Cash Resales of $32.7 Million 18% above Last Year

Seitel, Inc., a leading provider of seismic data to the oil and gas industry, today reported results for the second quarter ended June 30, 2008. Revenue for the second quarter of $44.7 million increased $14.3 million or 47% over the second quarter of 2007, primarily driven by $10.2 million growth in total resales from our library, that reflected a $6.1 million increase in selections from library cards and $4.9 million higher cash resales. Acquisition revenue grew by $3.6 million or 41% mainly in the US. Solutions revenue was $0.5 million or 34% higher than in 2007.

Revenue for the six month period was $92.1 million as compared to $66.7 million in 2007. The 38% growth in revenue came from $14.8 million higher total library resales and a $9.7 million increase in acquisition revenue. Solutions revenue was $1.0 million higher than in 2007.

Cash resales for the quarter were $32.7 million, compared to $27.8 million for the second quarter of last year. The 18% growth in cash resales reflected 19% growth in our core resales, with particularly robust licensing activity in Canada. Our non-core US 2D and offshore cash resales increased by 5%. For the first half of 2008, cash resales of $52.5 million were $3.0 million or 6% higher than in the prior year.

For the second quarter of 2008, the net loss of $20.4 million improved as compared to last year’s loss of $24.2 million. The 2008 period included approximately $24.6 million in costs related to purchase accounting adjustments to the value of assets and liabilities, mainly the step-up in value of the data library. The 2007 second quarter included approximately $26.9 million of purchase accounting adjustments. The year-on-year reduction in the net loss resulted from increased revenue, compensated by higher data amortization expense, lower currency gains, and higher income taxes. The second quarter of last year included $1.3 million more in currency gains from our Canadian operations and $2.0 million in net tax benefits, as compared to a $0.9 million tax expense in 2008. For the six month period, the net loss of $38.8 million was significantly lower than the $55.4 million for the equivalent period of 2007. The 2007 period included $18.7 million in merger expenses as compared to $0.4 million in 2008.

Cash EBITDA, defined as cash resales and solutions revenue less cash operating expenses, was $26.3 million for the second quarter of 2008, as compared to $22.2 million in the same quarter of 2007. This $4.2 million or 19% improvement was driven by a $5.4 million increase in cash revenue somewhat offset by a $1.2 million increase in cash operating expenses. The higher cash operating expenses were partly due to additional variable compensation of approximately $0.7 million, mainly sales commissions on the incremental revenue and higher accruals for employee incentive bonuses. In addition, the stronger Canadian dollar added $0.2 million to our operating expenses and the ramp up in activity, in particular data creation, has required the addition of resources.

For the first half of 2008, Cash EBITDA was $39.1 million as compared to $38.7 million in 2007, as a $4.0 million increase in cash revenue for the period was offset by a $3.5 million increase in cash operating expenses. The significant year on year growth in total revenue drove increases in compensation, including incremental resources to meet the higher activity levels, as well as higher sales commissions and employee performance bonuses. In addition, cash operating expenses in the first half of last year included $0.9 million in one-time recoveries from legal disputes.

“The second quarter confirmed the quality of the data we have added to the library over the past few years,” commented Rob Monson, president and chief executive officer. “Our total cash resales grew by 18% year-on-year and set a new record for a second quarter, with both the US and Canada delivering vigorous growth. Year to date cash resales are 6% ahead of 2007.

“Oil and gas companies continued to invest heavily in North American production as evidenced by the continued increase in drilling rigs,” stated Monson. “Exploration has also benefitted from our clients’ efforts to replace their production, as demonstrated by the 45% year to date increase in our acquisition revenue. The current environment has allowed us to secure the addition to our library of significant amounts of attractive data that should result in even higher resales over the years to come.”

The company reduced its operating losses to $9.5 million in the second quarter of 2008 as compared to $17.8 million in 2007, as a result of the higher revenue and stable SG&A. For the six month period, operating losses fell to $17.9 million from $41.1 million in 2007; last year included $18.7 million in merger expenses.

Depreciation and amortization expense for the second quarter of 2008 was $44.3 million compared to $37.8 million for the same period in 2007. For the second quarter of 2008, 20% of total resales were for fully amortized data, as compared to 16% for the first quarter. In 2007, substantially all revenue attracted amortization.

Selling, general and administrative expenses excluding merger expenses were $9.8 million for the second quarter of 2008 as compared to $9.5 million in the second quarter of last year. Increases in cash compensation were largely offset by a significant reduction in the amortization of option expenses related to employee incentives.

Net interest expense was $10.2 million for the second quarter, compared to $9.9 million for the first quarter of this year, and to $9.9 million for the second quarter of 2007.

Our cash balances at the end of the second quarter were $41.4 million. Cash generation during the second quarter was $4.2 million as our cash EBITDA was offset by higher working capital requirements and by net cash capital expenditures for the quarter of $7.9 million. Customer receivables for data library sales increased as a result of the high level of cash resales and capital expenditure liabilities from the robust creation activity in the first quarter were paid down. Cash balances on August 8, 2008 stood at $50.9 million.

Gross capital expenditures for the second quarter of 2008 were $22.5 million, as compared to $17.3 million for the prior year. Acquisition capital expenditures increased by $2.9 million as creation activity has ramped up in the US, while data purchases and trades grew by $1.9 million year-on-year.

For the six month period, gross capital expenditures increased to $59.4 million in 2008 from $39.2 million last year. Acquisition capital expenditures grew by $12.7 million or 41% with both Canada and the US contributing. Data purchases and trades were $7.1 million higher than last year. Net cash capex for the period was $20.3 million as compared to $15.8 million in 2007.

Our forecast net cash capital expenditures for the year 2008 are currently estimated to be approximately $48 million. Although our traded data should increase over our initial forecast, we now expect lower cash data purchases. In addition, we expect the cost per square mile of our net capital expenditures to end up lower than originally anticipated.

For the second quarter of 2008, we added approximately 400 square miles of seismic data to our library, reaching a cumulative 1,200 square miles for the first half of the year. We remain on target to increase the size of our onshore 3D library by approximately 10% or 3,000 square miles.

CONFERENCE CALL

Seitel will hold its quarterly conference call to discuss second quarter results for 2008 on Tuesday, August 12, 2008 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). The dial-in number for the call is 866-578-5784, passcode Seitel. A replay of the call will be available until August 20, 2008 by dialing 888-286-8010, passcode 30832695, and will be available following the conference call at the Investor Relations section of the company’s website at http://www.seitel-inc.com.

ABOUT SEITEL

Seitel is a leading provider of seismic data to the oil and gas industry in North America. Seitel's data products and services are critical for the exploration for, and development and management of, oil and gas reserves by oil and gas companies. Seitel has ownership in an extensive library of proprietary onshore and offshore seismic data that it has accumulated since 1982 and that it licenses to a wide range of oil and gas companies. Seitel believes that its library of onshore seismic data is one of the largest available for licensing in the United States and Canada. Seitel's seismic data library includes both onshore and offshore 3D and 2D data. Seitel has ownership in over 40,000 square miles of 3D and approximately 1.1 million linear miles of 2D seismic data concentrated in the major active North American oil and gas producing regions. Seitel serves a market which includes over 1,600 companies in the oil and gas industry.

The Press Release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include all statements that do not relate solely to historical or current facts, and you can identify forward-looking statements because they contain words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” or “anticipates” or similar expressions that concern the strategy, plans or intentions of the Company. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, actual results may differ materially from management expectations reflected in our forward-looking statements. These risks and uncertainties are described in the Company'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 the Company without charge. Management undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The press release also includes certain non-GAAP financial measurers as defined under the SEC rules. Non-GAAP financial measures include cash resales, for which the most comparable GAAP measure is total revenue, and also include cash EBITDA or cash margin, for which the most comparable GAAP measure is operating income.

(Tables to follow)

The following table summarizes the components of our revenue for the periods indicated (in thousands):

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

The following table summarizes the cash and non-cash components of our selling, general and administrative (“SG&A”) expenses for the periods indicated (in thousands):

The following table summarizes our capital expenditures for the periods indicated (in thousands):

Seitel, Inc.
William Restrepo, 713-881-8900