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


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

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

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


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

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

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

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

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

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

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

As of August 12,  1998  there were  22,625,227  shares of the  Company's  common
stock, par value $.01 per share, outstanding.


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<PAGE>
3
                                      INDEX


                                                                           Page
                                                                           ----
PART I.   FINANCIAL INFORMATION

          Item 1.     Financial Statements
          Consolidated Balance Sheets as of
          June 30, 1998 (Unaudited) and December 31, 1997.................... 3

          Consolidated Statements of Income and
          Comprehensive Income (Unaudited) for the
          Three Months Ended June 30, 1998 and 1997.......................... 4

          Consolidated Statements of Income and
          Comprehensive Income (Unaudited)for the
          Six Months Ended June 30, 1998 and 1997............................ 5

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

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

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

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

PART II.  OTHER INFORMATION..................................................13

<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<CAPTION>

                                                                                   (Unaudited)
                                                                                     June 30,    December 31,
                                                                                       1998         1997
                                                                                    ---------     ---------
<S>                                                                                 <C>           <C>
ASSETS
   Cash and equivalents                                                             $   2,709     $   4,881
   Receivables
     Trade                                                                             50,055        44,563
     Notes and other                                                                    1,640         2,121
   Net data bank                                                                      218,150       180,936
   Net oil and gas properties                                                         128,099       112,915
   Net other property and equipment                                                     2,407         2,349
   Investment in affiliate                                                             15,607        15,054
   Prepaid expenses, deferred charges and other assets                                  2,854         2,863
                                                                                    ---------     ---------

   TOTAL ASSETS                                                                     $ 421,521     $ 365,682
                                                                                    =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY
   Accounts payable and accrued liabilities                                         $  28,489     $  28,014
   Payable to affiliate                                                                 4,900        12,500
   Income taxes payable                                                                 1,835         1,242
   Debt
     Senior Notes                                                                      75,000        75,000
     Line of credit                                                                    58,750        15,000
     Term loans                                                                           281           477
   Obligations under capital leases                                                        48            89
   Contingent payables                                                                    274           274
   Deferred income taxes                                                               21,242        18,050
   Deferred revenue                                                                    10,849         7,763
                                                                                    ---------     ---------
TOTAL LIABILITIES                                                                     201,668       158,409
                                                                                    ---------     ---------

CONTINGENCIES AND COMMITMENTS

STOCKHOLDERS' EQUITY
   Preferred stock, par value $.01 per share; authorized
     5,000,000 shares; none issued                                                         --            --
   Common stock, par value $.01 per share; authorized
     50,000,000 shares; issued and outstanding
     22,625,227 and 22,548,408 at June 30, 1998
     and December 31,1997, respectively                                                   226           225
   Additional paid-in capital                                                         129,681       128,406
   Retained earnings                                                                   93,976        82,742
   Treasury stock, 175,818 shares at cost at
     June 30, 1998 and December 31, 1997                                               (2,977)       (2,977)
   Notes receivable from officers and employees                                        (1,109)       (1,109)
   Accumulated other comprehensive income (loss)                                           56           (14)
                                                                                    ---------     ---------
TOTAL STOCKHOLDERS' EQUITY                                                            219,853       207,273
                                                                                    ---------     ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $ 421,521     $ 365,682
                                                                                    =========     =========
</TABLE>

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

<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED  STATEMENTS  OF INCOME AND  COMPREHENSIVE  INCOME  (Unaudited)
(In thousands, except per share amounts)
<CAPTION>

                                                                            Three Months Ended
                                                                                 June 30,
                                                                           -------------------
                                                                            1998        1997
                                                                           -------     -------

<S>                                                                        <C>         <C>
REVENUE                                                                    $36,976     $34,673


EXPENSES
   Depreciation, depletion and amortization                                 17,726      11,560
   Cost of sales                                                             1,350       7,389
   Selling, general and administrative expenses                              6,472       6,296
                                                                           -------     -------
                                                                            25,548      25,245
                                                                           -------     -------

INCOME FROM OPERATIONS                                                      11,428       9,428

Interest expense, net                                                       (1,402)       (984)
Equity in earnings of affiliate                                                 84        --
                                                                           -------     -------

Income before provision for income taxes                                    10,110       8,444
Provision for income taxes                                                   3,741       3,040
                                                                           -------     -------

NET INCOME                                                                   6,369       5,404

Other comprehensive income, net of tax:
   Foreign currency translation adjustments,
     net of income tax expense of $35 and $0                                    43          12
                                                                           -------     -------
Comprehensive income                                                       $ 6,412     $ 5,416
                                                                           =======     =======

Net income per share:
   Basic                                                                   $   .28     $   .26
                                                                           =======     =======
   Diluted                                                                 $   .28     $   .25
                                                                           =======     =======


Weighted average number of common and common equivalent shares:
   Basic                                                                    22,592      20,878
                                                                           =======     =======
   Diluted                                                                  23,115      21,782
                                                                           =======     =======
</TABLE>


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

<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED  STATEMENTS  OF INCOME AND  COMPREHENSIVE  INCOME  (Unaudited)
(In thousands, except per share amounts)
<CAPTION>

                                                                      Six Months Ended
                                                                           June 30,
                                                                    -------------------
                                                                     1998        1997
                                                                    -------     -------

<S>                                                                 <C>         <C>
REVENUE                                                             $67,903     $61,892


EXPENSES
   Depreciation, depletion and amortization                          32,882      21,668
   Cost of sales                                                      2,479      12,431
   Selling, general and administrative expenses                      12,422      11,014
                                                                    -------     -------
                                                                     47,783      45,113
                                                                    -------     -------

INCOME FROM OPERATIONS                                               20,120      16,779

Interest expense, net                                                (2,397)     (2,023)
Equity in earnings of affiliate                                         125        --
                                                                    -------     -------

Income before provision for income taxes                             17,848      14,756
Provision for income taxes                                            6,614       5,268
                                                                    -------     -------

NET INCOME                                                           11,234       9,488

Other comprehensive income, net of tax:
   Foreign currency translation adjustments,
     net of income tax expense of $42 and $0                             70         (27)
                                                                    -------     -------
Comprehensive income                                                $11,304     $ 9,461
                                                                    =======     =======

Net income per share:
   Basic                                                            $   .50     $   .46
                                                                    =======     =======
   Diluted                                                          $   .49     $   .44
                                                                    =======     =======


Weighted average number of common and common equivalent shares:
   Basic                                                             22,572      20,807
                                                                    =======     =======
   Diluted                                                           23,041      21,679
                                                                    =======     =======
</TABLE>


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

<PAGE>

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

                                                                                                         Notes
                                                                                                      Receivable
                                                                                                         from        Accumulated
                                  Common Stock         Additional               Treasury Stock         Officers         Other
                                 --------------------   Paid-In    Retained   ------------------           &        Comprehensive
                                    Shares     Amount   Capital    Earnings    Shares    Amount        Employees       Income
                                 ----------    ------  ---------   --------   --------   -------       ---------       -------

<S>                              <C>          <C>      <C>         <C>         <C>       <C>           <C>             <C>
Balance, December 31, 1996       10,362,102   $ 104    $ 105,544   $ 51,185       (409)  $    (4)      $  (1,205)      $   17

   Net proceeds from issuance
       of common stock              912,472       8       17,318         --                   --              --           --
   Two-for-one stock split       11,273,834     113         (113)        --       (409)       --              --           --
   Tax reduction from exercise
       of stock options                  --      --        5,657         --         --        --              --           --
   Treasury stock purchased              --      --           --         --   (175,000)   (2,973)             --           --
   Payments received on notes
       receivable from officers
       and employees                     --      --           --         --         --        --              96           --
   Foreign currency translation
       adjustment                        --      --           --         --         --        --              --          (31)
   Net income                            --      --           --     31,557         --        --              --           --
                                 ----------   -----    ---------   --------   --------   -------       ---------       ------

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

   Net proceeds from
       issuance of
       common stock                  76,819       1          932         --         --        --              --           --
   Tax reduction from exercise
       of stock options                  --      --          343         --         --        --              --           --
   Foreign currency translation
       adjustment                        --      --           --         --         --        --              --           70
   Net income                            --      --           --     11,234         --        --              --           --
                                 ----------   -----    ---------   --------   --------   -------       ---------       ------

Balance, June 30, 1998  
       (unaudited)               22,625,227   $ 226    $ 129,681   $ 93,976   (175,818)  $(2,977)      $  (1,109)      $   56
                                 ==========   =====    =========   ========   ========   =======       =========       ======
</TABLE>


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

<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<CAPTION>
                                                                      Six Months Ended
                                                                          June 30,
                                                                    -------------------
                                                                     1998         1997
                                                                    -------     -------
<S>                                                                 <C>         <C>
Cash flows from operating activities:
   Cash received from customers                                     $66,402     $58,067
   Cash paid to suppliers and employees                             (10,737)    (24,875)
   Interest paid                                                     (2,341)     (2,595)
   Interest received                                                     44         484
   Income taxes paid                                                 (2,483)        (40)
                                                                    -------     -------
     Net cash provided by operating activities                       50,885      31,041
                                                                    -------     -------

Cash flows from investing activities:
   Cash invested in seismic data                                    (72,864)    (28,355)
   Cash invested in oil and gas properties                          (24,204)    (14,416)
   Cash paid to acquire property and equipment                         (497)     (7,960)
   Cash from disposal of property and equipment                          14          28
   Collections on loans made                                             --         269
                                                                    -------     -------
     Net cash used in investing activities                          (97,551)    (50,434)
                                                                    -------     -------

Cash flows from financing activities:
   Borrowings under line of credit agreement                         54,063      32,000
   Principal payments under line of credit                          (10,313)    (21,000)
   Borrowings under term loan                                            --       7,925
   Principal payments on term loans                                    (196)     (2,061)
   Principal payments on capital lease obligations                      (41)       (372)
   Proceeds from issuance of common stock                               934       3,451
   Costs of debt and equity transactions                                 (1)         (2)
                                                                    -------     -------
     Net cash provided by financing activities                       44,446      19,941
                                                                    -------     -------

Effect of exchange rate changes                                          48         (93)
                                                                    -------     -------

Net increase in cash and equivalents                                 (2,172)        455

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

                                                                    -------     -------
Cash and equivalents at end of period                               $ 2,709     $ 3,795
                                                                    =======     =======
</TABLE>


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

<PAGE>

<TABLE>
SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited), continued
(In thousands)
<CAPTION>
                                                                      Six Months Ended
                                                                          June 30,
                                                                    -------------------
                                                                     1998        1997
                                                                    -------     -------
<S>                                                                 <C>         <C>
Reconciliation of net income to net cash provided by
   operating activities:

Net income                                                          $11,234     $ 9,488
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation, depletion and amortization                          32,882      22,537
   Deferred income tax provision                                      3,192       2,634
   Equity in earnings of affiliate                                     (125)         --
   Amortization of deferred revenue                                      --      (4,086)
   Discount on note receivable                                           --         (53)
   Gain on sale of property and equipment                               (11)        (16)
   Increase in receivables                                           (5,465)     (4,080)
   Decrease (increase) in other assets                                  371      (4,398)
   Increase in account payable and other liabilities                  8,807       9,015
                                                                    -------     -------
     Total adjustments                                               39,651      21,553
                                                                    -------     -------


Net cash provided by operating activities                           $50,885     $31,041
                                                                    =======     =======



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


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

<PAGE>

SEITEL, INC. AND SUBSIDIARIES

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

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

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting  Comprehensive  Income," the Company has reported  comprehensive
income for the  quarter  and six month  periods  ended  June 30,  1998 and 1997.
Accumulated other comprehensive  income consists of foreign currency translation
adjustments.

NOTE B-EARNINGS PER SHARE
-------------------------
     In accordance  with SFAS No. 128,  "Earnings per Share," basic earnings per
share  is  computed  based  on the  weighted  average  shares  of  common  stock
outstanding during the periods.  Diluted earnings per share is computed based on
the weighted  average shares of common stock plus the assumed issuance of common
stock for all potentially dilutive  securities.  Earnings per share computations
to  reconcile  basic and diluted  net income for the three and six months  ended
June 30, 1998 and 1997 consist of the following  (in thousands  except per share
amounts):
<TABLE>
<CAPTION>
                                        Three Months Ended             Six Months Ended
                                             June 30,                       June 30,
                                       -------------------            -------------------
                                        1998        1997                 1998       1997
                                       -------     -------            -------     -------

<S>                                    <C>         <C>                <C>         <C>
Net income                             $ 6,369     $ 5,404            $11,234     $ 9,488
                                       =======     =======            =======     =======

Basic weighted average shares           22,592      20,878             22,572      20,807
Effect of dilutive securities: (1)<F1>
   Options and warrants                    523         904                469         872
                                       -------     -------            -------     -------
Diluted weighted average shares         23,115      21,782             23,041      21,679
                                       =======     =======            =======     =======
Per share income:
   Basic                               $   .28     $   .26            $   .50     $   .46
   Diluted                             $   .28     $   .25            $   .49     $   .44

----------
<FN>
(1)<F1>   During the second quarter of 1998 and 1997 and the first six months of
          1998 and 1997,  a weighted  average  number of options and warrants to
          purchase  2,196,000,  562,000,  2,424,000 and 715,000 shares of common
          stock were  outstanding,  respectively,  but were not  included in the
          computation of diluted per share income because their exercise  prices
          were greater than the average market price of the common shares.
</FN>
</TABLE>

<PAGE>

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


NOTE D-OIL AND GAS PROPERTIES
-----------------------------
     The  Company  accounts  for  its oil and  gas  exploration  and  production
activities  using the full-cost  method of  accounting.  Under this method,  all
costs  associated with  acquisition,  exploration and development of oil and gas
reserves,  including  directly related overhead costs and interest costs related
to its unevaluated properties and certain properties under development which are
not currently being amortized,  are  capitalized.  For the six months ended June
30, 1998 and 1997,  general and  administrative  costs of $821,000 and $686,000,
respectively,  have  been  capitalized  to oil and gas  properties.  For the six
months ended June 30, 1998 and 1997,  interest costs of $1,184,000 and $974,000,
respectively, have been capitalized to oil and gas properties.


Item 2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS OF OPERATIONS
          ----------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
     Total revenue was  $36,976,000  and  $34,673,000 in the second  quarters of
1998 and 1997, respectively, representing an increase of 7%, and was $67,903,000
and  $61,892,000  in the  first  six  months  of 1998  and  1997,  respectively,
representing an increase of 10%. Revenue primarily consists of revenue generated
from the  marketing  of  seismic  data and oil and gas  production.  The  second
quarter  and  first  six  months  of 1997  include  revenue  of  $8,654,000  and
$13,554,000,  respectively,  related to  proprietary  seismic  data  acquisition
services performed by Eagle Geophysical,  Inc. ("Eagle"),  which was spun-off on
August 11, 1997.

     Revenue from the marketing of seismic data  increased  from  $20,676,000 in
the second  quarter  of 1997 to  $31,777,000  in the second  quarter of 1998 and
increased from $35,078,000 in the first six months of 1997 to $58,093,000 in the
first six  months of 1998.  These  increases  are  primarily  attributable  to a
continued  increase in demand for  high-resolution  seismic data, which is being
used increasingly in oil and gas exploration and development efforts.

     Oil and gas revenue was  $5,199,000 in the second  quarter of 1998 compared
to $5,343,000 in the second  quarter of 1997 and was $9,810,000 in the first six
months of 1998  compared  to  $13,280,000  in the first six months of 1997.  The
slight  decrease in oil and gas revenue  between the second quarters of 1997 and
1998 was caused primarily by lower natural gas production partially offset by an
increase in the average natural gas price received by the Company.  The decrease
in oil and gas revenue  between the first six months of 1997 and 1998 was caused
by both lower  production  volumes and lower  commodity  prices.  The production
decline from certain of the Company's shallow,  short-lived producing properties

<PAGE>

has not yet been offset by  production  from new wells  coming  on-line.  Second
quarter  1998  production  volumes  increased  approximately  15% from the first
quarter 1998 volumes. Net volume and price information for the Company's oil and
gas production for the second  quarters and first six months of 1998 and 1997 is
summarized in the following table:
<TABLE>
<CAPTION>
                                                   Quarter Ended                  Six Months Ended
                                                      June 30,                        June 30,
                                               -----------------------         -----------------------
                                                 1998          1997              1998          1997
                                               ---------     ---------         ---------     ---------

<S>                                            <C>           <C>               <C>           <C>
Natural gas volumes (mmcf)                         1,564         1,683             2,921         3,632
Average natural gas price ($/mcf)              $    2.45     $    2.16         $    2.43     $    2.66
Crude oil/condensate volumes (mbbl)                  105            98               198           214
Average crude oil/condensate price ($/bbl)     $   12.17     $   16.37         $   12.87     $   15.87
</TABLE>

     Depreciation,  depletion and amortization  consists  primarily of data bank
amortization  and depletion of oil and gas  properties.  Data bank  amortization
increased  from  $8,286,000  during  the second  quarter of 1997 to  $14,104,000
during the second  quarter of 1998 and  increased  from  $14,184,000  during the
first half of 1997 to $26,076,000 during the first half of 1998. As a percentage
of revenue from licensing  seismic data, data bank  amortization was 45% and 41%
for the second quarters of 1998 and 1997, respectively,  and 45% and 42% for the
first six months of 1998 and 1997,  respectively.  These changes between periods
are  primarily  due to the mix of sales of 2D and 3D data  amortized  at varying
percentages  based on each data  program's  current and expected  future revenue
stream.

     Depletion of oil and gas  properties  was $3,399,000 for the second quarter
of 1998 compared to $2,660,000 for the second quarter of 1997, which amounted to
$1.55 and $1.17,  respectively,  per mcfe of gas produced  during such  periods.
Depletion of oil and gas properties  was  $6,374,000  and $6,257,000  during the
first six months of 1998 and 1997,  respectively,  which  amounted  to $1.55 and
$1.27, respectively,  per mcfe of gas produced during such periods. The increase
in the rate reflects the amount of exploration  and  development  costs incurred
increasing at a higher rate than the proven reserve base. The depletion rate per
mcfe of gas produced was $1.55 for both the first and second quarters of 1998.

     Cost of sales consists of expenses  associated  with oil and gas production
and seismic resale  support  services,  as well as  geophysical  services in the
second  quarter and first six months of 1997. The decrease in cost of sales from
$7,389,000 to $1,350,000 for the second quarter of 1997 and 1998,  respectively,
and from  $12,431,000  to $2,479,000  for the first six months of 1997 and 1998,
respectively,  is  primarily  due to the second  quarter and first six months of
1997 including cost of sales associated with geophysical  services of $6,718,000
and  $10,343,000,  respectively,  whereas  in 1998  there  are  none  due to the
spin-off of Eagle in 1997.  Oil and gas  production  costs  amounted to $.60 and
$.58 per mcfe of gas  produced  in the  second  quarter  and first six months of
1998,  respectively,  compared to $.27 and $.38 per mcfe in the same  periods in
1997.  The  increase in rate is  primarily  due to an  increase in workover  and
maintenance  costs on some of the  Company's  older wells  along with  increased
operating  costs on some of the Company's  newer wells that are  producing  from
deeper and higher pressure horizons.

     The Company's selling, general and administrative expenses increased during
the 1998  periods  as  compared  to the 1997  periods  primarily  as a result of
variable  expenses  related to the increased volume of business and the addition
of  employees to meet the demands of the  increased  level of  activities.  As a
percentage of total revenue, these expenses were 18% for all periods presented.

     Net interest  expense  increased  from $984,000 to $1,402,000 in the second
quarters  of 1997 and 1998,  respectively,  and  increased  from  $2,023,000  to
$2,397,000 in the first six months of 1997 and 1998, respectively, primarily due
to increased borrowings made under the Company's revolving line of credit during
the 1998 periods.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES 
-------------------------------
     On  March  16,  1998,  the  Company  increased  its  $50,000,000  unsecured
revolving line of credit facility to $75,000,000. The facility bears interest at
a rate  determined  by the  ratio  of the  Company's  debt  to  cash  flow  from
operations. Pursuant to the interest rate pricing structure, funds can currently
be borrowed at LIBOR plus 3/4%, the bank's  prevailing prime rate, or the sum of
the Federal Funds effective rate for such day plus 1/2%. The facility matures on
March  16,  2001.  The  balance  outstanding  on the  revolving  line of  credit
decreased from  $58,750,000 at June 30, 1998, to $52,250,000 at August 12, 1998,
and the  effective  interest  rate  decreased  from 6.74% to 6.45% over the same
period.

     On December 28, 1995,  the Company  completed a private  placement of three
series  of   unsecured   Senior  Notes   totaling   $75  million.   The  Company
contemporaneously  issued  its Series A Notes and  Series B Notes,  which  total
$52.5 million and bear interest at a fixed rate of 7.17%.  On April 9, 1996, the
Company  issued its Series C Notes,  which total $22.5 million and bear interest
at a fixed rate of 7.48%.  The Series A Notes mature on December  30, 2001,  and
require annual principal payments of $8.333 million beginning December 30, 1999.
The  Series B and  Series C Notes  mature on  December  30,  2002,  and  require
combined annual principal  payments of $10 million beginning  December 30, 1998.
Interest  on all  series of the notes is  payable  semi-annually  on June 30 and
December 30.

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

     From November 1995 to April 1997,  the Company and two of its  wholly-owned
subsidiaries  obtained three separate  three-year term loans totaling  $747,000.
One of the loans bears  interest  at the rate of 8.413%,  and two at the rate of
7.9%. The proceeds were used for the purchase of certain property and equipment,
which  secures  the  debt.   Monthly   principal  and  interest  payments  total
approximately  $23,000. The balance outstanding on the loans at August 12, 1998,
was $259,000.

     The Company owns  1,520,000  shares of Eagle common  stock.  As of June 30,
1998, the market value of the Company's  remaining  equity interest in Eagle was
$15,960,000,  based on the June 30,  1998  closing  price of $10.50 per share as
quoted by NASDAQ. These shares are subject to certain trading restrictions.

     From  January 1,  1998,  through  August 12,  1998,  the  Company  received
$933,000 from the exercise of common stock purchase warrants and options and the
Company's  401(k) stock  purchases.  In  connection  with these  exercises,  the
Company will also receive approximately $343,000 in tax savings.

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

     During the first six months of 1998,  gross seismic data bank additions and
capitalized  oil  and  gas   exploration  and  development   costs  amounted  to
$63,283,000 and $21,558,000,  respectively.  These capital expenditures, as well
as taxes,  interest  expenses,  cost of sales  and  general  and  administrative
expenses, were funded by operations and borrowings under the Company's revolving
line of credit.

<PAGE>

     Currently,  the Company anticipates capital  expenditures for the remainder
of  1998  to  total  approximately  $86  million.   Such  expenditures   include
approximately  $70 million for the creation of  proprietary  seismic  data,  and
approximately  $16 million for oil and gas exploration and development  efforts.
The Company believes its current cash balances,  revenues from operating sources
and proceeds  from the exercise of common stock  purchase  warrants and options,
combined with its available revolving line of credit and project financing where
applicable,  should be sufficient to fund the 1998 capital  expenditures,  along
with  expenditures  for  operating  and  general  and  administrative  expenses.
Additionally,  the Company could arrange for additional debt or equity financing
during 1998;  however,  there can be no assurance that the Company would be able
to accomplish any such debt or equity financing on satisfactory terms.

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

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities."  The Statement
establishes  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  The  Statement  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge  accounting  criteria are met.  Special  accounting for qualifying  hedges
allows a derivative's  gains and losses to offset related  results on the hedged
item  in the  income  statement,  and  requires  that a  company  must  formally
document,  designate,  and assess the effectiveness of transactions that receive
hedge  accounting.  Statement 133 is effective for fiscal years  beginning after
June 15, 1999. A company may also implement the Statement as of the beginning of
any fiscal quarter after issuance (that is, fiscal  quarters  beginning June 16,
1998 and thereafter.) Statement 133 cannot be applied  retroactively.  Statement
133 must be applied to (a)  derivative  instruments  and (b) certain  derivative
instruments  embedded  in  hybrid  contracts  that  were  issued,  acquired,  or
substantively  modified after December 31, 1997 (and, at the company's election,
before  January 1,  1998).  The  Company  has not yet  quantified  the impact of
adopting  Statement 133 on its financial  statements  and has not determined the
timing of or method of its  adoption  of  Statement  133.  However,  the Company
anticipates that application of the statement will not have a material effect on
its consolidated statements.

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

<PAGE>

Year 2000
---------
     The Company utilizes  software and  technologies  throughout its operations
that will be affected  by the date change in the year 2000 ("Year 2000  Issue").
An initial  assessment  of the  systems  that will be  affected by the Year 2000
Issue has been made and a more  thorough  analysis is  currently  underway.  The
Company  does not  believe  the  costs  related  to the  Year  2000  Issue  will
materially impact its results of operations.  However, there can be no guarantee
that the systems of other companies,  on which the Company's  systems rely, will
be timely  converted  or that a failure  to  convert  by  another  company  or a
conversion  that is  incompatible  with the  Company's  systems would not have a
material  adverse  effect on the  Company.  The  Company is  communicating  with
software vendors,  business partners, and others with which it conducts business
to provide written assurances that their systems will be year 2000 compliant.

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


                           PART II - OTHER INFORMATION

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

Item 6.   Exhibits and Reports on Form 8-K
------------------------------------------
          (a)  Exhibits

               10.1   Amendment to  Employment  Agreement dated effective  as of
                      June 10, 1998 between the Company and Debra D. Valice.
      
          (b)  Not applicable




<PAGE>



                                   SIGNATURES


     Pursuant to the  requirements  of the  Securities and Exchange Act of 1934,

the  registrant  has duly  caused  this report to be signed on its behalf by the

undersigned thereunto duly authorized.


                                         SEITEL, INC.




Dated:  August 13, 1998                  /s/  Paul A. Frame
                                         ---------------------------------------
                                              Paul A. Frame
                                              President




Dated:  August 13, 1998                  /s/  Debra D. Valice
                                         ---------------------------------------
                                              Debra D. Valice
                                              Chief Financial Officer




Dated:  August 13, 1998                  /s/  Marcia H. Kendrick
                                         ---------------------------------------
                                              Marcia H. Kendrick
                                              Chief Accounting Officer

<PAGE>

                                     EXHIBIT
                                      INDEX
--------------------------------------------------------------------------------

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

10.1               Amendment to  Employment  Agreement  dated              16
                   effective as of June 10, 1998 
                   between the Company and Debra D. Valice