |  |  |                                                                             
| |   |  |  |                                                                             
| |   |  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
| |   |  |  |                                                                             
| |   |  |  | ACT OF 1934                                                                 



|SEITEL, INC.                                               
|-----------------------------------------------------------
|(Exact name of registrant as specified in charter)         
|                                                           
|Delaware                                                   
|(State or other jurisdiction of                            
|incorporation or organization)                             
|                                                           
|50 Briar Hollow Lane, 7th Floor West                       
|Houston, Texas                                             
|(Address of principal executive offices)                   
|                                                           
|Registrant's telephone number, including area code:        
|                                                           
|Securities registered pursuant to Section 12(b) of the Act:
|                                                           
|Title of Each Class                                        
|Common Stock, par value $0.01                              
|                                                           
|                                                           
|Securities registered pursuant to Section 12(g) of the Act:
|None                                                       





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

As of May 11, 2001 there were 25,051,784 shares of the Company's common stock, par value $.01 per share outstanding.



---



INDEX



|         |                                                                             | Page                                         
|-------- | --------------------------------------------------------------------------- | ---------------------------------------------
|         |                                                                             |                                              
|PART I.  | FINANCIAL STATEMENTS                                                        |                                              
|         |                                                                             |                                              
|         | Item 1.                                                                     | FinancialStatement                           
|         |                                                                             |                                              
|         | ConsolidatedBalanceSheets as of                                             |                                              
|         | March 31, 2001 (Unaudited) and December 31, 2000                            | 3                                            
|         |                                                                             |                                              
|         | Consolidated Statements ofOperations(Unaudited) for the                     |                                              
|         | Three Months Ended March 31, 2001 and 2000                                  | 4                                            
|         |                                                                             |                                              
|         | Consolidated Statements of Stockholders'Equity(Unaudited)                   |                                              
|         | for the Three Months Ended March 31, 2001                                   | 5                                            
|         |                                                                             |                                              
|         | Consolidated Statements of Consolidated Statements ofCashFlows (Unaudited
) |                                              
|         | for the Three Months Ended March 31, 2001 and 2000                          | 6                                            
|         |                                                                             |                                              
|         | Notes to ConsolidatedInterimFinancial Statements                            | 7                                            
|         |                                                                             |                                              
|         | Item 2.                                                                     | Management's Discussion andAnalysisof        
|         |                                                                             | Financial Condition and Results of Operations
|         |                                                                             |                                              
|         | Item 3.                                                                     | Quantitative and QualitativeDisclosures      
|         |                                                                             | about Market Risk                            
|         |                                                                             |                                              
|PART II. | OTHERINFORMATION                                                            | 13                                           
|         |                                                                             |                                              

2



---

Index



|PART I - FINANCIAL INFORMATION
|------------------------------
|                              



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



SEITEL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)

|                                           |                                                       | (Unaudited)                                 |         |         |   |              |        
|------------------------------------------ | ----------------------------------------------------- | ------------------------------------------- | ------- | ------- | - | ------------ | -------
|                                           |                                                       | March 31,                                   |         |         |   | December 31, |        
|                                           |                                                       | 2001                                        |         |         |   | 2000         |        
|                                           |                                                       |                                             |         |         |   |              |        
|ASSETS                                     |                                                       |                                             |         |         |   |              |        
|                                           | Cash and equivalents                                  | $                                           | 7,273   |         |   | $            | 10,216 
|                                           | Receivables                                           |                                             |         |         |   |              |        
|                                           |                                                       | Trade (net)                                 |         | 72,361  |   |              |        
|                                           |                                                       | Notes and other                             |         | 689     |   |              |        
|                                           | Net seismic data library                              |                                             | 373,615 |         |   |              | 345,201
|                                           | Net oil and gas properties                            |                                             | 143,277 |         |   |              | 141,658
|                                           | Net other property and equipment                      |                                             | 4,423   |         |   |              | 3,997  
|                                           | Investment in marketable securities                   |                                             | 2,995   |         |   |              | 2,029  
|                                           | Prepaid expenses, deferred charges and other assets   |                                             | 5,311   |         |   |              | 4,716  
|                                           |                                                       |                                             |         |         |   |              |        
|                                           |                                                       |                                             |         |         |   |              |        
|                                           | TOTAL ASSETS                                          | $                                           | 609,944 |         |   | $            | 577,557
|                                           |                                                       |                                             |         |         |   |              |        
|                                           |                                                       |                                             |         |         |   |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                       |                                             |         |         |   |              |        
|                                           | Accounts payable and accrued liabilities              | $                                           | 56,324  |         |   | $            | 55,171 
|                                           | Income taxes payable                                  |                                             | 1,955   |         |   |              | 6,075  
|                                           | Debt                                                  |                                             |         |         |   |              |        
|                                           |                                                       | Senior Notes                                |         | 166,333 |   |              |        
|                                           |                                                       | Line of credit                              |         | 63,000  |   |              |        
|                                           | Obligations under capital leases                      |                                             | 239     |         |   |              | 265    
|                                           | Deferred income taxes                                 |                                             | 31,425  |         |   |              | 30,412 
|                                           | Deferred revenue                                      |                                             | 1,883   |         |   |              | 2,975  
|                                           |                                                       |                                             |         |         |   |              |        
|TOTAL LIABILITIES                          |                                                       | 321,159                                     |         |         |   | 301,231      |        
|                                           |                                                       |                                             |         |         |   |              |        
|                                           |                                                       |                                             |         |         |   |              |        
|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   |         |         |   |              |        
|                                           |                                                       | 25,644,952 and 25,306,517 at March 31, 2001 |         |         |   |              |        
|                                           |                                                       | and December 31, 2000, respectively         |         | 256     |   |              |        
|                                           | Additional paid-in capital                            |                                             | 164,195 |         |   |              | 159,543
|                                           | Retained earnings                                     |                                             | 137,060 |         |   |              | 129,543
|                                           | Treasury stock 635,918 shares at cost at              |                                             |         |         |   |              |        
|                                           |                                                       | March 31, 2001 and December 31, 2000        |         | (7,667  | ) |              |        
|                                           | Notes receivable from officers and employees          |                                             | (4,225  | )       |   |              | (4,965 
|                                           | Accumulated other comprehensive loss                  |                                             | (834    | )       |   |              | (381   
|                                           |                                                       |                                             |         |         |   |              |        
|TOTAL STOCKHOLDERS' EQUITY                 |                                                       | 288,785                                     |         |         |   | 276,326      |        
|                                           |                                                       |                                             |         |         |   |              |        
|                                           |                                                       |                                             |         |         |   |              |        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $                                                     | 609,944                                     |         |         | $ | 577,557      |        
|                                           |                                                       |                                             |         |         |   |              |        

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

3



---

Index

SEITEL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)(In thousands, except per share amounts)

|                                         |                                              | Three Months Ended March 31, |       
|---------------------------------------- | -------------------------------------------- | ---------------------------- | ------
|                                         |                                              |                              |       
|                                         |                                              | 2001                         |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|REVENUE                                  | $                                            | 48,978                       |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|EXPENSES                                 |                                              |                              |       
|                                         | Depreciation, depletion and amortization     |                              | 21,207
|                                         | Cost of sales                                |                              | 1,473 
|                                         | Selling, general and administrative expenses |                              | 11,368
|                                         |                                              |                              |       
|                                         |                                              | 34,048                       |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|INCOME FROM OPERATIONS                   |                                              | 14,930                       |       
|                                         |                                              |                              |       
|Interest expense, net                    |                                              | (3,015                       | )     
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|Income before provision for income taxes |                                              | 11,915                       |       
|Provision for income taxes               |                                              | 4,398                        |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|NET INCOME                               | $                                            | 7,517                        |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|Net income per share:                    |                                              |                              |       
|                                         | Basic                                        | $                            | .30   
|                                         |                                              |                              |       
|                                         | Diluted                                      | $                            | .29   
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|                                         |                                              |                              |       
|Weighted average number of common and    |                                              |                              |       
|                                         | common equivalent shares:                    |                              |       
|                                         | Basic                                        |                              | 24,781
|                                         |                                              |                              |       
|                                         | Diluted                                      |                              | 26,278
|                                         |                                              |                              |       
|                                         |                                              |                              |       

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

4



---

Index



|SEITEL, INC. AND SUBSIDIARIES                  
|-----------------------------------------------
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|(In thousands, except share amounts)           
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, December 31, 1999                     
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, December 31, 2000                     
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, March 31, 2001                        
|                                               
|                                               

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

5



---

Index

SEITEL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

|(In thousands)                                                             |                                                          |                                                     |        
|-------------------------------------------------------------------------- | -------------------------------------------------------- | --------------------------------------------------- | -------
|                                                                           |                                                          | Three Months Ended March 31,                        |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          | 2001                                                |        
|                                                                           |                                                          |                                                     |        
|Cash flows from operating activities:                                      |                                                          |                                                     |        
|Reconciliation of net income to net cash provided by operating activities: |                                                          |                                                     |        
|                                                                           | Net income                                               | $                                                   | 7,517  
|                                                                           | Depreciation, depletion and amortization                 |                                                     | 21,219 
|                                                                           | Deferred income tax provision                            |                                                     | 1,419  
|                                                                           | Non-cash sales                                           |                                                     | (7,824 
|                                                                           | Decrease (increase) in receivables                       |                                                     | (4,743 
|                                                                           | Decrease (increase) in other assets                      |                                                     | (584   
|                                                                           | Decrease in accounts payable and other liabilities       |                                                     | (12,308
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          | Net cash provided by operating activities           |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Cash flows from investing activities:                                      |                                                          |                                                     |        
|                                                                           | Cash invested in seismic data                            |                                                     | (29,052
|                                                                           | Cash invested in oil and gas properties                  |                                                     | (5,649 
|                                                                           | Cash paid to acquire property and equipment              |                                                     | (808   
|                                                                           | Net proceeds from sale of oil and gas properties         |                                                     | 78     
|                                                                           | Deferred offering costs                                  |                                                     | -      
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          | Net cash used in investing activities               |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Cash flows from financing activities:                                      |                                                          |                                                     |        
|                                                                           | Borrowings under line of credit agreement                |                                                     | 37,930 
|                                                                           | Principal payments under line of credit                  |                                                     | (14,930
|                                                                           | Principal payments on term loans                         |                                                     | -      
|                                                                           | Principal payments under capital lease obligations       |                                                     | (26    
|                                                                           | Proceeds from issuance of common stock                   |                                                     | 4,332  
|                                                                           | Costs of debt and equity transactions                    |                                                     | -      
|                                                                           | Payments on notes receivable from officers and employees |                                                     | 840    
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          | Net cash provided by (used in) financing activities |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Effect of exchange rate changes                                            |                                                          | (354                                                | )      
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Net decrease in cash and equivalents                                       |                                                          | (2,943                                              | )      
|                                                                           |                                                          |                                                     |        
|Cash and cash equivalents at beginning of period                           |                                                          | 10,216                                              |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Cash and equivalents at end of period                                      | $                                                        | 7,273                                               |        
|                                                                           |                                                          |                                                     |        
|                                                                           |                                                          |                                                     |        
|Supplemental disclosure of cash flow information:                          |                                                          |                                                     |        
|                                                                           | Cash paid during the period for:                         |                                                     |        
|                                                                           |                                                          | Interest (net of amounts capitalized)               | $      
|                                                                           |                                                          | Income taxes                                        | $      
|Supplemental schedule of non-cash investing and                            |                                                          |                                                     |        
|                                                                           |                                                          | financing activities:                               |        
|                                                                           | Additions to seismic data library                        | $                                                   | 7,824  
|                                                                           | Capital lease obligations incurred                       | $                                                   | -      

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

6



---

Index

SEITEL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
March 31, 2001
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 accounting principles generally accepted in the United States 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. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer to the financial statements and notes thereto for the year ended December 31, 2000 contained in the Company's Annual Report filed on Form 10-K with the Securities and Exchange
Commission.

The Company has changed its presentation of cash flows from operating activities from the direct method to the indirect method as allowed in Statement of
Financial Accounting Standards 95.

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 dilutive securities. The
computations for basic and diluted net income per share for the three months ended March 31, 2001 and 2000 consist of the following (in thousands except per share amounts):



|                                   |                      | Three Months Ended March 31, |      
|---------------------------------- | -------------------- | ---------------------------- | -----
|                                   |                      |                              |      
|                                   |                      | 2001                         |      
|                                   |                      |                              |      
|                                   |                      |                              |      
|Net income                         | $                    | 7,517                        |      
|                                   |                      |                              |      
|                                   |                      |                              |      
|Basic weighted average shares      |                      | 24,781                       |      
|Effect of dilutive securities: (1) |                      |                              |      
|                                   | Options and warrants |                              | 1,497
|                                   |                      |                              |      
|Diluted weighted average shares    |                      | 26,278                       |      
|                                   |                      |                              |      
|Per share income:                  |                      |                              |      
|                                   | Basic                | $                            | .30  
|                                   | Diluted              | $                            | .29  
|                                   |                      |                              |      





|    |                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                         
|(1) | A weighted average quarter-to-date number of options and warrants to purchase 122,000 and 6,159,000 shares of common stock were outstanding during the first quarter of 2001 and 2000, 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.

NOTE C-SEISMIC DATA LIBRARY

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 81%) of the costs incurred to develop the Company's seismic data library 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. If anticipated sales fall below expectations,
amortization is accelerated. 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. As of March 31, 2001, almost all (95%) of the net costs of the Company's data bank are
expected to be fully amortized within 10 years from when such data becomes available for resale.

7



---

Index

In certain transactions, 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 estimated fair value of such licenses based on values realized in cash transactions with other parties for similar seismic data, or at the estimated fair value of the seismic data libraries acquired.

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 salaries, benefits and other internal costs directly attributable to these activities. Costs associated with production and general corporate
activities are expensed in the period incurred. For the three months ended March 31, 2001 and 2000, exploration and development related overhead costs of $569,000 and $478,000, respectively, have been capitalized to oil and gas properties. Interest costs
related to unproved properties and certain properties under development are also capitalized to oil and gas properties. For the three months ended March 31, 2001 and 2000, interest costs of $579,000 and $745,000, respectively, have been capitalized to oil
and gas properties.

NOTE E-DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company enters into foreign exchange contracts to hedge a portion of its foreign currency exchange risk related to its Canadian activities. On
January 1, 2001, the Company adopted SFAS No. 133, as amended, "Accounting for Derivative Instruments and Hedging Activities." Effective with the adoption of SFAS No. 133, all derivatives are recognized on the balance sheet and measured at fair value. If
the derivative does not qualify as a hedge or is not designated as a hedge, the gain or loss on the derivative is recognized currently in earnings. If the derivative qualifies for hedge accounting, the gain or loss on the derivative is either recognized
in income along with an offsetting adjustment to the basis of the item being hedged or deferred in other comprehensive income to the extent the hedge is effective. The adoption of SFAS No. 133 did not have a material impact on the Company's financial
position or results of operations. As of March 31, 2001, the Company had forward exchange contracts totaling $1 million (Canadian dollars) at an exchange rate into U.S. dollars of .6925 maturing in April 2001.

8



---

Index

NOTE F-INDUSTRY SEGMENTS

Segment information has been prepared in accordance with SFAS NO. 131, "Disclosures About Segments of an Enterprise and Related Information." Selected
financial information as of and for the three months ended March 31, 2001 and 2000 is as follows (in thousands):

|                                                    |   |         |  |   | Exploration |  |   |          | 
|--------------------------------------------------- | - | ------- |  | - | ----------- |  | - | -------- | 
|                                                    |   |         |  |   | and         |  |   | Total    | 
|                                                    |   | Seismic |  |   | Production  |  |   | Segments | 
|                                                    |   |         |  |   |             |  |   |          | 
|As of and for the three months ended March 31, 2001 |   |         |  |   |             |  |   |          | 
|                                                    |   |         |  |   |             |  |   |          | 
|Revenue from external purchasers                    | $ | 40,901  |  | $ | 8,077       |  | $ | 48,978   | 
|Depreciation, depletion and amortization            |   | 18,155  |  |   | 2,640       |  |   | 20,795   | 
|Cost of sales                                       |   | 171     |  |   | 1,302       |  |   | 1,473    | 
|Segment operating income                            |   | 22,575  |  |   | 4,135       |  |   | 26,710   | 
|Capital expenditures (a)                            |   | 46,700  |  |   | 4,524       |  |   | 51,224   | 
|Assets                                              |   | 449,258 |  |   | 151,613     |  |   | 600,871  | 
|                                                    |   |         |  |   |             |  |   |          | 
|                                                    |   |         |  |   |             |  |   |          | 
|As of and for the three months ended March 31, 2000 |   |         |  |   |             |  |   |          | 
|                                                    |   |         |  |   |             |  |   |          | 
|Revenue from external purchasers                    | $ | 23,019  |  | $ | 5,412       |  | $ | 28,431   | 
|Depreciation, depletion and amortization            |   | 10,288  |  |   | 2,572       |  |   | 12,860   | 
|Cost of sales                                       |   | 77      |  |   | 1,573       |  |   | 1,650    | 
|Segment operating income                            |   | 12,654  |  |   | 1,267       |  |   | 13,921   | 
|Capital expenditures (a)                            |   | 19,758  |  |   | 3,809       |  |   | 23,567   | 
|Assets                                              |   | 380,574 |  |   | 156,913     |  |   | 537,487  | 



|    |                                    
|--- | -----------------------------------
|    |                                    
|(a) | Includes other ancillary equipment.



|                            |                                            |  | Three months ended March 31, |        
|--------------------------- | ------------------------------------------ |  | ---------------------------- | -------
|                            |                                            |  |                              |        
|                            |                                            |  | 2001                         |        
|                            |                                            |  |                              |        
|Income before income taxes: |                                            |  |                              |        
|                            | Total reportable segment operating income  |  | $                            | 26,710 
|                            | Selling general and administrative expense |  |                              | (11,368
|                            | Interest expense, net                      |  |                              | (3,015 
|                            | Eliminations and other                     |  |                              | (412   
|                            |                                            |  |                              |        
|                            | Income before income taxes                 |  | $                            | 11,915 
|                            |                                            |  |                              |        





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

RESULTS OF OPERATIONS

Total revenue was $48,978,000 and $28,431,000 in the first quarters of 2001 and 2000, respectively. Revenue primarily consists of revenue generated
from the marketing of seismic data and oil and gas production.

Revenue from the marketing of seismic data was $40,901,000 in the first quarter of 2001 compared to $23,019,000 in the first quarter of 2000. The increase in
revenue was primarily due to a 163% increase in licensing of existing data from the Company's data library. Since June 2000, the Company has experienced strong demand for its seismic library data as a result of increased capital expenditures by oil and
gas companies for seismic library data.

9



---

Index

Net volume and price information for the Company's oil and gas production for the first quarters of 2001 and 2000 is summarized in the
following table:



|                                           |   | Quarter Ended
|------------------------------------------ | - | -------------
|                                           |   | March 31,    
|                                           |   |              
|                                           |   | 2001         
|                                           |   |              
|                                           |   |              
|Natural gas volumes (mmcf)                 |   | 762          
|Average natural gas price ($/mcf)          | $ | 8.01         
|Crude oil/condensate volumes (mbbl)        |   | 70           
|Average crude oil/condensate price ($/bbl) | $ | 27.45        

Oil and gas revenue was $8,077,000 in the first quarter of 2001 compared to $5,412,000 in the first quarter of 2000. The increase
in oil and gas revenue was attributable to higher market prices in the 2001 quarter offset by lower gas production volumes as compared to the first quarter of 2000. The decline in gas production was primarily due to normal production declines experienced
on several of the Company's older wells as well as the effect of the sale of a group of wells in August 2000. These declines were partially offset by production from newer wells.

Depreciation, depletion and amortization consists primarily of data bank amortization and depletion of oil and gas properties. Data bank amortization was
$18,155,000 in the first quarter of 2001 compared to $10,288,000 in the first quarter of 2000. The amount of seismic data amortization fluctuates based on the level of seismic marketing revenue. As a percentage of revenue from licensing seismic data, data
bank amortization was 45% and 46% for the first quarters of 2001 and 2000, respectively. See Note C for a discussion of the Company's seismic data amortization policy.

Depletion of oil and gas properties was $2,640,000 in the first quarter of 2001 compared to $2,572,000 in the first quarter of 2000, which amounted to $2.23
and $1.49, respectively, per mcfe of gas produced during such periods. The rate per mcfe varies with the estimate of proved oil and gas reserves of the Company at each quarter end, as well as evaluated property costs. The increase in the rate was
primarily due to lower proved reserves at March 31, 2001 than at March 31, 2000.

Cost of sales primarily consists of expenses associated with oil and gas production and seismic resale support services. Oil and gas production costs
amounted to $1,302,000 or $1.10 per mcfe of gas produced in the first quarter of 2001 compared to $1,573,000, or $.91 per mcfe of gas produced in the first quarter of 2000. The increase in this rate was primarily due to higher production taxes in 2001 due
to higher oil and gas prices.

The Company's selling, general and administrative expenses were $11,368,000 in the first quarter of 2001 compared to $6,670,000 in the first quarter of 2000.
This increase was primarily due to an increase in fixed costs due to the growth of the Company, as well as an increase in variable expenses related to increased revenue.

The Company's effective income tax rate was 37% for the first quarter of 2001 compared to 35% for the first quarter of 2000. The increase in the effective
income tax rate is primarily due to the mix of estimated earnings for 2001 between U.S. and foreign locations.

Liquidity and Capital Resources

The Company's cash flow from operations was $4,696,000 and $29,672,000 for the three months ended March 31, 2001 and 2000, respectively. The decrease
from 2000 to 2001 was primarily attributable to (i) higher collection of accounts receivable in the first quarter of 2000 as compared to 2001, (ii) an increase in cash paid to suppliers and employees and (iii) an increase in income taxes paid.

The Company has a $75 million unsecured revolving line of credit facility whose maturity was extended to July 15, 2001. Under the terms of the extension, the
facility bears interest at a rate of LIBOR plus 1.25%, the bank's prevailing prime rate, or the sum of the Federal Funds effective rate for such day plus 1/2%. The balance outstanding on this revolving line of credit as of May 11, 2001 was $66 million.
The Company is currently in negotiations to establish a new line of credit facility upon expiration of the current facility. The Company's current bank, which has proposed to act as lead bank in the Company's new syndicated facility, expects, although
there can be no assurance, that the Company will successfully close a three year, $100 million facility by approximately June 15, 2001. The new facility is also expected to provide the Company with the ability to increase the amount of the facility to
$150 million.



10



---

Index

The Company's wholly-owned subsidiary, Olympic Seismic Ltd. ("Olympic"), has a revolving credit facility which allows it to borrow
up to $5 million (Canadian dollars) by way of prime based loans, bankers' acceptances, or letters of credit. Prime based loans and bankers' acceptances bear interest at the rate of the bank's prime rate plus 0.35% per annum and 0.50% per annum,
respectively. Letter of credit fees are based on scheduled rates in effect at the time of issuance. The facility is secured by Olympic's assets, but is not guaranteed by Seitel, Inc. or any of its other subsidiaries. Borrowings under the facility are
limited to 75% of trade receivables less than 90 days old. The facility is subject to repayment upon demand and is available from time to time at the Bank's sole discretion. As of May 11, 2001, no amounts were outstanding on this revolving line of credit.
Olympic is not a party to any of the debt issued by Seitel, Inc.

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 the Series D, E and F
Notes is payable semi-annually on February 15 and August 15. As of May 11, 2001, the balance outstanding on the Series D, E and F Notes was $138 million.

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 which began on 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 the Series A, B and C Notes is payable semi-annually on June 30 and December 30. As of May 11, 2001, the balance outstanding on the Series A, B, and C Notes was $28,333,000.

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 and
(iii) common stock, or any combination of the foregoing, up to an aggregate of $41,041,600 pursuant to an effective "shelf" registration statement filed with the SEC. In addition, under another effective "shelf" registration statement filed with the SEC,
the Company may offer up to an aggregate of $200,000,000 of the following securities, in any combination, from time to time in one or more series: (i) unsecured debt securities, which may be senior or unsubordinated; (ii) preferred stock; (iii) common
stock, and (iv) trust preferred securities.

From January 1, 2001, through May 11, 2001, the Company received $4,920,000 from the exercise of common stock purchase warrants and options. In connection
with these exercises, the Company will also realize approximately $370,000 in tax savings.

The Company's Board of Directors approved a stock repurchase program in 1997 of up to $25 million. As of May 11, 2001, the Company has repurchased a
total of 1,010,100 shares of its common stock at a cost of $11,124,000 since 1997 under this plan.

During the first three months of 2001, gross seismic data library additions and capitalized oil and gas exploration and development costs amounted to
$46,496,000 and $4,334,000, respectively. These capital expenditures, as well as taxes, interest expenses, cost of sales and general and administrative expenses, were funded by operations, proceeds from the exercise of common stock purchase warrants and
options and borrowings under the Company's revolving line of credit.

Currently, the Company anticipates capital expenditures for the remainder of 2001 to total approximately $89 million, of which approximately $69 million will
be for seismic data bank additions, approximately $3 million will be for computer equipment purchases and approximately $17 million will be for oil and gas exploration and development efforts. The Company believes its current cash balances, revenues from
operating sources, and proceeds from the exercise of common stock purchase warrants and options, combined with its available revolving line of credit, should be sufficient to fund the currently anticipated 2001 capital expenditures, along with
expenditures for operating and general and administrative expenses and debt repayments. 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 2001, the
Company could arrange for additional debt or equity financing during 2001; 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.

11



---

Index

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. The foregoing and other risk factors are identified in the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 2000.

|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, 2000 for a detailed discussion of these risks. The following information discusses changes in the Company's market risk exposures since December 31, 2000.

Commodity Price Risk

The Company may enter into various derivative instruments, principally natural gas swaps, to manage commodity price fluctuations. Currently, the Company
has no open commodity price hedges.

Interest Rate Risk

The Company may enter into various financial instruments, such as interest rate swaps, to manage the impact of changes in interest rates. Currently, the
Company has no open interest rate swap or interest rate lock agreements. Therefore, the Company's exposure to changes in interest rates primarily results from its short-term and long-term debt with both fixed and floating interest rates.

Foreign Currency Exchange Rate Risk

The Company conducts business in the Canadian dollar and pounds sterling and is therefore subject to foreign currency exchange rate risk on cash flows
related to sales, expenses, financing and investing transactions. As of March 31, 2001, the Company had open forward exchange contracts totaling $1 million (Canadian dollars) at an exchange rate into U.S. dollars of .6925 maturing in April 2001 to hedge a
portion of its foreign currency exchange risk related to its Canadian activities. Exposure from market rate fluctuations related to activities in the Cayman Islands, where the Company's functional currency is pounds sterling, is not material at this time.

12



---

Index



|PART II - OTHER INFORMATION
|---------------------------
|                           



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

|Item 6.  Exhibits and Report on Form 8-K
|----------------------------------------
|                                        
|                                        
|                                        
|                                        
|                                        
|                                        

13



---



|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.                   
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Dated:    May                                                                                          
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Dated:    May                                                                                          
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Dated:    May                                                                                          
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       

14



---

|       
|-------
|       
|       
|Exhibit
|       
|       
|10.1   
|       













15



---