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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549





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|[ X ]                          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------ |  | ----------------------------------------------------------------------------------------
|                               |  |                                                                                         
|                               |  | For the quarterly period ended September 30, 2003                                       
|                               |  |                                                                                         
|                               |  | OR                                                                                      
|                               |  |                                                                                         
|[    ]                         |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|Commission File Number 0-14488
|                              
|                              





|SEITEL, INC.                                       
|---------------------------------------------------
|(Exact name of registrant as specified in charter) 
|                                                   
|                                                   
|Delaware                                           
|(State or other jurisdiction of                    
|incorporation or organization)                     
|                                                   
|                                                   
|10811 S. Westview Circle                           
|Houston, Texas                                     
|(Address of principal executive offices)           
|                                                   
|                                                   
|Registrant's telephone number, including area code:





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







|Yes | [ X ] |  | No | [   ]
|--- | ----- |  | -- | -----





Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).







|Yes | [   ] |  | No | [ X ]
|--- | ----- |  | -- | -----



As of November 13, 2003, there were 25,375,683 shares of the Company's common stock, par value $.01 per share outstanding.







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|         |                                                                   | Page                                         
|-------- | ----------------------------------------------------------------- | ---------------------------------------------
|         |                                                                   |                                              
|PART I.  | FINANCIAL INFORMATION                                             |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Item 1.                                                           | Financial Statements                         
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Balance Sheetsas of                                  |                                              
|         | September 30, 2003 (Unaudited) and December 31, 2002              | 3                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Statements of Income(Unaudited)                      |                                              
|         | for the Three Months Ended September 30, 2003 and 2002            | 4                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Statements of Income(Unaudited)                      |                                              
|         | for the Nine Months Ended September 30, 2003 and 2002             | 5                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Statements of Comprehensive Income(Loss) (Unaudited) |                                              
|         | for the Three and Nine Months Ended September 30, 2003 and 2002   | 6                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Statements of Stockholders' Equity                   |                                              
|         | for the year ended December 31, 2002 and for the                  |                                              
|         | Nine Months Ended September 30, 2003 (Unaudited)                  | 7                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Consolidated Statements of Cash Flows(Unaudited)                  |                                              
|         | for the Nine Months Ended September 30, 2003 and 2002             | 8                                            
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Notes to Consolidated Interim Financial Statements                | 10                                           
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Item 2.                                                           | Management's Discussion and Analysis of      
|         |                                                                   | Financial Condition and Results of Operations
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Item 3.                                                           | Quantitative and Qualitative                 
|         |                                                                   | Disclosures About Market Risk                
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Item 4.                                                           | Controls and Procedures                      
|         |                                                                   |                                              
|         |                                                                   |                                              
|PART II. | OTHER INFORMATION                                                 | 38                                           
|         |                                                                   |                                              
|         |                                                                   |                                              
|         |                                                                   |                                              
|         | Signatures                                                        | 41                                           











---

INDEX









CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                           |                                                              | (Unaudited)                                          |                 |        |       |              |         
|------------------------------------------ | ------------------------------------------------------------ | ---------------------------------------------------- | --------------- | ------ | ----- | ------------ | --------
|                                           |                                                              | September 30,                                        |                 |        |       | December 31, |         
|                                           |                                                              | 2003                                                 |                 |        |       | 2002         |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|ASSETS                                     |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           | Cash and equivalents                                         | $                                                    | 45,739          |        |       | $            | 21,517  
|                                           | Restricted cash                                              |                                                      | 350             |        |       |              | 4,469   
|                                           | Receivables                                                  |                                                      |                 |        |       |              |         
|                                           |                                                              | Trade, net of allowance                              |                 | 32,976 |       |              |         
|                                           |                                                              | Notes and other                                      |                 | 460    |       |              |         
|                                           | Net seismic data library                                     |                                                      | 259,461         |        |       |              | 284,396 
|                                           | Net other property and equipment                             |                                                      | 16,749          |        |       |              | 19,789  
|                                           | Oil and gas operations held for sale                         |                                                      | 291             |        |       |              | 656     
|                                           | Investment in marketable securities                          |                                                      | 74              |        |       |              | 5       
|                                           | Deferred income taxes                                        |                                                      | 8,123           |        |       |              | 11,322  
|                                           | Prepaid expenses, deferred charges and other assets          |                                                      | 7,122           |        |       |              | 7,074   
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|TOTAL ASSETS                               | $                                                            | 371,345                                              |                 |        | $     | 398,136      |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           | Liabilities not subject to compromise:                       |                                                      |                 |        |       |              |         
|                                           |                                                              | Accounts payable and accrued liabilities             | $               | 11,666 |       |              | $       
|                                           |                                                              | Income taxes payable                                 |                 | 416    |       |              |         
|                                           |                                                              | Oil and gas operations held for sale                 |                 | 35     |       |              |         
|                                           |                                                              | Debt                                                 |                 |        |       |              |         
|                                           |                                                              |                                                      | Unsecured Notes |        | -     |              |         
|                                           |                                                              |                                                      | Term loans      |        | 5,910 |              |         
|                                           |                                                              | Obligations under capital leases                     |                 | 6,846  |       |              |         
|                                           |                                                              | Financial guaranty                                   |                 | -      |       |              |         
|                                           |                                                              | Deferred revenue                                     |                 | 50,540 |       |              |         
|                                           | Liabilities subject to compromise                            |                                                      | 267,598         |        |       |              | -       
|                                           |                                                              |                                                      |                 |        |       |              |         
|TOTAL LIABILITIES                          |                                                              | 343,011                                              |                 |        |       | 361,100      |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|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 25,811,601 |                 |        |       |              |         
|                                           |                                                              | at September 30, 2003 and December 31, 2002          |                 | 258    |       |              |         
|                                           | Additional paid-in capital                                   |                                                      | 166,630         |        |       |              | 166,630 
|                                           | Retained deficit                                             |                                                      | (133,946        | )      |       |              | (121,793
|                                           | Treasury stock, 435,918 shares at cost at September 30, 2003 |                                                      |                 |        |       |              |         
|                                           |                                                              | and December 31, 2002                                |                 | (5,373 | )     |              |         
|                                           | Notes receivable from officers and employees                 |                                                      | (169            | )      |       |              | (1,178  
|                                           | Accumulated other comprehensive income (loss)                |                                                      | 934             |        |       |              | (1,508  
|                                           |                                                              |                                                      |                 |        |       |              |         
|TOTAL STOCKHOLDERS' EQUITY                 |                                                              | 28,334                                               |                 |        |       | 37,036       |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $                                                            | 371,345                                              |                 |        | $     | 398,136      |         
|                                           |                                                              |                                                      |                 |        |       |              |         
|                                           |                                                              |                                                      |                 |        |       |              |         



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



---

INDEX







SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share amounts)



|                                                      |                                              |                                          | Three Months Ended September 30, |        
|----------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | -------------------------------- | -------
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          | 2003                             |        
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|REVENUE                                               |                                              | $                                        | 39,199                           |        
|                                                      |                                              |                                          |                                  |        
|EXPENSES:                                             |                                              |                                          |                                  |        
|                                                      | Depreciation and amortization                |                                          |                                  | 23,470 
|                                                      | Cost of sales                                |                                          |                                  | 180    
|                                                      | Selling, general and administrative expenses |                                          |                                  | 6,694  
|                                                      | Impairment of seismic data library           |                                          |                                  | 13,354 
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          | 43,698                           |        
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|INCOME (LOSS) FROM OPERATIONS                         |                                              |                                          | (4,499                           | )      
|                                                      |                                              |                                          |                                  |        
|Interest expense, net                                 |                                              |                                          | (4,945                           | )      
|Loss on sale of security                              |                                              |                                          | -                                |        
|Reorganization items                                  |                                              |                                          | (1,675                           | )      
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|Income (loss) from continuing operations before       |                                              |                                          |                                  |        
|                                                      | income taxes                                 |                                          |                                  | (11,119
|                                                      |                                              |                                          |                                  |        
|Provision (benefit) for income taxes                  |                                              |                                          | (192                             | )      
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|Income (loss) from continuing operations              |                                              |                                          | (10,927                          | )      
|                                                      |                                              |                                          |                                  |        
|Income (loss) from discontinued operations (including |                                              |                                          |                                  |        
|                                                      | loss from disposal of $1,225 in 2002)        |                                          |                                  | 19     
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|NET INCOME (LOSS)                                     |                                              | $                                        | (10,908                          | )      
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|Basic and diluted income (loss) per share:            |                                              |                                          |                                  |        
|                                                      |                                              | Income (loss) from continuing operations |                                  | $      
|                                                      |                                              | Loss from discontinued operations        |                                  |        
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              | Net income (loss)                        |                                  | $      
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        
|Weighted average number of common and common          |                                              |                                          |                                  |        
|                                                      | equivalent shares - basic and diluted        |                                          |                                  | 25,376 
|                                                      |                                              |                                          |                                  |        
|                                                      |                                              |                                          |                                  |        





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



---

INDEX





SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(In thousands, except per share amounts)



|                                                                |                                                         | Nine Months Ended September 30, |        
|--------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------- | -------
|                                                                |                                                         |                                 |        
|                                                                |                                                         | 2003                            |        
|                                                                |                                                         |                                 |        
|REVENUE                                                         | $                                                       | 101,296                         |        
|                                                                |                                                         |                                 |        
|EXPENSES:                                                       |                                                         |                                 |        
|                                                                | Depreciation and amortization                           |                                 | 61,718 
|                                                                | Cost of sales                                           |                                 | 510    
|                                                                | Selling, general and administrative expenses            |                                 | 21,213 
|                                                                | Impairment of seismic data library                      |                                 | 13,354 
|                                                                |                                                         |                                 |        
|                                                                |                                                         | 96,795                          |        
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|INCOME (LOSS) FROM OPERATIONS                                   |                                                         | 4,501                           |        
|                                                                |                                                         |                                 |        
|Interest expense, net                                           |                                                         | (14,860                         | )      
|Gain on extinguishment of liabilities                           |                                                         | 681                             |        
|Loss on sale of security                                        |                                                         | -                               |        
|Reorganization items                                            |                                                         | (1,675                          | )      
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|Loss from continuing operations before income taxes             |                                                         |                                 |        
|                                                                | and cumulative effect of change in accounting principle |                                 | (11,353
|Provision (benefit) for income taxes                            |                                                         | 621                             |        
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|Loss from continuing operations before cumulative               |                                                         |                                 |        
|                                                                | effect of change in accounting principle                |                                 | (11,974
|                                                                |                                                         |                                 |        
|Loss from discontinued operations (including loss               |                                                         |                                 |        
|                                                                | from disposal of $57,989 in 2002)                       |                                 | (179   
|                                                                |                                                         |                                 |        
|Cumulative effect of change in accounting principle, net of tax |                                                         | -                               |        
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|NET LOSS                                                        | $                                                       | (12,153                         | )      
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|Basic and diluted loss per share:                               |                                                         |                                 |        
|                                                                | Loss from continuing operations                         | $                               | (.47   
|                                                                | Loss from discontinued operations                       |                                 | (.01   
|                                                                | Cumulative effect of accounting change                  |                                 | -      
|                                                                |                                                         |                                 |        
|                                                                | Net loss                                                | $                               | (.48   
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        
|Weighted average number of common and                           |                                                         |                                 |        
|                                                                | common equivalent shares - basic and diluted            |                                 | 25,376 
|                                                                |                                                         |                                 |        
|                                                                |                                                         |                                 |        









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INDEX





SEITEL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(In thousands)



|                                                |                                               | Three Months Ended                        |      |   | Nine Months Ended |       
|----------------------------------------------- | --------------------------------------------- | ----------------------------------------- | ---- | - | ----------------- | ------
|                                                |                                               | September 30,                             |      |   | September 30,     |       
|                                                |                                               |                                           |      |   |                   |       
|                                                |                                               | 2003                                      |      |   | 2002              |       
|                                                |                                               |                                           |      |   |                   |       
|                                                |                                               |                                           |      |   |                   |       
|Net income (loss)                               | $                                             | (10,908                                   | )    | $ | 3,179             |       
|                                                |                                               |                                           |      |   |                   |       
|Unrealized gains (losses) on securities held as |                                               |                                           |      |   |                   |       
|                                                | available for sale:                           |                                           |      |   |                   |       
|                                                |                                               |                                           |      |   |                   |       
|                                                | Unrealized net holding gains                  |                                           | 7    |   |                   | -     
|                                                |                                               |                                           |      |   |                   |       
|                                                | Less:  Reclassification adjustment for losses |                                           |      |   |                   |       
|                                                |                                               | included in income, net of tax benefit of |      |   |                   |       
|                                                |                                               | $75 for the nine months ended             |      |   |                   |       
|                                                |                                               | September 30, 2002                        |      | - |                   |       
|                                                |                                               |                                           |      |   |                   |       
|                                                | Foreign currency translation adjustments      |                                           | (280 | ) |                   | (1,433
|                                                |                                               |                                           |      |   |                   |       
|                                                |                                               |                                           |      |   |                   |       
|Comprehensive income (loss)                     | $                                             | (11,181                                   | )    | $ | 1,746             |       
|                                                |                                               |                                           |      |   |                   |       
|                                                |                                               |                                           |      |   |                   |       



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





---

INDEX



SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands, except share amounts)







|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       | Accumulated |  
|-------------------------- | ------------------------------- | ------------------------------ | - | --- | ---------- | - | - | -------- | - | -------------- | -------- | -------- | ---------- | - | ------- | ------- | - | ----- | ---------- | ----- | ----- | ----------- | -
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       | Notes      |       |       | Other       |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       | Receivable |       |       | Compre-     |  
|                           |                                 | Common Stock                   |   |     | Additional |   |   |          |   | Treasury Stock |          |          | from       |   |         | hensive |  
|                           |                                 |                                |   |     | Paid-In    |   |   | Retained |   |                |          |          | Officers & |   |         | Income  |  
|                           |                                 | Shares                         |   |     | Amount     |   |   | Capital  |   |                | Earnings |          | Shares     |   |         | Amount  |   |       | Employees  |       |       | (Loss)      |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|Balance, December 31, 2001 |                                 | 25,810,603                     |   | $   | 258        |   | $ | 166,456  |   | $              | 91,624   |          | (735,918   | ) | $       | (9,072  | ) | $     | (3,776     | )     | $     | (1,903      | )
|                           | Net proceeds from issuance      |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | of common stock upon           |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | exercise of options            |   | 998 |            |   | - |          |   | 9              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           | Tax reduction from exercise of  |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | stock options                  |   | -   |            |   | - |          |   | 165            |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           | Issuance of common stock in     |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | connection with employee       |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | agreements                     |   | -   |            |   | - |          |   | -              |          |          | (977       | ) | 300,000 |         |   | 3,699 |            |       | -     |             |  
|                           | Payments received on notes      |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | receivable from officers       |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | and employees                  |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | 751   |             |  
|                           | Allowance for notes receivable  |                                | - |     |            | - |   |          | - |                |          | -        |            | - |         |         | - |       |            | 1,847 |       |             | -
|                           | Net loss                        |                                | - |     |            | - |   |          | - |                |          | (212,440 | )          | - |         |         | - |       |            | -     |       |             | -
|                           | Foreign currency translation    |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | adjustments                    |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           | Unrealized gain on marketable   |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | securities                     |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           | Reclassification adjustment for |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | losses included in income, net |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | of tax benefit of $75          |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|Balance, December 31, 2002 |                                 | 25,811,601                     |   |     | 258        |   |   | 166,630  |   |                | (121,793 | )        | (435,918   | ) |         | (5,373  | ) |       | (1,178     | )     |       | (1,508      | )
|                           | Payments received on notes      |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | receivable from officers       |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | and employees                  |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | 1,009 |             |  
|                           | Net loss                        |                                | - |     |            | - |   |          | - |                |          | (12,153  | )          |   |         |         | - |       |            | -     |       |             | -
|                           | Foreign currency translation    |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | adjustments                    |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           | Unrealized gain on              |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 | marketable securities          |   | -   |            |   | - |          |   | -              |          |          | -          |   | -       |         |   | -     |            |       | -     |             |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|Balance September 30, 2003 |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|(unaudited)                |                                 | 25,811,601                     |   | $   | 258        |   | $ | 166,630  |   | $              | (133,946 | )        | (435,918   | ) | $       | (5,373  | ) | $     | (169       | )     | $     | 934         |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  
|                           |                                 |                                |   |     |            |   |   |          |   |                |          |          |            |   |         |         |   |       |            |       |       |             |  









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



---

INDEX



SEITEL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)



|                                                   |                                                                 | Nine Months Ended September 30,                                    |        
|-------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------------------ | -------
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 | 2003                                                               |        
|                                                   |                                                                 |                                                                    |        
|Cash flows from operating activities:              |                                                                 |                                                                    |        
|Reconciliation of net loss to net cash provided by |                                                                 |                                                                    |        
|                                                   | operating activities of continuing operations:                  |                                                                    |        
|                                                   | Net loss                                                        | $                                                                  | (12,153
|                                                   | Loss from discontinued operations, net of tax                   |                                                                    | 179    
|                                                   | Cumulative effect of change in accounting principle, net of tax |                                                                    | -      
|                                                   | Depreciation, depletion and amortization                        |                                                                    | 61,718 
|                                                   | Impairment of seismic data library                              |                                                                    | 13,354 
|                                                   | Allowance for collection of accounts receivable                 |                                                                    | 275    
|                                                   | Allowance for collection on notes receivable                    |                                                                    | -      
|                                                   | Deferred income tax provision (benefit)                         |                                                                    | 3,199  
|                                                   | Non-cash sales                                                  |                                                                    | (13,073
|                                                   | Loss on sale of marketable securities                           |                                                                    | -      
|                                                   | Write-off of deferred financing costs                           |                                                                    | -      
|                                                   | Gain on extinguishment of liabilities                           |                                                                    | (681   
|                                                   | Gain on sale of property and equipment                          |                                                                    | 12     
|                                                   | Common stock issued as compensation                             |                                                                    | -      
|                                                   | Decrease in receivables                                         |                                                                    | 14,826 
|                                                   | Decrease in other assets                                        |                                                                    | 354    
|                                                   | Decrease in deferred revenue                                    |                                                                    | (5,137 
|                                                   | Decrease in accounts payable and other liabilities              |                                                                    | (1,075 
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 | Net cash provided by operating activities of continuing operations |        
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 |                                                                    |        
|Cash flows from investing activities:              |                                                                 |                                                                    |        
|                                                   | Cash invested in seismic data                                   |                                                                    | (33,281
|                                                   | Cash paid to acquire property and equipment                     |                                                                    | (737   
|                                                   | Cash received from disposal of property and equipment           |                                                                    | 15     
|                                                   | Net proceeds from sale of marketable securities                 |                                                                    | -      
|                                                   | Decrease in restricted cash                                     |                                                                    | 4,119  
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 | Net cash used in investing activities of continuing operations     |        
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 |                                                                    |        
|Cash flows from financing activities:              |                                                                 |                                                                    |        
|                                                   | Borrowings under line of credit                                 |                                                                    | -      
|                                                   | Principal payments under line of credit                         |                                                                    | -      
|                                                   | Borrowings under term loan                                      |                                                                    | -      
|                                                   | Principal payments on term loans                                |                                                                    | (2,906 
|                                                   | Principal payments on capital lease obligations                 |                                                                    | (1,978 
|                                                   | Proceeds from issuance of common stock                          |                                                                    | -      
|                                                   | Costs of debt and equity transactions                           |                                                                    | (431   
|                                                   | Buyout of financial guaranty                                    |                                                                    | (325   
|                                                   | Loans to officers, employees and director                       |                                                                    | (161   
|                                                   | Payments on notes receivable from officers and employees        |                                                                    | 1,015  
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 | Net cash used in financing activities of continuing operations     |        
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 |                                                                    |        
|Effect of exchange rate changes                    |                                                                 | (3,032                                                             | )      
|Net cash provided by discontinued operations       |                                                                 | 126                                                                |        
|                                                   |                                                                 |                                                                    |        
|Net increase (decrease) in cash and equivalents    |                                                                 | 24,222                                                             |        
|                                                   |                                                                 |                                                                    |        
|Cash and cash equivalents at beginning of period   |                                                                 | 21,517                                                             |        
|                                                   |                                                                 |                                                                    |        
|Cash and cash equivalents at end of period         | $                                                               | 45,739                                                             |        
|                                                   |                                                                 |                                                                    |        
|                                                   |                                                                 |                                                                    |        



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



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INDEX



|SEITEL, INC. AND SUBSIDIARIES                                         |                                    |                                       |        |       |      |       
|--------------------------------------------------------------------- | ---------------------------------- | ------------------------------------- | ------ | ----- | ---- | ------
|CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - continued         |                                    |                                       |        |       |      |       
|(in thousands)                                                        |                                    |                                       |        |       |      |       
|                                                                      |                                    |                                       |       
|                                                                      |                                    |                                       |       
|                                                                      |                                    | Nine Months Ended September 30,       |       
|                                                                      |                                    |                                       |       
|                                                                      |                                    | 2003                                  |        |       | 2002 |       
|                                                                      |                                    |                                       |        |       |      |       
|                                                                      |                                    |                                       |        |       |      |       
|Supplemental disclosure of cash flow information:                     |                                    |                                       |        |       |      |       
|                                                                      | Cash paid during period for:       |                                       |        |       |      |       
|                                                                      |                                    | Interest (net of amounts capitalized) | $      | 9,561 |      | $     
|                                                                      |                                    | Income taxes                          | $      | 1,129 |      | $     
|                                                                      |                                    |                                       |        |       |      |       
|Supplemental schedule of non-cash investing and financing activities: |                                    |                                       |        |       |      |       
|                                                                      | Additions to seismic data library  | $                                     | 10,293 |       | $    | 14,300
|                                                                      | Additions to marketable securities | $                                     | 60     |       | $    | -     
|                                                                      | Capital lease obligations incurred | $                                     | -      |       | $    | 7,137 
|                                                                      | Note payable to former executive   | $                                     | 469    |       | $    | -     
|                                                                      |                                    |                                       |        |       |      |       
|                                                                      |                                    |                                       |        |       |      |       





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



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INDEX



SEITEL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited)
September 30, 2003
NOTE A-BASIS OF PRESENTATION



The accompanying unaudited financial statements of Seitel, Inc. and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions of Regulation S-X.  Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring 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, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003.  These unaudited financial statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2002 contained in the Company's Annual Report filed on Form 10-K with the Securities and Exchange Commission.

Substantial Doubt About the Company's Ability to Continue as a Going Concern:   The Company's financial statements have been prepared on a basis that assumes the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  On July 21, 2003, the Company filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code (see "Note B-Reorganization Proceedings").  As a result of the bankruptcy filing, such realization of assets and liquidation of liabilities is subject to a significant number of uncertainties. Specifically, the interim consolidated financial statements do not present: (a) the realizable value of assets on a liquidation basis or the availability of such assets to satisfy liabilities, (b) the amount which will ultimately be paid to settle liabilities and contingencies which may be allowed in the bankruptcy, or (c) the effect of any changes which may occur in connection with the Company's capitalization or operations of the Company as a result of a plan of reorganization. Because of the ongoing nature of the bankruptcy, the discussions and consolidated financial statements contained herein are subject to material uncertainties.

Accordingly, there is substantial doubt about the Company's ability to continue as a going concern, including recovering assets and satisfying liabilities in the normal course of business.  The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result from the outcome of this uncertainty

Contractual Obligations:    As of September 30, 2003, the Company had approximately $273.6 million of outstanding debt and lease obligations, with aggregate contractual cash obligations summarized as follows (in thousands):







|                                   |   |         |   | Payments due by period | 
|---------------------------------- | - | ------- | - | ---------------------- | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Contractual cash obligations       |   | Total   |   | 2003                   | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Debt obligations (1)               | $ | 261,364 | $ | 260,792                | 
|Capital lease obligations          |   | 6,846   |   | 273                    | 
|Operating lease obligations        |   | 5,343   |   | 308                    | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Total contractual cash obligations | $ | 273,553 | $ | 261,373                | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 





|(1) | Debt obligations include debt subject to compromise of approximately $255.5 million.  These debt obligations have contractual maturities ranging from 2003 to 2011.  The Company is in non-compliance with certain of the covenants related to this debt, the holders of $255 million of such debt have accelerated the maturity thereof and the maturities have been reflected as due in 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





As
a result of the bankruptcy filing discussed in Note B below, the rights of and
ultimate payments related to certain of these contractual obligations may be
substantially altered.

Gain on Extinguishment of Liabilities:  In 2003, the Company negotiated settlement of certain liabilities for less than the amount recorded in the financial statements.  The resulting gain of $681,000 has been reflected as a gain on extinguishment of liabilities in the accompanying consolidated statements of income for the nine months ended September 30, 2003.



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INDEX

NOTE B-REORGANIZATION PROCEEDINGS

On July 21, 2003, (the "Petition Date"), Seitel, Inc., and its wholly owned U.S. subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") (Chapter 11 Case No. 03-12227 (PJW)).  Seitel, Inc. and its 30 U.S. subsidiaries that have filed petitions are collectively referred to herein as the "Debtors" and the Chapter 11 cases of these entities are collectively referred to herein as the "Cases."  By order of the Bankruptcy Court dated July 25, 2003, the Cases are being jointly administered.  Since the Petition Date, the Debtors have operated their business as "debtors-in-possession" pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code, which will allow them to continue operations during the reorganization proceeding.  Each Debtor will remain in possession of its assets and properties, and its business and affairs will continue to be managed by its directors and officers, subject in each case to the supervision of the Bankruptcy Court.  No trustee has been appointed.  An official equity committee (the "Equity Committee") was appointed on August 11, 2003.

None of the Company's direct or indirect subsidiaries or affiliates incorporated in Canadian or other non-U.S. jurisdictions have filed Chapter 11 and none are expected to file for reorganization or protection from creditors under any insolvency or similar law in the U.S. or elsewhere.  Such non-filing, non-U.S. based subsidiaries and affiliates are called "non-Debtors".

On July 22, 2003, the Debtors filed a Plan of Reorganization and such plan was subsequently amended (the "Debtors' Plan").  The Disclosure Statement for the Debtors' Plan was approved by the Bankruptcy Court on October 7, 2003 and voting on the Debtors' Plan concluded on November 13, 2003.  Based on preliminary, unaudited voting results: (i) all classes of claim holders approved the Debtors' Plan by requisite majorities; (ii) the class of securities action plaintiffs have not voted to accept the Debtors' Plan; and (iii) it is likely that shareholders did not vote in the required numbers to accept the Debtors' Plan.  A confirmation hearing with respect to the Debtors' Plan is scheduled to begin on November 17, 2003 and is expected to be continued on December 3, 2003.  If the Debtors' Plan is confirmed by the Bankruptcy Court and consummated, the Company will become a wholly owned subsidiary of Berkshire Hathaway Inc. ("Berkshire").  The document containing the specific Debtors' Plan terms and any amendments thereto is publicly available and has been filed with the Bankruptcy Court.

In connection with the filing of the Debtors' Plan, previously filed involuntary bankruptcy petitions which were pending against the Company were dismissed on July 25, 2003 by order of the Bankruptcy Court pursuant to a joint request for such dismissal filed by the Company and Ranch Capital L.L.C. ("Ranch").  Ranch previously purchased all of the senior unsecured notes (the "Notes") held by the entities which filed the involuntary bankruptcy petitions.  Ranch subsequently sold the Notes to Berkshire.

On November 3, 2003, the Equity Committee sought and obtained from the Bankruptcy Court a termination of the Company's exclusive right to file a plan of reorganization.  The Equity Committee filed an alternative plan and related disclosure statement on November 6, 2003, and a hearing on the adequacy of such disclosure statement has been set for December 3, 2003.  At the date of this report on Form 10-Q, no solicitation of or voting on such plan has been authorized by the Bankruptcy Court.  The document containing the specific plan terms proposed by the Equity Committee is publicly available and has been filed with the Bankruptcy Court.

On the Petition Date, the Company sought, and thereafter obtained, authority to take a broad range of actions, including the right to honor and perform under their pre-petition customer data agreements and to promote a "business as usual" atmosphere with customers and employees.  This relief was essential to minimize disruptions to the Company's businesses as a result of the commencement of the Chapter 11 cases and to assure customers that the data license agreements for selection of seismic data would be honored pending confirmation of the Plan.  Additionally, other orders were obtained, including authority to pay certain, limited pre-petition employee wages and benefits, employment of a noticing agent, adequate assurance of future payments to utility companies, continued use of cash management systems and payment of pre-petition sales and use taxes.

The Bankruptcy Court has approved a $20 million debtor-in-possession loan and security agreement (the "DIP Facility") with Wells Fargo Foothill, Inc., as lender ("Foothill"), to support the Debtors' operations during the course of the Cases.  The DIP Facility will terminate upon, among other events, the earlier of June 30, 2004 or the effective date of the Debtors' Plan or of any other alternative plan of reorganization.  The Debtors have not drawn on the DIP Facility.



---

INDEX

Generally, pre-Petition Date claims against the Debtors fall into two categories: secured and unsecured, including certain contingent or unliquidated claims.  Under the Bankruptcy Code, a creditor's claim is treated as secured only to the extent of the value of the collateral securing such claim, with the balance of such claim being treated as unsecured.  The amount and validity of pre-Petition Date contingent or unliquidated claims ultimately may be established by the Bankruptcy Court or by agreement of the parties.  As a result of the Cases, additional pre-Petition Date claims and liabilities have been asserted, some of which are significant.  The Debtors have objected to many of the asserted claims which the Debtors believe are improper or overstated.  No provision has been included in the accompanying financial statements for such contingent or unliquidated claims that have been filed with the Bankruptcy Court.

Under the Bankruptcy Code, the rights of and ultimate payments to pre-Petition Date creditors and stockholders may be substantially altered.  The Debtors anticipate that substantially all liabilities of the Debtors as of the date of the filing will be resolved pursuant to any plan of reorganization confirmed in the Cases in accordance with the provisions of the Bankruptcy Code.

The accompanying consolidated financial statements have been prepared in accordance with AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", and on a going concern basis, which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. However, as a result of the Cases, such realization of assets and liquidation of liabilities is subject to a significant number of uncertainties.

The following tables set forth certain financial information for the Debtors and non-Debtors (in thousands):





|Condensed Consolidating Balance Sheets
|--------------------------------------
|September 30, 2003                    
|                                      
|                                      
|                                      
|                                      
|                                      
|Cash and equivalents                  
|Receivables                           
|Investment in subsidiaries            
|Intercompany receivables (payables)   
|Net seismic data library              
|Net property and equipment            
|Deferred income tax asset (liability) 
|Other assets                          
|                                      
|                                      
|                                      
|                                      
|Liabilities not subject to compromise:
|                                      
|                                      
|                                      
|Liabilities subject to compromise     
|Stockholders' equity                  
|                                      
|                                      
|                                      
|                                      





---

INDEX



|Condensed Consolidating Statements of Income 
|---------------------------------------------
|For the Three Months Ended September 30, 2003
|                                             
|                                             
|                                             
|                                             
|                                             
|Revenue                                      
|Expenses:                                    
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|Loss from operations                         
|                                             
|Interest expense, net                        
|Reorganization items                         
|Benefit for income taxes                     
|Income from discontinued operations          
|                                             
|Net loss                                     
|                                             
|                                             











|Condensed Consolidating Statements of Income
|--------------------------------------------
|For the Nine Months Ended September 30, 2003
|                                            
|                                            
|                                            
|                                            
|                                            
|Revenue                                     
|Expenses:                                   
|                                            
|                                            
|                                            
|                                            
|                                            
|                                            
|Income from operations                      
|                                            
|Interest expense, net                       
|Gain on extinguishment of liabilities       
|Reorganization items                        
|Provision for incomes taxes                 
|Loss from discontinued operations           
|                                            
|Net income (loss)                           
|                                            
|                                            





---

INDEX



|Condensed Consolidating Statements of Cash Flows
|------------------------------------------------
|For the Nine Months Ended September 30, 2003    
|                                                
|                                                
|                                                
|                                                
|                                                
|Net cash provided (used) by:                    
|                                                
|                                                
|                                                
|Effect of exchange rate changes                 
|Net cash provided by discontinued               
|                                                
|                                                
|Net increase in cash and equivalents            
|Cash and equivalents at beginning of period     
|                                                
|Cash and equivalents at end of period           
|                                                
|                                                





Classification of Liabilities as "Liabilities Not Subject to Compromise" Versus "Liabilities Subject to Compromise." Liabilities not subject to compromise include: (1) liabilities incurred after the Petition Date of the Cases; (2) pre-Petition Date liabilities that the Debtors expect to pay in full including priority tax and employee claims, even though these amounts may not be paid until a plan of reorganization is approved; and (3) deferred revenue in connection with customer data agreements.

Liabilities subject to compromise refer to all other pre-Petition Date liabilities of the Debtors. The amounts of the various liabilities that are subject to compromise are set forth below. These amounts represent the Company's estimates of known or probable pre-Petition Date claims that are likely to be resolved in connection with the Cases. Such claims remain subject to future adjustments. There can be no assurance that the liabilities of the Debtors will not be found in the Cases to exceed the fair value of their assets. This could result in claims being paid at less than 100% of their face value.

The amounts subject to compromise at September 30, 2003 consisted of the following items (in thousands):







|Accounts payable          | $ | 629     | 
|------------------------- | - | ------- | 
|Accrued interest          |   | 7,719   | 
|Other accrued liabilities |   | 3,796   | 
|Debt                      |   | 255,454 | 
|                          |   |         | 
|Total                     | $ | 267,598 | 
|                          |   |         | 









Reorganization Items. Reorganization items under the Cases are expense or income items that are incurred or realized by the Debtors because they are in reorganization. These items include, but are not limited to, professional fees and similar types of expenses incurred directly related to the Cases, loss accruals or gains or losses resulting from activities of the reorganization process, and interest earned on cash accumulated by the Debtors because they are not paying their pre-petition liabilities. For the three and nine month periods ended September 30, 2003, reorganization items were as follows (in thousands):







|Professional fees | $ | 1,594 |  
|----------------- | - | ----- | -
|Interest Income   |   | (12   | )
|Other             |   | 93    |  
|                  |   |       |  
|Total             | $ | 1,675 |  
|                  |   |       |  





---

INDEX





NOTE C-REVENUE RECOGNITION

Revenue from Data Acquisition

Revenue from the creation of new seismic data is recognized using the proportional performance method based upon costs incurred and work performed to date as a percentage of total estimated costs and work required.  Management believes that this method is the most reliable and representative measure of progress for its data creation projects.  The duration of most data creation projects is generally less than one year.  Under these projects, the Company creates new seismic data designed in conjunction with its customers and specifically suited to the geology of the area using the most appropriate technology available. The contracts typically result in one or more customers underwriting a significant portion of the direct creation costs in exchange for a license or licenses to use the resulting data. Customers make periodic payments throughout the creation period, which generally correspond to costs incurred and work performed. These payments are non-refundable. The creation process generally occurs in the following stages: permitting, surveying, drilling, recording and processing. At each stage, the customers receive legally enforceable rights and access to, and the benefits of, the results of all work performed. The customers also receive access to and use of the newly acquired and processed data. The customers may have exclusive access to the work performed and exclusive use of the newly acquired and processed data for a limited term, which is generally nine months or less, after final delivery of the processed data. The customers' access to and use of the results of the work performed and of the newly acquired, processed data is governed by a license agreement which is a separate agreement from the acquisition contract. The Company's acquisition contracts require the customer either to have a license agreement in place or to execute one at the time the acquisition contract is signed. The Company maintains sole ownership of the newly acquired data, which is added to its library, and is free to license the data to other customers when the original customers' exclusivity period ends.

Revenue from Data Licenses

The Company licenses data from its seismic data library to customers under four basic forms of contracts.

Under the first form of contract, the customer licenses and selects data from the data library at the time the contract is executed.

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

Under the third form of contract, referred to as a "library card" contract, the customer initially receives only access to data. The customer may then select specific data, from the collection of data to which it has access, to hold long-term under its license agreement. The lengths of the selection periods under the library card contracts vary.

Under the fourth form of contract, referred to as a "review only" contract, the customer obtains rights to review a certain quantity of data for a limited period of time, but does not obtain the right to select specific data to hold long-term.

The usage of all data delivered to the customer, whether for review only or to hold long-term, is governed by a license agreement, which is a separate agreement from the contracts that are described above. The Company's contracts require the customer either to have a license agreement in place or to execute one at the time the contract is signed. The license agreement governs all data delivered to the customer during the term. Payment terms under the contracts vary from 30 days to 18 months depending on the size of the transaction. All payments due are non-cancelable and all payments made are non-refundable. The customer has access to all available data covered by the contracts on the date the contract is executed.  If the contract allows licensing of data that is not currently available, revenue is deferred until such time that the data is available for licensing.  The contracts permit selection of the data in its present form and the Company is under no obligation to make any enhancements, modifications or additions to the data unless specific terms to the contrary are included, in which case revenue with respect to such data would be deferred until performance is met.  Copies of the data are available to the customer immediately upon request.



---

INDEX



The Company recognizes revenue from licensing of seismic data when the Company has contracted with the customer for a fixed sales price; a licensing agreement is in place; the customer has selected specific data under the terms of the contract or the contract has expired without full selection having occurred; and collectibility of the sales price is reasonably assured. The Company recognizes revenue for the particular data selected as each specific selection of data is made by the customer. If selections are not completed by the expiration date of the contract, the Company recognizes any remaining revenue under that contract. In each case (selection or expiration), the earnings process is complete. The Company does not recognize revenue for amounts billed in advance of being earned until these conditions are met. For revenue that is deferred, the Company defers the direct costs (primarily commissions) related to the revenues. Revenue from licensing of seismic data is presented net of revenue shared with other entities.

Revenue from Non-Monetary Data Exchanges

In certain cases, the Company grants its customer a non-exclusive license to selected data from its library in exchange for ownership of seismic data from the customer.  The data that the Company receives is distinct from the data that it is licensing to the customer.  Because the Company receives ownership of distinct seismic data to be added to its library, and this data may be relicensed by the Company on a continuing basis, in exchange for a data license, the exchange is not a "like-kind" exchange, which would be accounted for at historical cost.  Once data selection is completed, the exchange represents the culmination of the earnings process with the customer and is not merely an exchange between two seismic companies.  These exchanges are referred to as non-monetary data exchanges.

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

The Company determines fair value of data exchanged by first determining the value of the license granted to the customer. It does so by evaluating the range of cash transactions by the Company for licenses of similar data during the prior six months for licenses in the United States and for the prior twelve months for licenses in Canada. In evaluating the range of cash transactions, the Company does not consider transactions that are disproportionately high or low. The Company then also considers the value of the data received from the customer. In determining the value of the data received, the Company considers the age, quality, current demand and future marketability of the data as well as the cost that would be required to create the data.  In the United States, the Company applies a limitation on the value it assigns per square mile on the data exchanged. In Canada, in the event of a difference greater than 2% between the value of the license granted and the value of the data received, the Company assigns the lower value to the exchange.  In significant exchanges ($500,000 or more), the Company also obtains an opinion from an independent third party in order to confirm the Company's valuation of the data received.  The Company obtains these opinions on an annual basis, usually in connection with the preparation of its annual financial statements.

For the three months ended September 30, 2003 and 2002, the Company recorded seismic data library assets from non-monetary exchanges of seismic data of $3,261,000, and $5,051,000, respectively.  For the nine months ended September 30, 2003 and 2002, the Company recorded seismic data library assets from non-monetary exchanges of seismic data of $9,218,000 and $13,399,000, respectively.  Revenue on a significant portion of the non-monetary data exchange transactions was initially deferred in accordance with the Company's accounting policy.  As a result of data selections by customers, the Company recognized revenue of $3,341,000, and $17,740,000 for the three months ended September 30, 2003 and 2002, respectively, and $11,938,000 and $39,140,000 for the nine months ended September 30, 2003 and 2002, respectively, from non-monetary data exchanges.

Revenue from Solutions

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

NOTE D-SEISMIC DATA LIBRARY

The Company's seismic data library consists of seismic surveys that are offered for license to customers on a non-exclusive basis. Costs associated with creating, acquiring or purchasing the seismic data library are capitalized and such costs are amortized on the income forecast method subject to a maximum amortization period determined based on the type of data.



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Costs of Seismic Data Library

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

For data acquired through a non-monetary data exchange, the Company capitalizes an amount equal to the fair value of the data received by the Company or the fair value of the license granted to the customer, whichever is more clearly determinable.  In the case of any single non-monetary exchange where the fair value recorded is in excess of $500,000, the Company also obtains an opinion from a third party to confirm the Company's valuation.

For internally created data, the capitalized costs include costs paid to third parties for the acquisition of data and related permitting, surveying and other activities associated with the data creation activity.  In addition, the Company capitalizes certain internal costs related to processing the created data.  Such costs include salaries and benefits of the Company's processing personnel and certain other costs incurred for the benefit of the processing activity.  The Company believes that the internal processing costs capitalized are not greater than, and generally are less than, those that would be incurred and capitalized if such activity were performed by a third party.  Capitalized costs for internal data processing were $472,000 and $386,000 for the three months ended September 30, 2003 and 2002, respectively, and $1,492,000 and $1,255,000 for the nine months ended September 30, 2003 and 2002, respectively.

Data Library Amortization

Effective January 1, 2002 (see "Change in Accounting Principle" below), the Company amortizes its seismic data library using the greater of the amortization that would result from the application of the income forecast method or a straight-line basis over the useful economic life of the data.

The actual rate of amortization depends on the location of specific seismic surveys licensed and selected by the Company's customers during the year.  Effective January 1, 2003, the Company assigns a specific amortization rate to each of fifteen separately identified segments of its seismic data library based on its estimate of future sales from each segment.  The amortization rates vary by segment and range from a low of 44% to a high of 66% with a weighted average rate of 50% based on the net book value of each segment compared with the net book value of the entire seismic data library as of September 30, 2003.  The actual rate of amortization recorded in any period varies from the weighted average rate due to the application of straight-line amortization on a survey-by-survey basis.

The Company applies the income forecast method by forecasting the ultimate revenue expected to be derived from a particular data library segment over the estimated useful economic life of each survey comprising part of such segment. That forecast is made by the Company annually and reviewed quarterly.  If, during any such review and update, the Company determines that the ultimate revenue for a library segment is expected to be significantly different than the original estimate of total revenue for such library segment, the Company revises the amortization rate attributable to future revenue from each survey in such segment.  In addition, in connection with such reviews and updates, the Company evaluates the recoverability of its seismic data library, and if required under Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the Impairment and Disposal of Long-Lived Assets," records an impairment charge with respect to such data.  See discussion on "Seismic Data Library Impairment" below.

The greater of the income forecast or straight-line amortization policy is applied quarterly on a cumulative basis at the individual survey level. Under this policy, the Company first records amortization using the income forecast method.  The cumulative income forecast amortization is then compared with the cumulative straight-line amortization. If the cumulative straight-line amortization is higher for any specific survey, additional amortization expense is recorded, resulting in accumulated amortization being equal to the cumulative straight-line amortization.  This requirement is applied regardless of future-year revenue estimates for the library segment of which the survey is a part and does not consider the existence of deferred revenue with respect to the library segment or to any survey.  As discussed below in "Revision of Useful Life of Data Library," the Company revised its useful life estimate in the fourth quarter of 2002 from ten years to five years with respect to offshore data and from ten years to seven years with respect to onshore data.

Change in Accounting Principle

In the second quarter of 2002, the Company changed its accounting policy for amortizing its created seismic data library from the income forecast method to the greater of the income forecast method or the straight-line method over the useful economic life of the data (described above) and reported the adoption of the new method as a cumulative effect of a change in accounting principle retroactive to January 1, 2002.  The Company changed its accounting policy in an effort to increase the transparency of its methodology and to be more consistent with other industry competitors.  Accordingly, the Company recorded a pre-tax charge of $17.2 million (after-tax charge of $11.2 million) as of January 1, 2002.



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Revision of Useful Life

In the fourth quarter of 2002, the Company reevaluated its estimate of the useful life of its seismic data library and revised the estimated useful life of its seismic data library to reduce the useful life of offshore data from ten to five years and onshore data from ten to seven years.  In making this decision, the Company considered a number of factors, including, among others, the impairment charges it reported in 2002, the additional amortization charges the Company recorded during the first three quarters of 2002 pursuant to its new amortization policy and seismic industry conditions.  With respect to each survey in the data library, the useful life policy is applied from the time such survey is available for licensing to customers generally, since some data in the library may not be licensed until an exclusivity period (usually nine months or less) has lapsed.



For the three and nine months ended September 30, 2003, the revision in the
useful life increased total amortization expense by approximately $5.1 million
and $12.6 million, respectively. In addition, because of the increased total
amortization charges, the impairment charge of $13.4 million recorded in the
third quarter of 2003 was $4.2 million lower than such charge would have been if
the useful lives had not been revised. Including both the increased amortization
charge and the difference in the impairment charge that resulted from the change
in the useful life, the net impact on reported results was a reduction in income
after taxes of $0.8 million and $8.3 million for the three and nine months ended
September 30, 2003, respectively, or $.03 and $.33, respectively, per share.

As a result of the adoption of the new accounting principle described above and the revision of the estimates of the useful lives of the seismic data in the fourth quarter of 2002, all of the Company's seismic data library is amortized on the greater of the income forecast method or straight-line amortization over five or seven years, as applicable.

Seismic Data Library Impairment

As events or conditions require, the Company evaluates the recoverability of its seismic data library in accordance with SFAS No. 144.  The Company evaluates its seismic data library for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Prior to the fourth quarter of 2002, the Company evaluated its seismic data library in the following components: (a) Gulf of Mexico offshore data, (b) Gulf Coast onshore data, (c) Rocky Mountain region data (including U.S. areas outside the Gulf Coast), (d) Canadian data, and (e) international data outside of North America.

In the fourth quarter of 2002, the Company reevaluated the level which constitutes the lowest level of independently identifiable cash flows.  In its reevaluation, the Company considered the results of the comprehensive forecasting process that had been undertaken by management in the fourth quarter of 2002, recent sales trends and management's expectations relative to its ability to attribute revenues to lower survey aggregation levels.  The results of management's analysis indicated that the Company could reasonably forecast the future sales at levels lower than previously practicable.  Accordingly, in the fourth quarter of 2002, the Company refined its impairment evaluation methodology to evaluate its seismic data library in components based on the Company's operations and geological and geographical trends, and as a result, established the following data library
groupings for purposes of evaluating impairments:  (I) Gulf of Mexico offshore comprised of the following components:  (a) multi-component data, (b) value-added products, (c) ocean bottom cable data, (d) shelf data, and (e) deep water data; (II)  North American onshore comprised of the following components: (a) Texas Gulf Coast, (b) North, East and West Texas, (c) South Louisiana and Mississippi, (d) North Louisiana, (e) Rocky Mountains, (f) North Dakota, (g) other United States, (h) Canada and (i) value-added products, and (III) international data outside North America.  The Company believes that these library components constitute the lowest levels of independently identifiable cash flows.

In accordance with SFAS No. 144, the impairment evaluation is based first on a comparison of the undiscounted future cash flows with the carrying value of each library component.  If the undiscounted cash flows are equal to or greater than the carrying value of such component, no impairment is recorded.  If undiscounted cash flows are less than the carrying value of any component, the forecast of future cash flows related to such component is discounted to fair value and compared with such component's carrying amount. The difference is recorded as an impairment loss equal to the difference between the library component's carrying amount and the discounted future value of the expected revenue stream.

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

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



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During the three months ended September 30, 2003, the Company recorded a
$13.4 million impairment loss with respect to certain  of its seismic data library
components.    Based on industry conditions and the recent level of cash sales for certain of its library components, the Company revised its estimate of future cash flows for
those components.  As a result, the Company determined that the revised estimate of future cash flows would not be sufficient to recover the carrying value of such certain components, and accordingly,
recorded an impairment based on the fair value of such library components by
discounting their estimated future cash flows.

NOTE E-DISCONTINUED OPERATIONS

In June 2002, the Company's Board of Directors unanimously adopted a plan to dispose of the Company's oil and gas operations by sale. Accordingly, the Company's consolidated financial statements report the oil and gas operations as discontinued operations.  During 2002, the Company sold a majority of its oil and gas assets.  Remaining oil and gas assets are not material and consist of seven properties in which the Company has a working interest.  The remaining carrying value of these properties is $145,000, and the Company continues to market such oil and gas assets for sale.

Revenue from the discontinued operations was $65,000 and $1,193,000 for the three months ended September 30, 2003 and 2002, respectively, and $255,000 and $7,579,000 for the nine months ended September 30, 2003 and 2002, respectively.  Pre-tax income (loss) from the discontinued operations was $19,000 and $(1,490,000) for the three months ended September 30, 2003 and 2002, respectively, and $(179,000) and $(60,201,000) for the nine months ended September 30, 2003 and 2002, respectively.

The Company uses the full-cost method of accounting for its oil and gas operations.

NOTE F-DEBT

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







|                                |                                    | September 30, |         |  | December 31,
|------------------------------- | ---------------------------------- | ------------- | ------- |  | ------------
|                                |                                    | 2003          |         |  | 2002        
|                                |                                    |               |         |  |             
|Debt not subject to compromise: |                                    |               |         |  |             
|                                | Debtor-in-Possession Loan Facility | $             | -       |  | $           
|                                | Term loan                          |               | 5,417   |  |             
|                                | Demand reducing credit facility    |               | 493     |  |             
|                                | Short-term borrowings              |               | -       |  |             
|Debt subject to compromise:     |                                    |               |         |  |             
|                                | Notes                              |               | 255,000 |  |             
|                                | Note payable to former executive   |               | 454     |  |             
|                                |                                    |               |         |  |             
|                                |                                    | $             | 261,364 |  | $           
|                                |                                    |               |         |  |             
|                                |                                    |               |         |  |             



Notes:    The Company has outstanding Notes totaling $255 million at September 30, 2003.  The financial covenants in the Notes include, among other restrictions, maintenance of minimum net worth and limitations on total debt, interest coverage, liens, debt issuance, dividends and disposition of assets.  As a result of the non-payment of interest thereon, the Company's Chapter 11 filing, the restatement of its financial statements prior to January 1, 2002, the impairment and sale, at a substantial loss, of its oil and gas properties and poor financial results in the first quarter of 2002, the Company is in default on the Notes.

On June 6, 2003, certain of the holders of the Notes filed involuntary chapter 11 petitions against the Company and 16 of its subsidiaries that guaranteed the Notes.  On June 26, 2003, the Company announced that Ranch had purchased all $255 million of the Notes.  Subsequently, the Company and Ranch reached agreements extending the time by which the Company must respond to the involuntary bankruptcy petitions.  On July 21, 2003, the Debtors filed voluntary petitions in bankruptcy and the Company and Ranch filed motions to dismiss the involuntary petitions (see Note B). In addition, on or before July 21, 2003, Ranch sold all of the Notes to Berkshire.

Term Loans:    The Company is not in compliance with the payment terms or covenants of a term loan obtained by its wholly owned subsidiary, Seitel Data, Ltd.  On September 10, 2003, the term loan was sold and assigned to a trust controlled by a wholly owned subsidiary of Berkshire.  At September 30, 2003, the term loan had an outstanding principal balance of $5.4 million and stated payment terms of $208,000 per month plus interest and a final maturity date of October 1, 2004, when a balloon payment of $2.5 million would be due.



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Note Payable to Former Executive:    In connection with the settlement of certain litigation, the Company entered into a note payable to a former executive consisting of payments of $6,417 per month for 36 months commencing June 2003 and payments of $6,000 per month for 84 months commencing June 2006.  The note is non-interest bearing.  The note is guaranteed by Olympic Seismic, Ltd., a wholly owned Canadian subsidiary of the Company and a non-Debtor.

Debtor-in-Possession Loan Facility:    The Bankruptcy Court has approved a $20 million debtor-in-possession loan and security agreement with Wells Fargo Foothill, Inc., as lender, to support the Debtor's operations during the course of the Cases (the "DIP Facility").  The DIP Facility will terminate upon, among other events, the earlier of June 30, 2004 or the effective date of a plan of reorganization.  Advances under the DIP Facility are available pursuant to a formula based on outstanding accounts receivable and the carrying value of the seismic library of the Debtors, subject to certain limitations.  If any advance is made under the DIP Facility, the first such advance must be at least in an amount equal to and the proceeds must be used to retire the balance of the term loan payable by Seitel Data Ltd. and described above.  The Debtors have not drawn on the DIP Facility.  In connection with the application and approval by the lender of the DIP Facility, the Company paid commitment fees of $200,000 plus certain expenses.  In addition, the terms of the DIP Facility include the payment of an unused line fee of .50% per annum payable in arrears.

NOTE G-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.  For the three and nine months ended September 30, 2003 and 2002, the Company did not have any potentially dilutive securities.  A weighted average number of options and warrants to purchase 4,201,000, 7,787,000, 4,980,000 and 8,478,000 shares of common stock were outstanding during the third quarter of 2003 and 2002 and the nine months ended September 30, 2003 and 2002, respectively, but were not included in the computation of diluted per share income because they were antidilutive.

The Company accounts for employee stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."  APB Opinion No. 25 generally does not require compensation costs to be recorded on options which have exercise prices at least equal to the market price of the stock on the date of grant. Accordingly, no compensation cost has been recognized for the Company's stock-based plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans consistent with the optional accounting method prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation" and expensed pro-rata over the vesting period of the awards, the Company's net loss and loss per share would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):





|                                  |             | Three Months Ended                        |         |      | Nine Months Ended |      
|--------------------------------- | ----------- | ----------------------------------------- | ------- | ---- | ----------------- | -----
|                                  |             | September 30,                             |         |      | September 30,     |      
|                                  |             |                                           |         |      |                   |      
|                                  |             | 2003                                      |         |      | 2002              |      
|                                  |             |                                           |         |      |                   |      
|Net income (loss):                |             |                                           |         |      |                   |      
|                                  | As reported | $                                         | (10,908 | )    | $                 | 3,179
|                                  | Less:       | Total stock-based employee expense        |         |      |                   |      
|                                  |             | determined under SFAS No. 123, net of tax |         | (225 | )                 |      
|                                  |             |                                           |         |      |                   |      
|                                  | Pro forma   | $                                         | (11,133 | )    | $                 | 2,120
|                                  |             |                                           |         |      |                   |      
|Basic and diluted loss per share: |             |                                           |         |      |                   |      
|                                  | As reported | $                                         | (.43    | )    | $                 | .13  
|                                  | Pro forma   | $                                         | (.44    | )    | $                 | .08  





NOTE H-STATEMENT OF CASH FLOW INFORMATION







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During the nine months ended September 30, 2003 and 2002, the Company had non-cash additions to its seismic data library totaling $10,293,000 and $14,300,000, respectively.  Of these amounts, $9,218,000 and $13,399,000 resulted from non-monetary exchanges during the nine months ended September 30, 2003 and 2002, respectively.  The balance of $1,075,000 and $901,000 for the nine months ended September 30, 2003 and 2002, respectively, resulted from certain data creation costs which were offset against amounts due from the customer for data license fee and certain data creation costs that were paid to the Company's vendors from an escrow account maintained jointly by the Company and its customer. The offset amounts are also included in non-cash sales in the Consolidated Statements of Cash Flows.

During the nine months ended September 30, 2003, the Company received marketable securities valued at $60,000 in exchange for a license to certain seismic data.  This amount is also included in non-cash sales in the Consolidated Statements of Cash Flows.

Operating cash flows resulting from reorganization items for the nine months ended September 30, 2003 include the following (in thousands):







|Interest received on cash accumulated         |                                                       |   |      
|--------------------------------------------- | ----------------------------------------------------- | - | -----
|                                              | because of the Chapter 11 proceeding                  | $ | (12  
|Professional and other fees paid for services |                                                       |   |      
|                                              | rendered in connection with the Chapter 11 proceeding |   | 1,521
|                                              |                                                       |   |      
|                                              |                                                       | $ | 1,509
|                                              |                                                       |   |      



NOTE I-COMMITMENTS AND CONTINGENCIES

Reference is made to previous 2003 Form 10-Q filings for discussion of litigation and other matters that have been resolved prior to the third quarter of 2003.

Under the terms of a separation agreement with a former officer of the Company, the Company has guaranteed a bank loan with a current outstanding balance of $193,000.  The balance is due in annual installments of $60,000 with a maturity date of November 13, 2006.

Litigation

During the pendency of the Cases, substantially all pending litigation against the Debtors is stayed. Generally, claims against a Debtor arising from actions or omissions prior to its Petition Date will be settled in connection with the plan of reorganization.

The former holders of the Notes accelerated the Notes and made demand upon the Company and certain of its former and current officers and directors for money damages arising from certain alleged negligent actions and/or misrepresentations of those officers and directors.  The holders alleged that money damages arising from the foregoing claims were not fully quantified, but exceeded $20 million and included, without limitation, the lost value of such holders investment in the Notes.  Notice of the demand has been provided by the Company to its insurance carriers. The holders of the Notes did not commence suit.  As of June 26, 2003, all of the former holders of the Notes had sold their Notes to Ranch, who subsequently sold the Notes to Berkshire.  Under the Debtors' Plan, if confirmed, all of the foregoing claims will be released and discharged.

The Company and certain of its former and current officers and directors have been named as defendants in eleven lawsuits brought as class actions alleging violations of the federal securities laws, all of which were consolidated by an Order entered August 7, 2002, under Cause No. 02-1566, styled In re Seitel, Inc. Securities Litigation, in the United States District Court for the Southern District of Texas.  The Court appointed a lead plaintiff and lead counsel for plaintiffs, who subsequently filed a consolidated amended complaint, which added the Company's auditors, Ernst & Young LLP, as a defendant.  The consolidated amended complaint alleges that during a proposed class period of May 5, 2000 through April 1, 2002, the defendants violated sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by overstating revenues in violation of generally accepted accounting principles.  The plaintiffs seek an unspecified amount of actual and exemplary damages, costs of court, pre- and post-judgment interest and attorneys' and experts' fees.  The Company intends to vigorously defend these consolidated lawsuits.    No discovery has been conducted and the action is stayed as a result of the Debtors' Chapter 11 filing.



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The Company has been named as a nominal defendant in seven stockholder derivative actions filed in various courts: Almekinder v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. H-02-2960, In the United States District Court for the Southern District of Texas; Basser v. Frame, Valice, Kendrick, Pearlman, Fiur, Zeidman, Stieglitz, Craig, Lerner, and Seitel, Inc., No. H-02-1874, In the United States District Court for the Southern District of Texas; Berger v. Frame, Pearlman, Valice, Craig, Stieglitz, Lerner, Zeidman, Fiur, and Seitel, Inc., No. 19534-NC, In the Court of Chancery, State of Delaware, Castle County; Chemical Valley & North Central West Virginia Carpenters Pension Plan v. Frame, Valice, Hoffman, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Fiur, and Seitel, Inc., No. 02-CV-3343, In the United States District Court for the Southern District of Texas; Couture v. Frame, Valice, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. 20002-37065, In the 80th Judicial District Court, Harris County, Texas; Talley v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., In the 151st Judicial District Court, Harris County, Texas; and Zambie v. Frame, Pearlman, Valice, Craig, Zeidman, Lerner, Stieglitz, Fiur, Ernst & Young LLP, and Seitel, Inc., In the 333rd Judicial District Court, Harris County, Texas.  The plaintiffs generally allege that the defendants breached and conspired to breach fiduciary duties to the Company's shareholders by failing to maintain adequate accounting controls and by using improper accounting and auditing practices and procedures. Certain of the plaintiffs also assert causes of action for mismanagement, waste of corporate assets and unjust enrichment.  The Zambie case also alleges professional negligence against Ernst & Young LLP.  The plaintiffs seek judgments for unspecified amounts of compensatory damages, including return of salaries and other payments to the defendants, exemplary damages, attorneys' fees, experts' fees and costs.  The Company's Board of Directors appointed a special litigation committee to conduct an independent investigation of the allegations asserted in the derivative lawsuits.  The special litigation committee completed its investigation and its report has been delivered to the Company.  The Company filed its motion to dismiss in Delaware Chancery court on March 20, 2003.  The parties previously agreed to stay the Texas state court cases pending the outcome of the Texas federal court derivative cases.  The federal court derivative cases have been consolidated, and the Company has moved to stay the cases pending resolution by the Delaware court.  Presently, all cases are stayed as a result of the Debtors' Chapter 11 filing.  In October 2003, a settlement of all issues in each derivative suit was reached among the parties, and on October 23, 2003, a stipulation and motion to approve the terms of such settlement was filed with the Bankruptcy Court.  The settlement stipulation provides for payment of $600,000, all of which is covered by insurance, and resolution of all claims against all parties to the litigation.  The motion is pending review and approval of the Bankruptcy Court.

The Company has been sued by its former chief executive officer in Frame v. Seitel, in the 113th Judicial District Court of Harris County, No. 2002-35891.  Mr. Frame alleges a breach of his employment contract by virtue of his termination and also alleges defamation.  He also seeks a declaratory judgment that certain funds he received from the Company were proper and do not have to be repaid.  The Company has answered and asserted various defenses.  The Company also has filed a counter suit to recover approximately $4,200,000 in corporate funds that the Company believes he inappropriately caused the Company to pay him or for his benefit plus over $800,000 due on two notes that were accelerated pursuant to their respective terms.  In addition, the Company also holds a judgment against Mr. Frame in the amount of at least $590,000 relating to a loan made to Mr. Frame by Bank One N.A. ("Bank One") and guaranteed by the Company.  The Company intends to defend the suit vigorously and pursue its counterclaim. Discovery is abated in the case pending finalization of certain other matters.  Mr. Frame has filed claims totaling $20.2 million against the Debtors in the Bankruptcy Cases.  The Debtors have filed objections to such claims.

The Company is a party to a suit for geophysical trespass entitled Joy Resources, Inc. v. Seitel Data, Ltd., Cause No. 01-02-00828-CV, in the 1st Court of Appeals, Houston, Texas.  The plaintiff is appealing a final judgment by the trial court holding that the plaintiff is not entitled to recover an injunction or to recover damages against the Company.  The plaintiffs assert that the Company obtained seismic data about mineral interests leased by the plaintiff by placing seismic equipment on property adjacent to the property leased by the plaintiff.  The trial court held that no cause of action exists where the seismic equipment is not located on the property leased by the plaintiff.  The briefing has been completed in this matter, and oral argument in the 1st Court of Appeals in Houston, Texas was on May 6, 2003.  The parties have reached a settlement in the matter and have executed a settlement stipulation which is pending before the Bankruptcy Court for approval.  The settlement stipulation provides that Joy Resources, Inc. ("Joy") will be granted an agreed, allowed claim in the amount of $73,000 in the Cases, and further provides that Seitel Data, Ltd. may use certain data upon the payment of additional costs and may acquire certain data owned by Joy on a right of first refusal basis.



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The Company and its subsidiary, Seitel Data, Ltd., are parties to a class action lawsuit for geophysical trespass entitled Juan O. Villarreal v. Grant Geophysical, Inc., et al., Cause No. DC-00-214, in the 229th District Court of Starr County, Texas.  The plaintiffs have sued a number of defendants, including Seitel, Inc. and Seitel Data, Ltd.  The plaintiffs allege that certain defendants conducted unauthorized 3-D seismic exploration of the mineral interests, and sold the information obtained to other defendants.  The plaintiffs seek an unspecified amount of damages.  All of the defendants have obtained summary judgments dismissing the plaintiffs' claims, and the case is now on appeal before the San Antonio Court of Appeals under Cause No. 04-02-00674-CV.  On July 22, 2003, the Texas Court of Appeals granted appellant motion to proceed against the other appellees.  The appeal against the Company remains stayed.  The Company intends to vigorously represent its interests in this appeal.

The Company has sued its former in-house counsel and law firm in Seitel, Inc. v. Cynthia Moulton and Franklin Cardwell and Jones, P.C.,Cause No. 2003-09151 in the 127th Judicial District Court of Harris County, Texas.  The suit alleges negligence, breach of fiduciary duty and breach of contract surrounding the settlement of a personal lawsuit against the former chief executive officer and other aspects of representation.  The Company seeks recovery for fees paid and related expenses.  Initial pleadings were filed on February 21, 2003.  Discovery has not yet commenced.

On March 27, 2003, the Company was served with a complaint filed by the General Electric Credit Corporation of Tennessee ("GE") in the District Court No. 333rd of Harris County, Texas, styled General Electric Credit Corporation of Tennessee, as Plaintiff v. N360X, LLC and Seitel, as Defendants.  The complaint alleges that the Company, as guarantor, and its wholly owned subsidiary N360X, LLC, as lessee, have defaulted on an agreement for the lease of a jet aircraft.  GE has accelerated the obligation, taken possession of the aircraft and demanded payment of amounts GE claims are due pursuant to the termination of the lease. The Company has not yet filed its answer.  The case is in its early stages and no discovery has yet been conducted. The Company has accrued an estimate of the deficiency that would result if the Plaintiff's claims were to be sustained, the aircraft sold and the proceeds of such sale were to be applied to the payments otherwise due under the lease.  The case is subject to the automatic stay of the Bankruptcy Court.  GE has filed an unsecured claim in the case totaling approximately $4.4 million.  The Debtors have filed objections to such claim.

On September 22, 2003, Bass Enterprises Production Co. ("Bass") filed a motion with the Bankruptcy Court seeking relief from the automatic stay applicable to the Debtors and requesting permission of the Bankruptcy Court to initiate litigation against the Debtors in a Texas State Court with respect to an alleged breach of certain provisions of a contract entered into in 2001.  The Debtors have objected to the motion and a hearing on the motion is scheduled for December 3, 2003.  No discovery has been conducted in the matter.

In addition to the lawsuits described above, the Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business. In the opinion of management, uninsured losses, if any, resulting from the ultimate resolutions of these matters should not be material to the Company's financial position or results of operation.  In addition, there have been a number of claims asserted by third parties in the Bankruptcy Cases.  The Debtors are evaluating each of the claims filed and based on the outcome of such analysis and the resolution of such claims, additional accruals may be required.  Such accruals could be material in amount.

It is not possible to predict or determine the outcomes of the legal actions brought against it or by it, or to provide an estimate of all additional losses, if any, that may arise. At September 30, 2003, the Company had accrued $2.3 million, representing management's best estimate of the amount that is probable of being paid relative to all of the litigation and claims set forth above.  However, if one or more of the parties were to prevail against the Company in one or more of the cases described above that have not been settled, or if certain of the claims filed in the Bankruptcy Cases were to be allowed at amounts in excess of liabilities presently recorded by the Company or if the amounts of any judgments against the Company or settlements that the Company may enter into were in addition to liabilities recorded by the Company at September 30, 2003, it could require adjustments that are material to the Company's financial statements for any particular reporting period.

Because of the uncertainty surrounding the ability of the Company to collect amounts due from a former executive officer, the Company has provided a full allowance for such amounts.

Stock Exchange Listings

The Company's common stock is publicly traded in the over-the-counter market and in the "pink sheets" under the symbol SEIEQ and on the Toronto Stock Exchange under the symbol OSL.  If the Debtors' Plan is confirmed, such stock will be canceled and not thereafter publicly traded and the listings will be terminated.



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NOTE J-RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").  FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  FIN 45 also expands the disclosures required to be made by a guarantor about its obligations under certain guarantees that it has issued.  Initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements were effective for 2002.  The adoption of FIN 45 on January 1, 2003 did not have a material effect on the results of operations or balance sheet of the Company.

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable Interest Entities, and Interpretation of Accounting Research Bulletin No. 51" ("FIN 46").  FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.  FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003.  For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after December 15, 2003.  The adoption of this interpretation is not expected to have a material impact on the financial position or results of operations of the Company.

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

RESULTS OF OPERATIONS

RECENT DEVELOPMENTS



Reorganization
Proceedings

On July 21, 2003, (the "Petition Date"), Seitel, Inc., and its wholly owned U.S. subsidiaries filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") (Chapter 11 Case No. 03-12227 (PJW)).  Seitel, Inc. and its 30 U.S. subsidiaries that have filed petitions are collectively referred to herein as the "Debtors" and the Chapter 11 cases of these entities are collectively referred to herein as the "Cases."  By order of the Bankruptcy Court dated July 25, 2003, the Cases are being jointly administered.  Since the Petition Date, the Debtors have operated their business as "debtors-in-possession" pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code, which will allow them to continue operations during the reorganization proceeding.  Each Debtor will remain in possession of its assets and properties, and its business and affairs will continue to be managed by its directors and officers, subject in each case to the supervision of the Bankruptcy Court.  No trustee has been appointed.  An official equity committee (the "Equity Committee") was appointed on August 11, 2003.

None of the Company's direct or indirect subsidiaries or affiliates incorporated in Canadian or other non-U.S. jurisdictions have filed Chapter 11 and none are expected to file for reorganization or protection from creditors under any insolvency or similar law in the U.S. or elsewhere.  Such non-filing, non-U.S. based subsidiaries and affiliates are called "non-Debtors".

On July 22, 2003, the Debtors filed a Plan of Reorganization and such plan was subsequently amended (the " Debtors' Plan").  The Disclosure Statement for the Debtors' Plan was approved by the Bankruptcy Court on October 7, 2003 and voting on the Debtors' Plan concluded on November 13, 2003.  Based on preliminary, unaudited voting results; (i) all classes of claim holders approved the Debtors' Plan by requisite majorities; (ii) the class of securities action plaintiffs have not voted to accept the Debtors' Plan; and (iii) it is likely that shareholders did not vote in the required numbers to accept the Debtors' Plan.  A confirmation hearing with respect to the Debtors' Plan is scheduled to begin on November 17, 2003 and is expected to be continued on December 3, 2003.  If the Debtor's Plan is confirmed by the Bankruptcy Court and consummated, the Company will become a wholly owned subsidiary of Berkshire Hathaway Inc. ("Berkshire").  The document containing the specific Plan terms and any amendments thereto is publicly available and has been filed with the Bankruptcy Court.

In connection with the filing of the Debtors' Plan, previously filed involuntary bankruptcy petitions which were pending against the Company were dismissed on July 25, 2003 by order of the Bankruptcy Court pursuant to a joint request for such dismissal filed by the Company and Ranch Capital L.L.C. ("Ranch").  Ranch previously purchased all of the senior unsecured notes (the "Notes") held by the entities which filed the involuntary bankruptcy petitions.  Ranch subsequently sold the Notes to Berkshire.



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On November 3, 2003, the Equity Committee sought and obtained from the Bankruptcy Court a termination of the Company's exclusive right to file a plan of reorganization.  The Equity Committee filed an alternative plan and related disclosure statement on November 6, 2003, and a hearing on the adequacy of such disclosure statement has been set for December 3, 2003.  At the date of this report on Form 10-Q, no solicitation of or voting on such plan has been authorized by the Bankruptcy Court.  The document containing the specific plan terms proposed by the Equity Committee is publicly available and has been filed with the Bankruptcy Court.

On the Petition Date, the Company sought, and thereafter obtained, authority to take a broad range of actions, including the right to honor and perform under their pre-petition customer data agreements and to promote a "business as usual" atmosphere with customers and employees.  This relief was essential to minimize disruptions to the Company's businesses as a result of the commencement of the Chapter 11 cases and to assure customers that the data license agreements for selection of seismic data would be honored pending confirmation of the Plan.  Additionally, other orders were obtained, including authority to pay certain, limited pre-petition employee wages and benefits, employment of a noticing agent, adequate assurance of future payments to utility companies, continued use of cash management systems and payment of pre-petition sales and use taxes.

The Bankruptcy Court has approved a $20 million debtor-in-possession loan and security agreement (the "DIP Facility") with Wells Fargo Foothill, Inc., as lender ("Foothill"), , to support the Debtors' operations during the course of the Cases.  The DIP Facility will terminate upon, among other events, the earlier of June 30, 2004 or the effective date of the Debtors' Plan or of any other alternative plan of reorganization.  The Debtors have not drawn on the DIP Facility.

Generally, pre-Petition Date claims against the Debtors fall into two categories: secured and unsecured, including certain contingent or unliquidated claims.  Under the Bankruptcy Code, a creditor's claim is treated as secured only to the extent of the value of the collateral securing such claim, with the balance of such claim being treated as unsecured.  The amount and validity of pre-Petition Date contingent or unliquidated claims ultimately may be established by the Bankruptcy Court or by agreement of parties.  As a result of the Cases, additional pre-Petition Date claims and liabilities have been asserted, some of which are significant.  The Debtors have objected to many of the asserted claims which the Debtors believe are improper or overstated.  No provision has been included in the accompanying financial statements for such contingent or unliquidated claims that have been filed with the Bankruptcy Court.

Under the Bankruptcy Code, the rights of and ultimate payments to pre-Petition Date creditors and stockholders may be substantially altered.  The Debtors anticipate that substantially all liabilities of the Debtors as of the date of the filing will be resolved pursuant to any plan of reorganization confirmed in the Cases in accordance with the provisions of the Bankruptcy Code.

The accompanying financial information of the Company and related discussions of financial condition and results of operations are based on the assumption that the Company will continue as a "going concern" which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business; however, as a result of the commencement of the Cases, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties.  Financial information for periods ending after the Petition Date will include adjustments and reclassifications to reflect the liabilities, which have been deferred as a result of the commencement of the Cases.  Specifically, but not all inclusive, the financial information as of and for the nine months ended September 30, 2003, contained herein does not represent: (a) the realizable value of assets on a liquidation basis or the availability of such assets to satisfy liabilities, (b) the amount which will ultimately be paid to settle liabilities and contingencies which may be allowed in the Cases, (c) the effect of any changes which may be made in connection with the 'Company's capitalization or operations of the Company as a  result of a plan of reorganization.  Because of the ongoing nature of the Cases, the discussions and consolidated financial statements contained herein are subject to material uncertainties.



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SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Revenue from Data Acquisition

Revenue from the creation of new seismic data is recognized using the proportional performance method based upon costs incurred and work performed to date as a percentage of total estimated costs and work required.  Management believes that this method is the most reliable and representative measure of progress for its data creation projects.  The duration of most data creation projects is generally less than one year.  Under these projects, the Company creates new seismic data designed in conjunction with its customers and specifically suited to the geology of the area using the most appropriate technology available. The contracts typically result in one or more customers underwriting a significant portion of the direct creation costs in exchange for a license or licenses to use the resulting data. Customers make periodic payments throughout the creation period, which generally correspond to costs incurred and work performed. These payments are non-refundable. The creation process generally occurs in the following stages: permitting, surveying, drilling, recording and processing. At each stage, the customers receive legally enforceable rights and access to, and the benefits of, the results of all work performed. The customers also receive access to and use of the newly acquired and processed data. The customers may have exclusive access to the work performed and exclusive use of the newly acquired and processed data for a limited term, which is generally nine months or less, after final delivery of the processed data. The customers' access to and use of the results of the work performed and of the newly acquired, processed data is governed by a license agreement which is a separate agreement from the acquisition contract. The Company's acquisition contracts require the customer either to have a license agreement in place or to execute one at the time the acquisition contract is signed. The Company maintains sole ownership of the newly acquired data, which is added to its library, and is free to license the data to other customers when the original customers' exclusivity period ends.

Revenue from Data Licenses

The Company licenses data from its seismic data library to customers to review for a limited period of time or to hold long-term.

The usage of all data delivered to the customer, whether for review only or to hold long-term, is governed by a license agreement, which is a separate agreement from the sales contract. The Company's contracts require the customer either to have a license agreement in place or to execute one at the time the contract is signed. The license agreement governs all data delivered to the customer during the term. Payment terms under the contracts vary from 30 days to 18 months depending on the size of the transaction.  All payments due are non-cancelable and all payments made are non-refundable. The customer has access to all available data covered by the contracts on the date the contract is executed.  If the contract allows licensing of data that is not currently available, revenue is deferred until such time that the data is available for licensing.  The contracts permit selection of the data in its present form and the Company is under no obligation to make any enhancements, modifications or additions to the data unless specific terms to the contrary are included, in which case revenue with respect to such data would be deferred until performance is accomplished.  Copies of the data are available to the customer immediately upon request.

The Company recognizes revenue from licensing of seismic data when the Company has contracted with the customer for a fixed sales price; a licensing agreement is in place; the customer has selected specific data under the terms of the contract or the contract has expired without full selection having occurred; and collectibility of the sales price is reasonably assured. The Company recognizes revenue for the particular data selected as each specific selection of data is made by the customer. If selections are not completed by the expiration date of the contract, the Company then recognizes any remaining revenue under that contract. In each case (selection or expiration), the earnings process is complete. The Company does not recognize revenue for amounts billed in advance of being earned until these conditions are met. For revenue that is deferred, the Company defers the direct costs (primarily commissions) related to the revenues. Revenue from licensing of seismic data is presented net of revenue shared with other entities.

Revenue from Non-Monetary Data Exchanges

In certain cases, the Company grants its customer a non-exclusive license to selected data from its library in exchange for ownership of seismic data from the customer.  The data that the Company receives is distinct from the data that it is licensing to the customer.  Because the Company receives ownership of distinct seismic data to be added to its library, and this data may be relicensed by the Company on a continuing basis, in exchange for a data license, the exchange is not a "like-kind" exchange, which would be accounted for at historical cost.  Once data selection is completed, the exchange represents the culmination of the earnings process with the customer and is not merely an exchange between two seismic companies.  These exchanges are referred to as non-monetary data exchanges.

The Company records a data library asset for the seismic data acquired at the time the contract is entered into and recognizes revenue on the transaction in accordance with its policy on revenue from data licenses, that is, when the data is selected by the customer.  These transactions are valued at the fair value of the data received or delivered, whichever is more readily determinable.



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The Company determines fair value of data exchanged by first determining the value of the license granted to the customer. It does so by evaluating the range of cash transactions by the Company for licenses of similar data during the prior six months for licenses in the United States and for the prior twelve months for licenses in Canada. In evaluating the range of cash transactions, the Company does not consider transactions that are disproportionately high or low. The Company then also considers the value of the data received from the customer. In determining the value of the data received, the Company considers the age, quality, current demand and future marketability of the data as well as the cost that would be required to create the data.  In the United States, the Company applies a limitation on the value it assigns per square mile on the data exchanged. In Canada, in the event of a difference greater than 2% between the value of the license granted and the value of the data received, the Company assigns the lower value to the exchange.  In significant exchanges ($500,000 or more), the Company obtains an opinion from an independent third party in order to confirm the Company's valuation of the data received.  The Company obtains these opinions on an annual basis, usually in connection with the preparation of its annual financial statements.

Revenue from Solutions

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

Seismic Data Library

Costs associated with creating, acquiring or purchasing the seismic data library are capitalized and such costs are amortized principally on the income forecast method subject to a maximum amortization period determined based on the type of data.

Costs of Seismic Data Library

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

For data acquired through a non-monetary data exchange, the Company capitalizes an amount equal to the fair value of the data received by the Company or the fair value of the license granted to the customer, whichever is more clearly determinable.  In the case of any single non-monetary exchange where the fair value recorded is in excess of $500,000, the Company also obtains an opinion from a third party to confirm the Company's valuation.

For internally created data, the capitalized costs include costs paid to third parties for the acquisition of data and related permitting, surveying and other activities associated with the data creation activity.  In addition, the Company capitalizes certain internal costs related to processing the created data.  Such costs include salaries and benefits of the Company's processing personnel and certain other costs incurred for the benefit of the processing activity.  The Company believes that the internal processing costs capitalized are not greater than, and generally are less than, those that would be incurred and capitalized if such activity were performed by a third party.

Data Library Amortization

Effective January 1, 2002 (see "Change in Accounting Principle" below), the Company amortizes its seismic data library using the greater of the amortization that would result from the application of the income forecast method or a straight-line basis over the useful economic life of the data.

The actual rate of amortization depends on the location of specific seismic surveys licensed and selected by the Company's customers during the year.  Effective January 1, 2003, the Company assigns a specific amortization rate to each of fifteen separately identified segments of its seismic data library based on its estimate of future sales from each segment.  The amortization rates vary by segment and range from a low of 44% to a high of 66% with a weighted average rate of 50% based on the net book value of each segment compared with the net book value of the entire seismic data library as of September 30, 2003.  The actual rate of amortization recorded in any period varies from the weighted average rate due to the application of straight-line amortization on a survey-by-survey basis.

The Company applies the income forecast method by forecasting the ultimate revenue expected to be derived from a particular data library segment over the estimated useful economic life of each survey comprising part of such segment. That forecast is made by the Company annually and reviewed quarterly.  If, during any such review and update, the Company determines that the ultimate revenue for a library segment is expected to be significantly different than the original estimate of total revenue for such library segment, the Company revises the amortization rate attributable to future revenue from each survey in such segment.  In addition, in connection with such reviews and updates, the Company evaluates the recoverability of its seismic data library, and if required under Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting for the Impairment and Disposal of Long-Lived Assets," records an impairment charge with respect to such data.  See discussion on "Seismic Data Library Impairment" below.



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The greater of the income forecast or straight-line amortization policy is applied quarterly on a cumulative basis at the individual survey level. Under this policy, the Company first records amortization using the income forecast method.  The cumulative income forecast amortization is then compared with the cumulative straight-line amortization. If the cumulative straight-line amortization is higher for any specific survey, additional amortization expense is recorded, resulting in accumulated amortization being equal to the cumulative straight-line amortization.  This requirement is applied regardless of future-year revenue estimates for the library segment of which the survey is a part and does not consider the existence of deferred revenue with respect to the library segment or to any survey.  As discussed below in "Revision of Useful Life of Data Library," the Company revised its useful life estimate in the fourth quarter of 2002 from ten years to five years with respect to offshore data and from ten years to seven years with respect to onshore data.

Change in Accounting Principle

In the second quarter of 2002, the Company changed its accounting policy for amortizing its created seismic data library from the income forecast method to the greater of the income forecast method or the straight-line method over the useful economic life of the data and reported the adoption of the new method as a cumulative effect of a change in accounting principle retroactive to January 1, 2002.  The Company changed its accounting policy in an effort to increase the transparency of its methodology and to be more consistent with other industry competitors.  Accordingly, the Company recorded a pre-tax charge of $17.2 million (after-tax charge of $11.2 million) as of January 1, 2002.

Revision of Useful Life

In the fourth quarter of 2002, the Company reevaluated its estimate of the useful life of its seismic data library and revised the estimated useful life of its seismic data library to reduce the useful life of offshore data from ten to five years and onshore data from ten to seven years.  In making this decision, the Company considered a number of factors, including, among others, the impairment charges it reported in 2002, the additional amortization charges the Company recorded during the first three quarters of 2002 pursuant to its new amortization policy and seismic industry conditions.  With respect to each survey in the data library, the useful life policy is applied from the time such survey is available for licensing to customers generally, since some data in the library may not be licensed until an exclusivity period (usually nine months or less) has lapsed.

As a result of the adoption of the new accounting principle described above and the revision of the estimates of the useful lives of the seismic data in the fourth quarter of 2002, all of the Company's seismic data library is amortized on the greater of the income forecast method or straight-line amortization over five or seven years, as applicable.

Seismic Data Library Impairment

As events or conditions require, the Company evaluates the recoverability of its seismic data library in accordance with SFAS No. 144.  The Company evaluates its seismic data library for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Prior to the fourth quarter of 2002, the Company evaluated its seismic data library in the following components: (a) Gulf of Mexico offshore data, (b) Gulf Coast onshore data, (c) Rocky Mountain region data (including U.S. areas outside the Gulf Coast), (d) Canadian data, and (e) international data outside of North America.



In the fourth quarter of 2002, the Company reevaluated the level which constitutes the lowest level of independently identifiable cash flows.  In its reevaluation, the Company considered the results of the comprehensive forecasting process that had been undertaken by management in the fourth quarter of 2002, recent sales trends and management's expectations relative to its ability to attribute revenues to lower survey aggregation levels.  The results of management's analysis indicated that the Company could reasonably forecast the future sales at levels lower than previously practicable.  Accordingly, in the fourth quarter of 2002, the Company refined its impairment evaluation methodology to evaluate its seismic data library in components based on the Company's operations and geological and geographical trends, and as a result, established the following data library
groupings for purposes of evaluating impairments:  (I) Gulf of Mexico offshore comprised of the following components:  (a) multi-component data, (b) value-added products, (c) ocean bottom cable data, (d) shelf data, and (e) deep water data; (II)  North American onshore comprised of the following components: (a) Texas Gulf Coast, (b) North, East and West Texas, (c) South Louisiana and Mississippi, (d) North Louisiana, (e) Rocky Mountains, (f) North Dakota, (g) other United States, (h) Canada and (i) value-added products, and (III) international data outside North America.  The Company believes that these library components constitute the lowest levels of independently identifiable cash flows.



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In accordance with SFAS No. 144, the impairment evaluation is based first on a comparison of the undiscounted future cash flows with the carrying value of each library component.  If the undiscounted cash flows are equal to or greater than the carrying value of such component, no impairment is recorded.  If undiscounted cash flows are less than the carrying value of any component, the forecast of future cash flows related to such component is discounted to fair value and compared with such component's carrying amount. The difference is recorded as an impairment loss equal to the difference between the library component's carrying amount and the discounted future value of the expected revenue stream.

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

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

Use of Estimates and Assumptions

In preparing the Company's financial statements, a number of estimates and assumptions are made by management that affect the accounting for and recognition of assets, liabilities, revenues and expenses. These estimates and assumptions must be made because certain of the information that is used in the preparation of the Company's financial statements is dependent on future events, cannot be calculated with a high degree of precision from data available or is simply not capable of being readily calculated based on generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and the Company must exercise significant judgment.

The most difficult, subjective and complex estimates and assumptions that deal with the greatest amount of uncertainty are related to the Company's accounting for its seismic data library and litigation, as described below.  In addition, management adopted a new accounting principle and revised several of the key assumptions and estimates in the Company's accounting for its seismic data library in 2002.

The Company's accounting for its seismic data library requires it to make significant estimates and assumptions relative to future sales and cash flows from such library. Any changes in these estimates or underlying assumptions will impact the Company's income from operations prospectively from the date changes are made. To the extent that such estimates, or the assumptions used to make those estimates, prove to be significantly different than actual results, the carrying value of the seismic data library may be subject to higher prospective amortization rates, additional straight-line amortization or impairment losses.  In addition, based on future events, the Company may make changes in the estimated useful life of the asset.  Changes in the underlying assumptions regarding future sales and cash flows from the library or revisions to estimated useful life may cause the Company's prospective amortization expense to decrease or increase materially and may also result in significant impairment losses being recognized.  If such changes or revisions take place in the future, the effect on the Company's reported results can be significant to any particular reporting period.



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In a portion of its seismic data library activities, the Company engages in certain non-monetary exchanges and records a data library asset for the seismic data acquired and recognizes revenue on the transaction in accordance with its policy on revenue from data licenses.  These transactions are valued at the fair value of the data received by the Company or licenses granted by the Company, whichever is more clearly determinable.  In addition, in significant exchanges, the Company obtains third-party appraisals to corroborate its estimate of the fair value of the transactions.  The Company's estimate of the value of these transactions is highly subjective and based, in large part, on data sales transactions between the Company and a limited number of customers over a limited time period, and appraisals of the value of such transactions based on a relatively small market of private transactions over a limited period of time.  If the Company's estimate of the fair value of such transactions were to change, the revenue recognized and the related amortization expense would increase or decrease accordingly.





The Company is involved in civil lawsuits including securities-related shareholder suits, litigation with former executives of the Company and other commercial litigation.  These matters are in various stages of progress.  During the pendency of the Cases, substantially all pending litigation against the Debtors is stayed.  In some cases, management expects that these matters may extend for a long period of time in the future.  The Company estimates the amount of potential exposure it may have with respect to these matters in accordance with Statement of Financial Accounting Standards ("SFAS") No. 5, "Accounting for Contingencies."  Reference to "Litigation" is made herein.

In developing its estimates of exposure, the Company considers all factors relevant to the likelihood of its success in these matters and makes a number of assumptions relative to what amounts, if any, may be required to be paid by the Company in the future relative to these matters.  Due to the inherent unpredictability of significant future events relative to these matters, it is possible that one or more of these matters may ultimately be settled or adjudicated in a manner inconsistent with the Company's current expectation.  Should that occur, the Company may be required to record an expense, which is in addition to any liabilities already established for such matters in accordance with SFAS No. 5, that could be material to its financial statements for any particular reporting period.

Actual results could differ materially from the estimates and assumptions that the Company uses in the preparation of its financial statements.  To the extent management's estimates and assumptions change in the future, the Company's future profitability may improve or decline significantly based on such changes.



The Company generates revenue primarily by licensing data from its data library and from new data acquisition partially underwritten or sponsored by clients.  Total revenue was $39,199,000 in the third quarter of 2003 compared to revenue of $50,604,000 in the third quarter of 2002.  Total revenue was $101,296,000 for the nine months ended September 30, 2003 compared to revenue of $120,219,000 for the nine months ended September 30, 2002.

The following table summarizes the components of the Company's revenue for the three and nine months ended September 30, 2003 and 2002 (in thousands):





|                    |                        | Three Months Ended |        |   | Nine Months Ended |       
|------------------- | ---------------------- | ------------------ | ------ | - | ----------------- | ------
|                    |                        | September 30,      |        |   | September 30,     |       
|                    |                        |                    |        |   |                   |       
|                    |                        | 2003               |        |   | 2002              |       
|                    |                        |                    |        |   |                   |       
|                    |                        |                    |        |   |                   |       
|Acquisition revenue | $                      | 7,747              |        | $ | 5,544             |       
|Licensing revenue:  |                        |                    |        |   |                   |       
|                    | New resale for cash    |                    | 19,246 |   |                   | 21,357
|                    | Non-monetary exchanges |                    | 3,261  |   |                   | 5,051 
|                    | Deferral of revenue    |                    | (9,805 | ) |                   | (9,113
|                    | Selections of data     |                    | 17,403 |   |                   | 26,974
|Solutions and other |                        | 1,347              |        |   | 791               |       
|                    |                        |                    |        |   |                   |       
|Total revenue       | $                      | 39,199             |        | $ | 50,604            |       
|                    |                        |                    |        |   |                   |       
|                    |                        |                    |        |   |                   |       





The decrease in total revenue for the three months ended September 30, 2003 was $11.4 million or about 23% compared to the corresponding period of 2002.  The decrease was due principally to (i) reduced selections of data from contracts whose revenue was initially deferred; (ii) lower cash resales, principally from the Company's U.S. data library; (iii) lower revenues from non-monetary exchanges; and (iv) higher deferrals relating to current cash sales and non-monetary exchanges.  Partially offsetting these decreases were increased revenues from data acquisition due to a more active program to add new data to the library and increased Solutions revenue reflecting the capture of activity previously outsourced to third parties.

For the nine month period, revenues decreased by $18.9 million or about 16% due principally to (i) reduced selections of data from contracts whose revenue was initially deferred; (ii) lower revenues from non-monetary exchanges; and (iii) higher deferrals relating to current cash sales and non-monetary exchanges.  Partially offsetting these decreases were increased revenues from data acquisition due to a more active program to add new data to the library, increased cash resales from the Company's data library and increased Solutions revenue reflecting the capture of activity previously outsourced to third parties.  The increase in cash resales is directly attributable to very poor first quarter 2002 cash licensing sales which were negatively impacted by lower than expected energy commodity prices, which in turn, led to an overall slowdown in spending on certain oil and gas activities, including seismic data.



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INDEX

At September 30, 2003, the Company had a deferred revenue balance of $50,540,000, of which $16,146,000 resulted from non-monetary exchanges.  The deferred revenue will be recognized when selection of the data is made by the customer or upon expiration of the selection period, whichever occurs first.

Depreciation and amortization consists of data bank amortization and depreciation on property and equipment.  Data bank amortization was $21,936,000 and $56,959,000 in the third quarter and first nine months of 2003, respectively, compared to $21,498,000 and $57,049,000 in the third quarter and first nine months of 2002, respectively.  The amount of seismic data amortization fluctuates based on the level and location of specific seismic surveys licensed (including licensing resulting from new data acquisition) and selected by the Company's customers during any period as well as the amount of straight-line amortization required under its accounting policy.  As a percentage of revenue from licensing seismic data, data bank amortization was 58% and 43% for the third quarters of 2003 and 2002, respectively, and 58% and 48% for the first nine months of 2003 and 2002, respectively.  The increase in the amortization rates from 2002 to 2003 is primarily due to a change in the amortization policy in effect for purchased data.  In the first nine months of 2002, amortization of purchased data costs was determined on a straight-line basis over 10 years, whereas, in 2003 purchased data library costs are amortized on the greater of the income forecast or straight-line method over the data's estimated useful life.   Additionally, in the third quarter and first nine months of 2003, the rate increase was also due to an increase in straight-line amortization charges resulting from the reduced estimated useful life of the data library in the fourth quarter of 2002.

Depreciation expense on property and equipment was $1,534,000 in the third quarter of 2003 compared to $1,846,000 in the third quarter of 2002.  Depreciation expense was $4,759,000 for the first nine months of 2003 compared to $4,456,000 for the same period in 2002.  The increase for the nine month period was primarily due to property and equipment placed in service in connection with the opening of data technology centers in Houston and Calgary in March and April 2002, respectively.

During the three months ended September 30, 2003, the Company recorded a
$13.4 million impairment loss with respect to certain  of its seismic data library
components.    Based on industry conditions and the recent level of cash sales for
those components, the Company revised its estimate of future cash flows for certain of its library components.  As a result, the Company determined that the revised estimate of future cash flows would not be sufficient to recover the carrying value of such certain components, and accordingly,
recorded an impairment based on the fair value of such library components by
discounting their estimated future cash flows. Declining industry conditions and
further decreases in cash resales could result in additional impairment charges
in future periods.

During the second quarter of 2002, the Company recorded a non-cash impairment charge on certain components of its seismic data library.  This charge totaled $25,696,000.  Based on industry conditions and recent revenue performance, the Company determined that its estimates of future cash flows on these certain seismic data library components would not be sufficient to recover the carrying value of such data.  As a result, the Company estimated the fair value of such seismic data components by discounting the estimated net cash flows of the data.  The resulting difference between the estimated fair value and carrying value was recorded as an impairment loss during the second quarter of 2002.

The Company's selling, general and administrative ("SG&A") expenses were $6,694,000 in the third quarter of 2003 compared to $14,912,000 in the third quarter of 2002 and were $21,213,000 in the first nine months of 2003 compared to $49,645,000 in the first nine months of 2002.  The lower SG&A expenses in the third quarter and first nine months of 2003 compared with 2002 reflect decreased personnel and other costs resulting from cost reduction measures implemented by the Company in the last half of 2002, including a reduction in work force, relocation of its headquarters, overhaul of its compensation structure and the imposition of strict controls on spending of all types.  Third quarter 2002 SG&A expenses included $4.6 million of legal and professional fees related to the Company's ongoing restructuring efforts and costs associated with litigation with several parties, including certain former officers and directors of the Company.  The third quarter of 2003 included $112,000 of such litigation costs; the legal and professional fees associated with the reorganization costs for the third quarter of 2003 are reflected in "Reorganization Items" in the Consolidated Statement of Income.  Offsetting a portion of these costs were foreign currency transaction gains (reducing SG&A expense) totaling $329,000 for the three months ended September 30, 2003, related to the strengthening of the Canadian dollar for U.S. denominated transactions of the Company's Canadian subsidiaries.  Foreign currency transaction losses in the third quarter of 2002 were $608,000.



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INDEX

The first nine months 2002 SG&A included $9.5 million of charges related to former executives for certain compensation paid pursuant to contracts and allowance for collection of notes receivable and an additional $7.8 million of costs associated with the Company's ongoing restructuring efforts and costs resulting from litigation with several parties, including certain former officers and directors of the Company.  The first nine months 2003 SG&A expenses include $6.1 million of legal and professional fees related to the Company's ongoing restructuring efforts offset partially by $3.4 million of foreign currency gains related to the strengthening of the Canadian dollar for U.S. denominated transactions of the Company's Canadian subsidiaries.  Additionally, in the first nine months of 2003, the Company recorded a reduction of $1.9 million in liabilities associated with certain litigation, primarily as a result of certain litigation being settled for amounts less than that previously estimated and recorded.



During the second quarter of 2003, the Company negotiated settlement of certain liabilities for less than the amount recorded in the financial statements resulting in a gain of $681,000 reflected in the nine months of 2003.

During the third quarter and first nine months of 2002, the Company sold certain marketable securities that it held.  As a result, the unrealized loss that was recorded as a component of equity was recognized in the income statement as a permanent impairment of the marketable security during the third quarter and first nine months of 2002.











|Professional fees | $ | 1,594 |  
|----------------- | - | ----- | -
|Interest Income   |   | (12   | )
|Other             |   | 93    |  
|                  |   |       |  
|Total             | $ | 1,675 |  
|                  |   |       |  



As a result of the Company recording a loss for the first nine months of 2003, along with the Chapter 11 filing and the fact that there is substantial doubt about the Company's ability to continue to recover assets and satisfy liabilities in the normal course of business, the U.S. income tax benefit on this loss was offset by a valuation allowance since such benefit is not assured of realization.  Tax expense (benefit) of $(192,000) and $621,000 was recorded in the third quarter and first nine months of 2003, respectively, related to earnings or losses on certain Canadian subsidiaries.

In June 2002, the Company's Board of Directors unanimously adopted a plan to dispose of the Company's oil and gas operations by sale.  In 2002, the Company sold a majority of its oil and gas assets.  The Company's remaining oil and gas assets are not material and consist of working interests in seven oil and gas properties for which the Company continues to seek buyers.  Based on the most recent non-binding proposals (none of which have been consummated) received by the Company for certain of its remaining oil and gas properties, the Company recorded charges in the third quarter and first nine months of 2003 totaling $15,000 and $293,000, respectively, to reduce the carrying value of such properties to their estimated realizable value.

Revenue from the discontinued operations was $65,000 and $1,193,000 for the three months ended September 30, 2003 and 2002, respectively, and $225,000 and $7,579,000 for the nine months ended September 30, 2003 and 2002, respectively. Pre-tax income (loss) from the discontinued operations was $19,000 and $(1,490,000) for the three months ended September 30, 2003 and 2002 respectively, and $(179,000) and $(60,201,000) for the nine months ended September 30, 2003 and 2002, respectively.  The decrease in revenue between 2003 and 2002 was primarily due to lower production volumes as a result of the sale of the majority of the producing wells.  The decrease in the pre-tax loss from the discontinued operations between 2003 and 2002 was primarily due to the loss on the sale of the assets recorded in the 2002 periods.

In the second quarter of 2002, the Company revised its policy for amortizing its seismic data library and reported the adoption of its revised method as a cumulative effect of a change in accounting principle retroactive to January 1, 2002. Accordingly, the Company recorded a pre-tax charge of $17.2 million (after-tax charge of $11.2 million) as of January 1, 2002.  Under its revised accounting policy, the Company calculates created data amortization as the greater of the income forecast method or straight-line amortization over the estimated useful life of the asset.



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INDEX

Liquidity and Capital Resources

As of November 13, 2003, the Company had $42.2 million in cash on hand. In addition, the Company has received approval from the Bankruptcy Court with respect to a debtor-in-possession financing facility for up to $20 million.  Advances under the facility are available pursuant to a formula based on the carrying value of certain accounts receivable and components of the seismic data library.  If an advance is made under the facility, the first such advance must be in an amount not less than and must be used to retire the Company's term loan presently outstanding in the amount of $5.4 million and secured by certain seismic data.

The Company's cash provided by operating activities from continuing operations was $61,798,000 and $24,716,000 for the nine months ended September 30, 2003 and 2002, respectively.  The increase from 2002 to 2003 was primarily due to receipt of a Federal income tax refund of $17.4 million, increased cash license sales during the first nine months of 2003 and non-payment of interest expense on the Debtors' debt due to the bankruptcy proceedings.

As of September 30, 2003, the Company had approximately $273.6 million of outstanding debt and lease obligations, with aggregate contractual cash obligations summarized as follows (in thousands):





|                                   |   |         |   | Payments due by period | 
|---------------------------------- | - | ------- | - | ---------------------- | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Contractual cash obligations       |   | Total   |   | 2003                   | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Debt obligations (1)               | $ | 261,364 | $ | 260,792                | 
|Capital lease obligations          |   | 6,846   |   | 273                    | 
|Operating lease obligations        |   | 5,343   |   | 308                    | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 
|Total contractual cash obligations | $ | 273,553 | $ | 261,373                | 
|                                   |   |         |   |                        | 
|                                   |   |         |   |                        | 





|(1) | Debt obligations include debt subject to compromise of approximately $255.5 million.  These debt obligations have contractual maturities ranging from 2003 to 2011.  The Company is in non-compliance with certain of the covenants related to this debt, the holders of $255 million of such debt have accelerated the maturity thereof and the maturities have been reflected as due in 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





As a result of the bankruptcy filing by the Company and its wholly owned U.S. subsidiaries, the rights of and ultimate payments related to certain of these contractual obligations may be substantially altered.

Notes

The Company has outstanding Notes totaling $255 million that were issued in various series from December 1995 through December 2001.  The Notes bear interest at rates ranging from 7.04% to 7.48% and have originally stated maturity dates ranging from December 2002 to October 2011.  The financial covenants in the Notes include, among other restrictions, maintenance of minimum net worth and limitations on total debt, interest coverage, liens, debt issuance, dividends and disposition of assets.  As a result of the non-payment of interest thereon, the Company's Chapter 11 filing, the restatement of its financial statements prior to January 1, 2002, the impairment and sale, at a substantial loss, of its oil and gas properties and poor financial results in the first quarter of 2002, the Company is in default on the Notes.

On June 6, 2003, certain of the holders of the Notes filed involuntary chapter 11 petitions against the Company and 16 of its subsidiaries that guaranteed the Notes.  On June 26, 2003, the Company announced that Ranch had purchased all $255 million of the Notes.  Subsequently, the Company and Ranch reached agreements extending the time by which the Company must respond to the involuntary bankruptcy petitions.  On July 21, 2003, the Debtors filed voluntary petitions in bankruptcy and the Company and Ranch filed motions to dismiss the involuntary petitions (see Note B). In addition, on or before July 21, 2003, Ranch sold all of the Notes to Berkshire.  The balance outstanding on the Notes was $255 million at November 13, 2003.  No principal or interest payments have been made on the Notes since the Petition Date.



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INDEX

Lines of Credit

On December 9, 2002 the Company's wholly owned subsidiary, Olympic Seismic Ltd. ("Olympic") entered into a new revolving credit facility.  The facility allows it to borrow up to $5 million (Canadian dollars), subject to an availability formula, by way of prime-based loans, bankers' acceptances or letters of credit.  Until January 22, 2003, prime-based loans and bankers' acceptances bore interest at the rate of the bank's prime rate plus 1.75% per annum and 1.40% per annum, respectively. Effective January 22, 2003, such rates were amended to 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 the assets of Olympic, SEIC Trust Administration Ltd. (as sole trustee of, and for and on behalf of, SEIC Business Trust) and SEIC Holdings, Ltd., but is not guaranteed by Seitel, Inc. or any of its other United States subsidiaries.  However, all intercompany debt owing by Olympic or SEIC Holdings, Ltd. to Seitel or to any Seitel U.S. subsidiary (approximately $13,923,000 (Canadian dollars) at September 30, 2003) has been subordinated to the repayment of the revolving credit facility.  Available borrowings under the facility are equivalent to a maximum of $5 million (Canadian dollars), subject to a requirement that such borrowings may not exceed 75% of good accounts receivable (as defined in the agreement) of SEIC Trust Administration, less prior-ranking claims, if any, relating to inventory or accounts. The facility is subject to repayment upon demand and is available from time to time at the Bank's sole discretion.  A review of this demand facility is performed annually at the Bank's discretion.  As of November 13, 2003, no amounts were outstanding on this revolving line of credit and $2,411,000 (Canadian dollars) was available on the line of credit.  Olympic is not a party to any of the debt issued by Seitel other than the note payable to a former executive.

The Company has received approval from the Bankruptcy Court with respect to a debtor-in-possession financing facility for up to $20 million.  Advances under the facility are available pursuant to a formula based on the carrying value of certain accounts receivable and components of the seismic data library.  If any advance is made under the facility, the first such advance must be at least in an amount equal to and the proceeds must be used to retire the Company's term loan presently outstanding in the principal amount of approximately $5.4 million and secured by certain seismic data.  As of November 13, 2003, no amounts were outstanding and $20 million was available on this facility.

Term Loans

On August 28, 2001, the Company's wholly owned subsidiary, Seitel Data, Ltd., obtained a term loan totaling $10 million for the purchase of certain seismic data, some of which data secures the debt.  On September 10, 2003 the term loan was sold and assigned to a trust controlled by a wholly owned subsidiary of Berkshire.  The loan bears interest at the rate of LIBOR plus 2.9%. Monthly principal payments total $208,000.  The Company is not in compliance with the payment terms or covenants of this term loan.  At September 30, 2003, the term loan had an outstanding principal balance of approximately $5.4 million and a maturity date of October 1, 2004, when a balloon payment of $2.5 million is due.  The principal balance outstanding on this loan on November 13, 2003, was $5,417,000.  No principal or interest payments have been made on this loan since the Petition Date.

On January 14, 2002, the Company's wholly owned subsidiary, SEIC Business Trust (the "Trust"), entered into a demand reducing credit facility to borrow $4 million (Canadian dollars) by way of prime-based loans. The funds were drawn down on January 30, 2002 to finance the purchase of seismic data.  On December 9, 2002, the Trust replaced the remaining balance owing under this facility with a $2.67 million (Canadian dollars) reducing demand facility, by way of prime-based loans.  Monthly payments total $166,670 (Canadian dollars) plus interest. The facility matures on January 28, 2004.  Until January 22, 2003, the loans bore interest at the bank's prime rate plus 2.00%.  Effective January 22, 2003, the rate was amended to the bank's prime rate plus 0.50%.  The facility is secured by the Trust's assets and guaranteed by Olympic and SEIC Holdings Ltd.  However, all intercompany debt owing by the Trust to Seitel or any Seitel U.S. subsidiary (approximately $38,882,000 (Canadian dollars) at September 30, 2003) has been subordinated to the repayment of the demand reducing credit facility.  The balance outstanding on this loan on November 13, 2003 was $500,000 (Canadian dollars).

Other Debt

During 2001 and 2002, the Company entered into capital leases for the purchase of computer and data technology center furniture and equipment. The lease agreement originally was for a term of approximately two years. On February 18, 2003, the Company and the lessor entered into a restructuring of this lease effective as of January 1, 2003.  Under the restructured obligation, on February 18, 2003, the Company made a one time payment of $1,580,000, plus applicable taxes, in consideration of past due lease payments and agreed to make 33 additional monthly payments of principal and interest of $165,000, plus applicable taxes.  At the conclusion of the lease, the Company may purchase the leased equipment, in whole but not in part, for $810,000, less a credit of $309,910 in respect of a cash deposit held by the lessor.  The outstanding balance on the capital lease as of November 13, 2003 was $4,053,000.

On April 30, 2002, Olympic entered into a sale leaseback agreement on a building and land located in Calgary, Alberta, Canada. Proceeds of the sale were $3.6 million (Canadian dollars). The proceeds were used to pay off Olympic's revolving line of credit and for general corporate purposes. The term of the lease is a 20-year capital lease with lease payments of: $336,000 (Canadian dollars) in years 1-5; $370,860 (Canadian dollars) in years 6-10; $409,500 (Canadian dollars) in years 11-15; and $452,340 (Canadian dollars) in years 16-20. The transaction resulted in a gain on the sale of $737,000, which has been deferred and is being recognized into income over the term of the lease.



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INDEX

In connection with the settlement of certain litigation, the Company entered into a note payable to a former executive consisting of payments of $6,417 per month for 36 months commencing June 2003 and payments of $6,000 per month for 84 months commencing June 2006.  The note is non-interest bearing.  The note is guaranteed by Olympic Seismic, Ltd.  The outstanding balance on this note as of November 13, 2003 was $451,000.  Since the Petition Date, Olympic Seismic, Ltd. has made the monthly payments on this note.

In May 2001, the Company's wholly owned subsidiary, N360X, LLC, entered into an operating lease for a jet aircraft.  The lease agreement was for a term of 10 years.  Monthly lease payments were $25,000 until May 2006 and $35,000 per month thereafter until the end of the lease term.  The lease payments were guaranteed by Seitel.  The Company surrendered the aircraft and has not made any lease payments since December 2002.  The Lessor has demanded payment of all amounts due under the lease and has filed suit to enforce its rights.  Refer to "Legal Proceedings."

Under the terms of a separation agreement with a former officer of the Company, the Company has guaranteed a bank loan with a current outstanding balance of $193,000.  The balance is due in annual installments of $60,000 with a maturity date of November 13, 2006.

Capital Expenditures

During the first nine months of 2003, capital expenditures for seismic data and other property and equipment amounted to $38.1 million and $1.0 million, respectively. Of the $38.1 million of seismic data additions, $27.8 million were cash additions and $10.3 million were non-cash additions. These capital expenditures were funded by operations and current cash balances.

Based on its present budget, the Company anticipates capital expenditures for the remainder of 2003 will total approximately $20 million, substantially all of which will be for seismic data library additions.  Of this amount, the Company anticipates that it will receive underwriting or sponsorship totaling approximately $9.5 million and will execute non-monetary exchanges for an additional $5 million leaving approximately $5.5 million of capital spending to be funded from operating cash flow. If the Company's cash balances and revenue from operating sources are not sufficient to fund the currently anticipated 2003 capital expenditures, general and administrative expenses and other costs of operation and costs incurred in connection with the Chapter 11 filing, the Company would be required to reduce its capital budget.

Recent Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board ("FASB") issued Interpretation 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").  FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee.  FIN 45 also expands the disclosures required to be made by a guarantor about its obligations under certain guarantees that it has issued.  Initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.  The disclosure requirements were effective for 2002.  The adoption of FIN 45 on January 1, 2003 did not have a material effect on the results of operations or balance sheet of the Company.





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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. Statements contained in this report about Seitel's future outlook, prospects and plans, including those that express belief, expectation, estimates or intentions, as well as those that are not statements of historical fact, are forward looking. The words "proposed", "anticipates", "anticipated", "will", "would", "should", "estimates" and similar expressions are intended to identify forward-looking statements. Forward looking statements represent Seitel's reasonable belief and are based on Seitel's current expectations and assumptions with respect to future events.  While Seitel believes its expectations and assumptions are reasonable, they involve risks and uncertainties beyond Seitel's control that could cause the actual results or outcome to differ materially from the expected results or outcome. Such factors include the ability of the Company to continue as a going concern; the Company's ability to obtain court approval with respect to motions in the Chapter 11 proceeding prosecuted by it from time to time; the impact of litigation on the Company and in any distribution to creditors or equity holders of the Company; the delay or inability of the Company to complete and/or consummate its proposed plan of reorganization; risks associated with third parties seeking and obtaining court approval to propose and confirm one or more plans of reorganization, for the appointment of a Chapter 11 trustee or to convert the Company's Chapter 11 case to a Chapter 7 case; the ability of the Company to obtain and maintain normal terms with vendors and service providers; the Company's ability to maintain contracts that are critical to its operations; the potential adverse impact of the Chapter 11 cases on the Company's liquidity or results of operations and other risks associated with operating a business in Chapter 11; any significant change in the oil and gas industry or the economy generally; 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 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 effect on our reported operating results and stock price as a result of the Company's restatement of financial statements; the results or settlement of litigation regarding the Company or its assets, any litigation or action taken as a result of the Company's non-compliance with its debt covenants; adverse actions which may be taken by the Company's creditors; the level of the Company's cash generated from operations; the Company's ability to obtain alternative debt or equity financing on satisfactory terms if internally generated funds are insufficient to fund its capital needs and the lack of any strategic disposition, acquisition or joint venture involving the Company's businesses and assets. The forward-looking statements contained in this Report speak only as of the date hereof, and Seitel disclaims any duty to update these 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, 2002.





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

The Company is exposed to market risk, including adverse changes in interest rates and foreign currency exchange rates.

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.  As of September 30, 2003 the Company did not have any 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's Canadian subsidiaries conduct business in the Canadian dollar and the Company is therefore subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing and investing transactions in currencies other than the U.S. dollar.  As of September 30, 2003, the Company did not have any open forward exchange contracts.

The Company has not had any significant changes in the market risk exposures since December 31, 2002.



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INDEX



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





The Company has carried out an evaluation, under the supervision and the participation of its management, including its Chief Executive Officer, Larry E. Lenig, Jr., and its Acting Chief Financial Officer, Marcia H. Kendrick, of the effectiveness of its disclosure controls and procedures as of September 30, 2003 pursuant to Rule 13a-15(b) under the Exchange Act.  Based on that evaluation, our Chief Executive Officer and Acting Chief Financial Officer have concluded that our disclosure controls and procedures are effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported in a timely manner.

The Company has carried out an evaluation, under the supervision and participation of its management, including its Chief Executive Officer and Acting Chief Financial Officer, of any changes in its internal controls over financial reporting that occurred during the quarterly period ended September 30, 2003, and the Chief Executive Officer and Acting Chief Financial Officer have concluded that there was no change during the quarterly period ended September 30, 2003 that has materially affected or is reasonably expected to materially affect the Company's internal control over financial reporting.







PART II - OTHER INFORMATION













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

Reference is made to previous 2003 Form 10-Q filings for discussion of
litigation and other matters that have been resolved prior to the third quarter
of 2003.



The former
holders of the Notes accelerated the Notes and made demand upon the Company and
certain of its former and current officers and directors for money damages
arising from certain alleged negligent actions and/or misrepresentations of
those officers and directors. The holders alleged that money damages arising
from the foregoing claims were not fully quantified, but exceeded $20 million
and included, without limitation, the lost value of such holders investment in
the Notes. Notice of the demand has been provided by the Company to its
insurance carriers. The holders of the Notes did not commence suit. As of June
26, 2003, all of the former holders of Notes had sold their Notes to Ranch, who
subsequently sold the Notes to Berkshire. Under the Debtors' Plan, if confirmed,
all of the foregoing claims will be released and discharged.

The Company and certain of its former and current officers and directors have been named as defendants in eleven lawsuits brought as class actions alleging violations of the federal securities laws, all of which were consolidated by an Order entered August 7, 2002, under Cause No. 02-1566, styled In re Seitel, Inc. Securities Litigation, in the United States District Court for the Southern District of Texas.  The Court appointed a lead plaintiff and lead counsel for plaintiffs, who subsequently filed a consolidated amended complaint, which added the Company's auditors, Ernst & Young LLP, as a defendant.  The consolidated amended complaint alleges that during a proposed class period of May 5, 2000 through April 1, 2002, the defendants violated sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by overstating revenues in violation of generally accepted accounting principles.  The plaintiffs seek an unspecified amount of actual and exemplary damages, costs of court, pre- and post-judgment interest and attorneys' and experts' fees.  The Company intends to vigorously defend these consolidated lawsuits.  No discovery has been conducted and the action is stayed as a result of the Debtors' Chapter 11 filing.

The Company has been named as a nominal defendant in seven stockholder derivative actions filed in various courts: Almekinder v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. H-02-2960, In the United States District Court for the Southern District of Texas; Basser v. Frame, Valice, Kendrick, Pearlman, Fiur, Zeidman, Stieglitz, Craig, Lerner, and Seitel, Inc., No. H-02-1874, In the United States District Court for the Southern District of Texas; Berger v. Frame, Pearlman, Valice, Craig, Stieglitz, Lerner, Zeidman, Fiur, and Seitel, Inc., No. 19534-NC, In the Court of Chancery, State of Delaware, Castle County; Chemical Valley & North Central West Virginia Carpenters Pension Plan v. Frame, Valice, Hoffman, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Fiur, and Seitel, Inc., No. 02-CV-3343, In the United States District Court for the Southern District of Texas; Couture v. Frame, Valice, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. 20002-37065, In the 80th Judicial District Court, Harris County, Texas; Talley v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., In the 151st Judicial District Court, Harris County, Texas; and Zambie v. Frame, Pearlman, Valice, Craig, Zeidman, Lerner, Stieglitz, Fiur, Ernst & Young LLP, and Seitel, Inc., In the 333rd Judicial District Court, Harris County, Texas.  The plaintiffs generally allege that the defendants breached and conspired to breach fiduciary duties to the Company's shareholders by failing to maintain adequate accounting controls and by using improper accounting and auditing practices and procedures. Certain of the plaintiffs also assert causes of action for mismanagement, waste of corporate assets and unjust enrichment.  The Zambie case also alleges professional negligence against Ernst & Young LLP.  The plaintiffs seek judgments for unspecified amounts of compensatory damages, including return of salaries and other payments to the defendants, exemplary damages, attorneys' fees, experts' fees and costs.  The Company's Board of Directors appointed a special litigation committee to conduct an independent investigation of the allegations asserted in the derivative lawsuits.  The special litigation committee completed its investigation and its report has been delivered to the Company.  The Company filed its motion to dismiss in Delaware Chancery court on March 20, 2003.  The parties previously agreed to stay the Texas state court cases pending the outcome of the Texas federal court derivative cases.  The federal court derivative cases have been consolidated, and the Company has moved to stay the cases pending resolution by the Delaware court.  Presently, all cases are stayed as a result of the Debtors' Chapter 11 filing.  In October 2003, a settlement of all issues in each derivative suit was reached among the parties, and on October 23, 2003, a stipulation and motion to approve the terms of such settlement was filed with the Bankruptcy Court.  The settlement stipulation provides for payment of $600,000, all of which is covered by insurance, and resolution of all claims against all parties to the litigation.  The motion is pending review and approval of the Bankruptcy Court.



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The Company has been sued by its former chief executive officer in Frame v. Seitel, in the 113th Judicial District Court of Harris County, No. 2002-35891.  Mr. Frame alleges a breach of his employment contract by virtue of his termination and also alleges defamation.  He also seeks a declaratory judgment that certain funds he received from the Company were proper and do not have to be repaid.  The Company has answered and asserted various defenses.  The Company also has filed a counter suit to recover approximately $4,200,000 in corporate funds that the Company believes he inappropriately caused the Company to pay him or for his benefit plus over $800,000 due on two notes that were accelerated pursuant to their respective terms.  In addition, the Company also holds a judgment against Mr. Frame in the amount of at least $590,000 relating to a loan made to Mr. Frame by Bank One N.A. ("Bank One") and guaranteed by the Company.  The Company intends to defend the suit vigorously and pursue its counterclaim. Discovery is abated in the case pending finalization of certain other matters.  Mr. Frame has filed claims totaling $20.2 million against the Debtors in the Bankruptcy Cases.  The Debtors have filed objections to such claims.

The Company is a party to a suit for geophysical trespass entitled Joy Resources, Inc. v. Seitel Data, Ltd., Cause No. 01-02-00828-CV, in the 1st Court of Appeals, Houston, Texas.  The plaintiff is appealing a final judgment by the trial court holding that the plaintiff is not entitled to recover an injunction or to recover damages against the Company.  The plaintiffs assert that the Company obtained seismic data about mineral interests leased by the plaintiff by placing seismic equipment on property adjacent to the property leased by the plaintiff.  The trial court held that no cause of action exists where the seismic equipment is not located on the property leased by the plaintiff.  The briefing has been completed in this matter, and oral argument in the 1st Court of Appeals in Houston, Texas was on May 6, 2003.  The parties have reached a settlement in the matter and have executed a settlement stipulation which is pending before the Bankruptcy Court for approval.  The settlement stipulation provides that Joy Resources, Inc. ("Joy") will be granted an agreed, allowed claim in the amount of $73,000 in the Cases, and further provides that Seitel Data, Ltd. may use certain data upon the payment of additional costs and may acquire certain data owned by Joy on a right of first refusal basis.

The Company and its subsidiary, Seitel Data, Ltd., are parties to a class action lawsuit for geophysical trespass entitled Juan O. Villarreal v. Grant Geophysical, Inc., et al., Cause No. DC-00-214, in the 229th District Court of Starr County, Texas.  The plaintiffs have sued a number of defendants, including Seitel, Inc. and Seitel Data, Ltd.  The plaintiffs allege that certain defendants conducted unauthorized 3-D seismic exploration of the mineral interests, and sold the information obtained to other defendants.  The plaintiffs seek an unspecified amount of damages.  All of the defendants have obtained summary judgments dismissing the plaintiffs' claims, and the case is now on appeal before the San Antonio Court of Appeals under Cause No. 04-02-00674-CV.  On July 22, 2003, the Texas Court of Appeals granted appellant motion to proceed against the other appellees.  The appeal against the Company remains stayed.  The Company intends to vigorously represent its interests in this appeal.

The Company has sued its former in-house counsel and law firm in Seitel, Inc. v. Cynthia Moulton and Franklin Cardwell and Jones, P.C.,Cause No. 2003-09151 in the 127th Judicial District Court of Harris County, Texas.  The suit alleges negligence, breach of fiduciary duty and breach of contract surrounding the settlement of a personal lawsuit against the former chief executive officer and other aspects of representation.  The Company seeks recovery for fees paid and related expenses.  Initial pleadings were filed on February 21, 2003.  Discovery has not yet commenced.



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On March 27, 2003, the Company was served with a complaint filed by the General Electric Credit Corporation of Tennessee ("GE") in the District Court No. 333rd of Harris County, Texas, styled General Electric Credit Corporation of Tennessee, as Plaintiff v. N360X, LLC and Seitel, as Defendants.  The complaint alleges that the Company, as guarantor, and its wholly owned subsidiary N360X, LLC, as lessee, have defaulted on an agreement for the lease of a jet aircraft.  GE has accelerated the obligation, taken possession of the aircraft and demanded payment of amounts GE claims are due pursuant to the termination of the lease. The Company has not yet filed its answer.  The case is in its early stages and no discovery has yet been conducted. The Company has accrued an estimate of the deficiency that would result if the Plaintiff's claims were to be sustained, the aircraft sold and the proceeds of such sale were to be applied to the payments otherwise due under the lease.  The case is subject to the automatic stay of the Bankruptcy Court. GE has filed an unsecured claim in the case totaling approximately $4.4 million.  The Debtors have file objections to such claim.

On September 22, 2003, Bass Enterprises Production Co. ("Bass") filed a motion with the Bankruptcy Court seeking relief from the automatic stay applicable to the Debtors and requesting permission of the Bankruptcy Court to initiate litigation against the Debtors in a Texas State Court with respect to an alleged breach of certain provisions of a contract entered into in 2001.  The Debtors have objected to the motion and a hearing on the motion is scheduled for December 3, 2003.  No discovery has been conducted in the matter.

In addition to the lawsuits described above, the Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business. In the opinion of management, uninsured losses, if any, resulting from the ultimate resolutions of these matters should not be material to the Company's financial position or results of operation.  In addition, there have been a number of claims asserted by third parties in the Bankruptcy Cases.  The Debtors are evaluating each of the claims filed and based on the outcome of such analysis and the resolution of such claims, additional accruals may be required.  Such accruals could be material in amount.

It is not possible to predict or determine the outcomes of the legal actions brought against it or by it, or to provide an estimate of all additional losses, if any, that may arise. At September 30, 2003, the Company had accrued $2.3 million, representing management's best estimate of the amount that is probable of being paid relative to all of the litigation and claims set forth above.  However, if one or more of the parties were to prevail against the Company in one or more of the cases described above that have not been settled, or if certain of the claims filed in the Bankruptcy Cases were to be allowed at amounts in excess of liabilities presently recorded by the Company or if the amounts of any judgments against the Company or settlements that the Company may enter into were in addition to liabilities recorded by the Company at September 30, 2003, it could require adjustments that are material to the Company's financial statements for any particular reporting period.



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

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|Item 3.  Defaults upon Senior Securities 
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|Item 6.  Exhibits and Reports on Form 8-K
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|SIGNATURES                                                                                                               
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|Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused
this report to be
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|signed on its behalf by the undersigned thereunto duly authorized.                                                       
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|Dated:  November                                                                                                         
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|Dated:  November                                                                                                         
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|        |  | EXHIBIT
INDEX                                                                                                                                         |  |       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------
|       
|        |  |                                                                                                                                                       |  | Page  
|Exhibit |  | Title                                                                                                                                                 |  | Number
|       
|        |  |                                                                                                                                                       |  |       
|31.1    |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of 2002 |  | 43    
|        |  |                                                                                                                                                       |  |       
|31.2    |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 Of The Sarbanes-Oxley Act of 2002 |  | 45    
|        |  |                                                                                                                                                       |  |       
|32.1    |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 |  | 47    
|        |  |                                                                                                                                                       |  |       
|32.2    |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 Of The Sarbanes-Oxley Act of 2002 |  | 49    











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