Seitel Announces 2007 Fourth Quarter Results

Cash Resales of $43.1 Million a New Quarterly High
HOUSTON--(Business Wire)--
Seitel, Inc., a leading provider of seismic data to the oil and
gas industry, today reported results for the fourth quarter ended
December 31, 2007. Because the company was acquired by ValueAct
Capital on February 14, 2007, the fourth quarter financial statements
include purchase accounting adjustments that resulted in significantly
higher non-cash expenses. Since our fourth quarter results are not
fully comparable to the pre-merger fourth quarter of 2006, the impact
from the purchase accounting adjustments on our financial results are
highlighted in the discussion below.

Revenue for the fourth quarter of $53.8 million included a $6.7
million reduction related to purchase accounting adjustments to our
deferred revenue balance. Without this adjustment, total revenue for
the quarter would have attained $60.5 million, as compared to revenue
of $52.8 million in the fourth quarter of 2006. Cash resales for the
quarter reached $43.1 million, compared to $29.2 million for the third
quarter and to $38.1 million for the fourth quarter of last year. The
$7.7 million year-on-year growth in fourth quarter adjusted revenue
reflected a $6.8 million increase in selections revenue before
purchase accounting adjustments, as well as $5 million increases in
both cash resales and non-monetary exchanges. Acquisition revenue
increased by $2.2 million on completion of weather delayed projects in
Texas. An $11.7 million increase in deferrals partially offset the
above improvements.

For the year, revenue of $148.8 million included an $18.3 million
reduction related to purchase accounting adjustments. Without these
adjustments, total revenue for 2007 would have reached $167.1 million
as compared to revenue of $191.9 million in 2006. The $24.8 million
reduction in adjusted revenue reflected primarily an $18.4 million
increase in deferrals, partially from higher library cards.
Acquisition revenue decreased $4.2 million mainly due to our decision
to reduce shooting in Canada, and to a lower acquisition underwriting
percentage than in 2006. Cash resales were $3.2 million lower due to
weak marine sales which was partially offset by increased licensing on
land in both the US and Canada. Non-monetary exchanges of $8.0 million
increased by $2.1 million.

For the fourth quarter of 2007, the company reported a net loss of
$14.8 million that included $28.1 million from purchase accounting
adjustments to the value of assets and liabilities, as well as $0.6
million of merger related expenses. Excluding the above items, net
income for the fourth quarter was $13.9 million, compared to net
income of $13.9 million for the 2006 quarter. The additional margin on
the $7.7 million adjusted revenue increase was mostly offset by a $5.1
million increase in net interest expense.

The net loss for the year was $93.4 million that included $88.8
million from purchase accounting adjustments and $24.1 million of
merger related expenses. Part of merger expenses was a $4.0 million
fee for bridge financing reported as interest expense. Excluding the
above items, 2007 net income was $19.5 million compared to net income
of $47.2 million in 2006. The $27.7 million adjusted net income
reduction was mainly the result of lower revenue and a $17.6 million
increase in net interest expense excluding bridge financing fees.

Cash EBITDA, defined as cash revenue less cash operating expenses,
was $37.7 million for the fourth quarter of 2007, an increase of 24%
from $30.4 million in 2006. This increase was primarily driven by a
$5.4 million increase in cash revenue and a $1.9 million reduction in
cash operating expenses essentially from lower compensation expense.
For the year, cash EBITDA was $100.2 million as compared to $99.2
million in 2006, as a $5.2 million reduction in cash revenue was
offset by a $6.2 million improvement in cash operating expenses.

"2007 closed with a quarterly record for cash resales," commented
Rob Monson, president and chief executive officer. "Our onshore data
licensing was strong during the full year. Both the U.S. and Canada
grew year on year partially offsetting lagging sales from our marine
library. Despite lower drilling activity in Canada and some concerns
about the royalty situation in Alberta, our Canadian library continued
to perform, with robust resales in the fourth quarter and full year
growth.

"In 2007, we continued to add significant amounts of data to our
onshore library," said Monson. "One of our key objectives is to grow
our onshore library by 10% per year and we were close to our target.
Our onshore 3D square miles grew by 9% during 2007 at a lower cost per
square mile than we had anticipated. As a result, our cash capex spend
on seismic data was lower than we had forecast.

"2008 has started with some uncertainty in the macro environment,
but the oil and gas industry continues to benefit from strong demand
for hydrocarbons and a favorable price environment for both
commodities. Natural gas storage remains at reasonable levels with
falling imports of Canadian natural gas and LNG. I believe most of the
ingredients are in place for another solid year for the seismic
industry in North America."

The company narrowed its operating loss to $6.4 million in the
fourth quarter from an operating loss of $18.4 million in the third
quarter of 2007. Excluding the impact from purchase accounting
adjustments and merger costs, operating income for the fourth quarter
would have been $25.1 million compared to operating income of $20.9
million in the fourth quarter of 2006. The current quarter's operating
losses included $24.3 million in increased depreciation and
amortization resulting from the purchase accounting adjustments to
assets and liabilities, as well as merger related costs of $0.6
million and a $6.7 million reduction to selections revenue from the
deferred revenue write-off. For the full year, the operating loss
closed at $65.9 million compared to operating income of $65.9 million
in 2006. Excluding purchase accounting impact and merger costs, 2007
operating income would have been $56.1 million.

Depreciation and amortization expense for the fourth quarter of
2007 was $49.9 million compared to $20.8 million for the same period
in 2006 and to $36.0 million in the third quarter of this year. The
2007 fourth quarter included $23.7 million in incremental amortization
from the step up in value of the data library, and a combined $1.7
million increase in depreciation and amortization of stepped up
equipment and intangible assets.

Selling, general and administrative expenses were $9.6 million for
the fourth quarter of 2007, compared to $9.6 million in the fourth
quarter of last year and $9.9 million in the third quarter of 2007.
The current quarter included $2.4 million in equity compensation
expense, flat with the third quarter, but significantly higher than
the $0.7 million in the fourth quarter of 2006. For the full year,
selling, general and administrative expenses were $37.0 million
compared to $35.9 million for the prior year. Equity compensation
expense increased by $6.0 million year on year.

Net interest expense was $9.8 million for the fourth quarter,
slightly lower than the $9.9 million for the third quarter of this
year, but higher than the $4.8 million for the fourth quarter of 2006,
reflecting the increased debt level.

Cash generated during the third quarter was $10.1 million with net
cash capital expenditures at $16.8 million. Our cash balances at the
end of the quarter increased to $43.4 million.

Gross capital expenditures for 2007 were $85.1 million, as
compared to $98.4 million for the prior year. Non-monetary exchanges
were $9.4 million lower than in 2006. Acquisition capital expenditures
were $2.3 million lower reflecting our decision to reduce the size of
our Canadian program. On a net cash basis, capital expenditures for
the year were $36.7 million as compared to $39.5 million in 2006. Our
forecasted net cash capital expenditures for the year 2008 are $54
million.

For the full year 2007, we added approximately 2,400 square miles
of seismic data to our library. During the full year 2008, we expect
to increase the size of our onshore 3D library by approximately 10% or
3,000 square miles, as compared to the 9% increment in 2007.

Conference Call

Seitel will hold its quarterly conference call to discuss fourth
quarter results for 2007 on Wednesday, March 12, 2008 at 9:00 a.m.
Central Time (10:00 a.m. Eastern Time). The dial-in number for the
call is 866-761-0749, passcode Seitel. A replay of the call will be
available until March 19, 2008 by dialing 888-286-8010, passcode
60789101, and will be available following the conference call at the
Investor Relations section of the company's Website at
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 annual financial
statements. 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. The 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.

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SEITEL, INC. AND SUBSIDIARIES
----------------------------------------------------------------------

CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------

(In thousands, except share and per share amounts)

SUCCESSOR PREDECESSOR
PERIOD PERIOD
----------- -----------
December 31,
-------------------------
2007 2006
----------- -----------
(unaudited)
ASSETS

Cash and equivalents $ 43,333 $ 107,390
Restricted cash 110 105
Receivables:
Trade, net 51,915 52,144
Notes and other, net 2,190 895
Net seismic data library 349,039 123,123
Net property and equipment 7,392 7,628
Investment in marketable securities 4,224 -
Prepaid expenses, deferred charges and
other 22,263 9,169
Intangible assets, net 52,512 -
Goodwill 209,409 -
Deferred income taxes - 4,981
----------- -----------

TOTAL ASSETS $ 742,387 $ 305,435
=========== ===========

LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable and accrued liabilities $ 49,325 $ 30,837
Income taxes payable 948 659
Debt:
Senior Notes 402,333 185,788
Notes payable 300 337
Obligations under capital leases 3,848 2,913
Deferred revenue 48,151 47,410
Deferred income taxes 16,493 -
----------- -----------
TOTAL LIABILITIES 521,398 267,944
----------- -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY

Preferred stock, par value $.01 per
share; authorized 5,000,000 shares;
none issued (Predecessor) - -
Common stock, par value $.01 per share;
authorized 400,000,000 shares; issued
and outstanding 155,184,084 at
December 31, 2006 (Predecessor) - 1,552
Common stock, par value $.001 per
share; 100 shares authorized, issued
and outstanding at December 31, 2007
(Successor) - -
Additional paid-in capital 264,805 240,431
Retained deficit (77,091) (209,539)
Accumulated other comprehensive income 33,275 5,047
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 220,989 37,491
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 742,387 $ 305,435
=========== ===========
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SEITEL, INC. AND SUBSIDIARIES
----------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
----------------------------------------------------------------------

(In thousands)

SUCCESSOR PREDECESSOR
PERIOD PERIOD
------------ ------------
Quarter Ended December 31,
--------------------------
2007 2006
------------ ------------

REVENUE $ 53,777 $ 52,802

EXPENSES:
Depreciation and amortization 49,905 20,823
Cost of sales 105 31
Selling, general and administrative 9,568 9,621
Merger 570 1,449
------------ ------------
60,148 31,924
------------ ------------

INCOME (LOSS) FROM OPERATIONS (6,371) 20,878
Interest expense, net (9,826) (4,750)
Foreign currency exchange gains (losses) 156 (866)
Gain on sale of marketable securities - 28
------------ ------------

Income (loss) before income taxes (16,041) 15,290
Provision (benefit) for income taxes (1,252) 1,364
------------ ------------
NET INCOME (LOSS) $ (14,789)$ 13,926
============ ============
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SEITEL, INC. AND SUBSIDIARIES
----------------------------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------

(In thousands)

Combined(1) SUCESSOR
------------
Year Ended PERIOD
-------------------
December 31, February 14, 2007 -
2007 December 31, 2007
------------------------------------
(unaudited)
REVENUE $ 148,812 $ 129,802

EXPENSES:
Depreciation and amortization 157,398 145,913
Gain on sale of seismic data - -
Cost of sales 226 218
Selling, general and
administrative 36,970 33,393
Merger 20,114 2,657
------------ -------------------
214,708 182,181
------------ -------------------

INCOME (LOSS) FROM OPERATIONS (65,896) (52,379)
Interest expense, net (41,128) (38,844)
Foreign currency exchange gains
(losses) 3,071 3,173
Gain on sale of marketable
securities - -
Other income 51 39
------------ -------------------
Income (loss) from continuing
operations before income taxes (103,902) (88,011)
Provision (benefit) for income
taxes (10,468) (10,920)
------------ -------------------
Income (loss) from continuing
operations (93,434) (77,091)
Income (loss) from discontinued
operations - -
------------ -------------------
NET INCOME (LOSS) $ (93,434) $ (77,091)
============ ===================

PREDECESSOR PERIOD
--------------------------------
Year Ended
January 1, 2007 - December 31,
February 13, 2007 2006
-------------------- ------------
(unaudited)
REVENUE $ 19,010 $ 191,919

EXPENSES:
Depreciation and amortization 11,485 88,662
Gain on sale of seismic data - (231)
Cost of sales 8 234
Selling, general and
administrative 3,577 35,930
Merger 17,457 1,449
----------------- ------------
32,527 126,044
----------------- ------------

INCOME (LOSS) FROM OPERATIONS (13,517) 65,875
Interest expense, net (2,284) (19,520)
Foreign currency exchange gains
(losses) (102) 259
Gain on sale of marketable
securities - 27
Other income 12 -
----------------- ------------
Income (loss) from continuing
operations before income taxes (15,891) 46,641
Provision (benefit) for income
taxes 452 (715)
----------------- ------------
Income (loss) from continuing
operations (16,343) 47,356
Income (loss) from discontinued
operations - (142)
----------------- ------------
NET INCOME (LOSS) $ (16,343) $ 47,214
================= ============

(1) Our combined results for the year ended December 31, 2007
represent the addition of the Predecessor Period from January 1, 2007
through February 13, 2007 and the Successor Period from February 14,
2007 to December 31, 2007. This combination does not comply with
GAAP or with the rules for pro forma presentation, but is presented
because we believe it provides a meaningful comparison of our
results.
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The following tables summarize the components of Seitel's revenue for
the quarters and years ended December 31, 2007 and 2006 (in
thousands):

SUCCESSOR PREDECESSOR SUCCESSOR
PERIOD PERIOD PERIOD
--------- ----------- -------------
Quarter Ended
---------------------------------------
December 31, September 30,
-----------------------
2007 2006 2007
--------- ----------- -------------
Acquisition revenue:
Cash underwriting $ 12,181 $ 9,061 $ 7,865
Underwriting from non-
monetary exchanges 673 1,567 646
--------- ----------- -------------
Total acquisition revenue 12,854 10,628 8,511
--------- ----------- -------------

Licensing revenue:
New resales for cash 43,138 38,124 29,162
Non-monetary exchanges 5,108 120 135
Revenue deferred (26,948) (15,269) (15,984)
Recognition of revenue
previously deferred 18,116 18,003 5,327
--------- ----------- -------------
Total resale revenue 39,414 40,978 18,640
--------- ----------- -------------

Total seismic revenue 52,268 51,606 27,151
--------- ----------- -------------

Solutions and other 1,509 1,196 1,205
--------- ----------- -------------
Total revenue $ 53,777 $ 52,802 $ 28,356
========= =========== =============
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SUCCESSOR PREDECESSOR
PERIOD PERIOD
------------------- -----------------
February 14, 2007 - January 1, 2007 -
December 31, 2007 February 13, 2007
------------------- -----------------
Acquisition revenue:
Cash underwriting $ 35,215 $ 6,087
Underwriting from non-
monetary exchanges 1,346 11
------------------- -----------------
Total acquisition revenue 36,561 6,098
------------------- -----------------

Licensing revenue:
New resales for cash 115,821 5,985
Non-monetary exchanges 7,981 (7)
Revenue deferred (64,250) (2,636)
Recognition of revenue
previously deferred 28,956 8,946
------------------- -----------------
Total resale revenue 88,508 12,288
------------------- -----------------

Total seismic revenue 125,069 18,386
------------------- -----------------

Solutions and other 4,733 624
------------------- -----------------
Total revenue $ 129,802 $ 19,010
=================== =================

PREDECESSOR
PERIOD
------------
COMBINED (1) Year Ended
-----------------
Year Ended December 31,
December 31, 2007 2006
----------------- ------------
Acquisition revenue:
Cash underwriting $ 41,302 $ 42,327
Underwriting from non-monetary
exchanges 1,357 4,494
----------------- ------------
Total acquisition revenue 42,659 46,821
----------------- ------------

Licensing revenue:
New resales for cash 121,806 124,988
Non-monetary exchanges 7,974 5,838
Revenue deferred (66,886) (48,471)
Recognition of revenue previously
deferred 37,902 55,344
----------------- ------------
Total resale revenue 100,796 137,699
----------------- ------------

Total seismic revenue 143,455 184,520
----------------- ------------

Solutions and other 5,357 7,399
----------------- ------------
Total revenue $ 148,812 $ 191,919
================= ============

(1) Our combined results for the year ended December 31, 2007
represent the addition of the Predecessor Period from January 1, 2007
through February 13, 2007 and the Successor Period from February 14,
2007 to December 31, 2007. This combination does not comply with
GAAP or with the rules for pro forma presentation, but is presented
because we believe it provides a meaningful comparison of our
results.
*T

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Cash EBITDA includes cash resales plus all other cash revenues other
than from data acquisitions, plus gain on seismic data, 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 income (in
thousands):

SUCCESSOR PREDECESSOR
PERIOD PERIOD SUCCESSOR
-----------------------
Quarter Ended PERIOD
-------------------
December 31, February 14, 2007 -
-----------------------
2007 2006 December 31, 2007
--------- ----------- -------------------

Cash EBITDA $ 37,705 $ 30,373 $ 96,741
Add (subtract) other
revenue components
not included in cash
margin:
Acquisition revenue 12,854 10,628 36,561
Non-monetary
exchanges 5,108 120 7,981
Licensing revenue
deferred (26,948) (15,269) (64,250)
Recognition of
licensing revenue
previously deferred 18,116 18,003 28,956
Solutions revenue
deferred (50) - (50)
Recognition of
Solutions revenue
previously deferred 6 13 6
Less:
Depreciation and
amortization (49,905) (20,823) (145,913)
Merger expenses (570) (1,449) (2,657)
Merger and
acquisition
transaction costs (197) - (1,145)
Non-cash operating
expenses (2,490) (718) (8,609)
--------- ----------- -------------------
Operating income
(loss), as reported $ (6,371) $ 20,878 $ (52,379)
========= =========== ===================

PREDECESSOR
PREDECESSOR PERIOD
------------
PERIOD COMBINED(1) Year Ended
----------------- -----------------
January 1, 2007 - Year Ended December 31,
February 13, 2007 December 31, 2007 2006
----------------- ----------------- ------------

Cash EBITDA $ 3,430 $ 100,171 $ 99,155
Add (subtract)
other revenue
components not
included in
cash margin:
Acquisition
revenue 6,098 42,659 46,821
Non-monetary
exchanges (7) 7,974 5,838
Licensing
revenue
deferred (2,636) (66,886) (48,471)
Recognition
of licensing
revenue
previously
deferred 8,946 37,902 55,344
Solutions
revenue
deferred - (50) -
Recognition
of Solutions
revenue
previously
deferred 6 12 33
Less:
Depreciation
and
amortization (11,485) (157,398) (88,662)
Merger
expenses (17,457) (20,114) (1,449)
Merger and
acquisition
transaction
costs - (1,145) -
Non-cash
operating
expenses (412) (9,021) (2,734)
----------------- ----------------- ------------
Operating
income (loss),
as reported $ (13,517) $ (65,896) $ 65,875
================= ================= ============

(1) Our combined results for the year ended December 31, 2007
represent the addition of the Predecessor Period from January 1, 2007
through February 13, 2007 and the Successor Period from February 14,
2007 to December 31, 2007. This combination does not comply with
GAAP or with the rules for pro forma presentation, but is presented
because we believe it provides a meaningful comparison of our
results.
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The following table summarizes the cash and non-cash components of our
selling, general and administrative ("SG&A") expenses for the
quarters and years ended December 31, 2007 and 2006 (in thousands):

SUCCESSOR PREDECESSOR
PERIOD PERIOD SUCCESSOR
----------------------
Quarter Ended PERIOD
-------------------
December 31, February 14, 2007 -
----------------------
2007 2006 December 31, 2007
--------- ----------- -------------------

Cash SG&A expenses $ 7,078 $ 8,903 $ 24,784
Non-cash equity
compensation expense 2,417 718 8,371
Non-cash rent expense 73 - 238
--------- ----------- -------------------
Total $ 9,568 $ 9,621 $ 33,393
========= =========== ===================

PREDECESSOR
PREDECESSOR PERIOD
-----------
PERIOD COMBINED(1) Year Ended,
----------------- -----------------
January 1, 2007 - Year Ended December 31
February 13, 2007 December 31, 2007 2006
----------------- ----------------- -----------

Cash SG&A expenses $ 3,165 $ 27,949 $ 33,196
Non-cash equity
compensation
expense 412 8,783 2,734
Non-cash rent
expense - 238 -
----------------- ----------------- -----------
Total $ 3,577 $ 36,970 $ 35,930
================= ================= ===========

(1) Our combined results for the year ended December 31, 2007
represent the addition of the Predecessor Period from January 1, 2007
through February 13, 2007 and the Successor Period from February 14,
2007 to December 31, 2007. This combination does not comply with
GAAP or with the rules for pro forma presentation, but is presented
because we believe it provides a meaningful comparison of our
results.
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The following table presents a reconciliation of net loss and loss
from operations to net income without the impact of merger related
items and income from operations without the impact of merger related
items. Merger related items include the adjustments resulting from
purchase accounting as well as the one-time merger related expenses.

Quarter Year
Ended Ended
December 31, December 31,
2007 2007
------------ ------------
(000's)
Net loss, as reported $ (14,789) $ (93,434)

Adjust for merger related items:
Merger expenses 570 20,114
Bridge acquisition financing fee - 4,000
Eliminated selection revenue 6,682 18,329
Amortization of data library on:
Eliminated selection revenue (1,263) (3,598)
Step up in data library value 23,724 81,118
Amortization of acquired intangibles 1,531 5,173
Depreciation on step-up of fixed
assets 188 627
Amortization of favorable facility
lease 73 238
Tax impact of adjustments (2,807) (13,064)
------------ ------------

Net income without impact of merger
related items $ 13,909 $ 19,503
============ ============

Loss from operations, as reported $ (6,371) $ (65,896)

Adjust for merger related items:
Merger expenses 570 20,114
Eliminated selection revenue 6,682 18,329
Amortization of data library on:
Elimination of selection revenue (1,263) (3,598)
Step up in data library value 23,724 81,118
Amortization of acquired intangibles 1,531 5,173
Depreciation on step-up of fixed
assets 188 627
Amortization of favorable facility
lease 73 238
------------ ------------

Income from operations without impact of
merger related items $ 25,134 $ 56,105
============ ============
*T

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

Copyright Business Wire 2008