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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2006 (May 2, 2006)

SEITEL, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State of Incorporation)

0-14488

(Commission File Number)

76-0025431

(IRS Employer Identification No.)

10811 S. Westview Circle Drive
Building C, Suite 100
Houston, Texas 77043

(Address of Registrant's principal executive offices)

(713) 881-8900

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

≅ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

≅ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

≅ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

≅ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition

Seitel, Inc. (the "Company") hereby incorporates by reference into this Item 2.02 the press release issued by the Company on March 15, 2006 with respect to its financial results for the first quarter ended March 31, 2006. The press release is furnished as Exhibit 99.1.

The earnings release includes non-GAAP financial measures, cash resales and cash margin, and the related reconciliations to total revenue and operating income, respectfully, the most directly comparable GAAP measures.

Management uses these non-GAAP financial measures because they provide meaningful information to assist in the evaluation and management of the Company's operations. Volatility in the trend for cash resales over several consecutive quarters could indicate changing market conditions. Cash margin is helpful in determining the level of cash from operations available for debt service and capital expenditures (net of customer underwriting). These non-GAAP financial measures are intended to supplement the Company's presentation of its financial results prepared in accordance with GAAP. Such measures are not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies.

The information in this Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Section 9 - Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(a) Financial Statements of Businesses Acquired.

None.

(b) Pro Forma Financial Information.

None.

99.1 Press Release dated May 2, 2006.

SIGNATURE

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

Dated: May 3, 2006 SEITEL, INC.

By: /s/ Robert D. Monson

Robert D. Monson

President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.

Description

99.1

Press Release dated May 2, 2006.

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:     Robert Monson, President and CEO                   William Restrepo, EVP and CFO

                   713-881-2816                                                       713-881-8900

SEITEL ANNOUNCES 2006 FIRST QUARTER RESULTS

Cash Resales Post Another Record and Profitability Surges

HOUSTON, May 2, 2006 - Seitel, Inc. (OTC Bulletin Board: SELA), a leading provider of seismic data to the oil and gas industry, today reported revenue of $44.7 million for the first quarter ended March 31, 2006, compared to revenue of $41.4 million in the fourth quarter of 2005 and $47.3 million in the first quarter of last year. Cash resales reached another record at $33.6 million, compared to $32 million in the fourth quarter of 2005 and $24.2 million in the first quarter of last year. Cash resales for the quarter increased 5% sequentially and 39% year-on-year. This is the sixth consecutive quarter of year-on-year growth in cash resales as demand for seismic data continued to increase.

For the first quarter of 2006, net income was $6.8 million, or $0.04 per diluted share, compared to net income of $1.4 million, or $0.01 per diluted share in the fourth quarter of last year and a loss of $146,000 in the first quarter of 2005.

"The year could not have started any better," stated Rob Monson, chief executive officer. "The growth trend in our cash resales more than offset our normal seasonal pattern and validates our belief that the rebound in exploration for oil and gas in North America is in its early stages. Demand for data was strong in all geographical areas with Louisiana leading the way, and for all types of seismic data, including not only our 3D data onshore, but also our 2D and offshore data. Our earlier vintages continued to deliver a strong contribution to our overall level of cash resales.

"For the quarter, our profitability was excellent and our average annual return on capital employed to date was over 45%," continued Monson. "The improved operating margins, now at 27%, validate our approach of focusing on increasing cash flow while maintaining a rigorous discipline in selecting new seismic data investments. Our team will remain focused over the coming months in taking advantage of the current environment to significantly expand our library while maintaining high rates of return on our investments."

The company reported operating income of $12 million in the 2006 first quarter, compared to operating income of $6 million in the 2005 first quarter and $7.4 million in the fourth quarter of last year. Operating margins improved to 27% during the current quarter, an improvement of 14 percentage points over the first quarter of 2005, and a sequential increase of 9 percentage points. Depreciation and amortization expense for the first quarter of 2006 was $23.8 million, compared to $33.3 million in the same period in 2005 and $22 million in the fourth quarter of last year. The 2005 period reflects lower amortization resulting from the effects of the level of revenue recognized on data with fully amortized costs, which increased to 62% of the total resales from the library, as compared to 61% percent in the fourth quarter of last year and 49% for the first quarter of 2005.

Selling, general and administrative expenses were $9 million for the first quarter of 2006, compared to $11.9 million in the fourth quarter of last year and $8 million in the first quarter of 2005. The above expenses included non-cash compensation of $604,000 in the first quarter of 2006, $354,000 in the same period last year, and $3.2 million in the fourth quarter of 2005.

Cash margin, defined as cash resales plus all other cash revenues other than from data acquisitions plus gain on sale of seismic data less cash expenses, is the indicator management believes best measures the level of cash from operations that is available for debt service and capital expenditures, net of underwriting. Cash margin for the first quarter increased to $27.6 million, compared to $17.6 million in the same period last year and $24.5 million in the fourth quarter of 2005. Cash margin grew 13% sequentially and 57% percent year-on-year.

CONFERENCE CALL

Seitel will broadcast live via the Internet its 2006 first quarter results tomorrow, May 3 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). To listen to the Webcast and gain access to the accompanying slide presentation, log on to the company's Website at http://www.seitel-inc.com/investorrelations.asp and click on the First Quarter 2006 Earnings Webcast link. The Webcast will be available as a combined audio and visual presentation or as a visual presentation only (by using the "Live Phone Only" button on the Webcast) for those dialing in on the conference call. To dial in for the call and to participate in the question and answer session, dial 800-659-1966, passcode Seitel. The call will also be available for replay for 30 days by dialing 888-286-8010, passcode 50604620. A replay of the Webcast will be available on the investor relations page of the company's Website within 24 hours of the call. The slide presentation will be available immediately after the call on the company's Website at http://www.seitel-inc.com/investorrelations.asp.

ABOUT SEITEL

Seitel (OTC Bulletin Board: SELA), founded in 1982, has grown to become the owner of one of the largest seismic data libraries providing information to the North American oil and gas market. Focused on the U.S. and Canada, the company owns data in all the major exploration and production basins. Seitel continues to grow the data library using its 20 years of experience in performing seismic surveys in North America. Seitel's strengths include expertise in managing and delivering seismic data, as well as an experienced and dynamic sales and marketing team. Seitel's seismic data library includes both onshore and offshore three-dimensional (3D) and two-dimensional (2D) data and offshore multi-component data. The company has ownership in over 36,000 square miles of 3D and approximately 1.1 million linear miles of 2D seismic data.

Statements in this release about the future outlook related to Seitel involve known and unknown risks and uncertainties, which may cause Seitel's actual results to differ materially from expected results. While Seitel believes its forecasting assumptions are reasonable, there are factors that are hard to predict and influenced by economic and other conditions that are beyond Seitel's control. Other important factors which could cause actual results to differ materially from those in the forward-looking statements are detailed in Seitel's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K, a copy of which may be obtained from Seitel without charge.

(Tables to follow)

SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

		(Unaudited)
		March 31,			December 31,
		2006			2005
ASSETS
Cash and cash equivalents	$	80,576		$	78,097
Restricted cash		101			85
Receivables
Trade, net		36,425			27,385
Notes and other, net		1,134			509
Net seismic data library		107,176			111,946
Net property and equipment		8,953			9,456
Oil and gas operations held for sale		219			194
Investment in marketable securities		82			54
Prepaid expenses, deferred charges and other		13,537			13,071
Deferred income taxes		5,347			5,874

TOTAL ASSETS	$	253,550		$	246,671

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities	$	24,364		$	25,666
Income taxes payable		-			276
Oil and gas operations held for sale		24			40
Debt
Senior Notes		185,395			185,272
Notes payable		368			378
Obligations under capital leases		2,938			2,950
Deferred revenue		44,385			43,250
TOTAL LIABILITIES		257,474			257,832

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; authorized
5,000,000 shares; none issued		-			-
Common stock, par value $.01 per share; authorized
400,000,000 shares; issued and outstanding 154,860,525
shares at March 31, 2006 and 153,604,345 shares
at December 31, 2005		1,549			1,536
Additional paid-in capital		238,744			241,289
Retained deficit		(249,488	)		(256,227	)
Deferred compensation - restricted stock		-			(2,944	)
Notes receivable from officers and employees for stock
purchases		-			(1	)
Accumulated other comprehensive income		5,271			5,186
TOTAL STOCKHOLDERS' DEFICIT		(3,924	)		(11,161	)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	253,550		$	246,671

(more)

SEITEL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except per share amounts)

		Three Months Ended March 31,
		2006			2005

REVENUE	$	44,698		$	47,306


EXPENSES:
Depreciation and amortization		23,778			33,257
Gain on sale of seismic data		(257	)		-
Cost of sales		108			39
Selling, general and administrative		9,030			8,020
		32,659			41,316
INCOME FROM OPERATIONS		12,039			5,990


Interest expense, net		(4,908	)		(5,950	)
Foreign currency exchange losses		(161	)		(192	)


Income (loss) from continuing operations before income taxes		6,970			(152	)
Provision for income taxes		184			11
Income (loss) from continuing operations		6,786			(163	)
Income from discontinued operations		13			17


NET INCOME (LOSS)	$	6,799		$	(146	)

Income (loss) per share:
Basic:
Income (loss) from continuing operations	$	.05		$	-
Income from discontinued operations		-			-
Net income (loss)	$	.05		$	-
Diluted:
Income (loss) from continuing operations	$	.04		$	-
Income from discontinued operations		-			-
Net income (loss)	$	.04		$	-

Weighted average number of common and
common equivalent shares:
Basic		150,722			151,851
Diluted		164,344			151,851

(more)

The following table summarizes the components of our revenue for the three months ended March 31, 2006 and 2005 and the three months ended December 31, 2005 (in thousands):

		Three months ended
		March 31,			March 31,			December 31,
		2006			2005			2005

Acquisition revenue:
Cash underwriting	$	8,809		$	12,032		$	3,835
Underwriting from non-monetary exchanges		1,835			387			492
Total acquisition revenue		10,644			12,419			4,327
Licensing revenue:
Cash resales		33,626			24,212			31,978
Non-monetary exchanges		2,037			605			2,413
Revenue deferred		(14,883	)		(12,667	)		(13,217	)
Recognition of revenue previously deferred		11,004			21,625			14,535
Total resale revenue		31,784			33,775			35,709
Solutions and other		2,270			1,112			1,325
Total revenue	$	44,698		$	47,306		$	41,361

The following table shows the percentage growth in cash resales and total revenue year-on-year (first quarter 2005 to first quarter 2006) and sequentially (fourth quarter 2005 to first quarter 2006):

	Year-on
	Year	Sequential
Cash resales	38.9%	5.2%
Total revenue	(5.5%)	8.1%

The following table shows cash margin (defined as cash resales plus all other cash revenues other than from data acquisitions, gain on sale of seismic data, less cash selling, general and administrative expenses and costs of goods sold) and the reconciliation of this non-GAAP financial measure to the most directly comparable GAAP measure, operating income, for the three months ended March 31, 2006 and 2005 and the three months ended December 31, 2005 (in thousands):

		Three Months Ended
		March 31,			March 31,			December 31,
		2006			2005			2005
Cash margin	$	27,619		$	17,619		$	24,539
Add (subtract) other revenue components not
included in cash margin:
Acquisition revenue		10,644			12,419			4,327
Non-monetary exchanges		2,037			605			2,413
Revenue deferred		(14,883	)		(12,667	)		(13,217	)
Recognition of revenue previously
deferred		11,004			21,625			14,535
Less:
Depreciation and amortization		(23,778	)		(33,257	)		(22,010	)
Non-cash operating expenses		(604	)		(354	)		(3,170	)
Operating income, as reported	$	12,039		$	5,990		$	7,417

(more)

The following table shows the percentage growth in cash margin and operating income year-on-year (first quarter 2005 to first quarter 2006) and sequentially (fourth quarter 2005 to first quarter 2006):

	Year-on
	Year	Sequential
Cash margin	56.8%	12.6%
Operating income, as reported	101.0%	62.3%

The following table summarizes the cash and non-cash components of our selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2006 and 2005 and the three months ended December 31, 2005 (in thousands):

		Three Months Ended
		March 31,		March 31,		December 31,
		2006		2005		2005
Cash SG&A	$	8,426	$	7,666	$	8,722
Non-cash SG&A		604		354		3,170
Total SG&A	$	9,030	$	8,020	$	11,892

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