Supplemental Guarantors Consolidating Condensed Financial Information

6 Months Ended

Jun. 30, 2011

Supplemental Guarantors Consolidating Condensed Financial Information

Supplemental Guarantors Consolidating Condensed Financial Information

NOTE L-SUPPLEMENTAL GUARANTORS CONSOLIDATING CONDENSED FINANCIAL INFORMATION

On February 14, 2007, the Company completed a private placement of 9.75% Senior Notes in the aggregate principal amount of $400.0 million. The Company's payment obligations under the 9.75% Senior Notes are jointly and severally guaranteed by certain of its 100% owned U.S. subsidiaries ("Guarantor Subsidiaries"). All subsidiaries of the Company that do not guaranty the 9.75% Senior Notes are referred to as Non-Guarantor Subsidiaries.

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

The following consolidating condensed financial information presents the consolidating condensed balance sheets as of June 30, 2011 and December 31, 2010, and the consolidating condensed statements of operations and statements of cash flows for the six months ended June 30, 2011 and June 30, 2010 of (a) the Company; (b) the Guarantor Subsidiaries; (c) the Non-Guarantor Subsidiaries; (d) elimination entries; and (e) the Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis.

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

CONSOLIDATING CONDENSED BALANCE SHEET

As of June 30, 2011

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
ASSETS
Cash and cash equivalents	$		-		$		172,281		$		1,089		$		-		$		173,370
Receivables
Trade, net			-				25,969				6,321				-				32,290
Notes and other			50				22				3,622				-				3,694
Due from Seitel Holdings, Inc.			-				162				-				-				162
Intercompany receivables (payables)			235,454				(219,686	)			(15,768	)			-				-
Investment in subsidiaries			253,189				415,210				1,253				(669,652	)			-
Net seismic data library			-				70,542				47,119				-				117,661
Net property and equipment			-				1,426				3,724				-				5,150
Investment in marketable securities			-				458				-				-				458
Prepaid expenses, deferred charges and other			7,231				5,728				527				-				13,486
Intangible assets, net			900				18,068				11,453				-				30,421
Goodwill			-				107,688				103,518				-				211,206
Deferred income taxes			-				326				-				-				326
TOTAL ASSETS	$		496,824		$		598,194		$		162,858		$		(669,652	)	$		588,224
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities	$		14,622		$		13,997		$		8,447		$		-		$		37,066
Income taxes payable			93				245				172				-				510
Senior Notes			400,000				-				-				-				400,000
Notes payable			125				-				-				-				125
Obligations under capital leases			-				-				3,419				-				3,419
Deferred revenue			-				31,121				2,856				-				33,977
Deferred income taxes			-				-				2,462				-				2,462
TOTAL LIABILITIES			414,840				45,363				17,356				-				477,559
STOCKHOLDER'S EQUITY
Common stock			-				-				-				-				-
Additional paid-in capital			397,900				-				-				-				397,900
Parent investment			-				764,752				156,914				(921,666	)			-
Retained deficit			(315,916	)			(212,379	)			(39,635	)			252,014				(315,916	)
Accumulated other comprehensive income			-				458				28,223				-				28,681
TOTAL STOCKHOLDER'S EQUITY			81,984				552,831				145,502				(669,652	)			110,665
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$		496,824		$		598,194		$		162,858		$		(669,652	)	$		588,224

CONSOLIDATING CONDENSED BALANCE SHEET

As of December 31, 2010

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
ASSETS
Cash and cash equivalents	$		-		$		75,068		$		14,903		$		-		$		89,971
Receivables
Trade, net			-				23,269				11,135				-				34,404
Notes and other			-				70				14				-				84
Due from Seitel Holdings, Inc.			-				156				-				-				156
Intercompany receivables (payables)			128,299				(124,507	)			(3,792	)			-				-
Investment in subsidiaries			246,883				414,476				1,262				(662,621	)			-
Net seismic data library			-				74,719				31,385				-				106,104
Net property and equipment			-				1,402				4,044				-				5,446
Investment in marketable securities			-				3,102				-				-				3,102
Prepaid expenses, deferred charges and other			6,948				2,912				389				-				10,249
Intangible assets, net			900				19,674				12,543				-				33,117
Goodwill			-				107,688				100,362				-				208,050
Deferred income taxes			-				326				-				-				326
TOTAL ASSETS	$		383,030		$		598,355		$		172,245		$		(662,621	)	$		491,009
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Accounts payable and accrued liabilities	$		14,731		$		18,410		$		20,029		$		-		$		53,170
Income taxes payable			2				-				6				-				8
Senior Notes			402,056				-				-				-				402,056
Notes payable			154				-				-				-				154
Obligations under capital leases			-				-				3,394				-				3,394
Deferred revenue			-				31,140				5,981				-				37,121
Deferred income taxes			-				-				2,128				-				2,128
TOTAL LIABILITIES			416,943				49,550				31,538				-				498,031
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock			-				-				-				-				-
Additional paid-in capital			277,488				-				-				-				277,488
Parent investment			-				764,752				156,908				(921,660	)			-
Retained deficit			(311,401	)			(219,050	)			(39,989	)			259,039				(311,401	)
Accumulated other comprehensive income			-				3,103				23,788				-				26,891
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)			(33,913	)			548,805				140,707				(662,621	)			(7,022	)
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)	$		383,030		$		598,355		$		172,245		$		(662,621	)	$		491,009

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2011

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
REVENUE	$		-		$		66,412		$		29,264		$		(635	)	$		95,041
EXPENSES:
Depreciation and amortization			-				42,731				22,929				-				65,660
Cost of sales			-				51				4				-				55
Selling, general and administrative			1,042				9,437				5,646				(635	)			15,490
			1,042				52,219				28,579				(635	)			81,205
INCOME (LOSS) FROM OPERATIONS			(1,042	)			14,193				685				-				13,836
Interest expense, net			(10,146	)			(9,936	)			(342	)			-				(20,424	)
Foreign currency exchange gains			-				4				453				-				457
Gain on sale of marketable securities			-				2,467				-				-				2,467
Other income			2				27				135				-				164
Income (loss) before income taxes and equity in loss of subsidiaries			(11,186	)			6,755				931				-				(3,500	)
Provision for income taxes			-				438				577				-				1,015
Equity in income of subsidiaries			6,671				354				-				(7,025	)			-
NET INCOME (LOSS)	$		(4,515	)	$		6,671		$		354		$		(7,025	)	$		(4,515	)

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2010

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Eliminations				Consolidated Total
REVENUE	$		-		$		44,506		$		22,434		$		(1,602	)	$		65,338
EXPENSES:
Depreciation and amortization			-				54,134				22,633				-				76,767
Cost of sales			-				58				5				-				63
Selling, general and administrative			2,181				8,216				6,103				(1,602	)			14,898
			2,181				62,408				28,741				(1,602	)			91,728
LOSS FROM OPERATIONS			(2,181	)			(17,902	)			(6,307	)			-				(26,390	)
Interest expense, net			(9,828	)			(10,381	)			(117	)			-				(20,326	)
Foreign currency exchange gains (losses)			-				2				(110	)			-				(108	)
Gain on sale of marketable securities			-				52				-				-				52
Other income			1				105				28				-				134
Loss before income taxes and equity in loss of subsidiaries			(12,008	)			(28,124	)			(6,506	)			-				(46,638	)
Provision (benefit) for income taxes			-				180				(1,990	)			-				(1,810	)
Equity in loss of subsidiaries			(32,820	)			(4,516	)			-				37,336				-
NET LOSS	$		(44,828	)	$		(32,820	)	$		(4,516	)	$		37,336		$		(44,828	)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2011

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor  Subsidiaries				Consolidating Eliminations			Consolidated Total
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$		(20,460	)	$		48,854		$		15,692		$		-	$		44,086
Cash flows from investing activities:
Cash invested in seismic data			-				(38,006	)			(41,073	)			-			(79,079	)
Cash paid to acquire property, equipment and other			-				(621	)			(118	)			-			(739	)
Net proceeds from sale of marketable securities			-				2,467				-				-			2,467
Cash from sale of property, equipment and other			-				34				1				-			35
Advances to Seitel Holdings, Inc.			-				(6	)			-				-			(6	)
Net cash used in investing activities			-				(36,132	)			(41,190	)			-			(77,322	)
Cash flows from financing activities:
Principal payments on notes payable			(29	)			-				-				-			(29	)
Repayment of 11.75% Senior Notes			(2,000	)			-				-				-			(2,000	)
Principal payments on capital lease obligations			-				-				(81	)			-			(81	)
Borrowings on line of credit			-				-				737				-			737
Payments on line of credit			-				-				(737	)			-			(737	)
Contributed capital			125,000				-				-				-			125,000
Costs of debt and equity transactions			(6,020	)			-				(47	)			-			(6,067	)
Intercompany transfers			(96,491	)			84,491				12,000				-			-
Net cash provided by financing activities			20,460				84,491				11,872				-			116,823
Effect of exchange rate changes			-				-				(188	)			-			(188	)
Net increase (decrease) in cash and cash equivalents			-				97,213				(13,814	)			-			83,399
Cash and cash equivalents at beginning of period			-				75,068				14,903				-			89,971
Cash and cash equivalents at end of period	$		-		$		172,281		$		1,089		$		-	$		173,370

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2010

(In thousands)

		Parent				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Consolidating Eliminations			Consolidated Total
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$		(19,720	)	$		36,019		$		16,272		$		-	$		32,571
Cash flows from investing activities:
Cash invested in seismic data			-				(7,743	)			(9,898	)			-			(17,641	)
Cash paid to acquire property, equipment and other			-				(7	)			(33	)			-			(40	)
Net Proceeds from sales of marketable Securities			-				52				-				-			52
Return of capital from subsidiary			-				4,501				(4,501	)			-			-
Advances to Seitel Holdings, Inc.			-				(5	)			-				-			(5	)
Net cash used in investing activities							(3,202	)			(14,432	)			-			(17,634	)
Cash flows from financing activities:
Principal payments on notes payable			(27	)			-				-				-			(27	)
Principal payments on capital lease obligations			-				-				(71	)			-			(71	)
Borrowings on line of credit			-				-				10				-			10
Payments on line of credit			-				-				(10	)			-			(10	)
Costs of debt and equity transactions			(65	)			-				-				-			(65	)
Intercompany transfers			19,812				(19,812	)			-				-			-
Net cash provided by (used in) financing activities			19,720				(19,812	)			(71	)			-			(163	)
Effect of exchange rate changes			-				-				224				-			224
Net increase in cash and cash equivalents			-				13,005				1,993				-			14,998
Cash and cash equivalents at beginning of period			-				24,221				2,049				-			26,270
Cash and cash equivalents at end of period	$		-		$		37,226		$		4,042		$		-	$		41,268