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


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

          For the quarterly period ended September 30, 1998
                                         ------------------
                OR

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


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

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

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

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

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

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

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

As of November 11, 1998 there were  23,448,547  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
         September 30, 1998 (Unaudited) and December 31, 1997.............   3

         Consolidated Statements of Operations (Unaudited) for the
         Three Months Ended September 30, 1998 and 1997...................   4

         Consolidated Statements of Operations (Unaudited) for the
         Nine Months Ended September 30, 1998 and 1997....................   5

         Consolidated Statements of Stockholders' Equity (Unaudited)
         for the Nine Months Ended September 30, 1998.....................   6

         Consolidated Statements of Cash Flows (Unaudited) for the
         Nine Months Ended September 30, 1998 and 1997...................    7

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

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


PART II. OTHER INFORMATION...............................................   16

<PAGE>

SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                          (Unaudited)
                                                          September 30,     December 31,
                                                              1998             1997
                                                          -------------     ---------
<S>                                                        <C>              <C>
ASSETS

   Cash and equivalents                                    $   3,805        $   4,881
   Receivables
     Trade                                                    40,529           44,563
     Notes and other                                           2,007            2,121
   Net data bank                                             245,622          180,936
   Net oil and gas properties                                136,809          112,915
   Net other property and equipment                            2,367            2,349
   Investment in affiliate                                    15,982           15,054
   Prepaid expenses, deferred charges and other assets         2,917            2,863
                                                           ---------        ---------

TOTAL ASSETS                                               $ 450,038        $ 365,682
                                                           =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY

   Accounts payable and accrued liabilities                $  34,122        $  28,014
   Payable to affiliate                                       20,994           12,500
   Income taxes payable                                        3,735            1,242
   Debt
     Senior Notes                                             75,000           75,000
     Line of Credit                                           60,000           15,000
     Term Loans                                                  215              477
   Obligations under capital leases                               30               89
   Contingent payables                                           274              274
   Deferred income taxes                                      22,985           18,050
   Deferred revenue                                            6,385            7,763
                                                           ---------        ---------

TOTAL LIABILITIES                                            223,740          158,409
                                                           ---------        ---------

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
     22,652,847 and 22,548,408 at September 30, 1998
     and December 31, 1997, respectively                         226              225
   Additional paid-in capital                                129,698          128,406
   Retained earnings                                         100,264           82,742
   Treasury stock, 175,818 shares at cost at September
     30, 1998 and December 31, 1997                           (2,977)          (2,977)
   Notes receivable from officers and employees               (1,033)          (1,109)
   Accumulated other comprehensive income (loss)                 120              (14)

                                                           ---------        ---------
TOTAL STOCKHOLDERS' EQUITY                                   226,298          207,273
                                                           ---------        ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $ 450,038        $ 365,682
                                                           =========        =========
</TABLE>

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




SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                       Three Months Ended September 30,
                                                                         ---------------------------
                                                                           1998               1997
                                                                         --------           --------

<S>                                                                      <C>                <C>
REVENUE                                                                  $ 38,332           $ 30,793


EXPENSES:

   Depreciation, depletion and amortization                                19,551             12,653
   Cost of sales                                                            1,175              3,382
   Selling, general and administrative expenses                             6,453              5,377
                                                                         --------           --------
                                                                           27,179             21,412
                                                                         --------           --------

INCOME FROM OPERATIONS                                                     11,153              9,381

Interest expense, net                                                      (1,516)              (691)
Equity in earnings (loss) of affiliate                                        344                (58)
Gain on sale of subsidiary stock                                             --               18,449
Gain on increase in underlying equity of affiliate                           --               10,750
Extinguishment of volumetric production payment                              --               (4,133)
                                                                         --------           --------

Income before provision for income taxes                                    9,981             33,698

Provision for income taxes                                                  3,693             12,002
                                                                         --------           --------

NET INCOME                                                               $  6,288           $ 21,696
                                                                         ========           ========

Earnings per share:

   Basic                                                                 $    .28           $   1.00
                                                                         ========           ========
   Diluted                                                               $    .28           $    .98
                                                                         ========           ========

Weighted average number of common and common equivalent shares:

   Basic                                                                   22,634             21,657
                                                                         ========           ========
   Diluted                                                                 22,818             22,205
                                                                         ========           ========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>






SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                        Nine Months Ended September 30,
                                                                         ----------------------------
                                                                            1998               1997
                                                                         ---------           --------

<S>                                                                      <C>                 <C>
REVENUE                                                                  $ 106,235           $ 92,685

EXPENSES:

   Depreciation, depletion and amortization                                 52,433             34,321
   Cost of sales                                                             3,654             15,813
   Selling, general and administrative expenses                             18,875             16,391
                                                                         ---------           --------
                                                                            74,962             66,525
                                                                         ---------           --------

INCOME FROM OPERATIONS                                                      31,273             26,160

Interest expense, net                                                       (3,913)            (2,714)
Equity in earnings (loss) of affiliate                                         469                (58)
Gain on sale of subsidiary stock                                              --               18,449
Gain on increase in underlying equity of affiliate                            --               10,750
Extinguishment of volumetric production payment                               --               (4,133)
                                                                         ---------           --------

Income before provision for income taxes                                    27,829             48,454

Provision for income taxes                                                  10,307             17,270
                                                                         ---------           --------

NET INCOME                                                               $  17,522           $ 31,184
                                                                         =========           ========

Earnings per share:

   Basic                                                                 $     .78           $   1.48
                                                                         =========           ========
   Diluted                                                               $     .76           $   1.43
                                                                         =========           ========

Weighted average number of common and common equivalent shares:

   Basic                                                                    22,593             21,094
                                                                         =========           ========
   Diluted                                                                  22,960             21,821
                                                                         =========           ========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>



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

<S>                             <C>        <C>          <C>        <C>         <C>        <C>        <C>      <C>         <C>
Balance, December 31, 1996                 10,362,102   $   104    $ 105,544   $ 51,185       (409)  $    (4) $   (1,205) $      17
   Net proceeds from issuance
       of common stock                        912,472         8       17,318         --                   --          --         --
   Two-for-one stock split                 11,273,834       113         (113)        --       (409)       --          --         --
   Tax reduction from exercise
       of stock options                            --        --        5,657         --         --        --          --         --
   Treasury stock purchased                        --        --           --         --   (175,000)   (2,973)         --         --
   Payments received on notes
       receivable from officers
       and employees                               --        --           --         --         --        --          96         --
   Net income                   $  31,557          --        --           --     31,557         --        --          --         --
   Foreign currency translation
       adjustments                    (31)         --        --           --         --         --        --          --        (31)
                                ---------
   Comprehensive income         $  31,526
                                =========  ----------   -------    ---------   --------   --------   -------   ---------  ---------

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                        104,439         1          948         --         --        --          --         --
   Tax reduction from exercise
       of stock options                            --        --          344         --         --        --          --         --
   Payments received on
       notes receivable from
       officers and employees                      --        --           --         --         --        --          76
   Net income                   $  17,522          --        --           --     17,522         --        --          --         --
   Foreign currency translation
       adjustments net of
       income tax expense
       of $77                         134          --        --           --         --         --        --          --        134
                                ---------
   Comprehensive income         $  17,656
                                =========  ----------   -------    ---------   --------   --------   -------   ---------  ---------
Balance, September 30, 1998
   (unaudited)                             22,652,847   $   226    $ 129,698   $100,264   (175,818)  $(2,977)  $  (1,033) $     120
                                           ==========   =======    =========   ========   ========   =======   =========  ========= 
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.


<PAGE>

SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
                                                                          Nine Months Ended September 30,
                                                                           ----------------------------
                                                                              1998               1997
                                                                           ---------           --------
<S>                                                                        <C>                 <C>
Cash flows from operating activities:

   Cash received from customers                                            $ 108,661           $ 90,783
   Cash paid to suppliers and employees                                      (17,284)           (31,378)
   Extinguishment of volumetric production payment                              --              (11,720)
   Interest paid                                                              (3,320)            (2,936)
   Interest received                                                             298                863
   Income taxes paid                                                          (2,535)               (40)
                                                                           ---------           --------

     Net cash provided by operating activities                                85,820             45,572
                                                                           ---------           --------

Cash flows from investing activities:

   Cash invested in seismic data                                            (100,429)           (42,979)
   Cash invested in oil and gas properties                                   (31,586)           (31,189)
   Cash paid to acquire property and equipment                                  (681)            (8,500)
   Cash from disposal of property and equipment                                   17                 28
   Proceeds from sale of stock of subsidiary                                    --               29,723
   Costs related to sale of stock subsidiary                                    --               (5,435)
   Cash received from affiliate for advances                                    --                2,094
   Collections on loans made                                                    --                5,385
                                                                           ---------           --------

     Net cash used in investing activities                                  (132,679)           (50,873)
                                                                           ---------           --------

Cash flows from financing activities:

   Borrowings under line of credit agreements                                 69,207             41,500
   Principal payments under line of credit                                   (24,207)           (41,500)
   Borrowings under term loans                                                  --                7,925
   Principal payments on term loans                                             (262)            (2,212)
   Principal payments on capital lease obligations                               (59)              (811)
   Proceeds from issuance of common stock                                      1,015             11,164
   Costs of debt and equity transactions                                         (66)                (6)
   Payments on receivables from officers and employees                            76                 96
                                                                           ---------           --------

     Net cash provided by financing activities                                45,704             16,156
                                                                           ---------           --------


Effect of exchange rate changes                                                   79                 (8)
                                                                           ---------           --------


Net increase (decrease) in cash and equivalents                               (1,076)            10,847

Cash and cash equivalents at beginning of period                               4,881              3,340
                                                                           ---------           --------


Cash and cash equivalents at end of period                                 $   3,805           $ 14,187
                                                                           =========           ========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

<PAGE>

SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In thousands)
<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30,
                                                                     ---------------------------
                                                                        1998              1997
                                                                     -----------        --------

<S>                                                                  <C>                <C>
Reconciliation of net income to net cash provided by
   operating activities:

Net income                                                           $ 17,522           $ 31,184
Adjustments to reconcile net income to net cash provided by
   operating activities:

   Gain on sale of subsidiary stock                                      --              (18,449)
   Gain on increase in underlying equity of affiliate                    --              (10,750)
   Equity in loss (earnings) of affiliate                                (469)                58
   Depreciation, depletion and amortization                            52,432             35,346
   Deferred income tax provision                                        4,935              8,635
   Non-cash sale                                                       (1,140)               --
   Amortization of deferred revenue                                      --               (4,079)
   Discount on note receivable                                           --                 (198)
   Gain on sale of property and equipment                                 (13)               (16)
   Decrease (increase) in receivables                                   3,623               (778)
   Decrease (increase) in other assets                                    347             (1,986)
   Increase in other liabilities                                        8,583              6,605
                                                                     --------           --------

     Total adjustments                                                 68,298             14,388
                                                                     --------           --------


Net cash provided by operating activities                            $ 85,820           $ 45,572
                                                                     ========           ========

Supplemental schedule of non-cash investing activities:
   Capital lease obligations incurred                                $   --             $    374
                                                                     ========           ========

   Increase in the underlying equity of affiliate                    $   --             $ 13,031
                                                                     ========           ========
</TABLE>

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

<PAGE>

SEITEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
September 30, 1998

NOTE A-BASIS OF PRESENTATION

     The  accompanying  unaudited  financial  statements  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions of Regulation S-X.  Accordingly,  they do
not include all of the  information  and notes  required by  generally  accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Certain reclassifications
have been  made to the  amounts  in the prior  year's  financial  statements  to
conform to the  current  year's  presentation.  Operating  results  for the nine
months ended  September 30, 1998 are not  necessarily  indicative of the results
that  may be  expected  for the year  ending  December  31,  1998.  For  further
information,  refer to the financial  statements  and notes thereto for the year
ended December 31, 1997.


     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting  Comprehensive  Income," the Company has reported  comprehensive
income  for the  quarter  and  nine-month  periods  ended  September  30,  1998.
Accumulated other comprehensive  income consists of foreign currency translation
adjustments.

NOTE B-EARNINGS PER SHARE

     In accordance  with 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.  Earnings per share computations
to  reconcile  basic and diluted net income for the three and nine months  ended
September 30, 1998 and 1997 consist of the  following  (in thousands  except per
share amounts):
<TABLE>
<CAPTION>

                                               Three Months Ended                Nine Months Ended
                                                  September 30,                     September 30,

                                            ------------------------          ------------------------
                                              1998            1997             1998             1997
                                            -------          -------          -------          -------
<S>                                         <C>              <C>              <C>              <C>
Net income                                  $ 6,288          $21,696          $17,522          $31,184
                                            =======          =======          =======          =======


Basic weighted average shares                22,634           21,657           22,593           21,094
Effect of dilutive securities: (1)<F1>
   Options and warrants                         184              548              367              727
                                            -------          -------          -------          -------

Diluted weighted average shares              22,818           22,205           22,960           21,821
                                            =======          =======          =======          =======

Per share income:
   Basic                                    $   .28          $  1.00          $   .78          $  1.48
   Diluted                                  $   .28          $   .98          $   .76          $  1.43

-------------------
<FN>

(1)<F1>  During the third  quarter of 1998 and 1997 and the first nine months of
         1998 and 1997,  a weighted  average  number of options and  warrants to
         purchase  3,873,000,  59,000,  2,563,000  and 485,000  shares of common
         stock were  outstanding,  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>

<PAGE>

NOTE C-DATA BANK

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

NOTE D-OIL AND GAS PROPERTIES

     The  Company  accounts  for  its oil and  gas  exploration  and  production
activities  using the full-cost  method of  accounting.  Under this method,  all
costs  associated with  acquisition,  exploration and development of oil and gas
reserves,  including  directly related overhead costs and interest costs related
to its unevaluated properties and certain properties under development which are
not  currently  being  amortized,  are  capitalized.  For the nine months  ended
September 30, 1998 and 1997, general and administrative  costs of $1,276,000 and
$1,017,000,  respectively,  have been capitalized to oil and gas properties. For
the nine months ended September 30, 1998 and 1997,  interest costs of $1,790,000
and $1,535,000, respectively, have been capitalized to oil and gas properties.


NOTE E-VOLUMETRIC PRODUCTION PAYMENT


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

NOTE F-ACCOUNTING   FOR   SALES   OF  STOCK  BY SUBSIDIARY COMPANIES


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


     On August 11, 1997,  the Company's  wholly-owned  seismic data  acquisition
crew subsidiary, Eagle Geophysical, Inc. ("Eagle"),  completed an initial public
offering in which the Company sold  1,880,000 of its  3,400,000  shares of Eagle
common stock as a selling stockholder.  As a result of the offering, the Company
now owns  1,520,000  shares of Eagle  common  stock.  The Company  received  net
proceeds of $29,723,000 from its  participation in the offering,  resulting in a
pre-tax  gain,  net of costs,  on the sale of Eagle common stock of  $18,449,000
that is reported in the  accompanying  consolidated  statement of operations for
the three and nine months ended  September 30, 1997.  Additionally,  the Company
recorded a pre-tax gain, net of costs,  of $10,750,000  representing an increase
in the Company's  underlying  equity of Eagle as a result of Eagle's issuance of
stock in  connection  with the  offering  that is reported  in the  accompanying
consolidated  statement  of  operations  for the  three  and nine  months  ended
September 30, 1997.
<PAGE>

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

OVERVIEW

     The Company's net income for the three and nine months ended  September 30,
1998, was $6,288,000 and  $17,522,000  respectively,  as compared to income from
core seismic  marketing and exploration and production  operations of $5,471,000
and  $14,372,000  for the  three  and nine  months  ended  September  30,  1997,
respectively.

     During the third  quarter of 1997,  the Company  spun-off its  wholly-owned
seismic crew subsidiary,  Eagle Geophysical,  Inc. ("Eagle). As a result of this
transaction,  the financial  results of Eagle are no longer  consolidated in the
Company's financial statements beginning August 11, 1997.

RESULTS OF OPERATIONS

     Total revenue  increased from $30,793,000  during the third quarter of 1997
to  $38,332,000  during the third quarter of 1998.  During the first nine months
total  revenue  increased  from  $92,685,000  in 1997 to  $106,235,000  in 1998.
Revenue  primarily  consists of revenue  generated from the marketing of seismic
data and oil and gas production. The third quarter and first nine months of 1997
include  revenue  of  $2,762,000  and  $16,316,000,   respectively,  related  to
proprietary seismic data acquisition services performed by Eagle.

     Revenue from the marketing of seismic data  increased  from  $21,955,000 in
the  third  quarter  of 1997 to  $33,714,000  in the third  quarter  of 1998 and
increased  from  $57,013,000  in the first nine months of 1997 to $91,807,000 in
the first nine months of 1998. These increases are primarily  attributable to an
increase  in  demand  for  high-resolution  seismic  data,  which is being  used
increasingly in oil and gas development as well as exploration efforts.

     Oil and gas revenue was $4,618,000 in the third quarter of 1998 compared to
$6,076,000  in the third quarter of 1997 and was  $14,428,000  in the first nine
months of 1998  compared to  $19,356,000  in the first nine months of 1997.  The
decrease in oil and gas revenue  between the third quarters of 1997 and 1998 was
caused  primarily by lower natural gas  production.  The decrease in oil and gas
revenue  between the first nine months of 1997 and 1998 was caused by both lower
production  volumes and lower  commodity  prices.  The  production  decline from
certain of the Company's shallow,  short-lived  producing properties has not yet
been offset by production from new wells. The Company has experienced  delays in
new wells coming on-line due to adverse weather  conditions and lengthy pipeline
negotiations.  Additionally, development wells have not been drilled in the time
frame  anticipated  by the Company as a result of some of its partners  delaying
plans to drill such wells due to lower commodity prices,  reallocation of budget
funds and  consolidations  within the industry.  Third  quarter 1998  production
volumes  increased  approximately  4% from the second quarter 1998 volumes.  Net
volume and price  information  for the Company's oil and gas  production for the
third  quarters  and first  nine  months of 1998 and 1997 is  summarized  in the
following table:
<TABLE>
<CAPTION>
                                                          Quarter Ended                    Nine Months Ended
                                                          September 30,                      September 30,
                                                   ----------------------------       ----------------------------
                                                       1998           1997                1998           1997
                                                   -------------  -------------       -------------  -------------


<S>                                                     <C>            <C>                 <C>            <C>
Natural gas volumes (mmcf)                              1,622          1,918               4,543          5,551
Average natural gas price ($/mcf)                       $2.20          $2.18               $2.35          $2.49
Crude oil/condensate volumes (mbbl)                        88             98                 286            313
Average crude oil/condensate price ($/bbl)             $11.22         $18.27              $12.36         $16.62
</TABLE>

<PAGE>

     Depreciation,  depletion and amortization  consists  primarily of data bank
amortization  and depletion of oil and gas  properties.  Data bank  amortization
increased from $9,268,000 during the third quarter of 1997 to $16,009,000 during
the third quarter of 1998 and increased from  $23,452,000 to $42,085,000 for the
first nine months of 1997 and 1998,  respectively.  As a  percentage  of revenue
from  licensing  seismic data,  data bank  amortization  was 43% and 48% for the
third  quarters  of 1997 and 1998,  respectively,  and 42% and 46% for the first
nine months of 1997 and 1998,  respectively.  These changes are primarily due to
the mix of sales of 2D and 3D data  amortized  at varying  percentages  based on
each data program's current and expected future revenue stream.

     Depletion of oil and gas properties was $3,323,000 for the third quarter of
1998 compared to $2,977,000  for the third  quarter of 1997,  which  amounted to
$1.55 and $1.19,  respectively,  per mcfe of gas produced  during such  periods.
Depletion of oil and gas properties  was  $9,697,000  and $9,234,000  during the
first nine months of 1998 and 1997,  respectively,  which  amounted to $1.55 and
$1.24, respectively,  per mcfe of gas produced during such periods. The increase
in the rate reflects the amount of exploration  and  development  costs incurred
increasing at a higher rate than the proven reserve base. The depletion rate per
mcfe of gas produced was $1.55 for both the first and second quarters of 1998.

     Cost of sales consists of expenses  associated  with oil and gas production
and seismic resale  support  services,  as well as  geophysical  services in the
third quarter and first nine months of 1997.  The decrease in cost of sales from
$3,382,000 to $1,175,000  for the third quarter of 1997 and 1998,  respectively,
and from  $15,813,000  to $3,654,000 for the first nine months of 1997 and 1998,
respectively,  is  primarily  due to the third  quarter and first nine months of
1997 including cost of sales associated with geophysical  services of $2,058,000
and  $12,401,000,  respectively,  whereas  in 1998  there  are  none  due to the
spin-off of Eagle in 1997.  Oil and gas  production  costs  amounted to $.53 and
$.56 per mcfe of gas  produced  in the third  quarter  and first nine  months of
1998,  respectively,  compared to $.48 and $.42 per mcfe in the same  periods in
1997.  The  increase in rate is  primarily  due to an  increase in workover  and
maintenance  costs on some of the  Company's  older wells  along with  increased
operating  costs on some of the Company's  newer wells that are  producing  from
deeper and higher pressure horizons.

     The Company's selling, general and administrative expenses increased during
the 1998  periods  as  compared  to the 1997  periods  primarily  as a result of
variable  expenses related to the increased volume of business.  As a percentage
of total  revenue,  these  expenses were 17% for the third  quarters of 1997 and
1998, and were 18% for the first nine months of 1997 and 1998.

     Net interest  expense  increased  from  $691,000 to $1,516,000 in the third
quarter of 1997 and 1998, respectively,  and $2,714,000 to $3,913,000 during the
first nine months of 1997 and 1998,  respectively,  primarily  due to  increased
borrowings  made under the Company's  revolving  line of credit  during  the1998
periods.

     On August 11, 1997, Eagle completed an initial public offering in which the
Company  sold  1,880,000  of its  3,400,000  shares of Eagle  common  stock as a
selling stockholder. As a result of the offering, the Company now owns 1,520,000
shares of Eagle common stock.  The Company  received net proceeds of $29,723,000
from its  participation  in the offering,  resulting in a pre-tax  gain,  net of
costs,  on the sale of Eagle  common  stock of  $18,449,000.  Additionally,  the
Company  recorded a pre-tax gain, net of costs,  of $10,750,000  representing an
increase  in the  Company's  underlying  equity of Eagle as a result of  Eagle's
issuance of stock in  connection  with the  offering.  The  Company's  equity in
earnings of Eagle was $344,000 and $469,000 in the third  quarter and first nine
months of 1998,  respectively  and  amounted to a loss of $58,000 for the period
from August 11, 1997 to September 30, 1997.

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

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES


     On  March  16,  1998,  the  Company  increased  its  $50,000,000  unsecured
revolving line of credit facility to $75,000,000. The facility bears interest at
a rate  determined  by the  ratio  of the  Company's  debt  to  cash  flow  from
operations. Pursuant to the interest rate pricing structure, funds can currently
be borrowed at LIBOR plus 3/4%, the bank's  prevailing prime rate, or the sum of
the Federal Funds effective rate for such day plus 1/2%. The facility matures on
March 16, 2001.  The balance  outstanding  on the  revolving  line of credit was
$66,500,000 at November 11, 1998.

     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 beginning  December 30, 1998.
Interest  on all  series of the notes is  payable  semi-annually  on June 30 and
December 30.

     On October 2, 1998,  the Company  completed a sale of 794,400 shares of its
common  stock to its  employees.  The  Company  granted  five-year  loans to its
employees  for the  purchase  of which 60% of the loan  amount is being  paid in
equal  monthly,  quarterly  or annual  payments,  as  applicable,  and a balloon
payment of the remaining 40% is due on October 2, 2003.

     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 November 1995 to April 1997,  the Company and two of its  wholly-owned
subsidiaries  obtained three separate  three-year term loans totaling  $747,000.
One of the loans bears  interest  at the rate of 8.413%,  and two at the rate of
7.9%. The proceeds were used for the purchase of certain property and equipment,
which  secures  the  debt.   Monthly   principal  and  interest  payments  total
approximately  $23,000.  The balance  outstanding  on the loans at November  11,
1998, was $193,000.

     The Company owns  1,520,000  shares of Eagle common stock.  As of September
30, 1998, the market value of the Company's  remaining  equity interest in Eagle
was  $10,545,000  based on the  September  30, 1998 closing price of $6.9375 per
share as  quoted  by  NASDAQ.  These  shares  are  subject  to  certain  trading
restrictions.

     From  January 1, 1998,  through  November 11,  1998,  the Company  received
$1,057,000  from the exercise of common stock purchase  warrants and options and
the Company's  401(k) stock purchases.  In connection with these exercises,  the
Company will also receive approximately $344,000 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 nine months of 1998, gross seismic data bank additions and
capitalized  oil  and  gas   exploration  and  development   costs  amounted  to
$106,792,000 and $33,590,000 respectively.  These capital expenditures,  as well
as taxes,  interest  expenses,  cost of sales  and  general  and  administrative
expenses, were funded by operations and borrowings under the Company's revolving
line of credit.

     Currently,  the Company anticipates capital  expenditures for the remainder
of  1998  to  total  approximately  $36.5  million.  Such  expenditures  include
approximately  $30 million for the creation of  proprietary  seismic  data,  and
approximately $6.5 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 sale of common stock and exercise of common stock purchase
warrants and options,  combined  with its  available  revolving  line of credit,
should  be  sufficient  to  fund  the  1998  capital  expenditures,  along  with
expenditures for operating and general and administrative expenses. In addition,
the Company is currently  negotiating  with its banks to increase its  revolving
line of credit to allow for future  growth.  In the event the  Company  does not
increase its revolving  line of credit,  it may arrange for  additional  debt or
equity financing;  however,  there can be no assurance that the Company would be
able to accomplish any such debt or equity  financing on satisfactory  terms. If
such debt or equity  financing  is not  available  on  satisfactory  terms,  the
Company  would reduce its capital  budget and fund  expenditures  with cash flow
generated from operating sources.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Under the
new standard,  companies  will be required to report certain  information  about
operating  segments  in  consolidated  statements.  Operating  segments  will be
determined  based on the method by which  management  organizes its business for
making operating decisions and assessing performance. The standard also requires
that companies report certain information about their products and services, the
geographic areas in which they operate, and their major customers.  SFAS No. 131
is effective for financial  statements for periods  beginning after December 15,
1997.

     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. Statement 133 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 on its consolidated  financial  statements and has not determined the timing
of or method of its adoption of Statement 133. However,  the Company anticipates
that  application  of the  statement  will not  have a  material  effect  on its
consolidated financial statements.

     In April 1998,  the  American  Institute of  Certified  Public  Accountants
issued Statement of Position  ("SOP") 98-5,  "Reporting on the Costs of Start-Up
Activities." Under this SOP, all costs of start-up activities and organizational
costs are to be expensed as  incurred.  SOP 98-5 is  effective  for fiscal years
beginning after December 15, 1998, although earlier implementation is permitted.
As of September  30, 1998,  the Company had not adopted this SOP;  however,  the
Company  anticipates  that the  application of this SOP 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.

     The  Company  has  made  a  preliminary  review  of  both  its  information
technology and its non-information  technology systems to determine whether they
are Year 2000  compliant.  The Company has not identified  any material  systems
which are not Year 2000 compliant.  The Company is currently  preparing 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.  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

<PAGE>

significantly  disrupted  even if  third  parties  with  whom  the  Company  has
relationships are not Year 2000 compliant. Further, 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.  While it is not  possible  at
present to quantify the cost of corrective  actions,  management does not expect
that these actions will materially  exceed the cost of normal software  upgrades
and  replacements   expected  to  occur  throughout  the  Year  2000.   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.  Therefore,  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 to consider
the likelihood of a material  business  interruption due to the Year 2000 issue,
and, if necessary, implement appropriate contingency plans.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

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

<PAGE>

                           PART II - OTHER INFORMATION

Items 1., 2., 3.  Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders.

     The Company's  Annual  Meeting of  Stockholders  was held on July 29, 1998.
Matters voted upon at the Annual Meeting,  and the results of those votes are as
follows:

1.   The election of nine directors to serve until the 1999 Annual Meeting.

            Name                 No. of Votes For      No. of Votes Withheld
     -------------------         ----------------      ---------------------


     Herbert M. Pearlman            19,748,241                  316,044
     Paul A. Frame                  19,748,241                  316,044
     Horace A. Calvert              19,884,477                  179,808
     David S. Lawi                  19,748,241                  316,044
     Debra D. Valice                19,884,177                  180,108
     Walter M. Craig, Jr.           19,748,241                  316,044
     William Lerner                 19,747,941                  316,344
     John E. Stieglitz              19,747,841                  316,444
     Fred S. Zeidman                19,748,041                  316,244


2.   Approval of proposed  amendments to the Company's  Non-Employee  Directors'
     Stock Option Plan.

       No. of Votes For        No. of Votes Against    No. of Votes Abstained
     -------------------       --------------------    ----------------------

        17,840,870                  2,062,312                 161,103

3.   Approval  of the  appointment  of the  public  accounting  firm  of  Arthur
     Andersen  LLP  to  act  as  the  Company's   independent  Certified  Public
     Accountants for the year of 1998.

       No. of Votes For        No. of Votes Against    No. of Votes Abstained
     -------------------       --------------------    ----------------------

        19,952,970                     50,335                  60,980

Item 5.  Other Information.

     A shareholder  who wishes to make a proposal at the 1999 Annual  Meeting of
Shareholders  without  complying with the  requirements  of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (and therefore without including the
proposal  in  the  Company's  proxy  materials)   should  notify  the  Company's
Secretary, at the Company's principal executive offices, of that proposal by May
15,  1999.  If a  shareholder  fails to give that notice by that date,  then the
persons named as proxies in the proxy cards  solicited by the Company's Board of
Directors for that meeting will be entitled to vote the proxy cards held by them
regarding that proposal, if properly raised at the meeting, in their discretion.

Item 6.  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:  November 12, 1998                      /s/  Paul A. Frame
                                               ---------------------------------
                                                    Paul A. Frame
                                                    President




Dated:  November 12, 1998                      /s/  Debra D. Valice
                                               ---------------------------------
                                                    Debra D. Valice
                                                    Chief Financial Officer




Dated:  November 12, 1998                      /s/  Marcia H. Kendrick
                                               ---------------------------------
                                                    Marcia H. Kendrick
                                                    Chief Accounting Officer