---

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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|[ X ]                          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
|------------------------------ |  | ----------------------------------------------------------------------------
|                               |  |                                                                             
|                               |  |                                                                             
|                               |  | For the quarterly period ended September 30, 2002                           
|                               |  |                                                                             
|                               |  |                                                                             
|                               |  | OR                                                                          
|                               |  |                                                                             
|                               |  |                                                                             
|[]                             |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
|                               |  | ACT OF 1934                                                                 
|                              
|                              
|Commission File Number 0-14488

|                                                   
|---------------------------------------------------
|SEITEL, INC.                                       
|(Exact name of registrant as specified in charter) 
|                                                   
|                                                   
|Delaware                                           
|(State or other jurisdiction of                    
|incorporation or organization)                     
|                                                   
|                                                   
|10811 S. Westview Circle, Bldg. C, Ste. 100        
|Houston, Texas                                     
|(Address of principal executive offices)           
|                                                   
|                                                   
|Registrant's telephone number, including area code:
|                                                   







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

As of November 12, 2002, there were 25,375,683 shares of the Company's common stock, par value $.01 per share outstanding.



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INDEX





PART I.
FINANCIAL INFORMATION
PageItem 1.Financial StatementsConsolidated Balance Sheetsas ofSeptember 30, 2002 (Unaudited) and December 31, 2001
3Consolidated Statements of Income(Unaudited) for theThree Months Ended September 30, 2002 and 2001 (Restated)
4Consolidated Statements of Income(Unaudited) for theNine Months Ended September 30, 2002 and 2001 (Restated)
5Consolidated Statements of Comprehensive Income(Unaudited) for theThree and Nine Months Ended September 30, 2002 and 2001 (Restated)
6Consolidated Statements of Stockholders' Equity(Unaudited)for the Nine Months Ended September 30, 2002
7Consolidated Statements of Cash Flows(Unaudited) for theNine Months Ended September 30, 2002 and 2001 (Restated)
8Notes to Consolidated Interim Financial Statements(Unaudited)
9Item 2.Management's Discussion and Analysis of FinancialCondition and Results of Operations
27Item 3.Quantitative and Qualitative Disclosuresabout Market Risk
39Item 4.Controls and Procedures
40PART II.
OTHER INFORMATION
40Signatures and Certifications
43




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PART I - FINANCIAL INFORMATION



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



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

|                                           |                                                       | (Unaudited)                                            |                                     |         |     |              |        
|------------------------------------------ | ----------------------------------------------------- | ------------------------------------------------------ | ----------------------------------- | ------- | --- | ------------ | -------
|                                           |                                                       | September 30,                                          |                                     |         |     | December 31, |        
|                                           |                                                       | 2002                                                   |                                     |         |     | 2001         |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|ASSETS                                     |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           | Cash and equivalents                                  | $                                                      | 24,981                              |         |     | $            | 25,223 
|                                           | Receivables                                           |                                                        |                                     |         |     |              |        
|                                           |                                                       | Trade, net of allowance                                |                                     | 36,439  |     |              |        
|                                           |                                                       | Notes and other                                        |                                     | 430     |     |              |        
|                                           | Net seismic data library                              |                                                        | 404,495                             |         |     |              | 455,845
|                                           | Net other property and equipment                      |                                                        | 21,407                              |         |     |              | 11,927 
|                                           | Oil and gas operations held for sale                  |                                                        | 3,421                               |         |     |              | 93,956 
|                                           | Investment in marketable securities                   |                                                        | 7                                   |         |     |              | 2,501  
|                                           | Deferred income taxes                                 |                                                        | 17,206                              |         |     |              | -      
|                                           | Prepaid expenses, deferred charges and other assets   |                                                        | 8,082                               |         |     |              | 11,712 
|                                           |                                                       |                                                        |                                     |         |     |              |        
|TOTAL ASSETS                               | $                                                     | 516,468                                                |                                     |         | $   | 661,469      |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           | Accounts payable and accrued liabilities              | $                                                      | 29,624                              |         |     | $            | 45,243 
|                                           | Income taxes payable                                  |                                                        | 1,534                               |         |     |              | 2,646  
|                                           | Oil and gas operations held for sale                  |                                                        | 367                                 |         |     |              | 3,962  
|                                           | Debt                                                  |                                                        |                                     |         |     |              |        
|                                           |                                                       | Senior notes                                           |                                     | 255,000 |     |              |        
|                                           |                                                       | Line of credit                                         |                                     | 35      |     |              |        
|                                           |                                                       | Term loans                                             |                                     | 9,182   |     |              |        
|                                           |                                                       | Financial guaranty                                     |                                     | 540     |     |              |        
|                                           | Obligations under capital leases                      |                                                        | 8,463                               |         |     |              | 2,656  
|                                           | Deferred income taxes                                 |                                                        | -                                   |         |     |              | 351    
|                                           | Deferred revenue                                      |                                                        | 57,398                              |         |     |              | 97,330 
|                                           |                                                       |                                                        |                                     |         |     |              |        
|TOTAL LIABILITIES                          |                                                       | 362,143                                                |                                     |         |     | 417,882      |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|CONTINGENCIES AND COMMITMENTS              |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|STOCKHOLDERS' EQUITY                       |                                                       |                                                        |                                     |         |     |              |        
|                                           | Preferred stock, par value $.01 per share; authorized |                                                        |                                     |         |     |              |        
|                                           |                                                       | 5,000,000 shares; none issued                          |                                     | -       |     |              |        
|                                           | Common stock, par value $.01 per share; authorized    |                                                        |                                     |         |     |              |        
|                                           |                                                       | 50,000,000 shares; issued and outstanding              |                                     |         |     |              |        
|                                           |                                                       | 25,811,601 and 25,810,603 at September 30, 2002        |                                     |         |     |              |        
|                                           |                                                       |                                                        | and December 31, 2001, respectively |         | 258 |              |        
|                                           | Additional paid-in capital                            |                                                        | 166,630                             |         |     |              | 166,456
|                                           | Retained earnings (deficit)                           |                                                        | (3,363                              | )       |     |              | 91,624 
|                                           | Treasury stock, 435,918 and 735,918 shares at cost at |                                                        |                                     |         |     |              |        
|                                           |                                                       | September 30, 2002 and December 31, 2001, respectively |                                     | (5,373  | )   |              |        
|                                           | Notes receivable from officers and employees          |                                                        | (2,222                              | )       |     |              | (3,776 
|                                           | Accumulated other comprehensive income (loss)         |                                                        | (1,605                              | )       |     |              | (1,903 
|                                           |                                                       |                                                        |                                     |         |     |              |        
|TOTAL STOCKHOLDERS' EQUITY                 |                                                       | 154,325                                                |                                     |         |     | 243,587      |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $                                                     | 516,468                                                |                                     |         | $   | 661,469      |        
|                                           |                                                       |                                                        |                                     |         |     |              |        
|                                           |                                                       |                                                        |                                     |         |     |              |        

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

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

|                                         |                                              |                                   | Three Months Ended September 30, |       
|---------------------------------------- | -------------------------------------------- | --------------------------------- | -------------------------------- | ------
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   | 2002                             |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|REVENUE (1)                              |                                              | $                                 | 50,604                           |       
|                                         |                                              |                                   |                                  |       
|EXPENSES:                                |                                              |                                   |                                  |       
|                                         | Depreciation and amortization                |                                   |                                  | 23,344
|                                         | Cost of sales                                |                                   |                                  | 444   
|                                         | Selling, general and administrative expenses |                                   |                                  | 14,873
|                                         | Special charges                              |                                   |                                  | 39    
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   | 38,700                           |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|INCOME FROM OPERATIONS                   |                                              |                                   | 11,904                           |       
|                                         |                                              |                                   |                                  |       
|Interest expense, net                    |                                              |                                   | (4,855                           | )     
|Loss on sale of marketable securities    |                                              |                                   | (250                             | )     
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|Income from continuing operations before |                                              |                                   |                                  |       
|                                         | provision for income taxes                   |                                   |                                  | 6,799 
|                                         |                                              |                                   |                                  |       
|Provision for income taxes               |                                              |                                   | 2,130                            |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|Income from continuing operations        |                                              |                                   | 4,669                            |       
|                                         |                                              |                                   |                                  |       
|Discontinued operations:                 |                                              |                                   |                                  |       
|                                         | Loss from operations (including loss from    |                                   |                                  |       
|                                         |                                              | from disposal of $1,225 in 2002)  |                                  |       
|                                         | Income tax benefit                           |                                   |                                  | -     
|                                         |                                              |                                   |                                  |       
|                                         | Loss from discontinued operations            |                                   |                                  | (1,490
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|NET INCOME (LOSS)                        |                                              | $                                 | 3,179                            |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|Net income (loss) per share:             |                                              |                                   |                                  |       
|                                         | Basic:                                       |                                   |                                  |       
|                                         |                                              | Income from continuing operations |                                  | $     
|                                         |                                              | Loss from discontinued operations |                                  |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              | Net income (loss)                 |                                  | $     
|                                         |                                              |                                   |                                  |       
|                                         | Diluted:                                     |                                   |                                  |       
|                                         |                                              | Income from continuing operations |                                  | $     
|                                         |                                              | Loss from discontinued operations |                                  |       
|                                         |                                              |                                   |                                  |       
|                                         |                                              | Net income (loss)                 |                                  | $     
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       
|Weighted average number of common and    |                                              |                                   |                                  |       
|                                         | common equivalent shares:                    |                                   |                                  |       
|                                         | Basic                                        |                                   |                                  | 25,376
|                                         |                                              |                                   |                                  |       
|                                         | Diluted                                      |                                   |                                  | 25,376
|                                         |                                              |                                   |                                  |       
|                                         |                                              |                                   |                                  |       



|(1) | Non-cash revenue and the percentage of total revenue for the three months ended September 30, 2002 and 2001 are $18,373,000 (36%) and $4,715,000 (19%), respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                      
|(2) | See Note F regarding restatement of financial statements.                                                                                                            



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

---

SEITEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)

|(In thousands, except per share amounts)                             |                                                               | Nine Months Ended September 30,          |        
|-------------------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------------------- | -------
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               | 2002                                     |        
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|REVENUE (1)                                                          | $                                                             | 120,219                                  |        
|                                                                     |                                                               |                                          |        
|EXPENSES:                                                            |                                                               |                                          |        
|                                                                     | Depreciation and amortization                                 |                                          | 61,505 
|                                                                     | Cost of sales                                                 |                                          | 674    
|                                                                     | Selling, general and administrative expenses                  |                                          | 40,819 
|                                                                     | Impairment of seismic data library                            |                                          | 25,696 
|                                                                     | Special charges                                               |                                          | 8,826  
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               | 137,520                                  |        
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|INCOME (LOSS) FROM OPERATIONS                                        |                                                               | (17,301                                  | )      
|                                                                     |                                                               |                                          |        
|Interest expense, net                                                |                                                               | (15,039                                  | )      
|Loss on sale of marketable securities                                |                                                               | (332                                     | )      
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|Income (loss) from continuing operations before provision for income |                                                               |                                          |        
|                                                                     | taxes and cumulative effect of change in accounting principle |                                          | (32,672
|Provision (benefit) for income taxes                                 |                                                               | (10,025                                  | )      
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|Income (loss) from continuing operations before cumulative effect of |                                                               |                                          |        
|                                                                     | change in accounting principle                                |                                          | (22,647
|Discontinued operations:                                             |                                                               |                                          |        
|                                                                     | Loss from operations (including loss from disposal of         |                                          |        
|                                                                     |                                                               | $57,989 in 2002)                         |        
|                                                                     | Income tax benefit                                            |                                          | -      
|                                                                     |                                                               |                                          |        
|                                                                     | Loss from discontinued operations                             |                                          | (60,201
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|Cumulative effect of change in accounting principle, net of tax      |                                                               | (11,162                                  | )      
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|NET LOSS                                                             | $                                                             | (94,010                                  | )      
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|Net loss per share:                                                  |                                                               |                                          |        
|                                                                     | Basic:                                                        |                                          |        
|                                                                     |                                                               | Income (loss) from continuing operations | $      
|                                                                     |                                                               | Loss from discontinued operations        |        
|                                                                     |                                                               | Cumulative effect of accounting change   |        
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               | Net loss                                 | $      
|                                                                     |                                                               |                                          |        
|                                                                     | Diluted:                                                      |                                          |        
|                                                                     |                                                               | Income (loss) from continuing operations | $      
|                                                                     |                                                               | Loss from discontinued operations        |        
|                                                                     |                                                               | Cumulative effect of accounting change   |        
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               | Net loss                                 | $      
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        
|Weighted average number of common and                                |                                                               |                                          |        
|                                                                     | common equivalent shares:                                     |                                          |        
|                                                                     | Basic                                                         |                                          | 25,275 
|                                                                     |                                                               |                                          |        
|                                                                     | Diluted                                                       |                                          | 25,275 
|                                                                     |                                                               |                                          |        
|                                                                     |                                                               |                                          |        

|(1) | Non-cash revenue and the percentage of total revenue for the nine' months ended September 30, 2002 and 2001 are $40,041,000 (33%) and $12,408,000 (15%), respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                       
|(2) | See Note F regarding restatement of financial statements.                                                                                                             
|    |                                                                                                                                                                       

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

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

|                                                |                                        | Three Months Ended                  |  |        | Nine Months Ended |  
|----------------------------------------------- | -------------------------------------- | ----------------------------------- |  | ------ | ----------------- | -
|                                                |                                        | September 30,                       |  |        | September 30,     |  
|                                                |                                        |                                     |  |        |                   |  
|                                                |                                        | 2002                                |  |        | 2001              |  
|                                                |                                        |                                     |  |        |                   |  
|                                                |                                        |                                     |  |        | (Restated)        |  
|                                                |                                        |                                     |  |        |                   |  
|Net income (loss)                               | $                                      | 3,179                               |  | $      | (12,410           | )
|                                                |                                        |                                     |  |        |                   |  
|Unrealized gains (losses) on securities held as |                                        |                                     |  |        |                   |  
|                                                | available for sale:                    |                                     |  |        |                   |  
|                                                | Unrealized net holding gains (losses), |                                     |  |        |                   |  
|                                                |                                        | net of income tax                   |  |        |                   |  
|                                                |                                        | expense (benefit) of $0 and $(345), |  |        |                   |  
|                                                |                                        | respectively, arising during period |  | -      |                   |  
|                                                | Less:  Reclassification adjustment for |                                     |  |        |                   |  
|                                                |                                        | losses included in income,          |  |        |                   |  
|                                                |                                        | net of tax benefit of $75           |  | -      |                   |  
|                                                |                                        |                                     |  |        |                   |  
|                                                | Foreign currency translation           |                                     |  |        |                   |  
|                                                |                                        | adjustments                         |  | (1,433 | )                 |  
|                                                |                                        |                                     |  |        |                   |  
|                                                |                                        |                                     |  |        |                   |  
|Comprehensive income (loss)                     | $                                      | 1,746                               |  | $      | (13,670           | )
|                                                |                                        |                                     |  |        |                   |  
|                                                |                                        |                                     |  |        |                   |  







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



---





|SEITEL, INC. AND SUBSIDIARIES                  
|-----------------------------------------------
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|(In thousands, except share amounts)           
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, December 31, 2000                     
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, December 31, 2001                     
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|                                               
|Balance, September 30, 2002                    
|                                               
|                                               
|                                               







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



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

|                                                            |                                                                 | Nine Months Ended September 30,                                    |                         
|----------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 | 2002                                                               |                         
|                                                            |                                                                 |                                                                    |                         
|Cash flows from operating activities:                       |                                                                 |                                                                    |                         
|Reconciliation of net income (loss) to net cash provided by |                                                                 |                                                                    |                         
|                                                            | operating activities of continuing operations:                  |                                                                    |                         
|                                                            | Net income (loss)                                               | $                                                                  | (94,010                 
|                                                            | Loss from discontinued operations, net of tax                   |                                                                    | 60,201                  
|                                                            | Cumulative effect of change in accounting principle, net of tax |                                                                    | 11,162                  
|                                                            | Depreciation and amortization                                   |                                                                    | 61,894                  
|                                                            | Impairment of seismic data library                              |                                                                    | 25,696                  
|                                                            | Allowance for collection on trade and notes receivable          |                                                                    | 9,014                   
|                                                            | Deferred income tax benefit                                     |                                                                    | (11,581                 
|                                                            | Non-cash sales                                                  |                                                                    | (40,041                 
|                                                            | Loss on sale of marketable securities                           |                                                                    | 332                     
|                                                            | Write-off of deferred financing costs                           |                                                                    | 321                     
|                                                            | Gain on sale of property and equipment                          |                                                                    | 7                       
|                                                            | Common stock issued as compensation                             |                                                                    | 444                     
|                                                            | Decrease in receivables                                         |                                                                    | 19,567                  
|                                                            | Decrease (increase) in other assets                             |                                                                    | 1,409                   
|                                                            | Decrease in deferred revenue                                    |                                                                    | (14,191                 
|                                                            | Decrease in accounts payable and other liabilities              |                                                                    | (5,508                  
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 | Net cash provided by operating activities of continuing operations |                         
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Cash flows from investing activities:                       |                                                                 |                                                                    |                         
|                                                            | Cash invested in seismic data                                   |                                                                    | (45,822                 
|                                                            | Cash paid to acquire property and equipment                     |                                                                    | (8,742                  
|                                                            | Cash received from disposal of property and equipment           |                                                                    | 2,530                   
|                                                            | Net proceeds from sale of marketable securities                 |                                                                    | 2,490                   
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 | Net cash used in investing activities of continuing operations     |                         
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Cash flows from financing activities:                       |                                                                 |                                                                    |                         
|                                                            | Borrowings under line of credit                                 |                                                                    | 19,207                  
|                                                            | Principal payments under line of credit                         |                                                                    | (20,477                 
|                                                            | Borrowings under term loan                                      |                                                                    | 2,514                   
|                                                            | Principal payments on term loans                                |                                                                    | (2,726                  
|                                                            | Principal payments on capital lease obligations                 |                                                                    | (1,198                  
|                                                            | Proceeds from issuance of common stock                          |                                                                    | 9                       
|                                                            | Costs of debt and equity transactions                           |                                                                    | (10                     
|                                                            | Repurchase of common stock                                      |                                                                    | -                       
|                                                            | Loans to officers, employees and director                       |                                                                    | (65                     
|                                                            | Payments on receivables from officers and employees             |                                                                    | 820                     
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 | Net cash provided by (used in) financing activities                |                         
|                                                            |                                                                 |                                                                    | of continuing operations
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Effect of exchange rate changes                             |                                                                 | (75                                                                | )                       
|Net cash provided by (used in) discontinued operations      |                                                                 | 26,587                                                             |                         
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Net decrease in cash and equivalents                        |                                                                 | (242)                                                              |                         
|                                                            |                                                                 |                                                                    |                         
|Cash and cash equivalents at beginning of period            |                                                                 | 25,223                                                             |                         
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Cash and cash equivalents at end of period                  | $                                                               | 24,981                                                             |                         
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         
|Supplemental disclosure of cash flow information:           |                                                                 |                                                                    |                         
|                                                            | Cash paid during period for:                                    |                                                                    |                         
|                                                            |                                                                 | Interest (net of amounts capitalized)                              | $                       
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 | Income taxes                                                       | $                       
|                                                            |                                                                 |                                                                    |                         
|                                                            |                                                                 |                                                                    |                         

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

---



SEITEL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATEDINTERIM FINANCIAL STATEMENTS (Unaudited)
September 30, 2002

NOTE A-BASIS OF PRESENTATION





The Company's financial statements have been prepared on a basis that assumes the Company will continue as a going concern. As more fully described in Note H, the Company is not in compliance with various covenants in its debt agreements. The independent auditors' report on the Company's 2001 financial statements contains a "going concern" qualification based on the Company's non-compliance with its debt agreements, which indicates the independent auditors' belief that there is substantial doubt about the Company's ability to continue to recover assets and satisfy liabilities in the normal course of business. The Company's independent auditors have advised the Company that, if the Company's non-compliance with its debt agreements is not satisfactorily resolved, the auditors' report relative to the Company's December 31, 2002 financial statements will include a "going concern" qualification. The Company is working with its lenders toward a long-term modification of the Senior Note Agreements, but there can be no assurance that the Company will be successful in its negotiations. At present, the Company and the Noteholders have entered into a standstill agreement which will terminate on December 2, 2002.  The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability of assets or the amounts of liabilities that may result from the outcome of this uncertainty.





NOTE B-REVENUE RECOGNITION





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



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



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



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



The usage of all data delivered to the customer, whether for review only or to hold long-term, is governed by a license agreement, which is a separate agreement from the contracts. The Company's contracts require the customer either to have a license agreement in place or to execute one at the time the contract is signed. The term of the license agreement is generally twenty years or more and governs all data delivered to the customer during the term. Payment terms under the contracts are typically less than eighteen months. All payments due are non-cancelable and all payments made are non-refundable.  The customer has complete access to all available data covered by the contracts on the date the contract is executed.  If the contract allows licensing of data that is not currently available, revenue is deferred until such time that the data is available for licensing.  The contracts permit selection of the data in its present form, and the Company is under no obligation to make any enhancements, modifications or additions to the data unless specific terms are included, upon which revenue would be deferred until performance is met. The customer's rights under the contracts are non-transferable without payment of an additional fee. Copies of the data are available to the customer immediately upon request.



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NOTE C - SPECIAL CHARGES





|                                 |                              | Three Months Ended September 30, |    |   | Nine Months Ended September 30, |    
|-------------------------------- | ---------------------------- | -------------------------------- | -- | - | ------------------------------- | ---
|                                 |                              |                                  |    |   |                                 |    
|Description                      |                              | 2002                             |    |   | 2001                            |    
|                                 |                              |                                  |    |   |                                 |    
|                                 |                              |                                  |    |   |                                 |    
|Company funds improperly         |                              |                                  |    |   |                                 |    
|                                 | converted for the personal   |                                  |    |   |                                 |    
|                                 | benefit of former executives | $                                | -  |   | $                               | 453
|Allowance for former executives' |                              |                                  |    |   |                                 |    
|                                 | advances and receivables     |                                  | 39 |   |                                 | -  
|Pearlman common stock issuance   |                              |                                  |    |   |                                 |    
|                                 | and cash payment             |                                  | -  |   |                                 | -  
|                                 |                              |                                  |    |   |                                 |    
|                                 | $                            | 39                               |    | $ | 453                             |    
|                                 |                              |                                  |    |   |                                 |    
|                                 |                              |                                  |    |   |                                 |    







The Company is seeking reimbursement from Mr. Frame for these costs, and the Company believes it has meritorious arguments in its pursuit of reimbursement of these funds. Given the uncertainty surrounding the recovery of these costs, the Company has continued to report these costs as expenses for the applicable periods.



Allowance for former executives' advances and receivables - Prior to their departure from the Company, the Company had advanced or loaned Mr. Frame and Ms. Valice an aggregate of $4.4 million. Approximately $1.2 million of such loans were secured by shares of the Company's common stock and had been reported as a component of equity in the Company's financial statements.  Additionally, the Company has accrued interest pursuant to the related note agreements on the loans secured by Company stock.  The Company is seeking payment by these former executives for these advances, loans and related interest. In addition, the Company recorded debt of approximately $540,000 relating to its guaranty of a bank's line of credit to Mr. Frame. Mr. Frame has defaulted on the line of credit. The bank has asserted that the Company is obligated to repay the outstanding principal amount under the guaranty and has accelerated the debt. The Company intends to seek reimbursement from Mr. Frame for this amount. The Company has terminated its guaranty arrangement, such that it is not a guarantor for any borrowings in excess of $540,000. However, given the uncertainty surrounding the ability of the Company to collect these amounts, the Company has provided a full allowance for these amounts as of September 30, 2002. The Company believes it has meritorious arguments in its pursuit of each of these recoveries.



Reimbursement of additional funds from Mr. Frame and Ms. Valice may be sought following the results of further investigation.



Pearlman common stock issuance and cash payment - In February 2002, the Board of Directors accepted the resignation of Herbert M. Pearlman as Chairman of the Board. In connection therewith, Mr. Frame entered into a modified employment agreement with Mr. Pearlman, which the Board of Directors of the Company did not authorize Mr. Frame to sign. In April 2002, pursuant to Mr. Frame's direction, the Company issued Mr. Pearlman 250,000 shares of Company stock valued at $2,277,500 and made a cash payment of $1,521,499 for the associated personal tax liability. The Company believes that there was no valid modified employment agreement and believes that such agreement is not binding on the Company or enforceable by Mr. Pearlman. The share issuance and related cash payment are considered by the Company as an advance of amounts under his existing employment agreement. Due to the inherent uncertainty associated with the Company's litigation with Mr. Pearlman, the Company recorded a full allowance for this advance during the three months ended June 30, 2002. Also, the Company has suspended payments that might otherwise be due Mr. Pearlman under his existing employment agreement, and the Company is not recording any further expense under that agreement.



Refer to Note K for further discussion.

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NOTE D-SEISMIC DATA LIBRARY







|(a) | $45.0 million of amortization expense, as a result of applying its amortization policy to revenues;                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | a cumulative effect of a change in accounting principle of approximately $17.2 million ($11.2 million after tax) relating to the Company's created seismic data library, which was recorded as of January 1, 2002;                                                                  
|(c) | required amortization expense of approximately $2.5 million and $12.1 million in the three and nine months ended September 30, 2002, respectively, relating to the Company's new accounting policy with respect to created seismic data; and                                        
|(d) | an impairment loss of approximately $25.7 million related to its Gulf of Mexico offshore data and its Rocky  Mountain region data in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."



See discussion of these items below.



Data Bank Amortization and Change in Accounting Principle







Prior to the change in accounting principle adopted in the second quarter of 2002 that relates to the Company's created seismic data and is described below, the Company's accounting policy with respect to amortization of its data library was as follows: (a) the seismic data that the Company creates was amortized on the income forecast method, which is discussed below, (b) purchased data is generally amortized on a straight-line basis over 10 years and (c) significant purchased data (those surveys that are individually in excess of five percent of the net book value of the Company's seismic library) is amortized using the greater of the income forecast method or the 10-year straight-line method. The policies described in (b) and (c) did not change as a result of the change in accounting principle.



The Company applies the income forecast method by forecasting the ultimate revenue expected to be derived from a particular data survey over its estimated useful economic life. That forecast is made by the Company at project initiation. Generally, the Company has estimated that it will earn revenue equivalent to 233% of the cost it incurs in creating the data, which yields an amortization rate of approximately 43% of revenue. If and when the revenue performance of a seismic survey indicates that the data may not generate the originally forecasted revenue, the Company reevaluates the expected future revenue of the survey. If the Company determines the ultimate revenue for the survey is expected to be less than the original estimate of total revenue it made at project initiation, the Company increases the amortization rate attributable to future revenue.



As of September 30, 2002, approximately 64% of the net book value of the Company's created seismic library is being amortized at a 43% rate, and approximately 25% of the net book value of the Company's created seismic library is being amortized at rates between 55% and 80%. In addition, there are ten surveys, which represent 11% of the created seismic library's net book value as of September 30, 2002, that have amortization rates ranging from 14% to 42%, relating to surveys in which amounts funded by customers reduced the recorded cost of the survey. The Company will continue to evaluate the performance of its surveys, and as appropriate, will increase the amortization rate (on a prospective basis) applicable to specific surveys based on its evaluation of revenue trends, oil and gas prospectivity and other relevant commercial factors.



In the second quarter of 2002, the Company evaluated and changed the method by which it amortizes its created seismic library in an effort to increase the transparency of its methodology and to be more consistent with other industry competitors. Under its new accounting policy, the Company calculates created data amortization as the greater of the income forecast method or 10-year straight-line amortization. This policy is applied on a cumulative basis, at the individual survey level and on a quarterly basis. Under this policy, the Company first records amortization using the income forecast method. The cumulative income forecast amortization is then compared to the cumulative straight-line amortization determined using a 10-year life based on the age of the survey. If the cumulative straight-line amortization is higher for a specific survey, additional amortization is recorded. This requirement is applied regardless of future-year revenue estimates for the survey and does not consider the existence of deferred revenue with respect to the survey.



The Company reported the adoption of this new method as a cumulative effect of a change in accounting principle retroactively as of January 1, 2002. Accordingly, the Company recorded a pre-tax charge of $17.2 million (after-tax charge of $11.2 million) as of January 1, 2002; a pre-tax charge of $5.2 million for the three months ended March 31, 2002; a pre-tax charge of $4.4 million for the three months ended June 30, 2002; and a pre-tax charge of $2.5 million for the three months ended September 30, 2002.

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Pro forma net income for the three and nine months ended September 30, 2001, assuming the new amortization policy had been applied retroactively in each period, was as follows (in thousands, except per share amounts):



|                                                    |                      | Three Months  |         |   | Nine Months   |        
|--------------------------------------------------- | -------------------- | ------------- | ------- | - | ------------- | -------
|                                                    |                      | Ended         |         |   | Ended         |        
|                                                    |                      | September 30, |         |   | September 30, |        
|Description                                         |                      | 2001          |         |   | 2001          |        
|                                                    |                      |               |         |   |               |        
|                                                    |                      |               |         |   |               |        
|Income (loss) from continuing operations:           |                      |               |         |   |               |        
|                                                    | As reported          | $             | 2,225   |   | $             | 5,445  
|                                                    | Pro forma            |               | (637    | ) |               | (2,069 
|Income (loss) from continuing operations per share: |                      |               |         |   |               |        
|                                                    | As reported, basic   | $             | .09     |   | $             | .22    
|                                                    | Pro forma, basic     |               | (.03    | ) |               | (.08   
|                                                    | As reported, diluted | $             | .09     |   | $             | .21    
|                                                    | Pro forma, diluted   |               | (.03    | ) |               | (.08   
|                                                    |                      |               |         |   |               |        
|Net income (loss):                                  |                      |               |         |   |               |        
|                                                    | As reported          | $             | (12,410 | ) | $             | (11,597
|                                                    | Pro forma            |               | (15,272 | ) |               | (19,121
|Net income (loss) per share:                        |                      |               |         |   |               |        
|                                                    | As reported, basic   | $             | (.50    | ) | $             | (.46   
|                                                    | Pro forma, basic     |               | (.61    | ) |               | (.77   
|                                                    | As reported, diluted | $             | (.49    | ) | $             | (.45   
|                                                    | Pro forma, diluted   |               | (.61    | ) |               | (.77   









In accordance with SFAS No. 144, the impairment evaluation is based first on a comparison of the undiscounted future cash flows and the carrying value of the library component, and, if necessary, the second step of the impairment evaluation compares the fair value of the library component, which is generally based on discounting forecasts of future cash flows associated with the assets, to the library component's carrying amount. Any impairment loss is recorded as the difference between the library component's carrying amount and fair value.



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



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



During the three months ended June 30, 2002, the Company recorded a non-cash impairment loss on its Gulf of Mexico offshore and its Rocky Mountain region seismic data totaling $25.7 million. Based on industry conditions and the recent revenue performance of these library components, the Company determined that its estimate of future cash flows in these library components would not be sufficient to recover the carrying value of such data. As a result, the Company estimated the fair value of these library components by discounting their estimated future net cash flows. The resulting difference between the estimated fair value and the carrying value was recorded as an impairment loss.

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NOTE E-DISCONTINUED OPERATIONS







In connection therewith, on July 3, 2002, the Company entered into a purchase and sale agreement with an independent oil and gas company for the sale of a majority of the Company's oil and gas assets. The initial sale was completed on August 2, 2002.  The purchaser also exercised its option to purchase a portion of the remaining oil and gas assets; such sale was completed on September 12, 2002.  The Company has received an offer from another independent oil and gas company for the purchase of a majority of the remaining oil and gas assets.  The Company continues to market the remaining oil and gas assets for sale. The Company expects the disposal to be completed by June 30, 2003.



As a result of its decision to dispose of these operations, the Company recorded a non-cash impairment loss of $56.8 million in the second quarter of 2002, determined as the sum of (i) the sale proceeds to be received, net of costs to sell, (ii) the present value of future net cash flows from its remaining estimated proved oil and gas reserves and (iii) the lower of cost or fair value of unproved properties, compared to the net carrying value of its oil and gas assets.  Additionally, in the third quarter of 2002, the Company recorded severance costs relating to the oil and gas operations of $1.2 million in accordance with certain employment contracts.



Revenue from discontinued operations was $1,193,000 and $4,104,000 for the three months ended September 30, 2002 and 2001, respectively, and $7,579,000 and $17,969,000 for the nine months ended September 30, 2002 and 2001, respectively. Pre-tax losses from the discontinued operations were $1,490,000 and $22,516,000 for the three months ended September 30, 2002 and 2001, respectively, and $60,201,000 and $26,234,000 for the nine months ended September 30, 2002 and 2001, respectively.



NOTE F-RESTATEMENT OF FINANCIAL STATEMENTS







The revisions to revenue recognition under the seismic data licensing agreements are based upon the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." The effect of these revisions is to defer revenue, which would have been recognized under the Company's previous accounting method, under certain seismic data licensing agreements until selection of specific data is made by the customer. The deferral of revenue resulted in an increase in deferred revenue. Associated with the deferral of the revenue on these contracts, the Company also deferred the direct costs (primarily commissions) related to the revenue, which resulted in an increase in prepaid expenses. The Company also recognized a reduction in amortization expense, which is recorded as an adjustment to accumulated amortization, and in income tax expense, which is recorded as an adjustment to deferred taxes. The total effects of all revisions to revenue recognition related to the seismic data licensing arrangements for the three and nine months ended September 30, 2001 are summarized in the tables on the following pages.



The revisions also reflect adjustments for the amount and timing of revenue previously recognized under certain data acquisition contracts. In 2001, the Company entered into certain acquisition contracts under which both the Company and the customer jointly participated in the acquisition services. Consequently, the Company did not assume the sole risk of service throughout the acquisition process. The Company recognized revenue under these contracts consistent with its revenue recognition policy for acquisition contracts. The Company has determined that revenue previously recognized for amounts funded by customers under these contracts should be used to reduce the Company's recorded cost of creating the seismic data. The Company continues to have sole ownership of the newly created data. The reduction of revenue resulting from these revisions also reduced the Company's amortization expense, which is recorded as an adjustment to accumulated amortization, and income tax expense, which is recorded as an adjustment to deferred taxes. The total effects of all revisions to revenue recognition related to certain data acquisition contracts for the three and nine months ended September 30, 2001 are summarized in the following tables.

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|                                     |                                   | Three Months Ended September 30, 2001 (Unaudited) |        
|------------------------------------ | --------------------------------- | ------------------------------------------------- | -------
|                                     |                                   |                                                   |        
|                                     |                                   | (in '000's except per share amounts)              |        
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|                                     |                                   | As                                                |        
|                                     |                                   | Reported                                          |        
|                                     |                                   |                                                   |        
|Statements of Operations Data:       |                                   |                                                   |        
|                                     |                                   |                                                   |        
|Revenue                              | $                                 | 44,278                                            |        
|                                     |                                   |                                                   |        
|Depreciation and amortization        |                                   | 17,984                                            |        
|Cost of sales                        |                                   | 372                                               |        
|SG&A expense                         |                                   | 8,584                                             |        
|Special charges                      |                                   | 453                                               |        
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|Income (loss) from operations        |                                   | 16,885                                            |        
|                                     |                                   |                                                   |        
|Interest expense and other, net      |                                   | (3,427                                            | )      
|                                     |                                   |                                                   |        
|(Provision) benefit for income taxes |                                   | (4,340                                            | )      
|                                     |                                   |                                                   |        
|Income (loss) from continuing        |                                   |                                                   |        
|                                     | operations                        |                                                   | 9,118  
|Loss from discontinued operations,   |                                   |                                                   |        
|                                     | net of income tax benefit         |                                                   | (14,635
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|Net loss                             | $                                 | (5,517                                            | )      
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        
|Net income (loss) per share:         |                                   |                                                   |        
|                                     |                                   |                                                   |        
|Basic:                               |                                   |                                                   |        
|                                     | Income (loss) from continuing     |                                                   |        
|                                     |                                   | operations                                        | $      
|                                     | Loss from discontinued operations |                                                   | (.59   
|`                                    |                                   |                                                   |        
|                                     | Net loss                          | $                                                 | (.22   
|                                     |                                   |                                                   |        
|Diluted:                             |                                   |                                                   |        
|                                     | Income (loss) from continuing     |                                                   |        
|                                     |                                   | operations                                        | $      
|                                     | Loss from discontinued operations |                                                   | (.58   
|                                     |                                   |                                                   |        
|                                     | Net loss                          | $                                                 | (.22   
|                                     |                                   |                                                   |        
|                                     |                                   |                                                   |        

|(1) | Non-cash revenue and the percentage of total revenue are $4,715,000 and 19%, respectively.
|--- | ------------------------------------------------------------------------------------------



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|                                     |                                   | Nine Months Ended September 30, 2001 (Unaudited) |        
|------------------------------------ | --------------------------------- | ------------------------------------------------ | -------
|                                     |                                   |                                                  |        
|                                     |                                   | (in '000's except per share amounts)             |        
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|                                     |                                   | As                                               |        
|                                     |                                   | Reported                                         |        
|                                     |                                   |                                                  |        
|Statements of Operations Data:       |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Revenue                              | $                                 | 122,806                                          |        
|                                     |                                   |                                                  |        
|Depreciation and amortization        |                                   | 53,441                                           |        
|Cost of sales                        |                                   | 1,015                                            |        
|SG&A expense                         |                                   | 27,330                                           |        
|Special charges                      |                                   | 1,130                                            |        
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Income (loss) from operations        |                                   | 39,890                                           |        
|                                     |                                   |                                                  |        
|Interest expense and other, net      |                                   | (9,486                                           | )      
|                                     |                                   |                                                  |        
|(Provision) benefit for income taxes |                                   | (10,580                                          | )      
|                                     |                                   |                                                  |        
|Income (loss) from continuing        |                                   |                                                  |        
|                                     | operations                        |                                                  | 19,824 
|Loss from discontinued operations,   |                                   |                                                  |        
|                                     | net of income tax benefit         |                                                  | (17,052
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Net income (loss)                    | $                                 | 2,772                                            |        
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Net income (loss) per share:         |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Basic:                               |                                   |                                                  |        
|                                     | Income (loss) from continuing     |                                                  |        
|                                     |                                   | operations                                       | $      
|                                     | Loss from discontinued operations |                                                  | (.68   
|                                     |                                   |                                                  |        
|                                     | Net income (loss)                 | $                                                | .11    
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        
|Diluted:                             |                                   |                                                  |        
|                                     | Income (loss) from continuing     |                                                  |        
|                                     |                                   | operations                                       | $      
|                                     | Loss from discontinued operations |                                                  | (.66   
|                                     |                                   |                                                  |        
|                                     | Net income (loss)                 | $                                                | .11    
|                                     |                                   |                                                  |        
|                                     |                                   |                                                  |        

|(1) | Non-cash revenue and the percentage of total revenue are $12,408,000 and 15%, respectively.
|--- | -------------------------------------------------------------------------------------------



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NOTE G-INCOME TAXES



|                                         |   | September 30, |   |   | December 31, |  
|---------------------------------------- | - | ------------- | - | - | ------------ | -
|                                         |   | 2002          |   |   | 2001         |  
|                                         |   |               |   |   |              |  
|                                         |   |               |   |   |              |  
|Deferred revenue                         | $ | 11,740        |   | $ | 15,241       |  
|Seismic data amortization                |   | 10,180        |   |   | (5,922       | )
|Oil and gas assets                       |   | -             |   |   | (13,767      | )
|Canadian net operating loss carryforward |   | 4,636         |   |   | 4,729        |  
|Other, net                               |   | 12,585        |   |   | (397         | )
|                                         |   |               |   |   |              |  
|                                         |   | 39,141        |   |   | (116         | )
|Less: valuation allowance                |   | (21,935       | ) |   | (235         | )
|                                         |   |               |   |   |              |  
|Total deferred tax asset (liability)     | $ | 17,206        |   | $ | (351         | )
|                                         |   |               |   |   |              |  
|                                         |   |               |   |   |              |  







NOTE H-FINANCING ARRANGEMENTS



|                                                     |                                                 |   | September 30, |        |   | December 31, |       
|---------------------------------------------------- | ----------------------------------------------- | - | ------------- | ------ | - | ------------ | ------
|                                                     |                                                 |   | 2002          |        |   | 2001         |       
|                                                     |                                                 |   |               |        |   |              |       
|                                                     |                                                 |   |               |        |   |              |       
|Senior notes, Series B, 7.17%, maturing in 2002      |                                                 | $ | 5,500         |        | $ | 5,500        |       
|Senior notes, Series C, 7.48%, maturing in 2002      |                                                 |   | 4,500         |        |   | 4,500        |       
|Senior notes, Series D, 7.03%, maturing in 2004      |                                                 |   | 20,000        |        |   | 20,000       |       
|Senior notes, Series E, 7.28%, maturing in equal     |                                                 |   |               |        |   |              |       
|                                                     | amounts of $12,500 beginning 2004 through 2009  |   |               | 75,000 |   |              | 75,000
|Senior notes, Series F, 7.43%, maturing in 2009      |                                                 |   | 43,000        |        |   | 43,000       |       
|Senior notes, Series G, 7.04%, maturing in 2006      |                                                 |   | 20,000        |        |   | 20,000       |       
|Senior notes, Series H, 7.19%, maturing in 2008      |                                                 |   | 50,000        |        |   | 50,000       |       
|Senior notes, Series I, 7.34%, maturing in 2011      |                                                 |   | 37,000        |        |   | 37,000       |       
|Seitel, Inc. revolving credit agreement              |                                                 |   | -             |        |   | -            |       
|Subsidiary revolving credit agreement, variable rate |                                                 |   | 35            |        |   | 1,319        |       
|Term loan, variable rate maturing                    |                                                 |   |               |        |   |              |       
|                                                     | $625 in 2002, $2,500 in 2003 and $4,375 in 2004 |   |               | 7,500  |   |              | 9,375 
|Demand reducing credit facility, variable rate       |                                                 |   | 1,682         |        |   | -            |       
|                                                     |                                                 |   |               |        |   |              |       
|                                                     |                                                 | $ | 264,217       |        | $ | 265,694      |       
|                                                     |                                                 |   |               |        |   |              |       
|                                                     |                                                 |   |               |        |   |              |       



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---









| | (i)   | there is an event of default by the Company under the standstill agreement or any subsequent defaults under the existing Senior Note Agreements;
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | the Company defaults on the payments of any non-excluded debt of $5,000,000 or more;                                                            
| | (iii) | the Company's existing term or revolving credit lines with the Royal Bank of Canada is terminated or expires; or                                
| | (iv)  | after five business days written notice from Noteholders owning a majority interest of the outstanding principal amount of the Notes.           







---



In addition, the Company was not in compliance with the leverage ratio covenant and the interest coverage covenant of the Seitel Data, Ltd. term loan at September 30, 2002, June 30, 2002 and March 31, 2002 and the leverage ratio covenant at September 30, 2001 and December 31, 2001. Additionally, the Company was not in compliance with the net worth covenant at September 30, 2002 and June 30, 2002. The lender has issued a notice of default but has not accelerated the debt.





NOTE I-EARNINGS PER SHARE





|                                   |                             | Three Months Ended |       |  | Nine Months Ended |      
|---------------------------------- | --------------------------- | ------------------ | ----- |  | ----------------- | -----
|                                   |                             | September 30,      |       |  | September 30,     |      
|                                   |                             |                    |       |  |                   |      
|                                   |                             | 2002               |       |  | 2001              |      
|                                   |                             |                    |       |  |                   |      
|Income (loss) from continuing      |                             |                    |       |  |                   |      
|                                   | operations before change in |                    |       |  |                   |      
|                                   | accounting principle        | $                  | 4,669 |  | $                 | 2,225
|                                   |                             |                    |       |  |                   |      
|                                   |                             |                    |       |  |                   |      
|Basic weighted average shares      |                             | 25,376             |       |  | 25,045            |      
|Effect of dilutive securities: (1) |                             |                    |       |  |                   |      
|                                   | Options and warrants        |                    | -     |  |                   | 132  
|                                   |                             |                    |       |  |                   |      
|Diluted weighted average shares    |                             | 25,376             |       |  | 25,177            |      
|                                   |                             |                    |       |  |                   |      
|Per share income (loss):           |                             |                    |       |  |                   |      
|                                   | Basic                       | $                  | .19   |  | $                 | .09  
|                                   | Diluted                     | $                  | .19   |  | $                 | .09  

|    |                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During the three months ended September 30, 2002 and 2001 and the nine months ended September 30, 2002 and 2001, a weighted average number of options and warrants to purchase 7,787,000, 6,188,000, 8,478,000 and 1,370,000 shares of common stock were outstanding, respectively, but were not included in the computation of diluted per share income because they were antidilutive.

NOTE J-STATEMENT OF CASH FLOW INFORMATION





During the nine months ended September 30, 2002 and 2001, the Company had non-cash additions to its seismic data library totaling $14,300,000 and $41,453,000, respectively. Of these amounts, $13,399,000 and $39,411,000 resulted from non-exclusive licensing of data in exchange for ownership of data during the nine months ended September 30, 2002 and 2001, respectively. The balance of  $901,000 and $2,042,000 for the nine months ended September 30, 2002 and 2001, respectively, resulted from non-cash additions related to certain data creation costs, which were offset from amounts due from the customer for data license fees. This remaining balance is also included in non-cash sales in the Consolidated Statements of Cash Flows.

---





NOTE K-COMMITMENTS AND CONTINGENCIES





| | - | $2,641,038 of "unearned advances" that he drew from Company funds;                                    
| | - | ------------------------------------------------------------------------------------------------------
| | - | $750,000 of his personal attorneys' fees and legal settlement costs that he caused the Company to pay;
| | - | $695,805 in his personal automobile racing expenses that he caused the Company to pay; and            
| | - | $148,309 for the purchase of a security system for his home that he caused the Company to pay.        









The Company and certain of its former and current officers and directors have been named as defendants in eleven lawsuits brought as class actions alleging violations of the federal securities laws, all of which were consolidated by an Order entered August 7, 2002, under Cause No. 02-1566, styled In re Seitel, Inc. Securities Litigation, in the United States District Court for the Southern District of Texas.  The complaints generally allege that during proposed class periods of May 5, 2000 through May 3, 2002 or July 13, 2000 through April 1, 2002, the defendants violated sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, by overstating revenues in violation of generally accepted accounting principles.  The plaintiffs seek an unspecified amount of actual and exemplary damages, costs of court, pre- and post-judgment interest and attorneys' fees.  The Court has appointed a lead plaintiff and lead counsel for plaintiffs, and has ordered that the plaintiffs file a consolidated amended complaint by December 6, 2002.  No discovery has been conducted.  The Company intends to vigorously defend this lawsuit.



The Company has been named as a nominal defendant in seven stockholder derivative actions filed in various courts:  Almekinder v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. H-02-2960, In the United States District Court for the Southern District of Texas; Basser v. Frame, Valice, Kendrick, Pearlman, Fiur, Zeidman, Stieglitz, Craig, Lerner, and Seitel, Inc., No. H-02-1874, In the United States District Court for the Southern District of Texas; Berger v. Frame, Pearlman, Valice, Craig, Stieglitz, Lerner, Zeidman, Fiur, and Seitel, Inc., No. 19534-NC, In the Court of Chancery, State of Delaware, Castle County; Chemical Valley & North Central West Virginia Carpenters Pension Plan v. Frame, Valice, Hoffman, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Fuir, and Seitel, Inc., No. 02-CV-3343, In the United States District Court for the Southern District of Texas; Couture v. Frame, Valice, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. 20002-37065, In the 80th Judicial District Court, Harris County, Texas; Talley v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., In the 151st Judicial District Court, Harris County, Texas; and Zambie v. Frame, Pearlman, Valice, Craig, Zeidman, Lerner, Stieglitz, Fiur, Ernst & Young, LLP, and Seitel, Inc., In the 333rd Judicial District Court, Harris County, Texas.  The plaintiffs generally allege that the defendants breached and conspired to breach fiduciary duties to the Company's shareholders by failing to maintain adequate accounting controls and by using improper accounting and auditing practices and procedures.  Certain of the plaintiffs also assert causes of action for mismanagement, waste of corporate assets and unjust enrichment.  The Zambie case also alleges professional negligence against Ernst & Young LLP.  The plaintiffs seek judgments for unspecified amounts of compensatory damages, including return of salaries and other payments to the defendants, exemplary damages, attorneys' fees, experts' fees and costs.  The Company's Board of Directors has appointed a special litigation committee, which is conducting an independent investigation of the allegations asserted in the derivative lawsuits, which it expects to be completed in December 2002.  No discovery has been conducted.  The parties have agreed to stay the Delaware case pending completion of the investigation.  The parties have agreed to stay the Texas state-court cases pending the outcome of the Texas federal-court derivative cases.  The parties have moved to consolidate the federal-court derivative cases, which the defendants have moved to stay pending completion of the investigation.

---



The Company has sued its former chairman of the board in Seitel, Inc. v. Pearlman, C.A. No. H.-02-1843, In the United States District Court in the Southern District of Texas.  The Company seeks a declaratory judgment with respect to the employment agreement between Mr. Pearlman and the Company.  Following his resignation as chairman of the board, Mr. Pearlman and the Company entered into negotiations for a restructuring of his employment agreement.  During the negotiations, a document was created that Mr. Pearlman now alleges has superseded the employment agreement.  The Company asserts that neither its Board of Directors, nor any of its committees, approved the document.  The Company seeks a judgment declaring the effect of Mr. Pearlman's resignation on the employment agreement, whether the Company owes any amounts under the employment agreement as a result of his resignation and, if so, how much, and a judgment that the subsequent document is not binding on the Company and is not enforceable by Mr. Pearlman against the Company.  Mr. Pearlman has filed counterclaims asserting that the Board of Directors approved the subsequent document and asserts causes of action for breach of contract, fraud, negligent misrepresentation and promissory estoppel.  Mr. Pearlman seeks to be realigned as the plaintiff in the action, actual damages in an amount exceeding $4,000,000, punitive damages, attorneys' fees, costs and expenses.  The Court has denied Mr. Pearlman's request to be realigned, subject to reconsideration at a time closer to trial  Discovery has commenced.  The Company intends to vigorously pursue its claims and defend against the counterclaims.



The Company has been sued by its former chief financial officer in Valice v. Seitel, in the 55th Judicial District Court of Harris County, No. 2002-30195.  Ms. Valice filed suit against the Company alleging a breach of her employment contract by virtue of her termination.  The Company terminated her employment for what it believes is "cause" as required by the contract, and the Company believes that she is entitled to no recovery on her suit.  The Company has filed a counter suit against Ms. Valice seeking to recover over $621,000 in unearned advances she received from the Company and has failed to repay.  The Company intends to vigorously defend the suit and pursue its counterclaim. Discovery has commenced.



The Company has been sued by its former chief executive officer in Frame v. Seitel, in the 113th Judicial District Court of Harris County, No. 2002-35891.  Mr. Frame filed suit against the Company alleging a breach of his employment contract by virtue of his asserted termination.  He also alleges a press release announcing his resignation and advising that the Company was investigating possible misappropriation of corporate funds for personal use by him was defamatory.  He also seeks a declaratory judgment that certain funds he received from the Company were proper and do not have to be repaid.  The Company has answered and asserted various defenses including the fact that the allegedly defamatory statement is true and that its publication was privileged.  The Company also has filed a counter suit to recover the approximately $4,200,000 in corporate funds that the Company believes he inappropriately converted for his personal use and benefit.  The Company intends to vigorously defend the suit and pursue its counterclaim.  Discovery is not yet underway.



The Company is a party to a dispute with Winthrop Resources Corporation ("Winthrop"), styled No. CT 02-011613, Winthrop Resources Corporation  v. Seitel, Inc.,Hennepin County District Court, Minnesota, arising out of an equipment lease for computer equipment primarily used in its Houston and Calgary data centers. Winthrop has alleged claims for breach of contract, an action for account stated, and replevin, and seeks damages of approximately $8.4 million and a court order requiring the Company to return the equipment.  The Company has filed a counterclaim seeking to set aside the lease on grounds that the lease delivered was not as represented and seeks damages from Winthrop.



The Company is a party to a dispute with Rimco Production Company, Inc. ("Rimco"), styled Rimco Production Company, Inc. v. Seitel Data, Ltd., Cause No. 2002-42420, In the 295th District Court of Harris County, Texas, in which Rimco alleges that Seitel Data, Ltd. has breached an agreement to provide seismic data as soon as it was processed. Rimco seeks a declaratory judgment and unspecified damages.  The Company intends to vigorously defend the suit.  Discovery has commenced.

---



The litigation referred to above is in its early stages.  Accordingly, the Company is unable to determine a range of contingent liabilities associated with such litigation.  However, if one or more of the parties were to prevail against the Company in one or more of the cases described above, the amounts of any judgments against the Company or settlements that the Company may enter into could be material to the Company's financial statements for any particular reporting period.  Based on its present evaluation of the merits of the litigation referred to above, the Company does not believe any amounts should be accrued based on SFAS No. 5, "Accounting For Contingencies."  Accordingly, the Company has not recorded any liabilities related to such litigation as of September 30, 2002.



In addition to the lawsuits described above, the Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business.  In the opinion of management, uninsured losses, if any, resulting from the ultimate resolutions of these matters should not be material to the Company's financial position or results of operation





In October 2002, in response to the Company's submission of a business plan outlining certain goals and initiatives, the New York Stock Exchange ("NYSE") notified the Company of the NYSE's acceptance of the business plan and its intent to continue listing the Company's stock despite the Company having fallen below NYSE continued listing standards.  Consistent with its practices, the NYSE also informed the Company of its intention to perform quarterly reviews over the next 18 months for compliance with the goals and initiatives outlined in the Company's business plan.  Failure to achieve these financial and operational goals could result in the Company being subject to NYSE trading suspension.  The Company must also achieve a $1.00 average share price over a 30 day trading period by January 24, 2003 to avoid being suspended by the NYSE and a possible delisting of its stock.



---



NOTE L-INDUSTRY SEGMENTS



|                                                                    |   |         |  |   | Data       |   |   |          | 
|------------------------------------------------------------------- | - | ------- |  | - | ---------- | - | - | -------- | 
|                                                                    |   |         |  |   | Technology |   |   | Total    | 
|                                                                    |   | Seismic |  |   | Services   |   |   | Segments | 
|                                                                    |   |         |  |   |            |   |   |          | 
|                                                                    |   |         |  |   |            |   |   |          | 
|As of and for the three months ended September 30, 2002             |   |         |  |   |            |   |   |          | 
|Revenue from external purchasers                                    | $ | 49,898  |  | $ | 706        |   | $ | 50,604   | 
|Intersegment revenue                                                |   | -       |  |   | 69         |   |   | 69       | 
|Depreciation and amortization                                       |   | 21,644  |  |   | 1,510      |   |   | 23,154   | 
|Cost of sales                                                       |   | 309     |  |   | 135        |   |   | 444      | 
|Selling, general and administrative expense                         |   | 7,436   |  |   | 2,514      |   |   | 9,950    | 
|Segment operating income (loss)                                     |   | 20,509  |  |   | (3,384     | ) |   | 17,125   | 
|Capital expenditures (a)                                            |   | 9,186   |  |   | 323        |   |   | 9,509    | 
|Assets                                                              |   | 461,247 |  |   | 17,853     |   |   | 479,100  | 
|                                                                    |   |         |  |   |            |   |   |          | 
|As of and for the three months ended September  30, 2001 (Restated) |   |         |  |   |            |   |   |          | 
|Revenue from external purchasers                                    |   | 25,175  |  |   | 27         |   |   | 25,202   | 
|Depreciation and amortization                                       |   | 9,767   |  |   | 159        |   |   | 9,926    | 
|Cost of sales                                                       |   | 308     |  |   | 64         |   |   | 372      | 
|Selling, general and administrative expense                         |   | 5,995   |  |   | 593        |   |   | 6,588    | 
|Segment operating income (loss)                                     |   | 9,105   |  |   | (789       | ) |   | 8,316    | 
|Capital expenditures (a)                                            |   | 30,762  |  |   | 978        |   |   | 31,740   | 
|Assets                                                              |   | 493,993 |  |   | 3,172      |   |   | 497,165  | 
|                                                                    |   |         |  |   |            |   |   |          | 
|As of and for the nine months ended September 30, 2002              |   |         |  |   |            |   |   |          | 
|Revenue from external purchasers                                    |   | 119,212 |  |   | 1,007      |   |   | 120,219  | 
|Intersegment revenue                                                |   | -       |  |   | 176        |   |   | 176      | 
|Depreciation and amortization                                       |   | 57,444  |  |   | 3,499      |   |   | 60,943   | 
|Impairment of seismic data                                          |   | 25,696  |  |   | -          |   |   | 25,696   | 
|Cost of sales                                                       |   | 374     |  |   | 377        |   |   | 751      | 
|Selling, general and administrative expense                         |   | 20,004  |  |   | 9,176      |   |   | 29,180   | 
|Segment operating income (loss)                                     |   | 15,694  |  |   | (11,869    | ) |   | 3,825    | 
|Capital expenditures (a)                                            |   | 49,120  |  |   | 12,143     |   |   | 61,263   | 
|Assets                                                              |   | 461,247 |  |   | 17,853     |   |   | 479,100  | 
|                                                                    |   |         |  |   |            |   |   |          | 
|As of and for the nine months ended September 30, 2001 (Restated)   |   |         |  |   |            |   |   |          | 
|Revenue from external purchasers                                    |   | 80,016  |  |   | 96         |   |   | 80,112   | 
|Depreciation and amortization                                       |   | 33,650  |  |   | 405        |   |   | 34,055   | 
|Cost of sales                                                       |   | 896     |  |   | 119        |   |   | 1,015    | 
|Selling, general and administrative expense                         |   | 18,166  |  |   | 2,101      |   |   | 20,267   | 
|Segment operating income (loss)                                     |   | 27,304  |  |   | (2,529     | ) |   | 24,775   | 
|Capital expenditures (a)                                            |   | 96,739  |  |   | 1,754      |   |   | 98,493   | 
|Assets                                                              |   | 493,993 |  |   | 3,172      |   |   | 497,165  | 
|                                                                    |   |         |  |   |            |   |   |          | 

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



---



|                                         |                      | Three Months Ended              |                                |        | Nine Months Ended |  
|---------------------------------------- | -------------------- | ------------------------------- | ------------------------------ | ------ | ----------------- | -
|                                         |                      | September 30,                   |                                |        | September 30,     |  
|                                         |                      |                                 |                                |        |                   |  
|                                         |                      | 2002                            |                                |        | 2001              |  
|                                         |                      |                                 |                                |        |                   |  
|                                         |                      |                                 |                                |        | (Restated)        |  
|Income (loss) from continuing operations |                      |                                 |                                |        |                   |  
|                                         | before income taxes: |                                 |                                |        |                   |  
|                                         |                      | Total reportable segment        |                                |        |                   |  
|                                         |                      |                                 | operating income               | $      | 17,125            |  
|                                         |                      | Corporate selling general and   |                                |        |                   |  
|                                         |                      |                                 | administrative expense         |        | (4,923            | )
|                                         |                      | Special charges                 |                                | (39    | )                 |  
|                                         |                      | Interest expense and other, net |                                | (5,105 | )                 |  
|                                         |                      | Eliminations and other          |                                | (259   | )                 |  
|                                         |                      |                                 |                                |        |                   |  
|                                         |                      | Income (loss) from continuing   |                                |        |                   |  
|                                         |                      |                                 | operations before income taxes | $      | 6,799             |  
|                                         |                      |                                 |                                |        |                   |  
|                                         |                      |                                 |                                |        |                   |  

NOTE M-RECENT ACCOUNTING PRONOUNCEMENTS









In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Disposal or Exit Activities."  This Statement requires that liabilities for the costs associated with exit or disposal activities be recognized when the liabilities are incurred, rather than when an entity commits to an exit plan.  This Statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged.  The new rules will change the timing of liability and expense recognition related to exit or disposal activities, but not the ultimate amount of such expenses.

NOTE N - RELATED PARTY TRANSACTION



---



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

BASIS OF PRESENTATION OF THE COMPANY'S FINANCIAL STATEMENTS





Because of the level of the Company's debt and the Company's non-compliance with certain covenants, (i) a substantial portion of the Company's cash flow from operations must be dedicated to debt service and payments of such obligations and, to the extent so used, will not be available for operational purposes, (ii) the Company's ability to obtain additional financing in the future may be limited, and (iii) the Company's flexibility in reacting to changes in the operating environment and economic conditions may be limited. If the Company is unable to successfully conclude its negotiations with its lenders, it may be forced to take actions such as reducing or delaying capital expenditures, reducing costs, selling assets, refinancing or restructuring its debt or other obligations and seeking additional equity capital. The Company may not be able to take any of these actions on satisfactory terms or at all.



As a result of the Company's current financial condition and the possibility that the Company may be unable to satisfy its future obligations, certain customers of the Company have refused to enter into large data licensing agreements for delivery of future data and some contractors have refused to provide services to the Company without receiving payment in advance. A significant loss of customers or agreements with contractors may have a material adverse effect on the financial condition of the Company.



SIGNIFICANT ACCOUNTING POLICIES









---





Revenue from Data Licenses







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



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



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



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



The usage of all data delivered to the customer, whether for review only or to hold long-term, is governed by a license agreement, which is a separate agreement from the contracts. The Company's contracts require the customer either to have a license agreement in place or to execute one at the time the contract is signed. The term of the license agreement is generally twenty years or more and governs all data delivered to the customer during the term. Payment terms under the contracts are typically less than eighteen months. All payments due are non-cancelable and all payments made are non-refundable. The customer has complete access to all available data covered by the contracts on the date the contract is executed.  If the contract allows licensing of data that is not currently available, revenue is deferred until such time that the data is available for licensing.  The contracts permit selection of the data in its present form, and the Company is under no obligation to make any enhancements, modifications or additions to the data unless specific terms are included, upon which revenue would be deferred until performance is met. The customer's rights under the contracts are non-transferable without payment of an additional fee. Copies of the data are available to the customer immediately upon request.



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



Revenue from Non-Cash Data Licenses





---



The Company determines the fair value of the data exchanged by first determining the value of the license granted to the customer. It does so by evaluating the range of cash transactions by the Company for licenses of similar data during either the prior six months (for licenses in the United States) or the prior twelve months (for licenses in Canada). In evaluating the range of cash transactions, the Company does not consider transactions that are disproportionately high or low. The Company then also considers the value of the data received from the customer. In determining the value of the data received, the Company considers the age, quality, current demand and future marketability of the data, as well as the cost that would be required to create the data. In significant exchanges, the Company also engages an independent third party to confirm the fairness of the Company's valuation of the data received. In the United States, the Company applies a limitation on the value it assigns per square mile on the data exchanged. In Canada, in the event of a difference greater than 2% between the value of the license granted and the value of the data received, the Company assigns the lower value to the exchange. In 2001, the Company obtained third party fairness opinions on all non-cash exchanges valued at $800,000 or more. Effective January 1, 2002, the Company intends to obtain third party fairness opinions on all non-cash exchanges of $500,000 or more. The Company intends to obtain these opinions on an annual basis, usually in connection with the preparation of its annual financial statements.



Data Bank Amortization and Change in Accounting Principle







The Company applies the income forecast method by forecasting the ultimate revenue expected to be derived from a particular data survey over its estimated useful economic life. That forecast is made by the Company at project initiation. Generally, the Company has estimated that it will earn revenue equivalent to 233% of the cost it incurs in creating the data, which yields an amortization rate of approximately 43% of revenue. If and when the revenue performance of a seismic survey indicates that the data may not generate the originally forecasted revenue, the Company reevaluates the expected future revenue of the survey. If the Company determines the ultimate revenue for the survey is expected to be less than the original estimate of total revenue it made at project initiation, the Company increases the amortization rate attributable to future revenue.



In the second quarter of 2002, the Company evaluated and changed the method by which it amortizes its created seismic library in an effort to increase the transparency of its methodology and to be more consistent with other industry competitors. Under its new accounting policy, the Company adopted an accounting policy that calculates created data amortization as the greater of the income forecast method or 10-year straight-line amortization. This policy is applied on a cumulative basis, at the individual survey level and on a quarterly basis. Under this policy, the Company first records amortization using the income forecast method. The cumulative income forecast amortization is then compared to the cumulative straight-line amortization determined using a 10-year life based on the age of the survey. If the cumulative straight-line amortization is higher for a specific survey, additional amortization is recorded. This requirement is applied regardless of future-year revenue estimates for the survey and does not consider the existence of deferred revenue with respect to the survey.



Data Bank Impairment





---



In accordance with SFAS No. 144, the impairment evaluation is based first on a comparison of the undiscounted future cash flows and the carrying value of the library component, and, if necessary, the second step of the impairment evaluation compares the fair value of the library component, which is generally based on discounting forecasts of future cash flows associated with the assets, to the library component's carrying amount. Any impairment loss is recorded as the difference between the library component's carrying amount and fair value.



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



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



RESULTS OF OPERATIONS











|                                         |                              | Three Months Ended   |        |     | Nine Months Ended |      
|---------------------------------------- | ---------------------------- | -------------------- | ------ | --- | ----------------- | -----
|                                         |                              | September 30,        |        |     | September 30,     |      
|                                         |                              |                      |        |     |                   |      
|                                         |                              | 2002                 |        |     | 2001              |      
|                                         |                              |                      |        |     |                   |      
|Income (loss) from continuing operations |                              |                      |        |     |                   |      
|                                         | before significant items     | $                    | 6,462  |     | $                 | 2,519
|Significant items, net of tax:           |                              |                      |        |     |                   |      
|                                         | Impairment of seismic data   |                      | -      |     |                   | -    
|                                         | Unusual professional fees    |                      | (2,289 | )   |                   | -    
|                                         | Special charges              |                      | (25    | )   |                   | (294 
|                                         | Deferred tax asset valuation |                      |        |     |                   |      
|                                         |                              | (allowance) reversal |        | 521 |                   |      
|                                         |                              |                      |        |     |                   |      
|Income (loss) from continuing operations | $                            | 4,669                |        | $   | 2,225             |      
|                                         |                              |                      |        |     |                   |      
|                                         |                              |                      |        |     |                   |      







The other components of income (loss) from continuing operations are discussed herein.



---



Seismic Operations







|                               |   | Three Months Ended |   |   | Nine Months Ended |  
|------------------------------ | - | ------------------ | - | - | ----------------- | -
|                               |   | September 30,      |   |   | September 30,     |  
|                               |   |                    |   |   |                   |  
|                               |   | 2002               |   |   | 2001              |  
|                               |   |                    |   |   |                   |  
|                               |   |                    |   |   | (Restated)        |  
|                               |   |                    |   |   |                   |  
|Acquisition revenue            | $ | 5,544              |   | $ | 4,533             |  
|New resale invoices - cash     |   | 21,357             |   |   | 14,982            |  
|New resale invoices - non-cash |   | 5,051              |   |   | 18,767            |  
|Deferral of revenue            |   | (9,113             | ) |   | (24,562           | )
|Selections of data             |   | 26,974             |   |   | 10,883            |  
|Other                          |   | 85                 |   |   | 572               |  
|                               |   |                    |   |   |                   |  
|Total seismic revenue          | $ | 49,898             |   | $ | 25,175            |  
|                               |   |                    |   |   |                   |  
|                               |   |                    |   |   |                   |  
|Non-cash revenue               | $ | 18,373             |   | $ | 4,715             |  
|                               |   |                    |   |   |                   |  
|                               |   |                    |   |   |                   |  







|(a) | $45.0 million of amortization expense, as a result of applying its amortization policy to revenues;                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | a cumulative effect of a change in accounting principle of approximately $17.2 million relating to the Company's created seismic data library, which was recorded as of January 1, 2002;                                                    
|(c) | required amortization expense of approximately $2.5 million and $12.1 million in the three and nine months ended September 30, 2002, respectively, relating to the Company's new accounting policy with respect to created seismic data; and
|(d) | an impairment loss of approximately $25.7 million related to its Gulf of Mexico offshore data and its Rocky Mountain region data in accordance with SFAS No. 144.                                                                           



See discussion of these items below.



Depreciation and amortization primarily consists of seismic data library amortization and depreciation of fixed assets. Seismic data library amortization was $21,498,000 during the third quarter of 2002 compared to $9,707,000 during the third quarter of 2001 and was $57,049,000 during the first nine months of 2002 compared to $33,402,000 during the first nine months of 2001. The amount of seismic data amortization fluctuates based on the level of seismic revenue, the mix of data to which the revenue relates and the amount of straight-line amortization required. As a percentage of revenue from licensing seismic data, seismic data library amortization was 43% and 39% for the third quarters of 2002 and 2001, respectively, and was 48% and 43% for the first nine months of 2002 and 2001, respectively. The increase in the percentage between the third quarter periods was primarily due to additional straight-line amortization on created programs under the Company's newly adopted amortization policy regarding created seismic data. The increase in the percentage between the nine month periods was primarily due to additional straight-line amortization on created programs under the Company's newly adopted amortization policy, partially offset by a decrease in the amortization rate on 3D onshore purchased data resulting from increased revenue on 3D onshore purchased data libraries that are amortized on a straight-line basis. During the third quarter and first nine months of 2002, the Company recorded additional straight-line amortization of $2,529,000 and $12,089,000, respectively, under its new amortization policy.



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



Corporate and Other







During the three and nine months ended September 30, 2002 and 2001, the Company incurred various charges and expenses that have been classified as special charges, which are set forth below (in thousands):



|                                       |                                          | Three Months Ended |    |   | Nine Months Ended |    
|-------------------------------------- | ---------------------------------------- | ------------------ | -- | - | ----------------- | ---
|                                       |                                          | September 30,      |    |   | September 30,     |    
|                                       |                                          |                    |    |   |                   |    
|                                       |                                          | 2002               |    |   | 2001              |    
|                                       |                                          |                    |    |   |                   |    
|Company funds improperly converted for |                                          |                    |    |   |                   |    
|                                       | the personal benefit of former executive | $                  | -  |   | $                 | 453
|Allowance for former executives'       |                                          |                    |    |   |                   |    
|                                       | advances and receivables                 |                    | 39 |   |                   | -  
|Pearlman common stock issuance         |                                          |                    |    |   |                   |    
|                                       | and cash payment                         |                    | -  |   |                   | -  
|                                       |                                          |                    |    |   |                   |    
|                                       | $                                        | 39                 |    | $ | 453               |    
|                                       |                                          |                    |    |   |                   |    
|                                       |                                          |                    |    |   |                   |    







The Company is seeking reimbursement from Mr. Frame for these costs, and the Company believes it has meritorious arguments in its pursuit of reimbursement of these funds. Given the uncertainty surrounding the recovery of these costs, the Company has continued to report these costs as expenses for the applicable periods.

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Allowance for former executives' advances and receivables - Prior to their departure from the Company, the Company had advanced or loaned Mr. Frame and Ms. Valice an aggregate of $4.4 million. Approximately $1.2 million of such loans were secured by shares of the Company's common stock and had been reported as a component of equity in the Company's financial statements.  Additionally, the Company has accrued interest pursuant to the related note agreements on the loans secured by Company stock.  The Company is seeking payment by these former executives for these advances, loans and related interest.  In addition, the Company recorded debt of approximately $540,000 relating to its guaranty of a bank's line of credit to Mr. Frame. Mr. Frame has defaulted on the line of credit, and the bank has asserted that the Company is obligated to repay the outstanding principal amount under this guaranty and has accelerated the debt. The Company intends to seek reimbursement from Mr. Frame for this amount. The Company has terminated its guaranty arrangement, such that it is not a guarantor for any borrowings in excess of $540,000. However, given the uncertainty surrounding the ability of the Company to collect these amounts, the Company has provided a full allowance for these amounts as of September 30, 2002. The Company believes it has meritorious arguments in its pursuit of each of these recoveries.



Pearlman common stock issuance and cash payment - In February 2002, the Board of Directors of the Company accepted the resignation of Herbert M. Pearlman as Chairman of the Board. In connection therewith, Mr. Frame entered into a modified employment agreement with Mr. Pearlman, which the Board of Directors of the Company did not authorize Mr. Frame to sign. In April 2002, pursuant to Mr. Frame's direction, the Company issued Mr. Pearlman 250,000 shares of Company stock valued at $2,277,500 and made a cash payment of $1,521,499 for the associated personal tax liability. The Company believes that there was no valid modified employment agreement and believes that such agreement is not binding on the Company or enforceable by Mr. Pearlman. The share issuance and related cash payment are considered by the Company as an advance of amounts under his existing employment agreement. Due to the inherent uncertainty associated with the Company's litigation with Mr. Pearlman, the Company recorded a full allowance for this advance during the three months ended June 30, 2002. Also, the Company has suspended payments that might otherwise be due Mr. Pearlman under his existing employment agreement, and the Company is not recording any further expense under that agreement.



Interest expense, net, was $4,855,000 and $3,365,000 for the third quarters of 2002 and 2001, respectively, and $15,039,000 and $9,414,000 for the nine months ended September 30, 2002 and 2001, respectively. The increase in net interest expense and other was primarily due to an increase in interest expense related to the Series G, H and I Senior Notes issued in October and December 2001 that was partially offset by a decrease in interest expense related to the Company's Revolving Line of Credit, as no balances were outstanding during 2002. The increase for the first nine months of 2002 was also due to the write-off of deferred financing costs of $321,000 associated with the Company's termination of its Revolving Line of Credit in June 2002 and to $370,000 paid in March 2002 by the Company to secure amendments to its Senior Notes.



During the first nine months of 2002, the Company sold certain marketable securities that it held for cash proceeds of $2,490,000.  As a result, a loss on the sale of these marketable securities of $250,000 and $332,000 is reflected in the consolidated statement of operations for the three and nine months ended September 30, 2002, respectively.



The Company's effective income tax rate from continuing operations was 31% for both the third quarter and first nine months of 2002, compared to 34% and 39% for the third quarter and first nine months of 2001, respectively. The Company's effective tax rate for these periods differed from the amount that results from applying the U.S. Federal income tax rate of 35% due principally to the effect of foreign taxes, non-deductible expenses and, in the nine months ended September 30, 2002, valuation allowances.



Discontinued Operations







In connection therewith, on July 3, 2002, the Company entered into a purchase and sale agreement with an independent oil and gas company for the sale of a majority of the Company's oil and gas assets. The initial sale was completed on August 2, 2002. The purchaser also exercised its option to purchase a portion of the remaining oil and gas assets; such sale was completed on September 12, 2002.  Through September 30, 2002, the Company received cash proceeds of $25.7 million.  In accordance with the purchase and sale agreement, on November 1, 2002, a final settlement adjustment was made whereby the purchaser was paid $92,000. The Company has received an offer from another independent oil and gas company for the purchase of a majority of the remaining oil and gas assets.  The Company continues to market the remaining oil and gas assets for sale. The Company expects the disposal to be completed by June 30, 2003.

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As a result of its decision to dispose of these operations, the Company recorded a non-cash impairment loss of $56,764,000, determined as the sum of (i) sale proceeds received, net of cost to sell, (ii) the present value of future net cash flows from its remaining estimated proved oil and gas reserves and (iii) the lower of cost or fair value of unproved properties, compared to the net carrying value of its oil and gas assets.  Additionally, in the third quarter of 2002, the Company recorded severance costs relating to the oil and gas operations of $1.2 million in accordance with certain employment contracts.



Revenue from the discontinued operations was $1,193,000 and $4,104,000 for the three months ended September 30, 2002 and 2001, respectively, and $7,579,000 and $17,969,000 for the nine months ended September 30, 2002 and 2001, respectively. Pre-tax losses from the discontinued operations were $1,490,000 and $22,516,000 for the three months ended September 30, 2002 and 2001, respectively, and $60,201,000 and $26,234,000 for the nine months ended September 30, 2002 and 2001, respectively. The decrease in revenue between the third quarter periods was primarily due to lower production volumes as a result of the sale of the majority of the producing wells.  The decrease in revenue between the nine month periods was primarily due to lower market prices in 2002 and, to a lesser extent, lower production volumes.  The decrease in the pre-tax loss from the discontinued operations between the third quarter periods was primarily due to an impairment of oil and gas properties of $22,058,000 recorded in the third quarter of 2001; there was no impairment in the third quarter 2002.  The increase in pre-tax loss from the discontinued operations between the nine month periods was primarily due to the loss on the sale of the assets of $56,764,000 recorded during the second quarter of 2002.



Change in Accounting Principle







LIQUIDITY AND CAPITAL RESOURCES







The Company's cash provided by operating activities of continuing operations was $24,716,000 and $13,084,000 for the nine months ended September 30, 2002 and 2001, respectively. The increase from 2001 to 2002 was primarily attributable to increased collections from customers and a decrease in income taxes paid, partially offset by an increase in interest expense paid.



During the third quarter of 2002, in connection with the sale of the majority of the Company's oil and gas assets, the Company received cash proceeds of $25.7 million which were placed in an escrow account pursuant to the Noteholders' Consent.  In accordance with the Noteholders' Consent, the Company paid the Noteholders $7.1 million of such proceeds on August 2, 2002, which represented accrued interest owed to the Noteholders, and has made monthly interest payments to the Noteholders totaling $1.6 million per month from the escrowed funds.



Senior Notes





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On February 12, 1999, the Company completed a private placement of three series of unsecured Senior Notes totaling $138 million. The Series D Notes total $20 million, bear interest at a fixed rate of 7.03% and mature on February 15, 2004, with no principal payments due until maturity. The Series E Notes total $75 million, bear interest at a fixed rate of 7.28% and mature on February 15, 2009, with annual principal payments of $12.5 million beginning February 15, 2004. The Series F Notes total $43 million, bear interest at a fixed rate of 7.43% and mature on February 15, 2009, with no principal payments due until maturity.  As of November 12, 2002, the balance outstanding on the Series D, E and F Notes was $138 million.



On December 28, 1995, the Company completed a private placement of three series of unsecured Senior Notes totaling $75 million. The Company contemporaneously issued its Series A Notes and Series B Notes, which total $52.5 million and bear interest at a fixed rate of 7.17%. On April 9, 1996, the Company issued its Series C Notes, which total $22.5 million and bear interest at a fixed rate of 7.48%. The Series A Notes matured on December 30, 2001. The Series B and Series C Notes mature on December 30, 2002, and require combined annual principal payments of $10 million, which began on December 30, 1998.  As of November 12, 2002, the balance outstanding on the Series B and C Notes was $10 million.



The Standstill Agreements executed by the Company and the Noteholders (see discussion below) provide for an increase of 25 basis points on the interest under the Senior Notes from June 21, 2002 through and including December 2, 2002. Additionally, in July 2002, the Senior Noteholders provided their consent for the sale of the Company's oil and gas assets. In accordance with the terms of the consent, all outstanding interest accrued as of August 2, 2002 under the Senior Notes totaling $7.1 million was paid out of the proceeds of the closing. Also, in accordance with the Noteholders' Consent, beginning September 2, 2002, the Company pays interest monthly on the notes (aggregating approximately $1.6 million).



Lines of Credit







The Company's wholly owned subsidiary, Olympic Seismic Ltd. ("Olympic"), has a revolving credit facility which allows it to borrow up to $5 million (Canadian dollars) by way of prime based loans, bankers' acceptances, or letters of credit. Prime based loans and bankers' acceptances bear interest at the rate of the bank's prime rate plus 0.35% per annum and 0.50% per annum, respectively. Letter of credit fees are based on scheduled rates in effect at the time of issuance. The facility is secured by Olympic's assets, but is not guaranteed by Seitel, Inc. or any of its other United States subsidiaries. Available borrowings under the facility are determined as $2 million (Canadian dollars) plus 75% of trade receivables less than 90 days old, the total not to exceed $5 million (Canadian dollars). The facility is subject to repayment upon demand and is available from time to time at the Bank's sole discretion. A review of this demand facility is performed annually at the Bank's discretion.  The Company is currently in negotiations with the bank regarding this facility. As of November 12, 2002, the balance outstanding on this revolving line of credit was $422,000. Olympic is not a party to any of the debt issued by Seitel, Inc.











On January 14, 2002, the Company's wholly owned subsidiary, SEIC Business Trust (the "Trust"), entered into a demand reducing credit facility to borrow $4 million (Canadian dollars) by way of prime based loans. Payments of $166,670 (Canadian dollars) are due on the last day of each month. The funds were drawn down on January 30, 2002 to finance the purchase of seismic data. The loans bear interest at the bank's prime rate plus 0.50%. The facility is secured by the Trust's assets and guaranteed by Olympic Seismic Ltd. and SEIC Holdings Ltd.  In connection with the renegotiation of the revolving credit facility discussed above, the Company is also negotiating with the Bank to convert this reducing facility to a reducing term facility.  The balance outstanding on this loan on November 12, 2002 was $1,598,000.

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











The financial covenants in the Senior Notes include, among other restrictions, maintenance of minimum net worth and limitations on total debt, interest coverage, liens, debt issuance and disposition of assets. As a result of the restatement of its financial statements, the Company was not in compliance with the limitation on total debt covenant in the Senior Note Agreements dated December 28, 1995 and February 12, 1999. In addition, as a result of the restatement of its financial statements and the impairment of oil and gas properties recorded in the fourth quarter of 2001, the Company was not in compliance with these same financial covenants in these agreements at December 31, 2001. The Company received an amendment from the Senior Noteholders that waived noncompliance with the limitation on total debt covenant in the third and fourth quarters of 2001 and increased the ratio of allowed debt to total capitalization through March 31, 2003, after which date the original financial covenants will again be imposed.



As a result of increased interest expense and decreased revenue in the first quarter of 2002, the Company, was not in compliance with the interest coverage covenant as of March 31, 2002 in the Senior Note Agreements dated December 28, 1995, February 12, 1999 and October 15, 2001. Additionally, as of March 31, 2002, the Company was not in compliance with the limitation on restricted payments and investments covenant in the Senior Note Agreement dated February 12, 1999. The Company received waivers from the Senior Noteholders for the covenants it was not in compliance with; such waivers continued through May 24, 2002. Effective as of June 21, 2002, the Company entered into a standstill agreement with its Senior Noteholders pursuant to which the Noteholders agreed not to exercise remedies available to them under the Senior Note Agreements as a result of existing defaults until July 17, 2002. Effective as of July 17, 2002, the Company reached an agreement with the Senior Noteholders to extend the standstill agreement for an additional 90 days until October 15, 2002.  Effective October 15, 2002, the Company and the Senior Noteholders entered into an agreement to extend the standstill agreement until December 2, 2002.  During the standstill period, various existing covenants are suspended and replaced with certain enumerated covenants, including the requirement that the Company receive Senior Noteholder approval to make certain investments or payments out of the ordinary course of business, incur additional debt, create liens or sell assets. The standstill may terminate prior to December 2, 2002 if, among other things,



| | (i)   | there is an event of default by the Company under the standstill agreement or any subsequent defaults under the existing Senior Note Agreements;
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | the Company defaults on the payments of any non-excluded debt of $5,000,000 or more; or                                                         
| |       |                                                                                                                                                 
| |       |                                                                                                                                                 
| | (iii) | the Company's existing term or revolving credit lines with the Royal Bank of Canada is terminated or expires; or                                
| | (iv)  | after five business days written notice from Noteholders owning a majority interest of the outstanding principal amount of the Notes.           



---





The Company is working with the Noteholders toward a long-term modification of the Senior Note Agreements. If the Company is unable to obtain such long-term modifications, the Senior Noteholders could elect to accelerate the debt. Based on the Company's current financial condition, if the debt were to be accelerated, the Company would be unable to satisfy the obligation. If such an acceleration occurred, the Company intends to seek additional or replacement sources of financing. However, there can be no assurances that the Company would be able to obtain such financing on satisfactory terms or at all.



Other Debt



The Company's now terminated Revolving Line of Credit agreement included interest coverage and leverage ratio covenants, among others. As a result of the restatement of its financial statements, the Company was not in compliance with its leverage ratio covenant at September 30, 2001. In addition, as a result of the restatement and the impairment of oil and gas properties in the fourth quarter of 2001, the Company was not in compliance with this covenant as of December 31, 2001. The Company was not in compliance with the interest coverage or leverage ratio covenants as of March 31, 2002. Due to its non-compliance with the applicable covenants during the six months ended June 30, 2002, the Company was unable to utilize this facility. In June 2002, the Company terminated the facility, which resulted in a write-off of $321,000 of deferred financing costs in the second quarter of 2002.



In addition, the Company was not in compliance with the leverage ratio covenant and the interest coverage covenant of the Seitel Data, Ltd. term loan at September 30, 2002, June 30, 2002 and March 31, 2002 and the leverage ratio covenant at September 30, 2001 and December 31, 2001. Additionally, the Company was not in compliance with the net worth covenant at September 30, 2002 and June 30, 2002. The lender has issued a notice of default but has not accelerated the debt.



Substantial Doubt About the Company's Ability to Continue as a Going Concern















The Company reviews and revises its capital expenditure budget periodically based on the amount of capital expected to be available from operating or other sources. Based on the assumption that the Company's Senior Notes will not be accelerated, the Company currently anticipates capital expenditures for the last quarter of 2002 to total approximately $13 million, the majority of which will be for seismic data library additions.  Of the remaining estimated seismic data additions, the Company estimates that $7 million will be cash additions and $6 million will be non-cash additions. If the Company's cash balances, revenue from operating sources and proceeds from the oil and gas asset sale and other sources of funding are not sufficient to cover the Company's anticipated expenditures or if the Company were to increase its planned capital expenditures for 2002, the Company could reduce its current capital budget or general and administrative expenses, and fund expenditures with cash flow generated from operating sources.

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Recent Accounting Pronouncements







In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Disposal or Exit Activities."  This Statement requires that liabilities for the costs associated with exit or disposal activities be recognized when the liabilities are incurred, rather than when an entity commits to an exit plan.  This Statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged.  The new rules will change the timing of liability and expense recognition related to exit or disposal activities, but not the ultimate amount of such expenses.



Information Regarding Forward Looking Statements





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Recent Developments











| | - | $2,641,038 of "unearned advances" that he drew from Company funds;                                    
| | - | ------------------------------------------------------------------------------------------------------
| | - | $750,000 of his personal attorneys' fees and legal settlement costs that he caused the Company to pay;
| | - | $695,805 in his personal automobile racing expenses that he caused the Company to pay; and            
| | - | $148,309 for the purchase of a security system for his home that he caused the Company to pay.        







The Company notified the Securities and Exchange Commission ("SEC") regarding the findings of the internal investigation. The SEC's Fort Worth District Office initiated an informal inquiry into theses events.  The Company continues to cooperate fully with the SEC with respect to the SEC's investigation of the previously disclosed alleged improprieties committed by Mr. Frame and Ms. Valice.  Additionally, the Company has received notification from the U.S. Attorney's Office for the Southern District of Texas of its inquiry into those alleged improprieties and the Company is fully cooperating with this investigation. As discussed below, Mr. Frame and Ms. Valice have each filed suit against the Company alleging, among other things, breach of contract. The Company has filed counterclaims against each to recover the above described funds owed by each to the Company.















Effective November 6, 2002, Kevin Fiur resigned as Chief Executive Officer and a Director of the Company.  The Company's Chairman, Fred Zeidman, has become acting Chief Executive Officer and will lead the search for a new Chief Executive Officer.







The Company is exposed to market risk, including adverse changes in commodity prices, interest rates and foreign currency exchange rates. Refer to the Company's Form 10-K, as amended, for the year ended December 31, 2001 for a detailed discussion of these risks. The Company has not had any significant changes in the market risk exposures since December 31, 2001.



Interest Rate Risk



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

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Foreign Currency Exchange Rate Risk



The Company conducts business in the Canadian dollar and pounds sterling and is therefore subject to foreign currency exchange rate risk on cash flows related to sales, expenses, financing and investing transactions. Currently, the Company has no open foreign exchange contracts.

Item 4. CONTROLS AND PROCEDURES



Since the departure in June 2002 of the Company's former Chief Executive Officer, Paul Frame, and former Chief Financial Officer, Debra Valice, the Company's management, in conjunction with its audit committee, has implemented improved internal controls and procedures, including, among others, procedures regarding cash disbursements and travel and expense reimbursement, centralized purchasing procedures and a disclosure control committee and governing charter.



Based on an evaluation of the disclosure controls and procedures conducted within 90 days prior to the filing date of this report on Form 10-Q, the Acting Chief Executive Officer, Fred S. Zeidman, and the Acting Chief Financial Officer, Marcia H. Kendrick, have concluded that the disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934, as amended) are effective. There were no significant changes in the internal controls or in other factors that could significantly affect those controls subsequent to the date of the evaluation thereof.



PART II - OTHER INFORMATION

Item 1. Legal Proceedings



The Company and certain of its former and current officers and directors have been named as defendants in eleven lawsuits brought as class actions alleging violations of the federal securities laws, all of which were consolidated by an Order entered August 7, 2002, under Cause No. 02-1566, styled In re Seitel, Inc. Securities Litigation, in the United States District Court for the Southern District of Texas.  The complaints generally allege that during proposed class periods of May 5, 2000 through May 3, 2002 or July 13, 2000 through April 1, 2002, the defendants violated sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, by overstating revenues in violation of generally accepted accounting principles.  The plaintiffs seek an unspecified amount of actual and exemplary damages, costs of court, pre- and post-judgment interest and attorneys' fees.  The Court has appointed a lead plaintiff and lead counsel for plaintiffs, and has ordered that the plaintiffs file a consolidated amended complaint by December 6, 2002.  No discovery has been conducted.  The Company intends to vigorously defend these lawsuits.



The Company has been named as a nominal defendant in seven stockholder derivative actions filed in various courts:  Almekinder v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. H-02-2960, In the United States District Court for the Southern District of Texas; Basser v. Frame, Valice, Kendrick, Pearlman, Fiur, Zeidman, Stieglitz, Craig, Lerner, and Seitel, Inc., No. H-02-1874, In the United States District Court for the Southern District of Texas; Berger v. Frame, Pearlman, Valice, Craig, Stieglitz, Lerner, Zeidman, Fiur, and Seitel, Inc., No. 19534-NC, In the Court of Chancery, State of Delaware, Castle County; Chemical Valley & North Central West Virginia Carpenters Pension Plan v. Frame, Valice, Hoffman, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Fuir, and Seitel, Inc., No. 02-CV-3343, In the United States District Court for the Southern District of Texas; Couture v. Frame, Valice, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., No. 20002-37065, In the 80th Judicial District Court, Harris County, Texas; Talley v. Frame, Valice, Pearlman, Craig, Lerner, Stieglitz, Zeidman, Hoffman, and Seitel, Inc., In the 151st Judicial District Court, Harris County, Texas; and Zambie v. Frame, Pearlman, Valice, Craig, Zeidman, Lerner, Stieglitz, Fiur, Ernst & Young, LLP, and Seitel, Inc., In the 333rd Judicial District Court, Harris County, Texas.  The plaintiffs generally allege that the defendants breached and conspired to breach fiduciary duties to the Company's shareholders by failing to maintain adequate accounting controls and by using improper accounting and auditing practices and procedures.  Certain of the plaintiffs also assert causes of action for mismanagement, waste of corporate assets and unjust enrichment.  The Zambie case also alleges professional negligence against Ernst & Young LLP.  The plaintiffs seek judgments for unspecified amounts of compensatory damages, including return of salaries and other payments to the defendants, exemplary damages, attorneys' fees, experts' fees and costs.  The Company's Board of Directors has appointed a special litigation committee, which is conducting an independent investigation of the allegations asserted in the derivative lawsuits, which it expects to be completed in December 2002.  No discovery has been conducted.  The parties have agreed to stay the Delaware case pending completion of the investigation.  The parties have agreed to stay the Texas state-court cases pending the outcome of the Texas federal-court derivative cases.  The parties have moved to consolidate the federal-court derivative cases, which the defendants have moved to stay pending completion of the investigation.

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The Company has sued its former chairman of the board in Seitel, Inc. v. Pearlman, C.A. No. H.-02-1843, In the United States District Court in the Southern District of Texas.  The Company seeks a declaratory judgment with respect to the employment agreement between Mr. Pearlman and the Company.  Following his resignation as chairman of the board, Mr. Pearlman and the Company entered into negotiations for a restructuring of his employment agreement.  During the negotiations, a document was created that Mr. Pearlman now alleges has superseded the employment agreement.  The Company asserts that neither its Board of Directors, nor any of its committees, approved the document.  The Company seeks a judgment declaring the effect of Mr. Pearlman's resignation on the employment agreement, whether the Company owes any amounts under the employment agreement as a result of his resignation and, if so, how much, and a judgment that the subsequent document is not binding on the Company and is not enforceable by Mr. Pearlman against the Company.  Mr. Pearlman has filed counterclaims asserting that the Board of Directors approved the subsequent document and asserts causes of action for breach of contract, fraud, negligent misrepresentation and promissory estoppel.  Mr. Pearlman seeks to be realigned as the plaintiff in the action, actual damages in an amount exceeding $4,000,000, punitive damages, attorneys' fees, costs and expenses.  The Court has denied Mr. Pearlman's request to be realigned, subject to reconsideration at a time closer to trial  Discovery has commenced.  The Company intends to vigorously pursue its claims and defend against the counterclaims.



The Company has been sued by its former chief financial officer in Valice v. Seitel, in the 55th Judicial District Court of Harris County, No. 2002-30195.  Ms. Valice filed suit against the Company alleging a breach of her employment contract by virtue of her termination.  The Company terminated her employment for what it believes is "cause" as required by the contract, and the Company believes that she is entitled to no recovery on her suit.  The Company has filed a counter suit against Ms. Valice seeking to recover over $621,000 in unearned advances she received from the Company and has failed to repay.  The Company intends to vigorously defend the suit and pursue its counterclaim. Discovery has commenced.



The Company has been sued by its former chief executive officer in Frame v. Seitel, in the 113th Judicial District Court of Harris County, No. 2002-35891.  Mr. Frame filed suit against the Company alleging a breach of his employment contract by virtue of his asserted termination.  He also alleges a press release announcing his resignation and advising that the Company was investigating possible misappropriation of corporate funds for personal use by him was defamatory.  He also seeks a declaratory judgment that certain funds he received from the Company were proper and do not have to be repaid.  The Company has answered and asserted various defenses including the fact that the allegedly defamatory statement is true and that its publication was privileged.  The Company also has filed a counter suit to recover the approximately $4,200,000 in corporate funds that the Company believes he inappropriately converted for his personal use and benefit.  The Company intends to vigorously defend the suit and pursue its counterclaim.  Discovery is not yet underway.



The Company is a party to a dispute with Winthrop Resources Corporation ("Winthrop"), styled No. CT 02-011613, Winthrop Resources Corporation  v. Seitel, Inc.,Hennepin County District Court, Minnesota, arising out of an equipment lease for computer equipment primarily used in its Houston and Calgary data centers. Winthrop has alleged claims for breach of contract, an action for account stated, and replevin, and seeks damages of approximately $8.4 million and a court order requiring the Company to return the equipment.  The Company has filed a counterclaim seeking to set aside the lease on grounds that the lease delivered was not as represented and seeks damages from Winthrop.



The Company is a party to a dispute with Rimco Production Company, Inc. ("Rimco"), styled Rimco Production Company, Inc. v. Seitel Data, Ltd., Cause No. 2002-42420, In the 295th District Court of Harris County, Texas, in which Rimco alleges that Seitel Data, Ltd. has breached an agreement to provide seismic data as soon as it was processed. Rimco seeks a declaratory judgment and unspecified damages.  The Company intends to vigorously defend the suit.  Discovery has commenced.

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In addition to the lawsuits described above, the Company is involved from time to time in ordinary, routine claims and lawsuits incidental to its business.  In the opinion of management, uninsured losses, if any, resulting from the ultimate resolutions of these matters should not be material to the Company's financial position or results of operation

|Items 2., 3., 4. and 5.    Not applicable. 
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|                                           
|Item 6.    Exhibits and Reports on Form 8-K
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|SIGNATURES                                                                                                            
|----------------------------------------------------------------------------------------------------------------------
|                                                                                                                      
|                                                                                                                      
|Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly
caused this report to
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|be signed on its behalf by the undersigned thereunto duly authorized.                                                 
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|Dated:  November                                                                                                      
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|Dated:  November                                                                                                      
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CERTIFICATION OF CHIEF EXECUTIVE OFFICER





I, Fred S. Zeidman, certify that:



1.          I have reviewed this quarterly report on Form 10-Q of Seitel, Inc.;



2.          Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4.          The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.          The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and



6.          The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





|Dated:  November | 13, | 2002 |  | /s/ | Fred S. Zeidman               
|---------------- | --- | ---- |  | --- | ------------------------------
|                 |     |      |  |     |                               
|                 |     |      |  |     | Fred S. Zeidman               
|                 |     |      |  |     | Acting Chief Executive Officer



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CERTIFICATION OF CHIEF FINANCIAL OFFICER





I, Marcia H. Kendrick, certify that:



1.          I have reviewed this quarterly report on Form 10-Q of Seitel, Inc.;



2.          Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;



3.          Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;



4.          The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.          The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and



6.          The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.





|Dated:  November | 13, | 2002 |  | /s/ | Marcia H. Kendrick            
|---------------- | --- | ---- |  | --- | ------------------------------
|                 |     |      |  |     |                               
|                 |     |      |  |     | Marcia H. Kendrick            
|                 |     |      |  |     | Acting Chief Financial Officer
|                 |     |      |  |     |                               



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|        |  | EXHIBIT
INDEX                            |  |       
|------- |  | ---------------------------------------- |  | ------
|        |  |                                          |  | Page  
|Exhibit |  | Title                                    |  | Number
|        |  |                                          |  |       
|        |  |                                          |  |       
|99.1    |  | Certification of Chief Executive Officer |  | 47    
|        |  |                                          |  |       
|99.2    |  | Certification of Chief Financial Officer |  | 48    



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