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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended September 30, 2009

OR



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

Commission File Number: 333-144844





SEITEL, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 76-0025431                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                                    |  |           
|------------------------------------------------------------------- |  | ----------
|10811 S. Westview Circle Drive Building C, Suite 100 Houston,
Texas |  | 77043     
|(Address of principal executive offices)                            |  | (Zip Code)

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





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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer,  accelerated filer and
smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No   ̈

As of November 12, 2009, there were 100 shares of the Companys common stock
outstanding, par value $.001 per share.









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INDEX



|         |  |                       |  |                                                                                       |  |   
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | --
|         |  |                       |  | Page                                                                                 
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                      
|         |  |                       | 
|         |  | Item 1.               |  | Financial Statements                                                                  |  | 3 
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Balance Sheets (Unaudited)                                     |  | 3 
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Operations (Unaudited)                           |  | 4 
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Comprehensive Loss (Unaudited)                   |  | 6 
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statement of Stockholders Equity (Unaudited)                  |  | 7 
|         |  |                       | 
|         |  |                       |  | Condensed Consolidated Statements of Cash Flows (Unaudited)                           |  | 8 
|         |  |                       | 
|         |  |                       |  | Notes to Condensed Consolidated Interim Financial Statements (Unaudited)              |  | 9 
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 25
|         |  |                       | 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 34
|         |  |                       | 
|         |  | Item 4T.              |  | Controls and Procedures                                                               |  | 35
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  |                                                                                      
|         |  |                       | 
|         |  | Item 1.               |  | Legal Proceedings                                                                     |  | 36
|         |  |                       | 
|         |  | Item 1A.              |  | Risk Factors                                                                          |  | 36
|         |  |                       | 
|         |  | Item 6.               |  | Exhibits                                                                              |  | 36
|         |  |                      
|         |  | Signatures            |  | 37                                                                                   



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PART I - FINANCIAL INFORMATION



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

SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)



|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                   |  | (Unaudited)September 30,2009 |          |   | December 31,2008 |  
|ASSETS                                                                                                                             |  |                              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                          |  | $                            | 10,966   |   |                  | $ | 42,678   |  
|Receivables                                                                                                                        |  |                              |          |   |                  |   |          |  
|Trade, net of allowance for doubtful accounts of $1,142 and $845, respectively                                                     |  |                              | 28,285   |   |                  |   | 60,779   |  
|Notes and other, net of allowance for doubtful accounts of $225                                                                    |  |                              | 433      |   |                  |   | 152      |  
|Net seismic data library, net of accumulated amortization of $403,629 and $287,153, respectively                                   |  |                              | 229,227  |   |                  |   | 279,257  |  
|Net property and equipment, net of accumulated depreciation and amortization of $6,614 and $4,611, respectively                    |  |                              | 7,234    |   |                  |   | 8,344    |  
|Investment in marketable securities                                                                                                |  |                              | 2,193    |   |                  |   | 1,317    |  
|Prepaid expenses, deferred charges and other                                                                                       |  |                              | 15,023   |   |                  |   | 20,033   |  
|Intangible assets, net of accumulated amortization of $15,618 and $10,633, respectively                                            |  |                              | 39,561   |   |                  |   | 41,859   |  
|Goodwill                                                                                                                           |  |                              | 200,979  |   |                  |   | 189,187  |  
|Deferred income taxes                                                                                                              |  |                              | 210      |   |                  |   | 219      |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|                                                                                                                                   |  |                             
|TOTAL ASSETS                                                                                                                       |  | $                            | 534,111  |   |                  | $ | 643,825  |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|                                                                                                                                   |  |                             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                               |  |                              |          |   |                  |   |          |  
|LIABILITIES                                                                                                                        |  |                              |          |   |                  |   |          |  
|Accounts payable and accrued liabilities                                                                                           |  | $                            | 22,379   |   |                  | $ | 46,290   |  
|Income taxes payable                                                                                                               |  |                              | 136      |   |                  |   | 255      |  
|Debt                                                                                                                               |  |                              |          |   |                  |   |          |  
|Senior Notes                                                                                                                       |  |                              | 402,178  |   |                  |   | 402,247  |  
|Notes payable                                                                                                                      |  |                              | 220      |   |                  |   | 256      |  
|Obligations under capital leases                                                                                                   |  |                              | 3,324    |   |                  |   | 2,996    |  
|Deferred revenue                                                                                                                   |  |                              | 40,289   |   |                  |   | 67,727   |  
|Deferred income taxes                                                                                                              |  |                              | 5,485    |   |                  |   | 8,269    |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|TOTAL LIABILITIES                                                                                                                  |  |                              | 474,011  |   |                  |   | 528,040  |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|                                                                                                                                   |  |                             
|COMMITMENTS AND CONTINGENCIES                                                                                                      |  |                              |          |   |                  |   |          |  
|                                                                                                                                   |  |                             
|STOCKHOLDERS EQUITY                                                                                                               |  |                              |          |   |                  |   |          |  
|Common stock, par value $.001 per share; 100 shares authorized, issued and outstanding at September 30, 2009 and
December 31, 2008 |  |                              | -        |   |                  |   | -        |  
|Additional paid-in capital                                                                                                         |  |                              | 274,407  |   |                  |   | 271,297  |  
|Retained deficit                                                                                                                   |  |                              | (229,687 | ) |                  |   | (151,187 | )
|Accumulated other comprehensive income (loss)                                                                                      |  |                              | 15,380   |   |                  |   | (4,325   | )
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                         |  |                              | 60,100   |   |                  |   | 115,785  |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  
|                                                                                                                                   |  |                             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                         |  | $                            | 534,111  |   |                  | $ | 643,825  |  
|                                                                                                                                   |  |                              |          |   |                  |   |          |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

(In thousands)



|                                         |  |                                 |         |   |      |   |         |  
|---------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                                         |  | Three Months EndedSeptember 30, |        
|                                         |  | 2009                            |         |   | 2008 |  
|                                         |  |                                
|REVENUE                                  |  | $                               | 19,504  |   |      | $ | 46,091  |  
|                                         |  |                                
|EXPENSES:                                |  |                                 |         |   |      |   |         |  
|Depreciation and amortization            |  |                                 | 33,436  |   |      |   | 43,592  |  
|Impairment of intangible asset           |  |                                 | -       |   |      |   | 225     |  
|Cost of sales                            |  |                                 | 131     |   |      |   | 72      |  
|Selling, general and administrative      |  |                                 | 5,375   |   |      |   | 9,850   |  
|                                         |  |                                 |         |   |      |   |         |  
|                                         |  |                                 | 38,942  |   |      |   | 53,739  |  
|                                         |  |                                 |         |   |      |   |         |  
|                                         |  |                                
|LOSS FROM OPERATIONS                     |  |                                 | (19,438 | ) |      |   | (7,648  | )
|                                         |  |                                
|Interest expense, net                    |  |                                 | (10,246 | ) |      |   | (9,967  | )
|Foreign currency exchange gains (losses) |  |                                 | 507     |   |      |   | (729    | )
|                                         |  |                                 |         |   |      |   |         |  
|                                         |  |                                
|Loss before income taxes                 |  |                                 | (29,177 | ) |      |   | (18,344 | )
|Benefit for income taxes                 |  |                                 | (1,208  | ) |      |   | (1,152  | )
|                                         |  |                                 |         |   |      |   |         |  
|                                         |  |                                
|NET LOSS                                 |  | $                               | (27,969 | ) |      | $ | (17,192 | )
|                                         |  |                                 |         |   |      |   |         |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

(In thousands)



|                                         |  |                                |         |   |      |   |         |  
|---------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                         |  | Nine Months EndedSeptember 30, |        
|                                         |  | 2009                           |         |   | 2008 |  
|                                         |  |                               
|REVENUE                                  |  | $                              | 76,672  |   |      | $ | 138,192 |  
|                                         |  |                               
|EXPENSES:                                |  |                                |         |   |      |   |         |  
|Depreciation and amortization            |  |                                | 108,682 |   |      |   | 132,706 |  
|Impairment of intangible asset           |  |                                | -       |   |      |   | 225     |  
|Cost of sales                            |  |                                | 238     |   |      |   | 351     |  
|Selling, general and administrative      |  |                                | 20,059  |   |      |   | 30,098  |  
|Merger                                   |  |                                | -       |   |      |   | 357     |  
|                                         |  |                                |         |   |      |   |         |  
|                                         |  |                                | 128,979 |   |      |   | 163,737 |  
|                                         |  |                                |         |   |      |   |         |  
|                                         |  |                               
|LOSS FROM OPERATIONS                     |  |                                | (52,307 | ) |      |   | (25,545 | )
|                                         |  |                               
|Interest expense, net                    |  |                                | (30,531 | ) |      |   | (30,041 | )
|Foreign currency exchange gains (losses) |  |                                | 873     |   |      |   | (1,442  | )
|Other income                             |  |                                | 74      |   |      |   | 39      |  
|                                         |  |                                |         |   |      |   |         |  
|                                         |  |                               
|Loss before income taxes                 |  |                                | (81,891 | ) |      |   | (56,989 | )
|Benefit for income taxes                 |  |                                | (3,391  | ) |      |   | (962    | )
|                                         |  |                                |         |   |      |   |         |  
|                                         |  |                               
|NET LOSS                                 |  | $                              | (78,500 | ) |      | $ | (56,027 | )
|                                         |  |                                |         |   |      |   |         |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(Unaudited)

(In thousands)



|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                               |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                               |  | 2009                            |         |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|                                                                               |  |                                 |         |  
|Net loss                                                                       |  | $                               | (27,969 | ) |                                | $ | (17,192 | )    |  | $ | (78,500 | ) |  | $ | (56,027 | )
|                                                                               |  |                                 |         |  
|Unrealized gains (losses) on securities held as available for sale, net of tax |  |                                 | 268     |   |                                |   | (2,811  | )    |  |   | 876     |   |  |   | (2,426  | )
|                                                                               |  |                                 |         |  
|Foreign currency translation adjustments                                       |  |                                 | 11,924  |   |                                |   | (6,809  | )    |  |   | 18,829  |   |  |   | (12,660 | )
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                                                               |  |                                 |         |  
|Comprehensive loss                                                             |  | $                               | (15,777 | ) |                                | $ | (26,812 | )    |  | $ | (58,795 | ) |  | $ | (71,113 | )
|                                                                               |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY(Unaudited)

(In thousands, except share amounts)



|                                                     |  |              |  |                          |   |                 |   |         |                                            |   |          |   |  |   |        |  
|---------------------------------------------------- |  | ------------ |  | ------------------------ | - | --------------- | - | ------- | ------------------------------------------ | - | -------- | - |  | - | ------ | -
|                                                     |  | Common Stock |  | AdditionalPaid-InCapital |   | RetainedDeficit |   |         | AccumulatedOtherComprehensiveIncome (Loss) |  
|                                                     |  | Shares       |  | Amount                   |   |                 |  
|                                                     |  |              |  |                          |  
|Balance, December 31, 2008                           |  | 100          |  | $                        | - |                 | $ | 271,297 |                                            | $ | (151,187 | ) |  | $ | (4,325 | )
|Amortization of stock-based compensation costs       |  | -            |  |                          | - |                 |   | 3,110   |                                            |   | -        |   |  |   | -      |  
|Net loss                                             |  | -            |  |                          | - |                 |   | -       |                                            |   | (78,500  | ) |  |   | -      |  
|Foreign currency translation adjustments             |  | -            |  |                          | - |                 |   | -       |                                            |   | -        |   |  |   | 18,829 |  
|Unrealized gain on marketable securities, net of tax |  | -            |  |                          | - |                 |   | -       |                                            |   | -        |   |  |   | 876    |  
|                                                     |  |              |  |                          |   |                 |   |         |                                            |   |          |   |  |   |        |  
|Balance, September 30, 2009                          |  | 100          |  | $                        | - |                 | $ | 274,407 |                                            | $ | (229,687 | ) |  | $ | 15,380 |  
|                                                     |  |              |  |                          |   |                 |   |         |                                            |   |          |   |  |   |        |  

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



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SEITEL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

(In thousands)



|                                                                         |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                         |  | Nine Months EndedSeptember 30, |        
|                                                                         |  | 2009                           |         |   | 2008 |  
|Cash flows from operating activities:                                    |  |                                |         |   |      |   |         |  
|Reconciliation of net loss to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Net loss                                                                 |  | $                              | (78,500 | ) |      | $ | (56,027 | )
|Depreciation and amortization                                            |  |                                | 108,682 |   |      |   | 132,706 |  
|Impairment of intangible asset                                           |  |                                | -       |   |      |   | 225     |  
|Deferred income tax benefit                                              |  |                                | (3,760  | ) |      |   | (2,702  | )
|Amortization of deferred financing costs                                 |  |                                | 1,424   |   |      |   | 1,208   |  
|Amortization of debt premium                                             |  |                                | (69     | ) |      |   | (64     | )
|Amortization of stock-based compensation                                 |  |                                | 3,110   |   |      |   | 4,332   |  
|Amortization of favorable facility lease                                 |  |                                | 185     |   |      |   | 210     |  
|Allowance for collection of trade receivables                            |  |                                | 316     |   |      |   | 96      |  
|Reversal of allowance for notes receivable                               |  |                                | -       |   |      |   | (54     | )
|Non-cash compensation expense                                            |  |                                | -       |   |      |   | 640     |  
|Non-cash other income                                                    |  |                                | -       |   |      |   | (24     | )
|Non-cash revenue                                                         |  |                                | (6,525  | ) |      |   | (14,441 | )
|Loss on sale of subsidiary                                               |  |                                | 19      |   |      |   | -       |  
|Decrease in receivables                                                  |  |                                | 32,868  |   |      |   | 372     |  
|Decrease in other assets                                                 |  |                                | 1,222   |   |      |   | 273     |  
|Decrease (increase) in deferred revenue                                  |  |                                | (22,305 | ) |      |   | 2,723   |  
|Decrease in accounts payable and other liabilities                       |  |                                | (16,652 | ) |      |   | (10,375 | )
|                                                                         |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                |  |                                | 20,015  |   |      |   | 59,098  |  
|                                                                         |  |                                |         |   |      |   |         |  
|                                                                         |  |                               
|Cash flows from investing activities:                                    |  |                                |         |   |      |   |         |  
|Cash invested in seismic data                                            |  |                                | (50,387 | ) |      |   | (65,484 | )
|Cash paid to acquire property and equipment and other                    |  |                                | (305    | ) |      |   | (910    | )
|Advances to Seitel Holdings, Inc.                                        |  |                                | (9      | ) |      |   | (135    | )
|Cash transferred upon sale of subsidiary                                 |  |                                | (22     | ) |      |   | -       |  
|Cash from disposal of property and equipment                             |  |                                | 14      |   |      |   | -       |  
|Increase in restricted cash                                              |  |                                | -       |   |      |   | (2      | )
|                                                                         |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                    |  |                                | (50,709 | ) |      |   | (66,531 | )
|                                                                         |  |                                |         |   |      |   |         |  
|                                                                         |  |                               
|Cash flows from financing activities:                                    |  |                                |         |   |      |   |         |  
|Principal payments on notes payable                                      |  |                                | (36     | ) |      |   | (32     | )
|Principal payments on capital lease obligations                          |  |                                | (90     | ) |      |   | (98     | )
|Borrowings on line of credit                                             |  |                                | 196     |   |      |   | 286     |  
|Payments on line of credit                                               |  |                                | (196    | ) |      |   | (286    | )
|Payments on notes receivable                                             |  |                                | -       |   |      |   | 54      |  
|                                                                         |  |                                |         |   |      |   |         |  
|Net cash used in financing activities                                    |  |                                | (126    | ) |      |   | (76     | )
|                                                                         |  |                                |         |   |      |   |         |  
|                                                                         |  |                               
|Effect of exchange rate changes                                          |  |                                | (892    | ) |      |   | 1,004   |  
|                                                                         |  |                                |         |   |      |   |         |  
|Net decrease in cash and equivalents                                     |  |                                | (31,712 | ) |      |   | (6,505  | )
|Cash and cash equivalents at beginning of period                         |  |                                | 42,678  |   |      |   | 43,333  |  
|                                                                         |  |                                |         |   |      |   |         |  
|Cash and cash equivalents at end of period                               |  | $                              | 10,966  |   |      | $ | 36,828  |  
|                                                                         |  |                                |         |   |      |   |         |  
|                                                                         |  |                               
|Supplemental disclosure of cash flow information:                        |  |                                |         |   |      |   |         |  
|Cash paid during the period for:                                         |  |                                |         |   |      |   |         |  
|Interest                                                                 |  | $                              | 39,363  |   |      | $ | 39,615  |  
|Income taxes                                                             |  | $                              | 262     |   |      | $ | 44      |  
|                                                                         |  |                               
|Supplemental schedule of non-cash investing activities:                  |  |                                |         |   |      |   |         |  
|Additions to seismic data library                                        |  | $                              | 1,443   |   |      | $ | 17,566  |  

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



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SEITEL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS(Unaudited)

September 30, 2009

NOTE A-ORGANIZATION

On February 14, 2007, Seitel Acquisition Corp. (Acquisition Corp.) was merged with and into Seitel, Inc. (the Company), pursuant
to a merger agreement among the Company, Acquisition Corp. and Seitel Holdings, Inc. (Holdings) dated October 31, 2006 (the Merger). Pursuant to the merger agreement, the Company continued as the surviving corporation
and became a privately owned corporation and wholly-owned subsidiary of Holdings. Holdings is an investment entity controlled by ValueAct Capital Master Fund, L.P. (ValueAct Capital).

In connection with the Merger, Acquisition Corp. conducted a cash tender offer and consent solicitation for all of the $189.0 million aggregate principal
amount of the Companys 11.75% senior notes due 2011 (the 11.75% Senior Notes). On February 14, 2007, the Company paid $187.0 million aggregate principal amount for all of the notes tendered. In connection with the tender offer
and consent solicitation, the Company entered into a supplemental indenture for the 11.75% Senior Notes. The supplemental indenture effected certain amendments to the original indenture, primarily to eliminate substantially all of the restrictive
covenants and certain events of default triggered or implicated by the Merger. $2.0 million aggregate principal amount of the 11.75% Senior Notes remain outstanding.

In addition, on February 14, 2007, the Company issued $400.0 million aggregate principal amount of 9.75% senior notes due 2014 (the 9.75% Senior Notes) pursuant to an indenture by and
among the Company, certain subsidiary guarantors and Bank of America, N.A. (as successor by merger to LaSalle Bank National Association), as trustee. Effective September 21, 2009, Deutsche Bank Trust Company Americas became trustee.

The Company also entered into an Amended and Restated Loan and Security Agreement with Wells Fargo Foothill, Inc. which provided for the ability to
borrow up to $25.0 million, subject to certain borrowing base limitations. The Company terminated the facility effective August 28, 2009 in advance of its stated maturity.

Pursuant to the Merger, all of the Companys outstanding common stock (other than shares of the Company owned by ValueAct Capital and certain shares owned by management investors, which were
contributed for ownership in Holdings) was exchanged for $3.70 per share.

NOTE B-BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements of the Company and its subsidiaries 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 adjustments) 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. 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. Operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.
The condensed consolidated balance sheet of the Company as of December 31, 2008, has been derived from the audited balance sheet of the Company as of that date. These financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The Company has evaluated subsequent events for potential recognition and/or disclosure through
November 16, 2009, the date the condensed consolidated interim financial statements were issued.



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NOTE C-LIQUIDITY

Effective August 28, 2009, the Company terminated its loan agreement with Wells Fargo Foothill, Inc. prior to its stated maturity. Under this agreement, the Company had the ability to borrow up to
$25.0 million. As a result of the termination of this loan agreement, the Company no longer has a credit facility available to it in the U.S. As of September 30, 2009, the Company had $11.0 million of cash and cash equivalents and expects to
satisfy its operating and capital needs for the remainder of 2009 and for 2010 from its available cash and cash flows from operating activities. The Company has semi-annual interest payments on its 9.75% Senior Notes due on February 15, 2010
and August 15, 2010 and on its 11.75% Senior Notes due on January 15, 2010 and July 15, 2010. Depending on demand for the Companys services and cash flows from operations, the Company may need to obtain additional capital to
meet its debt service obligations and operational needs. The Company is exploring obtaining financing with acceptable terms that would be available to it in the future. If the Company cannot raise required funds on acceptable terms, the Company may
not be able to, among other things, (i) maintain our general and administrative expenses at current levels; (ii) meet our debt service obligations; or (iii) respond to competitive pressures or unanticipated capital requirements.

NOTE D-REVENUE RECOGNITION

Revenue from Data Acquisition

The Company generates revenue when it creates a new seismic survey that is initially
licensed by one or more of its customers to use the resulting data. The initial licenses usually provide the customer with a limited exclusivity period, which will normally last for six months after final delivery of the processed data. The payments
for the initial exclusive licenses are sometimes referred to as underwriting or prefunding. Customers make periodic payments throughout the creation period, which generally correspond to costs incurred and work performed. These payments are
non-refundable.

Revenue from the creation of new seismic data is recognized throughout the creation period 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 contracts, 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 Company outsources the substantial majority of the work required to complete data acquisition projects
to third party contractors. The Companys payments to these third party contractors comprise the substantial majority of the total estimated costs of the project and are paid throughout the creation period. A typical survey includes specific
activities required to complete the survey, each of which has value to the customers. Typical activities, that often occur concurrently, include:



| |  |  | permitting for land access, mineral rights, and regulatory approval;
| | - |  | --------------------------------------------------------------------



| |  |  | surveying;
| | - |  | ----------



| |  |  | drilling for the placement of energy sources;
| | - |  | ---------------------------------------------



| |  |  | recording the data in the field; and
| | - |  | ------------------------------------



| |  |  | processing the data.
| | - |  | --------------------

The
customers paying for the initial exclusive licenses receive legally enforceable rights to any resulting product of each activity described above. The customers also receive access to and use of the newly acquired, 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.



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Revenue from Non-Exclusive Data Licenses

The Company recognizes a substantial portion of its revenue from data licenses sold after any exclusive license period. These are sometimes referred to as
resale licensing revenue, post acquisition license sales or shelf sales.

These sales fall under the following four basic forms of
non-exclusive license contracts.



| |  |  | Specific license contract - The customer licenses and selects data from the data library at the time the contract is entered into and holds this
license for a long-term period.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Library card license 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 length of the selection periods under the library card contracts is limited in time and varies from customer to customer.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Review and possession license 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Review only license 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 Companys non-exclusive license contracts specify the following:



| |  |  | that all customers must also execute a master license agreement that governs the use of all data received under our non-exclusive license contracts;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the specific payment terms, generally ranging from 30 days to 12 months, and that such payments are non-cancelable and non-refundable;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the actual data that is accessible to the customer; and
| | - |  | -------------------------------------------------------



| |  |  | that the data is licensed in its present form, where is and as is 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue from the non-exclusive licensing of
seismic data is recognized when the following criteria are met:



| |  |  | the Company has an arrangement with the customer that is validated by a signed contract;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the sales price is fixed and determinable;
| | - |  | ------------------------------------------



| |  |  | collection is reasonably assured;
| | - |  | ---------------------------------



| |  |  | the customer has selected the specific data or the contract has expired without full selection; and
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | the license term has begun.
| | - |  | ---------------------------

Copies of the data are available to the customer immediately upon request.

For licenses that have been invoiced but have not met the
aforementioned criteria, the revenue is deferred along with the related direct costs (primarily sales commissions). This normally occurs under the library card, review and possession or review only license contracts because the data selection may
occur over time. Additionally, if the contract allows licensing of data that is not currently available or enhancements, modifications or additions to the data are required per the contract, revenue is deferred until such time that the data is
available.

Revenue from Non-Monetary Exchanges

In certain cases, the Company will take ownership of a customers seismic data or revenue interest (collectively referred to as data) in exchange for a non-exclusive license to selected
seismic data from the Companys library. In connection with specific data acquisition contracts, the Company may choose to receive both cash and ownership of seismic data from the customer as consideration for the underwriting of new data
acquisition. In addition, the Company may receive advanced data processing services on selected existing data in exchange for



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a non-exclusive license to selected data from the Companys library. These exchanges are referred to as non-monetary exchanges. A non-monetary exchange for data always complies with the
following criteria:



| |  |  | the data license delivered is always distinct from the data received;
| | - |  | ---------------------------------------------------------------------



| |  |  | the customer forfeits ownership of its data; and
| | - |  | ------------------------------------------------



| |  |  | the Company retains ownership in its data.
| | - |  | ------------------------------------------

In non-monetary exchange transactions, the Company records a data library asset for the seismic data received or processed at the time the contract is entered into or the data is completed, as applicable,
and recognizes revenue on the transaction in equal value in accordance with its policy on revenue from data licenses, which is when the data is selected by the customer, or revenue from data acquisition, as applicable. 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.

Fair value of the data exchanged is determined using a multi-step process as follows:



| |  |  | First, the Company considers the value of the data or services 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 and, in the case of 3D seismic data, the cost that would be required to create the data. In addition, the Company applies a limitation on the value it assigns per square
mile on the data received. In determining the value of the services received, the Company considers the cost of such similar services that it could obtain from a third party provider.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, the Company determines the value of the license granted to the customer. Typically, the range of cash transactions by the Company for licenses
of similar data during the prior six months are evaluated. In evaluating the range of cash transactions, the Company does not consider transactions that are disproportionately high or low.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, the Company obtains concurrence from an independent third party on the portfolio of all non-monetary exchanges for data of $500,000 or more in
order to support the Companys valuation of the data received. The Company obtains this concurrence on an annual basis, usually in connection with the preparation of its annual financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to the Companys revenue recognition policies, revenue recognized on non-monetary exchange transactions may not occur at the same time the seismic
data acquired is recorded as an asset. The activity related to non-monetary exchanges was as follows (in thousands):



|                                                                    |  |                                 |       |                                |   |       |  |      |       |  |       
|------------------------------------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | - | ----- |  | ---- | ----- |  | ------
|                                                                    |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                                                    |  | 2009                            |       | 2008                           |   | 2009  |  | 2008
|                                                                    |  |                                 |       |                               
|Seismic data library additions                                      |  | $                               | 834   |                                | $ | 3,825 |  | $    | 1,443 |  | 17,566
|                                                                    |  |                                 |       |                               
|Revenue recognized on specific data licenses and selections of data |  |                                 | 1,435 |                                |   | 2,029 |  |      | 3,687 |  | 4,766 
|                                                                    |  |                                 |       |                               
|Revenue recognized related to acquisition contracts                 |  |                                 | 365   |                                |   | 4,053 |  |      | 2,838 |  | 9,675 

Revenue from Seitel Solutions

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

NOTE E-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
amortized principally on the income forecast method subject to a straight-line amortization period of four years, applied on a quarterly basis at the individual survey level.



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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 received through a non-monetary 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 readily determinable. See Note D  Revenue Recognition  Revenue from Non-Monetary Exchanges for discussion of the process used to determine fair value.

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 $281,000 and $484,000 for the three months ended September 30, 2009 and 2008, respectively, and $1,156,000 and $1,425,000 for the nine months ended September 30, 2009 and 2008, respectively.

Data Library Amortization

The Company amortizes its seismic data library investment using the greater of the amortization that would result from the application of the income forecast method subject to a minimum amortization rate or a straight-line basis over the
useful life of the data. With respect to each survey in the data library, the straight-line policy is applied from the time such survey is available for licensing to customers on a non-exclusive basis, since some data in the library may not be
licensed until an exclusivity period (usually six months) has lapsed.

The Company applies the income forecast method by forecasting the
ultimate revenue expected to be derived from a particular data library component over the estimated useful life of each survey comprising part of such component. This forecast is made by the Company annually and reviewed quarterly. If, during any
such review, the Company determines that the ultimate revenue for a library component is expected to be significantly different than the original estimate of total revenue for such library component, the Company revises the amortization rate
attributable to future revenue from each survey in such component. The lowest amortization rate the Company applies using the income forecast method is 70%. Additionally, in connection with the forecast reviews and updates, the Company evaluates the
recoverability of its seismic data library investment, and if required, records an impairment charge with respect to such investment. See discussion on Seismic Data Library Impairment below.

The actual aggregate rate of amortization depends on the specific seismic surveys licensed and selected by the Companys customers during the period
and the amount of straight-line amortization recorded. The income forecast amortization rates can vary by component and, as of October 1, 2009, range from 70% to 74% with a weighted average of 70%. For those seismic surveys which have been
fully amortized, no amortization expense is required on revenue recorded.

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 amortization recorded for each survey 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 for such survey. This requirement is applied regardless of future-year revenue estimates for the library component of which the survey is a part and does not consider the existence of deferred revenue with respect to the library
component or to any survey.

Seismic Data Library Impairment

The Company evaluates its seismic data library investment by grouping individual surveys into components based on its operations and geological and geographical trends, resulting in the following data
library segments for



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purposes of evaluating impairments: (I) Gulf of Mexico offshore, comprised of the following components: (a) multi-component data, (b) ocean bottom cable data, (c) shelf data,
(d) deep water data, and (e) value-added products; (II) North America onshore, comprised of the following components: (a) Texas Gulf Coast, (b) Northern, Eastern and Western Texas, (c) Southern Louisiana/Mississippi,
(d) Northern 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.

As events or conditions require, the Company
evaluates the recoverability of its seismic data library investment. The Company evaluates its seismic data library investment for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. The
Company considers the level of sales performance in each component compared to projected sales, as well as industry conditions, among others, to be key factors in determining when its seismic data investment should be evaluated for impairment. In
evaluating sales performance of each component, the Company generally considers five consecutive quarters of actual performance below forecasted sales to be an indicator of potential impairment.

The impairment evaluation is based first on a comparison of the undiscounted future cash flows related to such component over its remaining estimated useful
life with the carrying value of such 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 between the library components carrying amount and the discounted future
value of the expected revenue stream is recorded as an impairment charge.

For purposes of evaluating potential impairment losses, the Company
estimates the future cash flows attributable to a library component by evaluating, among other factors, historical and recent revenue trends, oil and gas prospectivity in particular regions, general economic conditions affecting its customer base,
expected changes in technology and other factors that the Company deems relevant. 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 and fair value is highly subjective and inherently imprecise. Estimates can change materially from period to period
based on many factors, including those described in the preceding paragraph. Accordingly, if conditions change in the future, the Company may record impairment losses relative to its seismic data library investment, which could be material to any
particular reporting period.

The Company did not have any impairment charges during the nine months ended September 30, 2009 or 2008.

NOTE F-DEBT

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



|                                    |  |                   |         |                  |   |        
|----------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                    |  | September 30,2009 |         | December 31,2008
|                                    |  |                  
|9.75% Senior Notes                  |  | $                 | 400,000 |                  | $ | 400,000
|11.75% Senior Notes                 |  |                   | 2,000   |                  |   | 2,000  
|Revolving Credit Facility           |  |                   | -       |                  |   | -      
|Subsidiary revolving line of credit |  |                   | -       |                  |   | -      
|Note payable to former executive    |  |                   | 220     |                  |   | 256    
|                                    |  |                   |         |                  |   |        
|                                    |  |                   | 402,220 |                  |   | 402,256
|Plus: Premium on debt               |  |                   | 178     |                  |   | 247    
|                                    |  |                   |         |                  |   |        
|                                    |  | $                 | 402,398 |                  | $ | 402,503
|                                    |  |                   |         |                  |   |        

9.75% Senior Notes:On February 14, 2007, the Company issued in a private placement
$400.0 million aggregate principal amount of 9.75% Senior Notes. The proceeds from the 9.75% Senior Notes were used to partially fund the Merger and the related transactions. As required by their terms, the 9.75% Senior Notes were exchanged for
senior notes of like amounts and terms in a registered exchange offer in August 2007. The 9.75% Senior Notes mature on February 15, 2014. Interest is payable in cash, semi-annually in arrears on February 15 and August 15 of each year.
The 9.75% Senior Notes are unsecured and are guaranteed by substantially all of the Companys domestic subsidiaries on a senior basis. The 9.75% Senior Notes contain restrictive covenants which limit the Companys ability to, among other
things, incur additional indebtedness, pay dividends and complete mergers, acquisitions and sales of assets.



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From time to time on or before February 15, 2010, the Company may redeem up to 35% of the aggregate
principal amount of the 9.75% Senior Notes with the net proceeds of equity offerings at a redemption price equal to 109.75% of the principal amount, plus accrued and unpaid interest. Upon a change of control (as defined in the indenture governing
the 9.75% Senior Notes), each holder of the 9.75% Senior Notes will have the right to require the Company to offer to purchase all of such holders notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest.

11.75% Senior Notes:On July 2, 2004, the Company issued in a private placement $193.0 million aggregate principal amount of
11.75% Senior Notes. As required by their terms, the 11.75% Senior Notes were exchanged for senior notes of like amounts and terms in a registered exchange offer in February 2005. In connection with an excess cash flow offer in March 2005, $4.0
million aggregate principal amount of these notes was tendered and accepted. In connection with the Merger and related transactions, $187.0 million aggregate principal amount of these notes was tendered and accepted on February 14, 2007. The
fair value of these notes was higher than the face value on the date of the Merger; consequently, a premium has been reflected in the financial statements related to these notes. Interest on the remaining notes is payable semi-annually in arrears on
January 15 and July 15 of each year. The remaining $2.0 million of notes mature on July 15, 2011. The 11.75% Senior Notes are unsecured and are guaranteed by substantially all of the Companys U.S. subsidiaries on a senior basis.

As a result of the tender and consent offer, effective February 14, 2007, the 11.75% Senior Notes no longer contain any restrictive
covenants, other than the requirement to make excess cash flow offers. Subject to certain conditions, if at the end of each fiscal year the Company has excess cash flow (as defined in the indenture governing the 11.75% Senior Notes) in excess of
$5.0 million, the Company is required to use 50% of the excess cash flow to fund an offer to repurchase the 11.75% Senior Notes on a pro rata basis at 100% of its principal amount, plus accrued and unpaid interest. If the Company has less than $5.0
million in excess cash flow at the end of any fiscal year, such excess cash flow will be carried forward to succeeding years, and such repurchase offer is required to be made in the first year in which the cumulative excess cash flow for all years
in which there has not been an offer is at least $5.0 million. Such repurchase offer is required only if there is no event of default under the Companys revolving credit facilities prior to and after giving effect to the repurchase payment.
The Company was not required to make an excess cash flow offer for the year ended December 31, 2008. Upon a change of control (as defined in the indenture governing the 11.75% Senior Notes), each holder of the 11.75% Senior Notes will have the
right to require the Company to offer to purchase all of such holders notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest.

Revolving Credit Facility:On February 14, 2007, the Company entered into an amended and restated U.S. revolving credit facility with Wells Fargo Foothill, Inc., as lender, which provided for
the ability to borrow up to $25.0 million, subject to borrowing base limitations. The Company terminated the facility effective August 28, 2009 in advance of its stated maturity. There were no amounts outstanding under the credit facility at
the date of termination. In connection with the termination, the Company recorded approximately $128,000 of deferred financing costs in interest expense.

Subsidiary Revolving Line of Credit:Our wholly owned subsidiary, Olympic Seismic Ltd. (Olympic), has a revolving credit facility, which allows it to borrow up to $5.0 million
(Canadian) subject to an availability formula by way of prime-based loans or letters of credit. The interest rate applicable to borrowings is the banks prime rate plus 0.75% per annum. 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, but is not guaranteed by the Company or any of its other U.S. subsidiaries. Available borrowings under the facility are equivalent to a maximum of $5.0 million
(Canadian), subject to a requirement that such borrowings may not exceed 75% of good accounts receivable (as defined in the credit agreement) of Olympic, 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.

Note Payable to Former Executive:In
connection with the settlement of certain litigation, the Company entered into a note payable to a former executive with remaining payments of $6,000 per month until May 2013. The note is non-interest bearing and is guaranteed by Olympic.

NOTE G-FAIR VALUE MEASUREMENTS

Authoritative guidance on fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).



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The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. In measuring the fair value of the Companys assets and liabilities, market data or assumptions are used that the Company believes market participants would use in pricing an asset or liability, including assumptions about
risk when appropriate. As of September 30, 2009, the Companys assets that are measured at fair value on a recurring basis include the following (in thousands):



|                                                         |  |       |        |                                       |   |                                           |  |                             |     |  |   |  
|-------------------------------------------------------- |  | ----- | ------ | ------------------------------------- | - | ----------------------------------------- |  | --------------------------- | --- |  | - | -
|                                                         |  |       |        | Fair Value Measurements Using        
|                                                         |  | Total |        | QuotedPricesin ActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | UnobservableInputs(Level 3)
|                                                         |  |       |        |                                      
|Cash equivalents                                         |  | $     | 10,833 |                                       | $ | 10,833                                    |  | $                           | -   |  | $ | -
|Investment in equity securities                          |  |       | 2,030  |                                       |   | 2,030                                     |  |                             | -   |  |   | -
|Investment in stock options related to equity securities |  |       | 163    |                                       |   | -                                         |  |                             | 163 |  |   | -

Cash equivalents consist primarily of treasury bills and money market funds that invest in United
States government obligations with original maturities of three months or less. The original costs of these assets approximates fair value due to their short-term maturity.

Investment in marketable securities are available-for-sale equity securities with total unrealized gains of $2.2 million reflected in accumulated other comprehensive income (loss) at September 30,
2009.

Other Financial Instruments:



| |  |  | Debt  Based upon the rates available to the Company, the fair value of the 9.75% Senior Notes, the 11.75% Senior Notes and the note payable to a
former executive approximated $274.9 million as of September 30, 2009, compared to the book value of $402.4 million. The quoted market price of the 9.75% Senior Notes was $273.0 million at September 30, 2009.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Accounts Receivable and Accounts Payable  The fair values of accounts receivable and accounts payable approximated carrying value due to the
short-term maturity of these instruments.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE H-STATEMENT OF CASH FLOW INFORMATION

Cash and cash equivalents at September 30, 2009 and December 31, 2008 includes $113,000 of restricted cash related to collateral on a seismic
operations bond.

During the nine months ended September 30, 2009 and 2008, the Company had non-cash additions to its seismic data
library comprised of the following (in thousands):



|                                                                 |  |                                |        |   |      |   |        |  
|---------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                 |  | Nine Months EndedSeptember 30, |       
|                                                                 |  | 2009                           |        |   | 2008 |  
|                                                                 |  |                               
|Non-monetary exchanges related to resale licensing revenue       |  | $                              | 1,010  |   |      | $ | 8,682  |  
|Non-monetary exchanges from underwriting of new data acquisition |  |                                | (1,291 | ) |      |   | 9,681  |  
|Other non-monetary exchanges                                     |  |                                | -      |   |      |   | 24     |  
|Completion of data in progress from prior non-monetary exchanges |  |                                | 1,724  |   |      |   | 1,779  |  
|Less: Non-monetary exchanges for data in progress                |  |                                | -      |   |      |   | (2,600 | )
|                                                                 |  |                                |        |   |      |   |        |  
|Total non-cash additions to seismic data library                 |  | $                              | 1,443  |   |      | $ | 17,566 |  
|                                                                 |  |                                |        |   |      |   |        |  

During the nine months ended September 30, 2009, the Company reversed a non-monetary exchange
valued at $1.3 million that was originally entered into in 2008. The Company was notified that the client was unable to provide clear title to one of the seismic surveys included in the original contract resulting in the negative amount of
non-monetary exchanges from underwriting of new data acquisition in the 2009 period. This portion of non-cash underwriting was subsequently satisfied with a cash payment.



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Non-cash revenue consisted of the following for the nine months ended September 30, 2009 and 2008 (in
thousands):



|                                                                                                |  |                                |       |      |   |       
|----------------------------------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | - | ------
|                                                                                                |  | Nine Months EndedSeptember 30,
|                                                                                                |  | 2009                           |       | 2008
|                                                                                                |  |                               
|Acquisition revenue on underwriting from non-monetary exchange contracts                        |  | $                              | 2,838 |      | $ | 9,675 
|Licensing revenue from specific data licenses and selections on non-monetary exchange contracts |  |                                | 3,687 |      |   | 4,766 
|                                                                                                |  |                                |       |      |   |       
|Total non-cash revenue                                                                          |  | $                              | 6,525 |      |   | 14,441
|                                                                                                |  |                                |       |      |   |       

NOTE I-COMMITMENTS AND CONTINGENCIES

The Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business. In the opinion of management, 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. However, 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, 2009, the Company did not have any amounts accrued related to litigation and claims, as the Company believes it is not probable that any
amounts will be paid relative to such litigation and claims.

NOTE J-RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance
is contained in Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements and Disclosures. In February 2008, the FASB deferred the effective date for all non-financial assets and non-financial liabilities,
except those that are measured at fair value on a recurring basis. Effective January 1, 2009, the Company adopted ASC Topic 820 with respect to non-financial assets and liabilities measured on a non-recurring basis. The application of the fair
value framework to these fair value measurements did not have a material impact on the Companys consolidated financial statements. See Note G for disclosures about the Companys fair value measurements.

In April 2009, the FASB issued additional guidance related to ASC Topic 820 for estimating fair value, increasing the frequency of fair value disclosures
and providing for additional guidance in accounting for and presenting impairment losses on securities. The adoption of this guidance did not have a material impact on the Companys consolidated financial statements. See Note G for expanded
disclosures about the Companys investments and the fair value measurements used for the Companys financial instruments.

In May
2009, the FASB issued ASC Topic 855, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to
be issued. The adoption of Topic 855 did not have a material impact on the Companys consolidated financial statements.

In
June 2009, the FASB issued ASC Topic 105, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This topic instituted a major change in the way accounting standards are organized.
The accounting standards Codification became the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). As of September 30, 2009 only one level of authoritative GAAP exists,
other than guidance issued by the Securities and Exchange Commission. All other literature is non-authoritative. Topic 105 is effective for interim or annual financial periods ending after September 15, 2009. The Company adopted this statement
in the third quarter of 2009 and updated all existing GAAP references to the new codification.



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Accounting Pronouncements Issued But Not Yet Adopted

In August 2009, the FASB issued Accounting Standards Update (ASU) No. 200905, Fair Value Measurements and Disclosures (Topic
820)  Measuring Liabilities at Fair Value to provide guidance when estimating the fair value of a liability. When a quoted price in an active market for the identical liability is not available, fair value should be measured using
(a) the quoted price of an identical liability when traded as an asset; (b) quoted prices for similar liabilities or similar liabilities when traded as assets; or (c) another valuation technique consistent with the principles of ASC
Topic 820 such as an income approach or a market approach. If a restriction exists that prevents the transfer of the liability, a separate adjustment related to the restriction is not required when estimating fair value. The ASU will be
effective October 1, 2009 for the Company and is not expected to have a material impact on its consolidated financial statements.

In
October 2009, the FASB issued ASU 2009-13 on Topic 605, Revenue Recognition Multiple Deliverable Revenue Arrangements  a consensus of the FASB Emerging Issues Task Force. The ASU provides guidance on accounting for
products or services (deliverables) separately rather than as a combined unit utilizing a selling price hierarchy to determine the selling price of a deliverable. The selling price is based on vendor-specific evidence, third-party evidence or
estimated selling price. The Company will be required to apply the standard prospectively for future revenue arrangements entered into or materially modified on or after January 1, 2011; however, earlier application is permitted. The
Company does not currently expect the adoption of this new accounting update to have a material impact on its consolidated financial statements.

NOTE K-SUPPLEMENTAL GUARANTORS CONSOLIDATING CONDENSED FINANCIAL INFORMATION

The Companys payment obligations under the
9.75% Senior Notes are jointly and severally guaranteed by certain of its wholly-owned U.S. subsidiaries (Guarantor Subsidiaries). All subsidiaries of the Company that do not guaranty the 9.75% Senior Notes are referred to as
Non-Guarantor Subsidiaries.

The consolidating condensed financial statements are presented below and should be read in connection with the
Condensed Consolidated Interim Financial Statements of the Company as of September 30, 2009. Separate financial statements of the Guarantor Subsidiaries are not presented because (i) the Guarantor Subsidiaries are wholly-owned and have
fully and unconditionally guaranteed the 9.75% Senior Notes on a joint and several basis, and (ii) the Companys management has determined such separate financial statements are not material to investors.

The following consolidating condensed financial information presents: the consolidating condensed balance sheets as of September 30, 2009 and
December 31, 2008, and the consolidating condensed statements of operations and statements of cash flows for the nine months ended September 30, 2009 and 2008 of (a) the Company; (b) the Guarantor Subsidiaries; (c) the
Non-Guarantor Subsidiaries; (d) elimination entries; and (e) the Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis.

Investments in subsidiaries are accounted for on the equity method. The principal elimination entries eliminate investments in subsidiaries, intercompany balances, intercompany transactions and
intercompany sales.



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CONSOLIDATING CONDENSED BALANCE SHEET

As of September 30, 2009

(In thousands)



|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|-------------------------------------------- |  | ------ | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | -------- | - |  | - | -------- | -
|                                             |  | Parent |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |         
|                                             |  |        |          |   |                      
|ASSETS                                       |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Cash and cash equivalents                    |  | $      | -        |   |                       | $ | 10,384   |                           |  | $ | 582                       |   |  | $                 | -        |   |  | $ | 10,966   |  
|Receivables                                  |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Trade, net                                   |  |        | -        |   |                       |   | 19,874   |                           |  |   | 8,411                     |   |  |                   | -        |   |  |   | 28,285   |  
|Notes and other, net                         |  |        | -        |   |                       |   | 397      |                           |  |   | 36                        |   |  |                   | -        |   |  |   | 433      |  
|Intercompany receivables (payables)          |  |        | 141,596  |   |                       |   | (141,214 | )                         |  |   | (382                      | ) |  |                   | -        |   |  |   | -        |  
|Investment in subsidiaries                   |  |        | 300,944  |   |                       |   | 438,196  |                           |  |   | 717                       |   |  |                   | (739,857 | ) |  |   | -        |  
|Net seismic data library                     |  |        | -        |   |                       |   | 169,709  |                           |  |   | 59,518                    |   |  |                   | -        |   |  |   | 229,227  |  
|Net property and equipment                   |  |        | -        |   |                       |   | 2,348    |                           |  |   | 4,886                     |   |  |                   | -        |   |  |   | 7,234    |  
|Investment in marketable securities          |  |        | -        |   |                       |   | 2,193    |                           |  |   | -                         |   |  |                   | -        |   |  |   | 2,193    |  
|Prepaid expenses, deferred charges and other |  |        | 8,968    |   |                       |   | 5,543    |                           |  |   | 512                       |   |  |                   | -        |   |  |   | 15,023   |  
|Intangible assets, net                       |  |        | 900      |   |                       |   | 23,690   |                           |  |   | 14,971                    |   |  |                   | -        |   |  |   | 39,561   |  
|Goodwill                                     |  |        | -        |   |                       |   | 107,688  |                           |  |   | 93,291                    |   |  |                   | -        |   |  |   | 200,979  |  
|Deferred income taxes                        |  |        | -        |   |                       |   | 210      |                           |  |   | -                         |   |  |                   | -        |   |  |   | 210      |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                             |  |        |          |   |                      
|TOTAL ASSETS                                 |  | $      | 452,408  |   |                       | $ | 639,018  |                           |  | $ | 182,542                   |   |  | $                 | (739,857 | ) |  | $ | 534,111  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                             |  |        |          |   |                      
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Accounts payable and accrued liabilities     |  | $      | 5,178    |   |                       | $ | 5,727    |                           |  | $ | 11,474                    |   |  | $                 | -        |   |  | $ | 22,379   |  
|Income taxes payable                         |  |        | 112      |   |                       |   | 24       |                           |  |   | -                         |   |  |                   | -        |   |  |   | 136      |  
|Senior Notes                                 |  |        | 402,178  |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 402,178  |  
|Notes payable                                |  |        | 220      |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 220      |  
|Obligations under capital leases             |  |        | -        |   |                       |   | -        |                           |  |   | 3,324                     |   |  |                   | -        |   |  |   | 3,324    |  
|Deferred revenue                             |  |        | -        |   |                       |   | 31,584   |                           |  |   | 8,705                     |   |  |                   | -        |   |  |   | 40,289   |  
|Deferred income taxes                        |  |        | -        |   |                       |   | -        |                           |  |   | 5,485                     |   |  |                   | -        |   |  |   | 5,485    |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES                            |  |        | 407,688  |   |                       |   | 37,335   |                           |  |   | 28,988                    |   |  |                   | -        |   |  |   | 474,011  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                             |  |        |          |   |                      
|STOCKHOLDERS EQUITY                         |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Common stock                                 |  |        | -        |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | -        |  
|Additional paid-in capital                   |  |        | 274,407  |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 274,407  |  
|Parent investment                            |  |        | -        |   |                       |   | 764,755  |                           |  |   | 172,069                   |   |  |                   | (936,824 | ) |  |   | -        |  
|Retained deficit                             |  |        | (229,687 | ) |                       |   | (165,265 | )                         |  |   | (31,702                   | ) |  |                   | 196,967  |   |  |   | (229,687 | )
|Accumulated other comprehensive income       |  |        | -        |   |                       |   | 2,193    |                           |  |   | 13,187                    |   |  |                   | -        |   |  |   | 15,380   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                   |  |        | 44,720   |   |                       |   | 601,683  |                           |  |   | 153,554                   |   |  |                   | (739,857 | ) |  |   | 60,100   |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                             |  |        |          |   |                      
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY   |  | $      | 452,408  |   |                       | $ | 639,018  |                           |  | $ | 182,542                   |   |  | $                 | (739,857 | ) |  | $ | 534,111  |  
|                                             |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  



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CONSOLIDATING CONDENSED BALANCE SHEET

As of December 31, 2008

(In thousands)



|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|--------------------------------------------- |  | ------ | -------- | - | --------------------- | - | -------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | -------- | - |  | - | -------- | -
|                                              |  | Parent |          |   | GuarantorSubsidiaries |   |          | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |         
|                                              |  |        |          |   |                      
|ASSETS                                        |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Cash and cash equivalents                     |  | $      | -        |   |                       | $ | 33,034   |                           |  | $ | 9,644                     |   |  | $                 | -        |   |  | $ | 42,678   |  
|Receivables                                   |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Trade, net                                    |  |        | -        |   |                       |   | 42,693   |                           |  |   | 18,086                    |   |  |                   | -        |   |  |   | 60,779   |  
|Notes and other, net                          |  |        | -        |   |                       |   | 152      |                           |  |   | -                         |   |  |                   | -        |   |  |   | 152      |  
|Intercompany receivables (payables)           |  |        | 162,182  |   |                       |   | (147,700 | )                         |  |   | (14,482                   | ) |  |                   | -        |   |  |   | -        |  
|Investment in subsidiaries                    |  |        | 364,424  |   |                       |   | 446,600  |                           |  |   | 1,243                     |   |  |                   | (812,267 | ) |  |   | -        |  
|Net seismic data library                      |  |        | -        |   |                       |   | 210,895  |                           |  |   | 68,362                    |   |  |                   | -        |   |  |   | 279,257  |  
|Net property and equipment                    |  |        | -        |   |                       |   | 3,342    |                           |  |   | 5,002                     |   |  |                   | -        |   |  |   | 8,344    |  
|Investment in marketable securities           |  |        | -        |   |                       |   | 1,317    |                           |  |   | -                         |   |  |                   | -        |   |  |   | 1,317    |  
|Prepaid expenses, deferred charges and other  |  |        | 10,365   |   |                       |   | 9,149    |                           |  |   | 519                       |   |  |                   | -        |   |  |   | 20,033   |  
|Intangible assets, net                        |  |        | 900      |   |                       |   | 26,098   |                           |  |   | 14,861                    |   |  |                   | -        |   |  |   | 41,859   |  
|Goodwill                                      |  |        | -        |   |                       |   | 107,688  |                           |  |   | 81,499                    |   |  |                   | -        |   |  |   | 189,187  |  
|Deferred income taxes                         |  |        | -        |   |                       |   | 210      |                           |  |   | 9                         |   |  |                   | -        |   |  |   | 219      |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                              |  |        |          |   |                      
|TOTAL ASSETS                                  |  | $      | 537,871  |   |                       | $ | 733,478  |                           |  | $ | 184,743                   |   |  | $                 | (812,267 | ) |  | $ | 643,825  |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                              |  |        |          |   |                      
|LIABILITIES AND STOCKHOLDERS EQUITY          |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Accounts payable and accrued liabilities      |  | $      | 15,003   |   |                       | $ | 13,168   |                           |  | $ | 18,119                    |   |  | $                 | -        |   |  | $ | 46,290   |  
|Income taxes payable                          |  |        | 255      |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 255      |  
|Senior Notes                                  |  |        | 402,247  |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 402,247  |  
|Notes payable                                 |  |        | 256      |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 256      |  
|Obligations under capital leases              |  |        | -        |   |                       |   | -        |                           |  |   | 2,996                     |   |  |                   | -        |   |  |   | 2,996    |  
|Deferred revenue                              |  |        | -        |   |                       |   | 56,597   |                           |  |   | 11,130                    |   |  |                   | -        |   |  |   | 67,727   |  
|Deferred income taxes                         |  |        | -        |   |                       |   | -        |                           |  |   | 8,269                     |   |  |                   | -        |   |  |   | 8,269    |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL LIABILITIES                             |  |        | 417,761  |   |                       |   | 69,765   |                           |  |   | 40,514                    |   |  |                   | -        |   |  |   | 528,040  |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                              |  |        |          |   |                      
|STOCKHOLDERS EQUITY                          |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|Common stock                                  |  |        | -        |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | -        |  
|Additional paid-in capital                    |  |        | 271,297  |   |                       |   | -        |                           |  |   | -                         |   |  |                   | -        |   |  |   | 271,297  |  
|Parent investment                             |  |        | -        |   |                       |   | 764,753  |                           |  |   | 172,217                   |   |  |                   | (936,970 | ) |  |   | -        |  
|Retained deficit                              |  |        | (151,187 | ) |                       |   | (102,357 | )                         |  |   | (22,346                   | ) |  |                   | 124,703  |   |  |   | (151,187 | )
|Accumulated other comprehensive income (loss) |  |        | -        |   |                       |   | 1,317    |                           |  |   | (5,642                    | ) |  |                   | -        |   |  |   | (4,325   | )
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|TOTAL STOCKHOLDERS EQUITY                    |  |        | 120,110  |   |                       |   | 663,713  |                           |  |   | 144,229                   |   |  |                   | (812,267 | ) |  |   | 115,785  |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  
|                                              |  |        |          |   |                      
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY    |  | $      | 537,871  |   |                       | $ | 733,478  |                           |  | $ | 184,743                   |   |  | $                 | (812,267 | ) |  | $ | 643,825  |  
|                                              |  |        |          |   |                       |   |          |                           |  |   |                           |   |  |                   |          |   |  |   |          |  



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CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2009

(In thousands)



|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|----------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | ------ | - |  | - | ------- | -
|                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |       
|                                                            |  |        |         |   |                      
|REVENUE                                                     |  | $      | -       |   |                       | $ | 56,783  |                           |  | $ | 21,938                    |   |  | $                 | (2,049 | ) |  | $ | 76,672  |  
|                                                            |  |        |         |   |                      
|EXPENSES:                                                   |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Depreciation and amortization                               |  |        | -       |   |                       |   | 80,711  |                           |  |   | 27,971                    |   |  |                   | -      |   |  |   | 108,682 |  
|Cost of sales                                               |  |        | -       |   |                       |   | 232     |                           |  |   | 6                         |   |  |                   | -      |   |  |   | 238     |  
|Selling, general and administrative                         |  |        | 3,200   |   |                       |   | 11,325  |                           |  |   | 7,583                     |   |  |                   | (2,049 | ) |  |   | 20,059  |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        | 3,200   |   |                       |   | 92,268  |                           |  |   | 35,560                    |   |  |                   | (2,049 | ) |  |   | 128,979 |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|LOSS FROM OPERATIONS                                        |  |        | (3,200  | ) |                       |   | (35,485 | )                         |  |   | (13,622                   | ) |  |                   | -      |   |  |   | (52,307 | )
|                                                            |  |        |         |   |                      
|Interest expense, net                                       |  |        | (12,392 | ) |                       |   | (18,011 | )                         |  |   | (128                      | ) |  |                   | -      |   |  |   | (30,531 | )
|Foreign currency exchange gains                             |  |        | -       |   |                       |   | -       |                           |  |   | 873                       |   |  |                   | -      |   |  |   | 873     |  
|Other income (loss)                                         |  |        | -       |   |                       |   | 93      |                           |  |   | (19                       | ) |  |                   | -      |   |  |   | 74      |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|Loss before income taxes and equity in loss of subsidiaries |  |        | (15,592 | ) |                       |   | (53,403 | )                         |  |   | (12,896                   | ) |  |                   | -      |   |  |   | (81,891 | )
|Provision (benefit) for income taxes                        |  |        | -       |   |                       |   | 149     |                           |  |   | (3,540                    | ) |  |                   | -      |   |  |   | (3,391  | )
|Equity in loss of subsidiaries                              |  |        | (62,908 | ) |                       |   | (9,356  | )                         |  |   | -                         |   |  |                   | 72,264 |   |  |   | -       |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|NET LOSS                                                    |  | $      | (78,500 | ) |                       | $ | (62,908 | )                         |  | $ | (9,356                    | ) |  | $                 | 72,264 |   |  | $ | (78,500 | )
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  



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CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2008

(In thousands)



|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|----------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - |  | ----------------- | ------ | - |  | - | ------- | -
|                                                            |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   |  | ConsolidatedTotal |       
|                                                            |  |        |         |   |                      
|REVENUE                                                     |  | $      | -       |   |                       | $ | 92,950  |                           |  | $ | 49,128                    |   |  | $                 | (3,886 | ) |  | $ | 138,192 |  
|                                                            |  |        |         |   |                      
|EXPENSES:                                                   |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|Depreciation and amortization                               |  |        | 23      |   |                       |   | 86,214  |                           |  |   | 46,469                    |   |  |                   | -      |   |  |   | 132,706 |  
|Impairment of intangible asset                              |  |        | -       |   |                       |   | -       |                           |  |   | 225                       |   |  |                   | -      |   |  |   | 225     |  
|Cost of sales                                               |  |        | -       |   |                       |   | 312     |                           |  |   | 39                        |   |  |                   | -      |   |  |   | 351     |  
|Selling, general and administrative                         |  |        | 4,947   |   |                       |   | 15,321  |                           |  |   | 13,716                    |   |  |                   | (3,886 | ) |  |   | 30,098  |  
|Merger                                                      |  |        | -       |   |                       |   | 357     |                           |  |   | -                         |   |  |                   | -      |   |  |   | 357     |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        | 4,970   |   |                       |   | 102,204 |                           |  |   | 60,449                    |   |  |                   | (3,886 | ) |  |   | 163,737 |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|LOSS FROM OPERATIONS                                        |  |        | (4,970  | ) |                       |   | (9,254  | )                         |  |   | (11,321                   | ) |  |                   | -      |   |  |   | (25,545 | )
|                                                            |  |        |         |   |                      
|Interest expense, net                                       |  |        | (13,618 | ) |                       |   | (15,708 | )                         |  |   | (715                      | ) |  |                   | -      |   |  |   | (30,041 | )
|Foreign currency exchange losses                            |  |        | -       |   |                       |   | (123    | )                         |  |   | (1,319                    | ) |  |                   | -      |   |  |   | (1,442  | )
|Other Income                                                |  |        | -       |   |                       |   | 15      |                           |  |   | 24                        |   |  |                   | -      |   |  |   | 39      |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|Loss before income taxes and equity in loss of subsidiaries |  |        | (18,588 | ) |                       |   | (25,070 | )                         |  |   | (13,331                   | ) |  |                   | -      |   |  |   | (56,989 | )
|Provision (benefit) for income taxes                        |  |        | -       |   |                       |   | 181     |                           |  |   | (1,143                    | ) |  |                   | -      |   |  |   | (962    | )
|Equity in loss of subsidiaries                              |  |        | (37,439 | ) |                       |   | (12,188 | )                         |  |   | -                         |   |  |                   | 49,627 |   |  |   | -       |  
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  
|                                                            |  |        |         |   |                      
|NET LOSS                                                    |  | $      | (56,027 | ) |                       | $ | (37,439 | )                         |  | $ | (12,188                   | ) |  | $                 | 49,627 |   |  | $ | (56,027 | )
|                                                            |  |        |         |   |                       |   |         |                           |  |   |                           |   |  |                   |        |   |  |   |         |  



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CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2009

(In thousands)



|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|----------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - | ----------------- | - | - |  | - | ------- | -
|                                                      |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   | ConsolidatedTotal |  
|Cash flows from operating activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) operating activities   |  | $      | (38,457 | ) |                       | $ | 39,648  |                           |  | $ | 18,824                    |   |                   | $ | - |  | $ | 20,015  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Cash flows from investing activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash invested in seismic data                         |  |        | -       |   |                       |   | (38,329 | )                         |  |   | (12,058                   | ) |                   |   | - |  |   | (50,387 | )
|Cash paid to acquire property and equipment and other |  |        | -       |   |                       |   | (236    | )                         |  |   | (69                       | ) |                   |   | - |  |   | (305    | )
|Advances to Seitel Holdings, Inc.                     |  |        | -       |   |                       |   | (9      | )                         |  |   | -                         |   |                   |   | - |  |   | (9      | )
|Cash transferred upon sale of subsidiary              |  |        | -       |   |                       |   | -       |                           |  |   | (22                       | ) |                   |   | - |  |   | (22     | )
|Return of capital from subsidiary                     |  |        | -       |   |                       |   | 500     |                           |  |   | (500                      | ) |                   |   | - |  |   | -       |  
|Cash from disposal of property and equipment          |  |        | -       |   |                       |   | 14      |                           |  |   | -                         |   |                   |   | - |  |   | 14      |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash used in investing activities                 |  |        | -       |   |                       |   | (38,060 | )                         |  |   | (12,649                   | ) |                   |   | - |  |   | (50,709 | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Cash flows from financing activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Principal payments on notes payable                   |  |        | (36     | ) |                       |   | -       |                           |  |   | -                         |   |                   |   | - |  |   | (36     | )
|Principal payments on capital lease obligations       |  |        | -       |   |                       |   | -       |                           |  |   | (90                       | ) |                   |   | - |  |   | (90     | )
|Borrowings on line of credit                          |  |        | -       |   |                       |   | -       |                           |  |   | 196                       |   |                   |   | - |  |   | 196     |  
|Payments on line of credit                            |  |        | -       |   |                       |   | -       |                           |  |   | (196                      | ) |                   |   | - |  |   | (196    | )
|Intercompany transfers                                |  |        | 38,493  |   |                       |   | (24,238 | )                         |  |   | (14,255                   | ) |                   |   | - |  |   | -       |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) financing activities   |  |        | 38,457  |   |                       |   | (24,238 | )                         |  |   | (14,345                   | ) |                   |   | - |  |   | (126    | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Effect of exchange rate changes                       |  |        | -       |   |                       |   | -       |                           |  |   | (892                      | ) |                   |   | - |  |   | (892    | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net decrease in cash and cash equivalents             |  |        | -       |   |                       |   | (22,650 | )                         |  |   | (9,062                    | ) |                   |   | - |  |   | (31,712 | )
|Cash and cash equivalents at beginning of period      |  |        | -       |   |                       |   | 33,034  |                           |  |   | 9,644                     |   |                   |   | - |  |   | 42,678  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash and cash equivalents at end of period            |  | $      | -       |   |                       | $ | 10,384  |                           |  | $ | 582                       |   |                   | $ | - |  | $ | 10,966  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  



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CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2008

(In thousands)



|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|----------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------------- | - | ----------------- | - | - |  | - | ------- | -
|                                                      |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | ConsolidatingEliminations |   | ConsolidatedTotal |  
|Cash flows from operating activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) operating activities   |  | $      | (40,194 | ) |                       | $ | 66,289  |                           |  | $ | 33,003                    |   |                   | $ | - |  | $ | 59,098  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Cash flows from investing activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash invested in seismic data                         |  |        | -       |   |                       |   | (41,077 | )                         |  |   | (24,407                   | ) |                   |   | - |  |   | (65,484 | )
|Cash paid to acquire property and equipment and other |  |        | -       |   |                       |   | (419    | )                         |  |   | (491                      | ) |                   |   | - |  |   | (910    | )
|Advances to Seitel Holdings, Inc.                     |  |        | -       |   |                       |   | (135    | )                         |  |   | -                         |   |                   |   | - |  |   | (135    | )
|Increase in restricted cash                           |  |        | -       |   |                       |   | (2      | )                         |  |   | -                         |   |                   |   | - |  |   | (2      | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash used in investing activities                 |  |        | -       |   |                       |   | (41,633 | )                         |  |   | (24,898                   | ) |                   |   | - |  |   | (66,531 | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Cash flows from financing activities:                 |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Principal payments on notes payable                   |  |        | (32     | ) |                       |   | -       |                           |  |   | -                         |   |                   |   | - |  |   | (32     | )
|Principal payments on capital lease obligations       |  |        | -       |   |                       |   | -       |                           |  |   | (98                       | ) |                   |   | - |  |   | (98     | )
|Borrowings on line of credit                          |  |        | -       |   |                       |   | -       |                           |  |   | 286                       |   |                   |   | - |  |   | 286     |  
|Payments on line of credit                            |  |        | -       |   |                       |   | -       |                           |  |   | (286                      | ) |                   |   | - |  |   | (286    | )
|Payments on notes receivable                          |  |        | -       |   |                       |   | 54      |                           |  |   | -                         |   |                   |   | - |  |   | 54      |  
|Intercompany transfers                                |  |        | 40,226  |   |                       |   | (35,261 | )                         |  |   | (4,965                    | ) |                   |   | - |  |   | -       |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net cash provided by (used in) financing activities   |  |        | 40,194  |   |                       |   | (35,207 | )                         |  |   | (5,063                    | ) |                   |   | - |  |   | (76     | )
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|                                                      |  |        |         |   |                      
|Effect of exchange rate changes                       |  |        | -       |   |                       |   | -       |                           |  |   | 1,004                     |   |                   |   | - |  |   | 1,004   |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents  |  |        | -       |   |                       |   | (10,551 | )                         |  |   | 4,046                     |   |                   |   | - |  |   | (6,505  | )
|Cash and cash equivalents at beginning of period      |  |        | -       |   |                       |   | 36,847  |                           |  |   | 6,486                     |   |                   |   | - |  |   | 43,333  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  
|Cash and cash equivalents at end of period            |  | $      | -       |   |                       | $ | 26,296  |                           |  | $ | 10,532                    |   |                   | $ | - |  | $ | 36,828  |  
|                                                      |  |        |         |   |                       |   |         |                           |  |   |                           |   |                   |   |   |  |   |         |  



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

The following discussion should be read in conjunction with our consolidated financial statements and the related notes to the financial statements
included elsewhere in this document.

CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q (this Quarterly Report) contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Statements contained in this report about our future outlook, prospects, strategies and plans, and about
industry conditions, demand for seismic services and the future economic life of our seismic data are forward-looking. All statements 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, will, would, should, estimates and similar expressions are intended to identify forward-looking statements.
Forward-looking statements represent our present belief and are based on our current expectations and assumptions with respect to future events. While we believe our expectations and assumptions are reasonable, they involve risks and uncertainties
beyond our control that could cause the actual results or outcome to differ materially from the expected results or outcome reflected in our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Quarterly Report may not occur. Such risks and uncertainties include, without limitation, actual customer demand for our 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, conditions in the capital markets during the periods covered by the forward-looking statements, the effect of the current global financial crisis on our business, our ability to obtain financing
on satisfactory terms if internally generated funds are insufficient to fund our capital needs, the impact on our financial condition as a result of our debt and our debt service, our ability to obtain and maintain normal terms with our vendors and
service providers, our ability to maintain contracts that are critical to our operations, changes in the oil and gas industry or the economy generally, changes in the exploration budgets of our customers, and our ability to comply with the terms of
our final judgment of permanent injunction by the Securities and Exchange Commission (SEC). The foregoing and other risk factors are identified in this Quarterly Report and our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 filed with the SEC.

The forward-looking statements contained in this report speak only as of the date hereof. Except
as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All forward-looking statements
attributable to Seitel, Inc. or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed
with the SEC and in our future periodic reports filed with the SEC.

Overview

General

Our products and services
are used by oil and gas companies to assist in oil and gas exploration and development and management of hydrocarbon reserves. We own an extensive library of onshore and offshore seismic data that we offer for license to oil and gas companies. Oil
and gas companies use seismic data in oil and gas exploration and development efforts to increase the probability of drilling success. We believe that our library of onshore seismic data is one of the largest available for licensing in the United
States and Canada. We generate revenue primarily by licensing data from our data library and from new data creation products, which are substantially underwritten or paid for by clients. By participating in underwritten, nonexclusive surveys or
purchasing licenses to existing data, oil and gas companies can obtain access to surveys at reduced costs as compared to acquiring seismic data on a proprietary basis.



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Our primary areas of focus are onshore United States and Canada and, to a lesser extent, offshore U.S. Gulf
of Mexico. Exploration activity in North America began to decline in late 2008 as a result of the economic downturn and weak commodity prices. North American drilling activity bottomed in May 2009 and was down 62% from its peak in August 2008. North
American drilling activity increased 34% from its low in May to the end of September 2009. However, the average year-to-date rig count is 44% lower than the same period of 2008.

We have experienced a reduction in cash resales during the first nine months of 2009 as oil and gas companies continued to reduce their exploration and development spending due to weak commodity prices,
economic uncertainty and tightened credit markets. Although we are unable to predict the duration of this decline, we currently do not anticipate any significant recovery in North America drilling activity before 2010; therefore, we continue to
expect cash resales for the full year of 2009 to be lower than our 2008 results. In order to address the current industry challenges, we have reduced our planned 2009 net cash capital expenditures by more than 50% from the level we had in 2008. In
addition, we have implemented measures to reduce our cash operating expenses by approximately one-third in 2009, including workforce reductions implemented in January and April of 2009.

The Merger

On February 14, 2007, Seitel Acquisition Corp. (Acquisition
Corp.) was merged with and into Seitel, Inc. (Seitel), pursuant to a merger agreement among Seitel, Acquisition Corp. and Seitel Holdings, Inc. (Holdings) dated October 31, 2006 (the Merger). Pursuant
to the merger agreement, Seitel continued as the surviving corporation and became a privately owned corporation and wholly-owned subsidiary of Holdings.

Principal Factors Affecting Our Business

Our business is dependent upon a variety
of factors, many of which are beyond our control. The following are those that we consider to be principal factors affecting our business.

Demand for Seismic Data: Demand for our products and services is cyclical due to the nature of the oil and gas industry. In particular, demand for our seismic data services depends upon exploration, production, development and
field management spending by oil and gas companies and, in the case of new data creation, the willingness of these companies to forgo ownership in the seismic data. Capital expenditures by oil and gas companies depend upon several factors, including
actual and forecasted oil and natural gas commodity prices, prospect availability and the companies own short-term and strategic plans. These capital expenditures may also be affected by worldwide economic or industry-wide conditions. Demand
for our seismic data is more likely to be influenced by natural gas prices rather than crude oil prices due to the geographic location of our seismic data. The economic downturn has resulted in lower commodity prices and reduced exploration capital
expenditures, which, in turn, has caused demand for seismic data to decline. However, we are unable to predict the severity or duration of this decrease in demand.

Availability of Capital for Our Customers: Many of our customers consist of independent oil and gas companies and private prospect-generating companies that rely primarily on private capital
markets to fund their exploration, production, development and field management activities. The reduction in cash flows being experienced by our customers resulting from the declines in commodity prices, along with the reduced availability of credit
and increased costs of borrowing due to the tightening of the credit markets, could have a material impact on the ability of such companies to obtain funding necessary to purchase our seismic data.

Merger and Acquisition Activity:Merger and acquisition activity continues to occur within our client base. This activity could have a
negative impact on seismic companies that operate in markets with a limited number of participating clients. However, we believe that, over time, this activity could have a positive impact on our business, as it should generate re-licensing fees,
result in increased vitality in the trading of mineral interests and result in the creation of new independent customers through the rationalization of staff within those companies affected by this activity.

North America Drilling Activity: Although there has been a sharp reduction in drilling activity in North America in 2009, we believe the
production of natural gas has not fallen significantly and continues to exceed current demand. Until this imbalance is corrected, we expect drilling activity in North America to remain low, reducing the demand for our seismic data.



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Government Regulation: Our operations are subject to a variety of federal, provincial, state,
foreign and local laws and regulations, including environmental and health and safety laws. We invest financial and managerial resources to comply with these laws and related permit requirements. Modification of existing laws or regulations and the
adoption of new laws or regulations limiting or increasing exploration or production activities by oil and gas companies may have a material effect on our business operations.

Non-GAAP Key Performance Measures

Management considers certain
performance measures in evaluating and managing our financial condition and operating performance at various times and from time to time. Some of these performance measures are non-GAAP financial measures. Generally, a non-GAAP financial measure is
a numerical measure of a companys performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance
with United States generally accepted accounting principles, or GAAP. These non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. These non-GAAP measures are intended to supplement our presentation of our
financial results that are prepared in accordance with GAAP.

The following are the key performance measures considered by management.

Cash Resales:Cash resales represent new contracts for data licenses from our library, payable in cash. We believe this measure is
important in gauging new business activity. We expect cash resales to generally follow a consistent trend over several quarters, while considering our normal seasonality. Volatility in this trend over several consecutive quarters could indicate
changing market conditions. The following is a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, total revenue (in thousands):



|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                           |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                           |  | 2009                            |        |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|                                           |  |                                 |        |  
|Cash resales                               |  | $                               | 12,293 |   |                                | $ | 37,297  |      |  | $ | 29,553  |   |  | $ | 89,802  |  
|Other revenue components:                  |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Acquisition revenue                        |  |                                 | 6,615  |   |                                |   | 11,598  |      |  |   | 32,990  |   |  |   | 42,547  |  
|Non-monetary exchanges                     |  |                                 | 834    |   |                                |   | 2,202   |      |  |   | 1,010   |   |  |   | 6,659   |  
|Revenue deferred                           |  |                                 | (7,833 | ) |                                |   | (18,064 | )    |  |   | (15,932 | ) |  |   | (47,081 | )
|Recognition of revenue previously deferred |  |                                 | 6,717  |   |                                |   | 11,566  |      |  |   | 25,711  |   |  |   | 41,129  |  
|Solutions and other                        |  |                                 | 878    |   |                                |   | 1,492   |      |  |   | 3,340   |   |  |   | 5,136   |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total revenue, as reported                 |  | $                               | 19,504 |   |                                | $ | 46,091  |      |  | $ | 76,672  |   |  | $ | 138,192 |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  



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Cash EBITDA:Cash EBITDA represents cash generated from licensing data from our data library net of
recurring operating expenses. We believe this measure is helpful in determining the level of cash from operations we have available for debt service and funding of capital expenditures (net of the portion funded or underwritten by our customers).
Cash EBITDA includes cash resales plus all other cash revenues other than from data acquisitions, less cost of goods sold and cash selling, general and administrative expenses (excluding non-recurring corporate expenses such as merger and
acquisition transaction costs and severance costs). The following is a quantitative reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure, operating loss (in thousands):



|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |          |  
|-------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|                                                                     |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                     |  | 2009                            |         |   | 2008                           |   |         | 2009 |  |   | 2008     |  
|                                                                     |  |                                 |         |  
|Cash EBITDA                                                          |  | $                               | 8,519   |   |                                | $ | 30,529  |      |  | $ | 17,059   |   |  | $ | 69,632   |  
|Add (subtract) other revenue components not included in cash EBITDA: |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |          |  
|Acquisition revenue                                                  |  |                                 | 6,615   |   |                                |   | 11,598  |      |  |   | 32,990   |   |  |   | 42,547   |  
|Non-monetary exchanges                                               |  |                                 | 834     |   |                                |   | 2,202   |      |  |   | 1,010    |   |  |   | 6,659    |  
|Revenue deferred                                                     |  |                                 | (7,833  | ) |                                |   | (18,064 | )    |  |   | (15,932  | ) |  |   | (47,081  | )
|Recognition of revenue previously deferred                           |  |                                 | 6,717   |   |                                |   | 11,566  |      |  |   | 25,711   |   |  |   | 41,129   |  
|Recognition of Solutions revenue previously deferred                 |  |                                 | -       |   |                                |   | -       |      |  |   | -        |   |  |   | 44       |  
|Less:                                                                |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |          |  
|Depreciation and amortization                                        |  |                                 | (33,436 | ) |                                |   | (43,592 | )    |  |   | (108,682 | ) |  |   | (132,706 | )
|Impairment of intangible asset                                       |  |                                 | -       |   |                                |   | (225    | )    |  |   | -        |   |  |   | (225     | )
|Merger expenses                                                      |  |                                 | -       |   |                                |   | -       |      |  |   | -        |   |  |   | (357     | )
|Merger and acquisition transaction costs                             |  |                                 | -       |   |                                |   | -       |      |  |   | -        |   |  |   | (5       | )
|One-time costs associated with cost reduction measures               |  |                                 | 43      |   |                                |   | -       |      |  |   | (1,168   | ) |  |   | -        |  
|Non-cash operating expenses                                          |  |                                 | (897    | ) |                                |   | (1,662  | )    |  |   | (3,295   | ) |  |   | (5,182   | )
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |          |  
|Operating loss, as reported                                          |  | $                               | (19,438 | ) |                                | $ | (7,648  | )    |  | $ | (52,307  | ) |  | $ | (25,545  | )
|                                                                     |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |          |  

Growth of Our Seismic Data Library: We regularly add to our seismic data library through four
different methods: (1) recording new data; (2) buying ownership of existing data for cash; (3) obtaining ownership of existing data sets through non-monetary exchanges; and (4) creating new value-added products from existing data
within our library. For the period from January 1, 2009 to September 30, 2009, we completed the addition of approximately 710 square miles of seismic data to our library. As of September 30, 2009, we had approximately 320 square miles
of seismic data in progress.

Critical Accounting Policies

We operate in one business segment, which is made up of seismic data acquisition, seismic data licensing, seismic data processing and seismic reproduction
services. There have not been any changes in our critical accounting policies since December 31, 2008.



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Results of Operations

Revenue

The following table summarizes the components of our revenue for the three
and nine months ended September 30, 2009 and 2008 (in thousands):



|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------ |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                           |  | Three Months EndedSeptember 30, |        |   | Nine Months EndedSeptember 30, |  
|                                           |  | 2009                            |        |   | 2008                           |   |         | 2009 |  |   | 2008    |  
|Acquisition revenue:                       |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Cash underwriting                          |  | $                               | 6,250  |   |                                | $ | 7,545   |      |  | $ | 30,152  |   |  | $ | 32,872  |  
|Underwriting from non-monetary exchanges   |  |                                 | 365    |   |                                |   | 4,053   |      |  |   | 2,838   |   |  |   | 9,675   |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total acquisition revenue                  |  |                                 | 6,615  |   |                                |   | 11,598  |      |  |   | 32,990  |   |  |   | 42,547  |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Resale licensing revenue:                  |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Cash resales                               |  |                                 | 12,293 |   |                                |   | 37,297  |      |  |   | 29,553  |   |  |   | 89,802  |  
|Non-monetary exchanges                     |  |                                 | 834    |   |                                |   | 2,202   |      |  |   | 1,010   |   |  |   | 6,659   |  
|Revenue deferred                           |  |                                 | (7,833 | ) |                                |   | (18,064 | )    |  |   | (15,932 | ) |  |   | (47,081 | )
|Recognition of revenue previously deferred |  |                                 | 6,717  |   |                                |   | 11,566  |      |  |   | 25,711  |   |  |   | 41,129  |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total resale licensing revenue             |  |                                 | 12,011 |   |                                |   | 33,001  |      |  |   | 40,342  |   |  |   | 90,509  |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                           |  |                                 |        |  
|Total seismic revenue                      |  |                                 | 18,626 |   |                                |   | 44,599  |      |  |   | 73,332  |   |  |   | 133,056 |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|                                           |  |                                 |        |  
|Solutions and other                        |  |                                 | 878    |   |                                |   | 1,492   |      |  |   | 3,340   |   |  |   | 5,136   |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total revenue                              |  | $                               | 19,504 |   |                                | $ | 46,091  |      |  | $ | 76,672  |   |  | $ | 138,192 |  
|                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  

Total revenue for the third quarter of 2009 was $19.5 million, a decrease of $26.6 million, or 58%,
from total revenue of $46.1 million for the third quarter of 2008. This decline was primarily driven by a $21.0 million, or 64%, decline in total resale licensing revenue from our library. Resale revenue in the third quarter of 2009 continued to be
impacted by weak natural gas prices and the slowdown in drilling activity in North America with oil and gas companies continuing to curtail their exploration and development spending as compared to the third quarter of 2008. Cash resales for the
third quarter of 2009 were $12.3 million, down 67% from the third quarter of 2008 as clients general concerns about the economic environment and liquidity delayed spending on seismic data. Cash resales for the third quarter of 2009 were lower
in both the U.S. and Canada, falling 66% and 69%, respectively. Revenue deferred was lower in the third quarter of 2009 as a result of fewer library cards purchased. Recognition of previously deferred revenue, primarily selections, was lower between
the quarters as customers made fewer selections on open library cards. Acquisition revenue was $6.6 million for the third quarter of 2009, a $5.0 million, or 43%, decrease from the third quarter of 2008. The decrease was primarily due to a reduction
in Canadas acquisition revenue between periods as we did not shoot any summer programs in Canada during 2009 due to our planned reduction in capital programs as a result of the current industry conditions. Solutions and other revenue was $0.9
million in the third quarter of 2009 compared to $1.5 million in the third quarter of 2008. Solutions revenue is primarily driven by the level of seismic revenue; therefore, the $0.6 million reduction was primarily due to the lower level of total
seismic revenue.

Total revenue for the first nine months of 2009 was $76.7 million as compared to $138.2 million in total revenue for the
first nine months of 2008. This $61.5 million, or 45%, decline was due to lower total resale licensing revenue and a decrease in acquisition revenue. Total resale licensing revenue was $40.3 million in the first nine months of 2009 compared to $90.5
million in the first nine months of 2008, reflecting the lower activity levels by our clients. Cash resales for the first nine months of 2009 were $29.6 million, down 67% from the first nine months of 2008. For the first nine months of 2009, cash
resales were lower in both the U.S. and Canada, declining 66% and 69%, respectively, from the first nine months of 2008. Revenue deferred was lower in the first nine months of 2009 as a result of fewer library cards purchased. Recognition of
previously deferred revenue, primarily selections, was lower between the nine-month periods as customers made fewer selections on open library cards. Acquisition revenue was $33.0 million for the first nine months of 2009, a $9.6 million, or 22%,
decrease from the first nine months of 2008. The decrease was primarily attributable to lower acquisition revenue in Canada in the 2009 period as a result of a very strong seismic data shooting season in 2008. Solutions and other revenue decreased
$1.8 million between the nine-month periods due to the lower level of total seismic revenue.

At September 30, 2009, we had a deferred
revenue balance of $40.3 million, compared to the December 31, 2008 balance of $67.7 million. The deferred revenue balance was related to (i) data licensing contracts on which selection of specific data had not yet occurred,
(ii) deferred revenue on data acquisition projects and (iii) contracts



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in which the data products are not yet available or the revenue recognition criteria has not yet been met. The deferred revenue will be recognized when selection of specific data is made by the
customer, upon expiration of the data selection period specified in the data licensing contracts, as work progresses on the data acquisition contracts, as the data products become available or as all of the revenue recognition criteria are met.

Depreciation and Amortization

Depreciation and amortization was comprised of the following (in thousands):



|                                       |  |                                 |        |                                |   |        |  |      |         |  |   |        
|-------------------------------------- |  | ------------------------------- | ------ | ------------------------------ | - | ------ |  | ---- | ------- |  | - | -------
|                                       |  | Three Months EndedSeptember 30, |        | Nine Months EndedSeptember 30,
|                                       |  | 2009                            |        | 2008                           |   | 2009   |  | 2008
|                                       |  |                                 |        |                               
|Amortization of seismic data:          |  |                                 |        |                                |   |        |  |      |         |  |   |        
|Income forecast                        |  | $                               | 11,328 |                                | $ | 28,068 |  | $    | 45,508  |  | $ | 82,824 
|Straight-line                          |  |                                 | 20,143 |                                |   | 13,502 |  |      | 57,414  |  |   | 43,740 
|                                       |  |                                 |        |                                |   |        |  |      |         |  |   |        
|Total amortization of seismic data     |  |                                 | 31,471 |                                |   | 41,570 |  |      | 102,922 |  |   | 126,564
|Depreciation of property and equipment |  |                                 | 566    |                                |   | 592    |  |      | 1,682   |  |   | 1,776  
|Amortization of acquired intangibles   |  |                                 | 1,399  |                                |   | 1,430  |  |      | 4,078   |  |   | 4,366  
|                                       |  |                                 |        |                                |   |        |  |      |         |  |   |        
|Total                                  |  | $                               | 33,436 |                                | $ | 43,592 |  | $    | 108,682 |  | $ | 132,706
|                                       |  |                                 |        |                                |   |        |  |      |         |  |   |        

Total seismic data library amortization amounted to $31.5 million in the third quarter of 2009
compared to $41.6 million in the third quarter of 2008 and $102.9 million for the first nine months of 2009 compared to $126.6 million for the first nine months of 2008. The amount of seismic data library amortization fluctuates based on the level
and location of specific seismic surveys licensed (including licensing resulting from new data acquisitions) and selected by our customers during any period as well as the amount of straight-line amortization required under our accounting policy.

Seismic data amortization as of percentage of total seismic revenue is summarized as follows:



|                           |  |                                 |   |  |                                |   |  |       |   |  |      |  
|-------------------------- |  | ------------------------------- | - |  | ------------------------------ | - |  | ----- | - |  | ---- | -
|                           |  | Three Months EndedSeptember 30, |   |  | Nine Months EndedSeptember 30, |  
|Components of Amortization |  | 2009                            |   |  | 2008                           |   |  | 2009  |   |  | 2008 |  
|                           |  |                                 |   | 
|Income forecast            |  | 60.8                            | % |  | 62.9                           | % |  | 62.1  | % |  | 62.2 | %
|Straight-line              |  | 108.1                           | % |  | 30.3                           | % |  | 78.3  | % |  | 32.9 | %
|                           |  |                                 |   |  |                                |   |  |       |   |  |      |  
|Total                      |  | 168.9                           | % |  | 93.2                           | % |  | 140.4 | % |  | 95.1 | %
|                           |  |                                 |   |  |                                |   |  |       |   |  |      |  

The percentage of income forecast amortization to total seismic revenue decreased slightly between
the three and nine month periods of 2009 and 2008 due to the mix of data being licensed. In all periods, we had resale revenue recognized which was from data whose costs were fully amortized. In the third quarter and first nine months of 2009, 21%
and 20%, respectively, of resale revenue recognized was from data whose costs were fully amortized as compared to 14% and 17%, in the third quarter and first nine months of 2008, respectively. Straight-line amortization represents the expense
required under our accounting policy to ensure our data value is fully amortized within four years of when the data becomes available for sale. The amount of straight-line amortization increased $6.6 million between the 2008 and 2009 third quarter
periods and $13.7 million in the first nine months of 2009 compared to the first nine months of 2008 due to lower revenues in the 2009 periods and the distribution of revenue among the various seismic surveys, resulting in more straight-line
amortization required in 2009.



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Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses were $5.4 million in the third quarter of 2009 compared to $9.9 million in the third
quarter of 2008 and $20.1 million in the first nine months of 2009 compared to $30.1 million in the first nine months of 2008. SG&A expenses are made up of the following cash and non-cash expenses (in thousands):



|                              |  |                                 |       |                                |   |       |  |      |        |  |   |       
|----------------------------- |  | ------------------------------- | ----- | ------------------------------ | - | ----- |  | ---- | ------ |  | - | ------
|                              |  | Three Months EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                              |  | 2009                            |       | 2008                           |   | 2009  |  | 2008
|                              |  |                                 |       |                               
|Cash SG&A expenses            |  | $                               | 4,478 |                                | $ | 8,188 |  | $    | 16,764 |  | $ | 24,916
|Non-cash compensation expense |  |                                 | 831   |                                |   | 1,594 |  |      | 3,110  |  |   | 4,972 
|Non-cash rent expense         |  |                                 | 66    |                                |   | 68    |  |      | 185    |  |   | 210   
|                              |  |                                 |       |                                |   |       |  |      |        |  |   |       
|Total                         |  | $                               | 5,375 |                                | $ | 9,850 |  | $    | 20,059 |  | $ | 30,098
|                              |  |                                 |       |                                |   |       |  |      |        |  |   |       

The decrease in cash SG&A expenses of $3.7 million from the third quarter of 2008 to the third
quarter of 2009 was primarily due to (1) a decrease of $1.1 million in personnel costs resulting from workforce reductions and reductions in base salaries and employee benefits implemented in 2009, (2) a decrease of $1.0 million due to no
performance incentive accruals in 2009 because of the current economic environment and lower cash resales, (3) a decrease of $0.8 million in sales commissions as a result of lower revenues and (4) a decrease of $0.8 million in various
other expenses primarily resulting from cost cutting measures implemented in 2009.

The decrease in cash SG&A expenses of $8.2 million
from the first nine months of 2008 to the first nine months of 2009 was primarily due to (1) a decrease of $3.3 million in personnel costs resulting from workforce reductions and reductions in base salaries and employee benefits implemented in
2009, (2) a decrease of $2.7 million due to no performance incentive accruals in 2009 because of the current economic environment and lower cash resales, (3) a decrease of $1.6 million in sales commissions as a result of lower revenues and
(4) a decrease of $2.0 million in various other expenses resulting primarily from cost cutting measures implemented in 2009. These decreases were partially offset by $1.2 million of one-time costs incurred to implement cost reduction measures
and additional reserves for bad debt in 2009 of $0.2 million.

The decrease in non-cash compensation expense between 2009 and 2008 was
primarily due to our using graded vesting to amortize the compensation expense related to our stock option issuances, thus recognizing more expense in the earlier periods and gradually reducing in later years. There have been no additional option
issuances since the second quarter of 2008. In addition, the first nine months of 2008 included a charge of $0.6 million related to the issuance of fully vested restricted stock units to certain key employees.

Merger Expenses

During the nine
months ended September 30, 2008, we recorded $357,000 related to change in control payments resulting from the Merger.

Income
Taxes

Tax benefit was $1.2 million for both the third quarter of 2009 and 2008. The benefit in the third quarter of 2009 was comprised
of (i) a benefit of $0.8 million related to our Canadian operations, (ii) a benefit of $0.3 million related to certain research and development tax credits received in Canada and (iii) a benefit of $0.1 million primarily related to a
reduction in interest on uncertain tax positions following the expiration of the statute of limitations. The 2008 third quarter benefit was comprised of (i) a benefit of $0.9 million related to our Canadian operations, (ii) a benefit of
$0.8 million related to certain research and development tax credits received in Canada, (iii) an expense of $0.3 million related to interest on uncertain tax positions and (iv) $0.2 million of state tax expense in the U.S. The Federal tax
benefit in both the third quarter of 2009 and 2008 resulting from our U.S. operations was offset by a valuation allowance because it was more likely than not that the deferred tax asset would not be realized.

Tax benefit was $3.4 million and $1.0 million for the nine months ended September 30, 2009 and 2008, respectively. The benefit for the first nine
months of 2009 was comprised of (i) a benefit of $3.3 million related to our Canadian operations, (ii) a benefit of $0.3 million related to certain research and development tax credits



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received in Canada and (iii) $0.2 million of state tax expense in the U.S. The benefit for the first nine months of 2008 was comprised of (i) a benefit of $3.7 million related to our
Canadian operations, (ii) a benefit of $0.8 million related to certain research and development tax credits received in Canada, (iii) an expense of $2.7 million related to an additional reserve, penalties and interest on uncertain tax
positions, (iv) $0.7 million of state tax expense in the U.S. and (v) $0.2 million of Canadian withholding taxes. The Federal tax benefit in both the first nine months of 2009 and 2008 resulting from our U.S. operations was offset by a
valuation allowance because it was more likely than not that the deferred tax asset would not be realized.

Liquidity and
Capital Resources

As of September 30, 2009, we had $11.0 million in consolidated cash, cash equivalents and short-term investments,
including $113,000 of restricted cash. We currently anticipate satisfying our operating and capital needs for the remainder of 2009 and for 2010, as well as our debt service obligations in 2010, from our available cash and cash flows from operating
activities. Depending on demand for our services and cash flows from operations, we may need to obtain additional capital to meet our debt service obligations and operational needs in 2010. Effective August 28, 2009, we terminated our U.S.
revolving credit facility. We are currently seeking to replace this facility with another source of financing. However, we cannot assure you that any financing will be available to us in the future on acceptable terms or at all. As described below,
our Canadian credit facility continues to be in place. For further discussion on our liquidity see - Anticipated Liquidity.

Canadian Credit Facility: Our wholly owned subsidiary, Olympic Seismic Ltd. (Olympic), has a revolving credit facility which allows it to borrow up to $5.0 million (Canadian), subject to an availability formula, by way of
prime-based loans or letters of credit. Available borrowings under the facility are equivalent to a maximum of $5.0 million (Canadian), subject to a requirement that such borrowings may not exceed 75% of good accounts receivable (as defined in the
agreement) of Olympic, less prior-ranking claims, if any, relating to inventory or accounts. As of September 30, 2009, no amounts were outstanding on this revolving line of credit and $1.3 million (Canadian) was available on the line of credit.

9.75% Senior Notes: On February 14, 2007, we issued in a private placement $400.0 million aggregate principal amount of our 9.75%
Senior Notes. The proceeds from the 9.75% Senior Notes were used to partially fund the Merger and the related transactions. Interest on the 9.75% Senior Notes is payable in cash, semi-annually in arrears on February 15 and August 15.

11.75% Senior Notes: On July 2, 2004, we issued in a private placement $193.0 million aggregate principal amount of our 11.75%
Senior Notes. As of September 30, 2009, $2.0 million of the 11.75% Senior Notes remain outstanding. Interest on the 11.75% Senior Notes is payable in cash, semi-annually in arrears on January 15 and July 15.

Contractual Obligations: As of September 30, 2009, we had outstanding debt and lease obligations, with aggregate contractual cash obligations
summarized as follows (in thousands):



|                                   |  |       |         |                        |   |           |  |           |         |                    |   |         |  |   |      
|---------------------------------- |  | ----- | ------- | ---------------------- | - | --------- |  | --------- | ------- | ------------------ | - | ------- |  | - | -----
|                                   |  |       |         | Payments due by period
|Contractual cash obligations       |  | Total |         | Remainderof 2009       |   | 2010-2012 |  | 2013-2014 |         | 2015 andThereafter
|Debt obligations(1)(2)             |  | $     | 578,234 |                        | $ | 18        |  | $         | 119,686 |                    | $ | 458,530 |  | $ | -    
|Capital lease obligations(2)       |  |       | 4,913   |                        |   | 86        |  |           | 1,062   |                    |   | 764     |  |   | 3,001
|Operating lease obligations        |  |       | 3,658   |                        |   | 298       |  |           | 3,088   |                    |   | 272     |  |   | -    
|                                   |  |       |         |                        |   |           |  |           |         |                    |   |         |  |   |      
|Total contractual cash obligations |  | $     | 586,805 |                        | $ | 402       |  | $         | 123,836 |                    | $ | 459,566 |  | $ | 3,001
|                                   |  |       |         |                        |   |           |  |           |         |                    |   |         |  |   |      



|(1) | Debt obligations include the face amount of our 9.75% Senior Notes totaling $400.0 million and the 11.75% Senior Notes totaling $2.0 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts include interest related to debt and capital lease obligations.
|--- | -----------------------------------------------------------------------

Cash Flows from Operating Activities:Cash flows provided by operating activities were $20.0 million and $59.1 million for the nine months ended September 30, 2009 and 2008, respectively.
Operating cash flows for 2009 decreased from 2008 primarily due to decreased collections from our cash resales in the 2009 period as a result of the slowdown in activity.



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Cash Flows from Investing Activities: Cash flows used in investing
activities were $50.7 million and $66.5 million for the nine months ended September 30, 2009 and 2008, respectively. Cash expenditures for seismic data were $50.4 million and $65.5 million for the nine months ended September 30, 2009 and
2008, respectively. The decrease in cash invested in seismic data for 2009 compared to 2008 was primarily due to a decrease in cash paid for new data acquisition projects in both the U.S. and Canada and a reduction in payments on cash
purchases.

Cash Flows from Financing Activities: Cash flows used in financing activities were $0.1 million for both the
nine months ended September 30, 2009 and 2008.

Anticipated Liquidity: Our ability to cover our operating and capital
expenses, make required payments of interest on our 9.75% and 11.75% Senior Notes and incur additional indebtedness, will depend primarily on our ability to generate substantial operating cash flows. Over the next 12 months, we anticipate obtaining
the funds necessary to pay our operating, capital and other expenses and principal and interest on our senior notes and our other indebtedness from our operating cash flows and cash and cash equivalents on hand. Our ability to satisfy our payment
obligations depends substantially on our future operating and financial performance, which necessarily will be affected by, and subject to, industry, market, economic and other factors. To the extent our operating cash flows and cash on hand are not
sufficient to cover our anticipated expenditures, we could seek to obtain additional financing. We are currently seeking to replace our U.S. credit facility with another source of financing. However, there can be no assurance that we will be able to
accomplish any such financing on satisfactory terms or at all. If necessary, we could choose to reduce our spending on capital projects and operating expenses to ensure we operate within the cash flow generated from our operations. We will not be
able to predict or control many of these factors, such as economic conditions in the markets where we operate and competitive pressures.

Deferred Taxes

As of September 30, 2009, we had a net deferred tax liability of $5.5 million attributable to our
Canadian operations and a $210,000 deferred tax asset attributable to U.S. state deferred taxes. In the U.S., we had a deferred tax asset of $82.3 million, all of which was fully offset by a valuation allowance. The recognition of the U.S. deferred
tax asset will not occur until such time that it is more likely than not that some portion or all of the deferred tax asset will be realized. As of September 30, 2009, it was more likely than not that all of the U.S. deferred tax asset will not
be realized.

Off-Balance Sheet Transactions

Other than operating leases, we do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to
have a material current or future effect on our financial condition, changes in financial condition, revenue or expense, results of operations, liquidity, capital expenditures or capital resources.



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Capital Expenditures

During the nine months ended September 30, 2009, capital expenditures for seismic data and other property and equipment amounted to $44.9 million. Our capital expenditures for the remainder of 2009
are presently estimated to be $12.8 million. The first nine months of 2009 actual and 2009 estimated remaining capital expenditures are comprised of the following (in thousands):



|                                            |  |                                    |        |   |                              |   |        |                       |  |   |        |  
|------------------------------------------- |  | ---------------------------------- | ------ | - | ---------------------------- | - | ------ | --------------------- |  | - | ------ | -
|                                            |  | Nine MonthsEndedSeptember 30, 2009 |        |   | Estimate forRemainderof 2009 |   |        | TotalEstimatefor 2009 | 
|                                            |  |                                    |       
|New data acquisition                        |  | $                                  | 41,523 |   |                              | $ | 10,677 |                       |  | $ | 52,200 |  
|Cash purchases of seismic data and other    |  |                                    | 1,636  |   |                              |   | 964    |                       |  |   | 2,600  |  
|Non-monetary exchanges                      |  |                                    | 1,443  |   |                              |   | 957    |                       |  |   | 2,400  |  
|Property and equipment and other            |  |                                    | 308    |   |                              |   | 192    |                       |  |   | 500    |  
|                                            |  |                                    |        |   |                              |   |        |                       |  |   |        |  
|Total capital expenditures                  |  |                                    | 44,910 |   |                              |   | 12,790 |                       |  |   | 57,700 |  
|Less: Non-monetary exchanges                |  |                                    | (1,443 | ) |                              |   | (957   | )                     |  |   | (2,400 | )
|Changes in working capital                  |  |                                    | 7,225  |   |                              |   | -      |                       |  |   | 7,225  |  
|                                            |  |                                    |        |   |                              |   |        |                       |  |   |        |  
|Cash investment per statement of cash flows |  | $                                  | 50,692 |   |                              | $ | 11,833 |                       |  | $ | 62,525 |  
|                                            |  |                                    |        |   |                              |   |        |                       |  |   |        |  

Capital expenditures funded from operating cash flow are as follows (in thousands):



|                                                     |  |                                    |         |   |                              |   |        |                       |  |   |         |  
|---------------------------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------- | - | ------ | --------------------- |  | - | ------- | -
|                                                     |  | Nine MonthsEndedSeptember 30, 2009 |         |   | Estimate forRemainderof 2009 |   |        | TotalEstimatefor 2009 | 
|                                                     |  |                                    |        
|Total capital expenditures                           |  | $                                  | 44,910  |   |                              | $ | 12,790 |                       |  | $ | 57,700  |  
|Less: Non-cash additions                             |  |                                    | (1,443  | ) |                              |   | (957   | )                     |  |   | (2,400  | )
|Cash underwriting                                    |  |                                    | (30,152 | ) |                              |   | (5,948 | )                     |  |   | (36,100 | )
|                                                     |  |                                    |         |   |                              |   |        |                       |  |   |         |  
|Capital expenditures funded from operating cash flow |  | $                                  | 13,315  |   |                              | $ | 5,885  |                       |  | $ | 19,200  |  
|                                                     |  |                                    |         |   |                              |   |        |                       |  |   |         |  

As of November 12, 2009, we had capital expenditure commitments related to data acquisition
projects of approximately $17.8 million, of which we have obtained approximately $12.4 million of cash underwriting.



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

We are exposed to market risk, including adverse changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

We may enter into various financial instruments, such as interest rate
swaps or interest rate lock agreements, to manage the impact of changes in interest rates. As of September 30, 2009, we did not have any open interest rate swap or interest rate lock agreements. Therefore, our exposure to changes in interest
rates primarily results from our short-term and long-term debt with both fixed and floating interest rates.

Foreign Currency Exchange Rate
Risk

Our Canadian subsidiaries conduct business in the Canadian dollar and are 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. Currently, we do not have any open forward exchange contracts.

We have not had any significant changes in our market risk exposures during the quarter ended September 30, 2009.



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

a)
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management carried out an
evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our President and Chief Executive Officer along with our Chief Financial Officer concluded that the
Companys disclosure controls and procedures as of September 30, 2009 were effective in ensuring that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.

b) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2009 that have
materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



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PART II - OTHER INFORMATION



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

See Part I,
Item 1, Note I to Consolidated Financial Statements, which is incorporated herein by reference.



|Item 1A. | RISK FACTORS
|-------- | ------------

Part 1,
Item 1A, Risk Factors, of our Annual Report on Form 10-K for fiscal year ended December 31, 2008 (the 2008 Form 10-K) includes a detailed discussion of our risk factors. The information presented below updates, and
should be read in conjunction with, the risk factors and information disclosed in our 2008 Form 10-K. The risks described in this report and in our 2008 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known
to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and future results.

We may require additional funding, and our failure to raise additional capital could adversely affect our ability to meet our debt service obligations and could harm our business.

Effective August 28, 2009, we terminated our loan agreement with Wells Fargo Foothill, Inc. prior to its stated maturity. Under this agreement, we had
the ability to borrow up to $25.0 million. As a result of the termination of this loan agreement, we no longer have a credit facility available to us in the U.S. As of September 30, 2009, we had $11.0 million of cash and cash equivalents and
expect to satisfy our operating and capital needs for the remainder of 2009 and for 2010 from our available cash and cash flows from operating activities. We have semi-annual interest payments on our 9.75% Senior Notes due on February 15, 2010
and August 15, 2010 and on our 11.75% Senior Notes due on January 15, 2010 and July 15, 2010. Depending on demand for our services and cash flow from operations, we may need to obtain additional capital to meet our debt service
obligations and operational needs. We cannot assure you that any financing will be available to us in the future on acceptable terms or at all. If we cannot raise required funds on acceptable terms, we may not be able to, among other things,
(i) maintain our general and administrative expenses at current levels; (ii) meet our debt service obligations; or (iii) respond to competitive pressures or unanticipated capital requirements.

Item 2, 3., 4. and 5.Not applicable.



|Item 6. | EXHIBITS
|------- | --------



|       |  |                                                                                                                                                                                            
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|3.1    |  | Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on
July 25, 2007).
|       | 
|3.2    |  | Bylaws of Seitel, Inc. (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on July 25,
2007).                     
|       | 
|31.1*  |  | Certification of Robert D. Monson pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                    
|       | 
|31.2*  |  | Certification of Marcia H. Kendrick pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                  
|       | 
|32.1** |  | Certification of Robert D. Monson pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                        
|       | 
|32.2** |  | Certification of Marcia H. Kendrick pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                      



|* | Filed herewith.
|- | ---------------

|** | Furnished, not filed, pursuant to 601(b)(32) of Regulation S-K.
|-- | ---------------------------------------------------------------



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SIGNATURES

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



|                         |  |  |  |                                      
|------------------------ |  |  |  | -------------------------------------
|                         |  |  |  | SEITEL, INC.                         
|                         |  | 
|Dated: November 16, 2009 |  |  |  | /S/    ROBERT D.
MONSON              
|                         |  |  |  | Robert D. Monson                     
|                         |  |  |  | Chief Executive Officer and President
|                         |  | 
|Dated: November 16, 2009 |  |  |  | /S/    MARCIA H.
KENDRICK            
|                         |  |  |  | Marcia H. Kendrick                   
|                         |  |  |  | Chief Financial Officer              



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EXHIBIT

INDEX



|        |  |                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Title                                                                                                                                                                                      
|        | 
|3.1     |  | Certificate of Incorporation of the Company (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on July 25,
2007).
|        | 
|3.2     |  | Bylaws of Seitel, Inc. (incorporated by reference from Exhibit 3.2 to the Registration Statement on Form S-4, No. 333-144844, as filed with the SEC on July 25,
2007).                     
|        | 
|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                                      
|        | 
|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                                      
|        | 
|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                                      
|        | 
|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                                      



|* | Filed herewith.
|- | ---------------

|** | Furnished, not filed, pursuant to 601(b)(32) of Regulation S-K.
|-- | ---------------------------------------------------------------



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