3-D GEOPHYSICAL INC, 424B1, 1996-12-18

3-D GEOPHYSICAL INC
424B1, 1996-12-18
OIL & GAS FIELD EXPLORATION SERVICES

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<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-13665

PROSPECTUS
3,500,000 SHARES

3-D GEOPHYSICAL, INC.

[3-D GEOPHYSICAL LOGO] COMMON STOCK

------------------

All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby are being sold by 3-D Geophysical, Inc. (the "Company").

The Common Stock is traded on the Nasdaq National Market under the symbol
"TDGO". The last reported sale price for the Common Stock on the Nasdaq National
Market on December 17, 1996 was $8 1/8 per share.

------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF
THE COMMON STOCK OFFERED HEREBY.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $7.50 $.45 $7.05
- -------------------------------------------------------------------------------------------------
Total(3) $26,250,000 $1,575,000 $24,675,000
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting".

(2) Before deducting expenses payable by the Company estimated at $800,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
525,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$30,187,500, $1,811,250 and $28,376,250, respectively. See "Underwriting".

------------------

The shares of Common Stock are being offered hereby by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for the
shares of Common Stock offered hereby will be available for delivery on or about
December 23, 1996 at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.

SMITH BARNEY INC.

RAUSCHER PIERCE REFSNES, INC.

SIMMONS & COMPANY
INTERNATIONAL

DECEMBER 17, 1996
<PAGE> 2
3-D GEOPHYSICAL, INC. provides state-of- the-art seismic data acquisition
services to the oil and gas industry in the Western Hemisphere. The Company is
an industry leader in 3-D land surveys and in heliportable, conventional, and
shallow water operations, with over 12,000 channels of 24-bit recording system
capability.

[Photograph of helicopter transporting the central electronics unit to a remote
site.]

[Photograph of boats off the coast of Alaska performing shallow water seismic
data acquisition.]

[Photograph of crew in heavy forest in Mexico.]

The Company has considerable experience in areas ranging from the Arctic icepack
to jungle environments. This includes a high level of heliportable expertise
that allows the Company to conduct operations in rough terrain, heavy forests,
and environmentally sensitive areas. The Company also provides shallow water
services in some areas.

For more information on 3-D Geophysical, Inc., see the inside back cover.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
OF THE COMPANY ON NASDAQ IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

Unless the context indicates otherwise, all references herein to the
"Company" or to "3-D Geophysical" mean 3-D Geophysical, Inc. and its
subsidiaries, the principal ones of which operate two seismic data acquisition
businesses (the "Operating Subsidiaries") -- Geovaluaciones, S.A. de C.V.
("Geovaluaciones") and Northern Geophysical of America, Inc. ("Northern"). In
addition, the Company processes seismic data through another subsidiary,
Procesos Interactivos Avanzados, S.A. de C.V. ("PIASA"). Concurrently with the
consummation of the Company's initial public offering (the "Initial Public
Offering") in February 1996, 3-D Geophysical acquired Geoevaluaciones, Northern,
Paragon Geophysical, Inc. ("Paragon") and Kemp Geophysical Corporation ("Kemp").
In December 1996, Paragon and Kemp were merged with and into Northern. Unless
the context indicates otherwise, certain technical and other terms used in this
Prospectus have the meanings assigned to them in the Glossary appearing
elsewhere herein.

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, all information
included in this Prospectus assumes that the Underwriters' over-allotment option
will not be exercised. In this Prospectus, unless otherwise indicated,
references to "dollars" and "$" are to United States dollars, references to
"pesos" are to Mexican pesos and references to "Canadian dollars" and "C$" are
to Canadian dollars, and the terms "United States" and "U.S." mean the United
States of America, its states, territories and possessions and all areas subject
to its jurisdiction.

THE COMPANY
GENERAL

3-D Geophysical, Inc. is one of the leading providers of land-based and
shallow water three-dimensional ("3-D") and two-dimensional ("2-D") seismic data
acquisition services to the oil and gas industry in the Western Hemisphere. As
of October 31, 1996, the Company's nine crews operated land-based and shallow
water seismic data acquisition systems, primarily utilizing state-of-the-art,
24-bit equipment, with a total of approximately 12,000 channels, in Alaska, the
Rocky Mountain, West Coast and Appalachian regions and in Mexico.

The seismic data acquisition services industry is currently experiencing
several significant changes, including a continuing consolidation of service
providers. The Company believes that this consolidation is due in part to the
trend by oil and gas exploration and production companies to rely on third-party
seismic contractors to provide increasingly more sophisticated and extensive 3-D
seismic surveys. These surveys require a greater number of recording channels
and therefore substantial capital expenditures. This trend is rationalizing the
seismic services industry and creating a competitive advantage for companies
with extensive 3-D channel capacity and greater financial resources.

The Company believes that (i) its state-of-the-art systems, (ii) its
ability to relocate equipment and crews among the regions in which it operates,
(iii) the regional experience of its management and crews in performing 3-D and
2-D surveys, and (iv) the quality of its services and relationships with
customers will enable the Company to take advantage of this industry trend.

Since the Initial Public Offering, the Company has:

- Increased its channel capacity from approximately 7,500 to approximately
12,000 channels;

- Expanded its operations in Alaska with seismic data acquisition contracts
with Arco Alaska Inc., a subsidiary of Atlantic Richfield Company
("ARCO"), BP Exploration (Alaska) Inc. ("BP Alaska") and Marathon Oil
Company ("Marathon");

- Obtained two of the first group of 3-D seismic data acquisition contracts
awarded to date by Petroleos Mexicanos ("PEMEX"), Mexico's national oil
company;

- Established a presence in Peru by opening a branch office and a seismic
data processing center and bidding on several contracts to provide
seismic data acquisition services in Peru; and

- Entered into a stock purchase agreement to acquire J.R.S. Exploration
Company Limited ("J.R.S. Exploration"), a seismic data acquisition
business that has been operating in Western Canada since

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<PAGE> 4

1978 using up to four crews utilizing 24-bit seismic data acquisition
systems with a total of approximately 2,000 channels.

INDUSTRY OVERVIEW

Seismic data is the principal source of information used by geoscientists
to map potential or existing oil and gas bearing formations and the geologic
structures that surround them. Seismic data is acquired over a specified area by
deploying a network of electronic cables over the area to which electronic
receivers, or geophones, are attached. Once this network is deployed, an energy
source, such as truck mounted vibrators ("vibroseis") or dynamite, is used to
generate seismic waves over a pre-determined set of frequencies that move
through the rock formation under the area and reverberate back to the surface in
milliseconds. The geophones capture the changing velocity and character of these
seismic waves as they travel down and back through the earth's surface and
transmit this information a short distance along an electrical path (a
"channel") to a remote signal conditioner. The remote signal conditioner
digitizes the analog data and transmits it to a central electronics unit that
stores the acquired data. The data is then sent to a processing center where
mathematical algorithms are applied to separate signals from interference and to
correct distortion. Migration techniques are also applied to produce a spatial
representation of the subsurface formations that were surveyed. After
processing, the data is transferred to a computer workstation that allows the
data to be viewed and reconfigured by a geoscientist who interprets the data
with computer-aided exploration techniques in order to plot features and map the
structures of the subsurface area.

In the past, a 2-D survey was the standard technique utilized to acquire
seismic data. 2-D seismic data can be visualized as a single vertical plane of
subsurface information. 3-D seismic surveys produce data that is best visualized
as a cube of information that can be sliced into numerous planes. Thus, 3-D
surveys provide different views of a subsurface geologic structure and much
higher resolution of the structure than is available from a 2-D survey and have
proven to be more reliable indicators of the oil and gas potential in the area
surveyed. As a result, drilling based on 3-D seismic surveys has improved the
economics of finding oil and gas. Consequently, demand for 3-D seismic surveys,
and for surveys that cover wide areas and utilize a greater number of channels,
has increased in the past several years. Furthermore, due to the enhanced
information provided, 3-D surveys have proven to be a cost effective and
efficient tool for oil and gas exploration and, increasingly, the development of
existing reserves.

BUSINESS STRATEGY

The Company's objective is to capitalize on the consolidation taking place
in its industry to enhance its position as one of the leading providers of
land-based and shallow water seismic data acquisition services and to become a
significant provider of related services to the oil and gas industry in the
Western Hemisphere. The Company intends to achieve this objective by:

- Optimizing the utilization of its state-of-the-art seismic data
acquisition systems by relocating equipment and crews among the regions
in which the Company operates;

- Expanding its operations in Mexico and elsewhere in Latin America by
seeking further contract opportunities with PEMEX and other oil companies
operating in Latin America;

- Pursuing opportunities in the United States, including Alaska, by
attempting to strengthen existing business relationships with
multinational companies and their affiliates, such as ARCO, BP Alaska,
Marathon and others;

- Pursuing strategic acquisitions by seeking to acquire providers of
seismic data acquisition and related services, such as J.R.S.
Exploration, that complement the Company's geographic market coverage
and growth strategy; and

- Expanding the Company's data processing and interpretation and reservoir
characterization services already being provided to PEMEX in Mexico into
other markets.

4
<PAGE> 5

THE OFFERING

Common Stock offered....... 3,500,000 shares

Common Stock to be
outstanding after the
Offering(1).............. 11,100,000 shares

Use of proceeds............ Of the net proceeds of this Offering, the Company
intends to use (i) approximately $16.9 million to
purchase additional systems, additional channel
capacity for the six 24-bit seismic data
acquisition systems it presently owns and related
vehicles and equipment to enhance the Company's 3-D
seismic data acquisition capacity; (ii)
approximately $2.7 million to pay the cash portion
of the purchase price for J.R.S. Exploration (and
certain related equipment) and approximately $1.0
million to repay debt of J.R.S. Exploration to a
commercial bank; (iii) approximately $3.0 million
to repay indebtedness incurred in connection with
the Company's purchase in May 1996 of two 24-bit
seismic data acquisition systems; and (iv) the
balance, if any, for working capital and other
general corporate purposes. See "Use of Proceeds,"
"Business -- Capital Expenditures" and
"Business -- Proposed Acquisition of J.R.S.
Exploration."

Nasdaq National Market
symbol................... "TDGO"
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(1) Excludes (a) 720,000 shares reserved for issuance upon the exercise of
options granted and to be granted under the 3-D Geophysical 1995 Long-Term
Incentive Compensation Plan, as amended, of which options for 624,350 shares
have been granted as of October 31, 1996, and (b) 265,002 shares reserved
for issuance upon the exercise of options granted other than pursuant to
such plan to certain directors and key employees of the Company (see
"Management -- Director Compensation" and "Management -- Long-Term Incentive
Compensation Plan").

5
<PAGE> 6

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

On February 9, 1996, simultaneously with the consummation of the Initial
Public Offering, 3-D Geophysical acquired in separate transactions, in exchange
for cash, notes and shares of Common Stock, Geoevaluaciones, PIASA, Northern's
land-based seismic data operations, Paragon and Kemp. See "Certain
Transactions." For accounting purposes, the acquisitions of Geoevaluaciones and
PIASA were treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror and predecessor
of 3-D Geophysical. Accordingly, the combined net assets of Geoevaluaciones and
PIASA were valued at historical cost and the consideration given to the former
stockholders of Geoevaluaciones and PIASA was treated for accounting purposes as
a dividend. The acquisitions of Northern's land-based seismic data operations,
Paragon and Kemp (the "Purchased Companies") were treated as business
combinations accounted for by the purchase method of accounting as prescribed by
Accounting Principles Board Opinion No. 16 and Securities and Exchange
Commission ("SEC") Staff Accounting Bulletin No. 48 (as applied prior to the
issuance of SAB 97) and are included within 3-D Geophysical's historical
consolidated statement of operations commencing February 9, 1996. The
acquisition of Paragon's common stock in exchange for shares of Common Stock was
accounted for at Paragon's historical cost. Northern's land-based seismic data
operations and Kemp were valued at the fair market value of consideration given.
In connection with the acquisitions of Northern's land-based seismic data
operations and Kemp, the excess of consideration given over the fair market
value of net assets is being amortized on a straight-line basis over 15 years.
For purposes of identification and description, the Company is referred to as
the "Predecessor" for the period prior to the Initial Public Offering and the
acquisition of the Purchased Companies as described below, the "Successor" for
the period subsequent to the Initial Public Offering and the acquisition of the
Purchased Companies and the "Company" for both periods.

Summary historical financial data is provided for Geoevaluaciones and PIASA
on a combined basis because, as described in the preceding paragraph,
Geoevaluaciones and PIASA are considered the acquirors of the Purchased
Companies for accounting purposes and therefore are deemed to be the predecessor
of 3-D Geophysical. The historical financial information for each of the three
years ended December 31, 1995 and for the nine months ended September 30, 1995
was derived from financial statements appearing elsewhere in this Prospectus.
The historical financial information for the years ended December 31, 1991 and
1992 was derived from Geoevaluaciones' financial statements (1991 is unaudited)
which do not appear elsewhere in this Prospectus. The historical financial
information for the nine months ended September 30, 1996 represents combined
operations for the entire nine months for Geoevaluaciones and also includes
operations for the Purchased Companies for the period from February 9, 1996 to
September 30, 1996. As a result, the Successor's statement of operations for the
nine months ended September 30, 1996 is not comparable to the Predecessor's
statement of operations for the nine months ended September 30, 1995. The pro
forma consolidated statements of operations for the year ended December 31, 1995
and the nine months ended September 30, 1995 and 1996 assume that the Company
had completed the recapitalization, the acquisition of the Purchased Companies
and the Initial Public Offering on January 1, 1995. The following summary pro
forma statement of operations information was derived from the pro forma
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. The pro forma consolidated statement of operations
data may not be indicative of actual results that would have been achieved if
the transactions had occurred on the dates indicated or the results which may be
realized in the future.

The pro forma consolidated statement of operations information does not
include the effects of the proposed acquisition of J.R.S. Exploration and
certain related equipment (see "Business -- Proposed Acquisition of J.R.S.
Exploration"). For a presentation of the pro forma effects of this proposed
acquisition, see the adjusted pro forma consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.

The following summary financial data is qualified in its entirety by the
more detailed information appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.

6
<PAGE> 7

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMPANY
-------------------------
PRO
FORMA(2)
PREDECESSOR(1) ---------
------------------------------------------------------------
NINE MONTHS NINE MONTHS YEAR
YEAR ENDED DECEMBER 31, ENDED ENDED ENDED
-------------------------------------------- SEPT. 30, SEPT. 30, DEC. 31,
1991 1992 1993 1994 1995 1995 1996 1995
------ ------- ------- ------- ------ ------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $4,241 $10,342 $17,638 $17,660 $9,825 $7,157 $ 36,151 $37,835
Expenses:
Cost of data acquisition............. 2,574 7,577 13,146 11,004 5,968 3,759 26,563 28,931
Depreciation and
amortization....................... 651 941 990 1,468 662 531 2,788 3,431
General and administrative
expenses........................... 538 908 1,280 1,814 1,038 833 3,907 4,298
------ ------- ------- ------- ------ ------ -------- -------
Operating income...................... 478 916 2,222 3,374 2,157 2,034 2,893 1,175
Other income (expense):
Interest expense..................... (283) (669) (1,032) (466) (803) (562) (668) (1,124)
Foreign currency transaction gains
(losses)........................... 45 -- 33 (92) (120) (83) 8 (120)
Miscellaneous........................ (3) 63 270 87 503 38 437 415
------ ------- ------- ------- ------ ------ -------- -------
Income (loss) before provision for
income taxes and extraordinary
item................................. 237 310 1,493 2,903 1,737 1,427 2,670 346
Provision (benefit) for income
taxes................................ 66 95 418 1,000 130 81 645 (357)
------ ------- ------- ------- ------ ------ -------- -------
Income (loss) before extraordinary
item................................. 171 215 1,075 1,903 1,607 1,346 2,025 $ 703
=======
Extraordinary item, net............... -- -- -- -- -- -- 57
------ ------- ------- ------- ------ ------ --------
Net income............................ $ 171 $ 215 $ 1,075 $ 1,903 $1,607 $1,346 $ 2,082
====== ======= ======= ======= ====== ====== ========
Weighted average shares outstanding... 6,927 6,232
PER SHARE INFORMATION:
Income before extraordinary item...... $ .29 $ .11
======== =======
Extraordinary item, net............... $ .01
========
Net earnings.......................... $ .30
========
STATEMENT OF CASH FLOWS DATA:
Operating activities................. $ 997 $ 1,724 $ 2,199 $ 4,399 $1,672 $ 1,585 $ (2,089)
Investing activities................. (1,362) (671) (747) (3,262) 204 (123) (22,484)
Financing activities................. (11) (655) (63) (2,058) (1,423) (663) 25,162
OTHER FINANCIAL DATA:
EBITDA(3)............................. $1,171 $ 1,920 $ 3,515 $ 4,837 $3,202 $ 2,520 $ 6,126 $ 4,901
OPERATING DATA:
Number of crews at end of period:
I/O SYSTEM TWO(R) crews.............. 2 2 2 2 2 6 7
DFS-VTM crews........................ -- -- -- -- -- 1 1
Number of recording channels at end
of period.......................... 672 672 960 960 960 12,000 7,500

<CAPTION>
COMPANY
----------------------------
PRO FORMA(2)
----------------------------
NINE MONTHS
ENDED
-----------------------------
SEPT. 30, SEPT. 30,
1995 1996
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......................... $25,669 $39,974
Expenses:
Cost of data acquisition............. 19,063 30,082
Depreciation and
amortization....................... 2,530 3,068
General and administrative
expenses........................... 3,093 4,272
------- -------
Operating income...................... 983 2,552
Other income (expense):
Interest expense..................... (752) (710)
Foreign currency transaction gains
(losses)........................... (83) 8
Miscellaneous........................ (68) 437
------- -------
Income (loss) before provision for
income taxes and extraordinary
item................................. 80 2,287
Provision (benefit) for income
taxes................................ (390) 511
------- -------
Income (loss) before extraordinary
item................................. $ 470 $ 1,776
======= =======
Extraordinary item, net...............
Net income............................
Weighted average shares outstanding... 6,232 6,232
PER SHARE INFORMATION:
Income before extraordinary item...... $ .08 $ .28
======= =======
Extraordinary item, net...............
Net earnings..........................

STATEMENT OF CASH FLOWS DATA:
Operating activities.................
Investing activities.................
Financing activities.................
OTHER FINANCIAL DATA:
EBITDA(3)............................. $ 3,362 $ 6,065
OPERATING DATA:
Number of crews at end of period:
I/O SYSTEM TWO(R) crews.............. 5 6(4)
DFS-VTM crews........................ 4 2(4)
Number of recording channels at end
of period.......................... 5,220 12,000

</TABLE>

<TABLE>
<CAPTION>
COMPANY COMPANY AS OF
AS OF SEPTEMBER 30, 1996 AS
SEPTEMBER 30, 1996 ADJUSTED(5)
------------------ ---------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $ 2,850 $ 6,824
Total assets......................................................... 54,396 75,271
Long-term debt and capital leases.................................... 8,682 5,682
Total stockholders' equity........................................... 26,987 50,862
</TABLE>

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(1) Amounts represent the combination of Geoevaluaciones and PIASA, the
Predecessor.

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<PAGE> 8

elsewhere in this Prospectus for a discussion of the assumptions made and
adjustments applied in the preparation of the summary historical and pro
forma financial and operating data, as well as the pro forma effect of the
proposed acquisition of J.R.S. Exploration and certain related equipment.

(3) EBITDA represents earnings before interest expense, taxes, depreciation and
amortization. EBITDA should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flow as a better measure of liquidity.

(4) Does not include one crew providing drilling and survey services for a
seismic data acquisition crew operated by PEMEX.

(5) Reflects the sale of shares of Common Stock offered hereby and the
application of a portion of the estimated net proceeds as described in "Use
of Proceeds;" does not reflect the application of any net proceeds to, or
the issuance of any shares of Common Stock in connection with, the proposed
acquisition of J.R.S. Exploration and certain related equipment. See
"Business -- Proposed Acquisition of J.R.S. Exploration."

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<PAGE> 9

CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. The factors discussed under
"Risk Factors," among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Prospectus,
including, without limitation, in "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," filings by the
Company with the SEC and the Company's press releases. When used in this
Prospectus, the words "estimate," "project," "anticipate," "expect," "intend,"
"believe" and similar expressions are intended to identify forward-looking
statements.

RISK FACTORS

LIMITED COMBINED OPERATING HISTORY

3-D Geophysical was incorporated in March 1995 and concurrently with the
Initial Public Offering in February 1996 acquired the Operating Subsidiaries and
PIASA. Prior to the Initial Public Offering, the Operating Subsidiaries operated
independently and neither the historical results of their separate operations
nor their pro forma financial information are necessarily indicative of the
results that would have been achieved had the Operating Subsidiaries been
operated on an integrated basis or the results that may be realized in the
future. Although members of management of the Company have extensive experience
in providing land-based and shallow water seismic data acquisition services and
in managing businesses that provide such services, there can be no assurance
that management will be able to implement the Company's operating and growth
strategies successfully. See "Management."

DEPENDENCE UPON ENERGY INDUSTRY SPENDING

Demand for the Company's services depends upon the level of capital
expenditures by oil and gas companies for exploration, production, development
and field management activities. These activities depend in part on oil and gas
prices, expectations about future prices, the cost of exploring for, producing
and delivering oil and gas, the sale and expiration dates of leases in the
United States and abroad, the discovery rate of new oil and gas reserves in land
and shallow water areas, local and international political, regulatory and
economic conditions and the ability of oil and gas companies to obtain capital.
In addition, a decrease in oil and gas expenditures could result from such
factors as unfavorable tax and other legislation or uncertainty concerning
national energy policies. Beginning in 1982, a sharp decline in oil and gas
prices led to a worldwide reduction in oil and gas activities. This decline
resulted in a significant reduction in the overall demand for seismic services.
No assurance can be given that current levels of oil and gas activities will be
maintained or that demand for the Company's services will reflect the level of
such activities. Decreases in oil and gas activities could have a significant
adverse effect upon the demand for the Company's services and the Company's
results of operations.

CAPITAL INTENSIVE BUSINESS; RAPID OBSOLESCENCE OF TECHNOLOGY

The Company competes in a capital intensive industry. As the number of
channels per 3-D crew has increased significantly over the past few years, the
capital costs of fully equipping each crew have also increased. The development
of seismic data acquisition equipment has been characterized by rapid
technological advancements in recent years and the Company expects this trend to
continue. There can be no assurance that manufacturers of seismic equipment will
not develop new systems that have competitive advantages over systems now in use
that either render the Company's current equipment obsolete or require the
Company to make significant incremental capital expenditures to maintain its
competitive position. The Company's strategy is to upgrade its data acquisition
systems as often as necessary to maintain its competitive position. Furthermore,
any significant increase in the level of the Company's operations may require it
to acquire additional data acquisition systems. To do so will likely require
large expenditures of capital in addition to the

9
<PAGE> 10

Company's planned capital expenditures. There can be no assurance that the
Company will have the capital necessary to upgrade its equipment to maintain its
competitive position or to acquire any additional required equipment, or that
any required financing therefor will be available on favorable terms. If the
Company is unable to raise the capital necessary to update or increase the
capacity of its data acquisition systems to the extent necessary, it will be
unable to update such systems or increase its level of operations and may be
materially and adversely affected as a result. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Capital
Expenditures" and "Business -- Competition."

SUBSTANTIAL COMPETITION

The Company has extensive competition in each of the regions in which it
operates. Competitive factors include price, crew experience, equipment
availability, technological expertise and reputation for dependability and
safety. Certain of the Company's major competitors have more crews and operate
data acquisition systems having significantly more channels than the Company,
provide integrated data acquisition, processing and interpretation services and
have far greater financial and other resources than the Company and more
extensive relationships with major integrated and multinational oil and gas
companies. Such resources enable these competitors to maintain state-of-the-art
technology and certain other advantages relating to costs that may provide them
with an advantage over the Company in bidding for contracts. In addition,
certain competitors of the Company take an economic interest in oil and gas
exploration and development projects for which they perform services for their
customers. There can be no assurance that the Company will be able to compete
successfully against its competitors for contracts to conduct seismic surveys.
See "Business -- Competition."

SUBSTANTIAL RISKS OF DOING BUSINESS IN LATIN AMERICA

For the year ended December 31, 1995 and for the nine months ended
September 30, 1996, 26.0% and 22.7%, respectively, of the pro forma net revenues
of the Company resulted from the operations of Geoevaluaciones and PIASA in
Mexico (the "Mexican Operations"). The level of land-based seismic data
acquisition services in Mexico has in the past been vulnerable to economic
downturns and changes in government policies and public spending. Since December
1994, Mexico has experienced an economic crisis characterized by a significant
devaluation of the peso, exchange rate instability, increased inflation, high
domestic interest rates, negative economic growth, reduced consumer purchasing
power and high unemployment. Despite certain austerity measures, volatility in
the peso to dollar foreign exchange rate and financial markets persisted through
1995. The peso to dollar exchange rate (as published by Banco Mexicano de
Comercio Exterior) at the close of the last business day of 1993, 1994, 1995 and
on September 30, 1996 was 3.13, 5.00, 7.68 and 7.55, respectively. On October
31, 1996, such exchange rate was 8.05. Inflation in Mexico for the year ended
December 31, 1995 and for the nine months ended September 30, 1996 was
approximately 52.0% and 20.3%, respectively, based on the consumer price index.

The December 1994 devaluation of the peso had a number of effects on the
Mexican economy that have adversely affected the financial condition of
businesses in Mexico, including the Mexican Operations. The devaluation caused
the peso value of dollar denominated indebtedness associated with the Mexican
Operations, which consists primarily of equipment financing, to increase
significantly, and also greatly increased the rate of inflation, resulting in a
sharp rise in nominal interest rates on peso denominated financing.

The prices the Company pays for certain equipment, energy and other
materials for the Mexican Operations are set, in part, by reference to
international prices denominated in currencies other than pesos, and the results
of operations of the Mexican Operations, denominated in pesos, are translated
into dollars for inclusion in the Company's financial statements. However, the
operations and revenues of the Mexican Operations are primarily peso-denominated
and the Company has not hedged against currency risks in Mexico, except that
certain of the costs incurred by the Mexican Operations may be adjusted,
pursuant to the Company's contracts with PEMEX, to take into account economic
events such as inflation and devaluation of the peso (see "Business -- Marketing
and Customers -- Contracts"). The Company is subject to foreign exchange risks
primarily in connection with the conversion into dollars of the results of
operations of the

10
<PAGE> 11

Mexican Operations. Increases in the peso to dollar exchange rate will result in
a reduction of the dollar value of peso-based revenues of the Company as well as
the dollar value of peso-based expenses of the Company. Likewise, decreases in
such rate will result in increases in the dollar value of such revenues and
expenses. As a result, such fluctuations could have a material adverse effect on
the financial condition and results of operations of the Company. The Company
does not currently employ any hedging method to reduce such foreign exchange
risks. While the Company may from time to time evaluate methods to reduce such
foreign exchange risks, the adoption of any particular method will depend on
existing market conditions. The Company cannot reasonably predict what method,
if any, it will adopt to reduce foreign exchange risks, and there can be no
assurance that it will adopt any such method or that, if adopted, any such
method will reduce such risks.

There can be no assurance that future developments in the Mexican
political, economic, social or diplomatic condition, over which the Company has
no control, will not have a material adverse effect on the Company's financial
condition or results of operations or the market price of its securities.

In June 1996, the Company established a branch and opened a seismic data
processing center in Peru. In September 1996, the Company entered into a
contract to provide land-based seismic data acquisition services there; however,
this contract is subject to the resolution of certain uncertainties relating to
obtaining required local permits. The Company intends to continue to seek
expansion opportunities in Peru and other countries in Latin America. In
general, so long as the Company derives a significant portion of its revenues
outside the United States, in addition to currency risks, the Company will be
subject to risks associated with international operations, including war, civil
disturbance and government activity, which may limit or disrupt the Company's
operations.

DEPENDENCE ON SIGNIFICANT CUSTOMER

26.0% and 22.7% of the pro forma net revenues of the Company for the year
ended December 31, 1995 and nine months ended September 30, 1996, respectively,
and in excess of 95% of the net revenues of the Mexican Operations in those
periods, were derived from land-based seismic data acquisition services provided
to PEMEX. The loss of PEMEX as a customer would have a material adverse effect
on the Company's financial condition and results of operations. See
"Business -- Marketing and Customers -- Customers."

RELIANCE ON KEY SUPPLIER

The Company is dependent on Input/Output, Inc. ("Input/Output") for
additions to and replacements for its I/O SYSTEM TWO(R) seismic data acquisition
systems. Although Input/Output is not the only supplier of seismic data
acquisition systems, it is the Company's primary supplier and the Company
considers Input/Output's systems to be among the state-of-the-art seismic data
acquisition systems for performing 3-D seismic surveys on land and in shallow
water. Therefore, should a system be substantially damaged, or should a
significant systems failure occur, and should Input/Output be unwilling or
unable to furnish replacement parts or otherwise repair such systems, the
Company may be unable to obtain such replacements from other sources and would
have to acquire other equipment that may be less advanced technologically.
Although the Company believes it will be able to obtain systems from
Input/Output or another source of state-of-the-art seismic data acquisition
systems in the future, should it be unable to do so, the Company's anticipated
revenues could be reduced significantly and the amount of cash needed for
capital expenditures could be increased significantly. See "Business -- Capital
Expenditures."

OPERATING RISKS; WEATHER

The Company's crews often conduct operations in extreme weather, in
difficult terrain that is not easily accessible and under other hazardous
conditions. Accordingly, its operations are subject to risks of injury to
personnel and loss of equipment. Fixed costs, including costs associated with
operating leases, labor costs and depreciation, account for more than half of
the Company's costs and expenses. As a result, low productivity resulting from
weather interruptions, equipment failures or other causes such as fires and
accidental explosions resulting from the handling of equipment and supplies can
result in significant operating losses. In addition,

11
<PAGE> 12

while the Company has insurance policies that protect it against liabilities
that may be incurred in the ordinary course of its business, the Company is
unable to insure fully against all possible loss or liability. For example, no
insurance is available at a cost deemed reasonable by the Company for war,
nationalization, appropriation or other extreme events. See
"Business -- Operating Conditions" and "Business -- Marketing and
Customers -- Contracts."

RELIANCE ON KEY PERSONNEL

The Company's operations are dependent on the efforts of Messrs. Richard
Davis, Luis Ferran, Joel Friedman, Ronald Koons, Charles Merchant and Wayne
Widynowski. If any of these key persons becomes unable to continue in his
present role, or if the Company is unable to attract and retain other skilled
employees, the Company's business could be adversely affected. See "Management."

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK

Upon completion of this Offering, the Company will have outstanding
11,100,000 shares of Common Stock. The Company and its officers and directors
have agreed that for a period of 120 days from the date of this Prospectus they
will not without the prior written consent of Smith Barney Inc. (i) sell, offer
to sell, solicit an offer to buy, contract to sell or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for, or any rights to purchase or acquire, shares of
Common Stock, or (ii) grant any options or warrants to purchase shares of Common
Stock (other than the grant of options under the 3-D Geophysical 1995 Long-Term
Incentive Compensation Plan, as amended (the "Plan"), and Common Stock issuable
upon the exercise of options granted under the Plan or otherwise to officers,
directors and other key employees of the Company). The 1,400,681 shares of
Common Stock issued in connection with the founding of 3-D Geophysical will be
eligible for resale in the public market commencing in March 1997 and the
1,599,319 shares of Common Stock issued to the former stockholders of the
Operating Subsidiaries and PIASA simultaneously with the consummation of the
Initial Public Offering will be eligible for resale in the public market
commencing in February 1998, subject in each case to certain volume and other
restrictions provided for in Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
granted pursuant to the Plan options to purchase an aggregate of 624,350 shares
of Common Stock and has granted options to purchase an additional aggregate of
265,002 shares of Common Stock other than pursuant to the Plan to certain
directors and key employees of the Company (see "Management -- Director
Compensation" and "Management -- Long-Term Incentive Compensation Plan"). The
Company intends to register under the Securities Act the shares issuable upon
exercise of such options and, upon such registration, such shares will be
eligible for resale in the public market, except that any such shares issued to
affiliates are subject to certain restrictions under Rule 144.

Sales of substantial amounts of the Common Stock in the public market could
adversely affect prevailing market prices and the ability of the Company to
raise equity capital in the future. See "Shares Eligible for Future Sale" and
"Underwriting."

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE GENERAL CORPORATION LAW

Certain provisions of the Certificate of Incorporation and By-laws may tend
to deter potential unsolicited offers or other efforts to obtain control of the
Company that are not approved by the Board of Directors. Such provisions may
therefore deprive the stockholders of opportunities to sell shares of Common
Stock at prices higher than prevailing market prices. See "Description of
Capital Stock -- Certain Anti-Takeover Effects of Certain Provisions of the
Certificate of Incorporation, By-laws and Delaware General Corporation Law."

12
<PAGE> 13

THE COMPANY

3-D Geophysical, Inc. is one of the leading providers of land-based and
shallow water 3-D and 2-D seismic data acquisition services to the oil and gas
industry in the Western Hemisphere. As of October 31, 1996, the Company's nine
crews operated land-based and shallow water seismic data acquisition systems,
primarily utilizing state-of-the-art, 24-bit equipment, with a total of
approximately 12,000 channels, in Alaska, the Rocky Mountain, West Coast and
Appalachian regions and in Mexico.

3-D Geophysical, Inc., a Delaware corporation, was incorporated in March
1995. The Company's principal offices are located at 7076 South Alton Way,
Building H, Englewood, Colorado 80112, and its telephone number is (303)
290-0214.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby, after deducting the underwriting discount and
estimated expenses of this Offering to be paid by the Company, are estimated to
be approximately $23.9 million ($27.6 million if the Underwriters'
over-allotment option is exercised in full). The Company anticipates that it
will use the net proceeds for the following purposes: (i) approximately $16.9
million to purchase additional systems, additional channel capacity for the six
24-bit seismic data acquisition systems it presently owns and related vehicles
and equipment to enhance the Company's 3-D seismic data acquisition capacity;
(ii) approximately $2.7 million to pay the cash portion of the purchase price
for J.R.S. Exploration (and certain related equipment) and approximately $1.0
million to repay debt of J.R.S. Exploration to a commercial bank (see
"Business -- Proposed Acquisition of J.R.S. Exploration"); (iii) approximately
$3.0 million to repay indebtedness incurred in connection with the Company's
purchase in May 1996 of two 24-bit seismic data acquisition systems; and (iv)
the balance, if any, for working capital and other general corporate purposes.

The additional systems and equipment referred to in clause (i) above
include a 1,000 channel seismic data acquisition system and certain equipment
that are is presently leased from The Andrews Group International, Inc. under
leases that contain a purchase option. See "Use of Proceeds,"
"Business -- Capital Expenditures" and "Certain Transactions." The indebtedness
referred to in clause (iii) above consists of a portion of the $12 million
borrowed under a term loan from First Interstate Bank of Texas, N.A. that
matures on July 31, 1999 and bears interest at an annual rate equal to the prime
rate plus 1%. See "Capitalization" and "Business -- Capital Expenditures."

The Company may revise its plans in response to future changes in the oil
and gas industry in general and the demand for its services in particular, its
results of operations, its other capital requirements and other relevant
factors. Until the proceeds are utilized as set forth above, the Company intends
to invest the net proceeds of this Offering in money market obligations,
certificates of deposit or other short-term, interest bearing securities.

DIVIDEND POLICY

The Company intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. Any payment of future dividends will be at the discretion of the Board
of Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level and terms of indebtedness,
contractual restrictions with respect to the payment of dividends and other
factors that the Board of Directors may deem relevant. The Company is a party to
a loan agreement that restricts the payment of dividends and certain other
matters. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Capital Expenditures."

13
<PAGE> 14

PRICE RANGE OF COMMON STOCK

Since the Initial Public Offering in February 1996 of Common Stock at $7.50
per share, the Common Stock has been traded on the Nasdaq National Market under
the symbol "TDGO." The following table sets forth, for the periods indicated,
the high and low sale prices per share for the Common Stock as reported by the
Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter (February 6 through March 31)........................... 10 3/8 7 7/16
Second Quarter........................................................ 12 1/2 8 1/2
Third Quarter......................................................... 11 3/4 6 3/4
Fourth Quarter (through December 17).................................. 9 3/4 7 1/2
</TABLE>

On December 17, 1996, the last reported sale price of the Common Stock as
reported by the Nasdaq National Market was $8 1/8.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996, and as adjusted to reflect the sale of shares of Common
Stock offered hereby and the application of a portion of the estimated net
proceeds therefrom as described in Note 1 below. This table should be read in
conjunction with the consolidated financial statements of the Company, including
the notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------
AS
ACTUAL ADJUSTED(1)
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt and capital leases................... $ 6,517 $ 6,517
======= =======
Long-term debt and capital leases, excluding current portion(2)........ $ 8,682 $ 5,682
------- -------
Stockholders' equity:
Preferred Stock, $.01 par value per share; 1,000,000 shares
authorized; none issued and outstanding........................... -- --
Common Stock, $.01 par value per share; 25,000,000 shares authorized;
7,600,000 shares issued and outstanding and 11,100,000 shares
issued and outstanding, as adjusted............................... $ 76 $ 111
Additional paid-in capital........................................... 28,173 52,013
Retained earnings.................................................... 1,934 1,934
Cumulative foreign currency translation adjustments.................. (3,196) (3,196)
------- -------
Total stockholders' equity................................... 26,987 50,862
------- -------
Total capitalization......................................... $35,669 $56,544
======= =======
</TABLE>

- ---------------

(1) Reflects the sale of shares of Common Stock offered hereby and the
application of a portion of the estimated net proceeds as described in "Use
of Proceeds;" does not reflect the application of any net proceeds to, or
the issuance of any shares of Common Stock in connection with, the proposed
acquisition of J.R.S. Exploration and certain related equipment. See
"Business -- Proposed Acquisition of J.R.S. Exploration."

(2) On May 31, 1996, the Company acquired seismic data acquisition equipment
(the "Equipment") from the manufacturer thereof, Input/Output, for an
aggregate of approximately $8.5 million in cash and refinanced certain
conditional sales agreements with Input/Output for an additional $4.5
million of equipment. A portion of the purchase price for the Equipment and
the funds for the refinancing were paid from the proceeds of a $12 million
borrowing under a $15 million term loan (the "Term Loan") from First
Interstate Bank of Texas, N.A. (the "Bank") pursuant to a Loan Agreement
between the Company and the Bank, dated as of May 29, 1996 (the "Loan
Agreement"). For a summary of the Loan Agreement, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

14
<PAGE> 15

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

On February 9, 1996, simultaneously with the consummation of the Initial
Public Offering, 3-D Geophysical acquired in separate transactions, in exchange
for cash, notes and shares of Common Stock, Geoevaluaciones, PIASA, Northern's
land-based seismic data operations, Paragon and Kemp. See "Certain
Transactions." For accounting purposes, the acquisitions of Geoevaluaciones and
PIASA were treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror and predecessor
of 3-D Geophysical. Accordingly, the combined net assets of Geoevaluaciones and
PIASA were valued at historical cost and the consideration given to the former
stockholders of Geoevaluaciones and PIASA was treated for accounting purposes as
a dividend. The acquisitions of Northern's land-based seismic data operations,
Paragon and Kemp (the "Purchased Companies") were treated as business
combinations accounted for by the purchase method of accounting as prescribed by
Accounting Principles Board Opinion No. 16 and SEC Staff Accounting Bulletin No.
48 (as applied prior to the issuance of SAB 97) and are included within 3-D
Geophysical's historical consolidated statement of operations commencing
February 9, 1996. The acquisition of Paragon's common stock in exchange for
shares of Common Stock was accounted for at Paragon's historical cost.
Northern's land-based seismic data operations and Kemp were valued at the fair
market value of consideration given. In connection with the acquisitions of
Northern's land-based seismic data operations and Kemp, the excess of
consideration given over the fair market value of net assets is being amortized
on a straight-line basis over 15 years. For purposes of identification and
description, the Company is referred to as the "Predecessor" for the period
prior to the Initial Public Offering and the acquisition of the Purchased
Companies as described below, the "Successor" for the period subsequent to the
Initial Public Offering and the acquisition of the Purchased Companies and the
"Company" for both periods.

Selected historical financial data is provided for Geoevaluaciones and
PIASA on a combined basis because, as described in the preceding paragraph,
Geoevaluaciones and PIASA are considered the acquirors of the Purchased
Companies for accounting purposes and therefore are deemed to be the predecessor
of 3-D Geophysical. The historical financial information for each of the three
years ended December 31, 1995 and for the nine months ended September 30, 1995
was derived from financial statements appearing elsewhere in this Prospectus.
The historical financial information for the years ended December 31, 1991 and
1992 was derived from Geoevaluaciones' financial statements (1991 is unaudited)
which do not appear elsewhere in this Prospectus. The historical financial
information for the nine months ended September 30, 1996 represents combined
operations for the entire nine months for Geoevaluaciones and also includes
operations for the Purchased Companies for the period from February 9, 1996 to
September 30, 1996. As a result, the Successor's statement of operations for the
nine months ended September 30, 1996 is not comparable to the Predecessor's
statement of operations for the nine months ended September 30, 1995. The pro
forma consolidated statements of operations for the year ended December 31, 1995
and the nine months ended September 30, 1995 and 1996 assume that the Company
had completed the recapitalization, the acquisition of the Purchased Companies
and the Initial Public Offering on January 1, 1995. The following selected pro
forma statement of operations information was derived from the pro forma
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. The pro forma consolidated statement of operations
data may not be indicative of actual results that would have been achieved if
the transactions had occurred on the dates indicated or the results which may be
realized in the future.

The following selected financial data is qualified in its entirety by the
more detailed information appearing in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.

15
<PAGE> 16

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

PREDECESSOR(1) COMPANY
---------------------------------------------------------------- -------------
NINE MONTHS NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
--------------------------------------------- SEPTEMBER 30, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $4,241 $10,342 $17,638 $17,660 $9,825 $ 7,157 $ 36,151
Expenses:
Cost of data acquisition.......... 2,574 7,577 13,146 11,004 5,968 3,759 26,563
Depreciation and
amortization.................... 651 941 990 1,468 662 531 2,788
General and administrative
expenses........................ 538 908 1,280 1,814 1,038 833 3,907
------ ------- ------- ------- ------ ------- ---------
Operating income................... 478 916 2,222 3,374 2,157 2,034 2,893
Other income (expense):
Interest expense.................. (283) (669) (1,032) (466) (803) (562) (668)
Foreign currency transaction gains
(losses)........................ 45 -- 33 (92) (120) (83) 8
Miscellaneous..................... (3) 63 270 87 503 38 437
------ ------- ------- ------- ------ ------- ---------
Income (loss) before provision for
income taxes and extraordinary
item.............................. 237 310 1,493 2,903 1,737 1,427 2,670
Provision (benefit) for income
taxes............................. 66 95 418 1,000 130 81 645
------ ------- ------- ------- ------ ------- ---------
Income (loss) before extraordinary
item.............................. 171 215 1,075 1,903 1,607 1,346 2,025
Extraordinary item, net............ -- -- -- -- -- -- 57
------ ------- ------- ------- ------ ------- ---------
Net income......................... $ 171 $ 215 $ 1,075 $ 1,903 $1,607 $ 1,346 $ 2,082
====== ======= ======= ======= ====== ======= =========
Weighted average shares

outstanding....................... 6,927
PER SHARE INFORMATION:
Income before extraordinary item... $ .29
=========
Extraordinary item, net............ $ .01
=========
Net earnings....................... $ .30
=========

STATEMENT OF CASH FLOWS DATA:
Operating activities.............. $ 997 $ 1,724 $ 2,199 $ 4,399 $1,672 $ 1,585 $ (2,089)
Investing activities.............. (1,362) (671) (747) (3,262) 204 (123) (22,484)
Financing activities.............. (11) (655) (63) (2,058) (1,423) (663) 25,162
OTHER FINANCIAL DATA:
EBITDA(3).......................... $1,171 $ 1,920 $ 3,515 $ 4,837 $3,202 $ 2,520 $ 6,126
OPERATING DATA:
Number of crews at end of period:
I/O SYSTEM TWO(R) crews........... 2 2 2 2 2 6
DFS-VTM crews..................... -- -- -- -- -- 1
Number of recording channels at
end of period................... 672 672 960 960 960 12,000

<CAPTION>
<CAPTION>
PRO FORMA(2)
-------------------------------------------
NINE MONTHS
YEAR ENDED
ENDED ------------------------------
DEC. 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
--------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................... $37,835 $25,669 $39,974
Expenses:
Cost of data acquisition.......... 28,931 19,063 30,082
Depreciation and
amortization.................... 3,431 2,530 3,068
General and administrative
expenses........................ 4,298 3,093 4,272
------- ------- -------
Operating income................... 1,175 983 2,552
Other income (expense):
Interest expense.................. (1,124) (752) (710)
Foreign currency transaction gains
(losses)........................ (120) (83) 8
Miscellaneous..................... 415 (68) 437
------- ------- -------
Income (loss) before provision for
income taxes and extraordinary
item.............................. 346 80 2,287
Provision (benefit) for income
taxes............................. (357) (390) 511
------- ------- -------
Income (loss) before extraordinary
item.............................. $ 703 $ 470 $ 1,776
======= ======= =======
Extraordinary item, net............
Net income.........................
Weighted average shares
outstanding....................... 6,232 6,232 6,232
PER SHARE INFORMATION:
Income before extraordinary item... $ .11 $ .08 $ .28
======= ======= =======
Extraordinary item, net............
Net earnings.......................

STATEMENT OF CASH FLOWS DATA:
Operating activities..............
Investing activities..............
Financing activities..............
OTHER FINANCIAL DATA:
EBITDA(3).......................... $ 4,901 $ 3,362 $ 6,065
OPERATING DATA:
Number of crews at end of period:
I/O SYSTEM TWO(R) crews........... 7 5 6(4)
DFS-VTM crews..................... 1 4 2(4)
Number of recording channels at
end of period................... 7,500 5,220 12,000
</TABLE>

<TABLE>
<CAPTION>
COMPANY COMPANY AS OF
AS OF SEPTEMBER 30, 1996
SEPTEMBER 30, 1996 AS ADJUSTED(5)
------------------ ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................................... $ 2,850 $ 6,824
Total assets....................................................................... 54,396 75,271
Long-term debt and capital leases.................................................. 8,682 5,682
Total stockholders' equity......................................................... 26,987 50,862
</TABLE>

16
<PAGE> 17

- ---------------

(1) Amounts represent the combination of Geoevaluaciones and PIASA, the
Predecessor.

(2) Reflects pro forma adjustments for the acquisitions of the Purchased
Companies and the consummation of the Initial Public Offering; does not
reflect adjustments related to the proposed acquisition of J.R.S.
Exploration and certain related equipment as described in
"Business -- Proposed Acquisition of J.R.S. Exploration." See the pro forma
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus for a discussion of the assumptions made and
adjustments applied in the preparation of the selected historical pro forma
financial and operating data of the Company, as well as the pro forma
effect of the proposed acquisition of J.R.S. Exploration and certain
related equipment.

(4) Does not include one crew providing drilling and survey services for a
seismic data acquisition crew operated by PEMEX.

17
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion has been divided into several sections: the first
section contains the pro forma results of operations for the four Operating
Subsidiaries and PIASA for the periods indicated based on the pro forma
consolidated financial statements of the Operating Subsidiaries, PIASA and 3-D
Geophysical assuming the Initial Public Offering was consummated and the
Operating Subsidiaries and PIASA were acquired on January 1, 1994. The second
section contains a discussion of the combined financial statements of the
Company for the periods indicated. For accounting purposes, the Mexican
Operations are considered the predecessor company, and the combined financial
statements include the operating results of the Mexican Operations for all the
periods and the operating results of the Purchased Companies only for the period
beginning February 9, 1996. As a result, the Company's statement of operations
for the nine months ended September 30, 1996 is not comparable to the statement
of operations for the nine months ended September 30, 1995. Finally, there is a
discussion of the liquidity and capital resources of the Company, the impact of
the Mexican economy and certain other matters. The following discussion of the
results of operations and the financial position of 3-D Geophysical and of the
Operating Subsidiaries and PIASA should be read in connection with "Selected
Historical and Pro Forma Financial and Operating Data," and the financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.

PRO FORMA RESULTS OF OPERATIONS

Nine Months Ended September 30, 1996 Compared to Nine Months Ended September
30, 1995

NET REVENUES. Pro forma net revenues for the Company increased 55.7% to
$40.0 million in the nine months ended September 30, 1996 from $25.7 million in
the nine months ended September 30, 1995. The increase is primarily the result
of an increase in seismic survey activities in the United States. Pro forma net
revenues in the United States increased 66.9% to $30.9 million in the nine
months ended September 30, 1996 from $18.5 million in the nine months ended
September 30, 1995. The increase is primarily the result of increased seismic
survey activities in Alaska and the Rocky Mountain region. Pro forma net
revenues for the Mexican Operations increased 27.0% to $9.1 million in the nine
months ended September 30, 1996 from $7.2 million in the nine months ended
September 30, 1995 due primarily to inflation. The $7.2 million of net revenues
in the nine months ended September 30, 1995 for the Mexican Operations include
$2.6 million of contractual price adjustments related to increased costs due to
the devaluation of the peso which occurred in December 1994. Net revenues in the
nine months ended September 30, 1996 include similar contractual adjustments of
$1.1 million.

COST OF DATA ACQUISITION. Pro forma cost of data acquisition for the
Company increased 57.8% to $30.1 million in the nine months ended September 30,
1996 from $19.1 million in the nine months ended September 30, 1995. The
increase is primarily the result of increased seismic survey activities in the
United States. Pro forma cost of data acquisition in the United States increased
50.8% to $23.1 million in the nine months ended September 30, 1996 from $15.3
million in the nine months ended September 30, 1995 due to greater activity in
Alaska and the Rocky Mountain region. Pro forma cost of data acquisition for the
Mexican Operations increased 86.4% to $7.0 million in the nine months ended
September 30, 1996 from $3.8 million in the nine months ended September 30,
1995. The decrease in gross margin for the Mexican Operations is primarily
attributable to larger price adjustments realized in the nine months ended
September 30, 1995 and the impact in the nine months ended September 30, 1996 of
a drilling and field services crew operating in Southern Mexico which did not
commence work in 1995 until November.

DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization for
the Company increased 21.3% to $3.1 million in the nine months ended September
30, 1996 from $2.5 million in the nine months ended September 30, 1995. This
increase is primarily the result of the acquisition of new equipment.
Depreciation and amortization for the Mexican Operations increased 27.1% to
$675,000 in the nine months ended September 30, 1996 from $531,000 in the nine
months ended September 30, 1995.

GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma general and administrative
expenses for the Company increased 38.1% to $4.3 million in the nine months
ended September 30, 1996 from $3.1 million in the nine months ended September
30, 1995. The increase is primarily the result of the establishment of a 3-D

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Geophysical headquarters, added costs associated with being a publicly traded
company and increased marketing costs. Pro forma general and administrative
expenses in the United States increased 50.7% to $3.4 million in the nine months
ended September 30, 1996 from $2.3 million in the nine months ended September
30, 1995. Pro forma general and administrative expenses for the Mexican
Operations increased 4.0% to $866,000 in the nine months ended September 30,
1996 from $833,000 in the nine months ended September 30, 1995. The increase in
general and administrative expenses in the Mexican Operations is attributable
primarily to the costs of evaluating business opportunities in Latin America.

OPERATING INCOME. Pro forma operating income for the Company increased
159.6% to $2.6 million in the nine months ended September 30, 1996 from $983,000
in the nine months ended September 30, 1995. The increase is primarily related
to improvements in the operations in the United States which recognized an
operating profit of $2.0 million in the nine months ended September 30, 1996
compared to a loss of $1.1 million in the nine months ended September 30, 1995.
Pro forma operating income for the Mexican Operations decreased 73.5% to
$540,000 in the nine months ended September 30, 1996 from $2.0 million in the
nine months ended September 30, 1995. The decrease is primarily attributable to
a $2.6 million price adjustment realized in the nine months ended September 30,
1995 as a result of contractual adjustments relating to the devaluation of the
peso in December 1994. Similar contractual adjustments of $1.1 million were
realized in the nine months ended September 30, 1996.

INTEREST EXPENSE. The Company's pro forma interest expense decreased 5.6%
to $710,000 in the nine months ended September 30, 1996 from $752,000 in the
nine months ended September 30, 1995. The decline in interest expense is
attributable to lower borrowing costs for the Mexican Operations compared with
the nine months ended September 30, 1995.

FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). The Company recognized pro
forma foreign currency gains of $8,000 in the nine months ended September 30,
1996 compared to foreign currency losses of $83,000 in the nine months ended
September 30, 1995. The gains are attributable to the reduction of dollar
liabilities of the Mexican Operations and the fluctuation of the peso to dollar
exchange rate.

MISCELLANEOUS INCOME (EXPENSE). The Company recognized pro forma
miscellaneous income of $437,000 in the nine months ended September 30, 1996
compared to miscellaneous expense of $68,000 in the nine months ended September
30, 1995. The increase is primarily the result of interest income in Mexico due
to the high investment interest rates available in Mexico, interest income from
the investment of the proceeds of the Initial Public Offering and interest
income from the conversion of a trade receivable to an interest-bearing note
receivable, which was paid in July 1996.

INCOME TAX EXPENSE (BENEFIT). The Company recognized pro forma income tax
expense of $511,000 in the nine months ended September 30, 1996 compared to pro
forma income tax benefit of $390,000 in the nine months ended September 30,
1995. The increase is attributable to earnings increases in the operations in
the United States and a higher effective tax rate in the Mexican Operations due
to lower inflation adjustments.

The Company believes that it is probable that the inflation rate in Mexico,
as measured by the consumer price index, will exceed 100% for the three-year
period ending December 31, 1996. Accordingly, the Company will likely adopt the
dollar as the functional currency for the Mexican Operations beginning on
January 1, 1997 in accordance with Statement of Financial Accounting Standards
No. 52. Using the dollar as the functional currency will result in adjustments
to the consolidated statement of operations in future periods for foreign
currency translation gains and losses.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

NET REVENUES. Pro forma net revenues for the Company decreased 9.1% to
$37.8 million for the year ended December 31, 1995 from $41.6 million for the
year ended December 31, 1994. The decline is primarily the result of decreased
seismic survey activities in the Mexican Operations partially offset by an
increase in survey activities in the United States. Pro forma net revenues in
the United States increased 17.0% to $28.0 million for the year ended December
31, 1995 from $23.9 million for the year ended December 31, 1994. The increase
is primarily attributable to operations in the Rocky Mountain region where
revenues

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<PAGE> 20

increased 29.0% to $19.9 million. Pro forma net revenues for the Mexican
Operations decreased 44.4% to $9.8 million for the year ended December 31, 1995
from $17.6 million for the year ended December 31, 1994. The decline in net
revenues in the Mexican Operations is attributable primarily to the devaluation
of the peso as well as the decline in demand for seismic surveys by PEMEX in
1995 due to the economic turmoil in Mexico in 1995 and PEMEX's internal
transition from 2-D to 3-D as its primary seismic survey technique.

COST OF DATA ACQUISITION. Pro forma cost of data acquisition for the
Company increased 1.3% to $28.9 million for the year ended December 31, 1995
from $28.6 million for the year ended December 31, 1994. The increase is
primarily the result of increased seismic survey activities in the United
States. The increase in the cost of data acquisition in the United States was
partially offset by a decline in survey activities in the Mexican Operations.
Pro forma cost of data acquisition in the United States increased 30.8% to $23.0
million for the year ended December 31, 1995 from $17.6 million for the year
ended December 31, 1994. The increase is primarily attributable to significant
equipment rental expenses in the Rocky Mountain region. Pro forma cost of data
acquisition for the Mexican Operations decreased 45.8% to $6.0 million for the
year ended December 31, 1995 from $11.0 million for the year ended December 31,
1994. The decline in cost of data acquisition in the Mexican Operations is
attributable primarily to the devaluation of the peso and to a lesser extent is
attributable to decreases in personnel due the decline in demand for seismic
surveys by PEMEX in 1995.

DEPRECIATION AND AMORTIZATION. Pro forma depreciation and amortization for
the Company decreased 19.5% to $3.4 million for the year ended December 31, 1995
from $4.3 million for the year ended December 31, 1994. The decrease is
primarily the result of the devaluation of the peso which was partially offset
by capital expenditures in the operations in the United States. Pro forma
depreciation and amortization in the United States remained relatively unchanged
at $2.8 million for the year ended December 31, 1995 from the year ended
December 31, 1994. Pro forma depreciation and amortization for the Mexican
Operations decreased 54.9% to $662,000 for the year ended December 31, 1995 from
$1.5 million for the year ended December 31, 1994, primarily due to the
devaluation of the peso and to a lesser extent decreases in capital
expenditures.

GENERAL AND ADMINISTRATIVE EXPENSES. Pro forma general and administrative
expenses for the Company decreased 6.7% to $4.3 million for the year ended
December 31, 1995 from $4.6 million for the year ended December 31, 1994. The
decrease is primarily the result of decreased general and administrative
expenses for the Mexican Operations due the devaluation of the peso, partially
offset by increased overhead in the operations in the United States. Pro forma
general and administrative expenses in the United States increased 16.8% to $3.3
million for the year ended December 31, 1995 from $2.8 million for the year
ended December 31, 1994. Pro forma general and administrative expenses for the
Mexican Operations decreased 42.8% to $1.0 million for the year ended December
31, 1995 from $1.8 million for the year ended December 31, 1994. The decline in
general and administrative expenses for the Mexican Operations is attributable
primarily to the devaluation of the peso and to a lesser extent decreases in
personnel due to the decline in demand for seismic surveys by PEMEX in 1995.

OPERATING INCOME. Pro forma operating income for the Company decreased
71.9% to $1.2 million for the year ended December 31, 1995 from $4.2 million for
the year ended December 31, 1994. Pro forma operating income in the United
States decreased to a loss of $982,000 for the year ended December 31, 1995 from
operating income of $801,000 for the year ended December 31, 1994. The losses in
the United States were primarily attributable to a decline in seismic activities
in the Rocky Mountain region in the first half of 1995. Pro forma operating
income for the Mexican Operations decreased 36.1% to $2.2 million for the year
ended December 31, 1995 from $3.4 million for the year ended December 31, 1994.
The decline in operating income in the Mexican Operations is attributable
primarily to the devaluation of the peso as well as the decline in demand for
seismic surveys by PEMEX in 1995 due to the economic turmoil in Mexico in 1995
as well as PEMEX's internal transition from 2-D to 3-D as its primary seismic
survey technique.

INTEREST EXPENSE. The Company recognized pro forma interest expense of $1.1
million for the year ended December 31, 1995 compared to $625,000 for the year
ended December 31, 1994. The increase is primarily due to increased debt levels
at Paragon.

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<PAGE> 21

FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). The Company recognized pro
forma foreign currency losses of $120,000 for the year ended December 31, 1995
compared to foreign currency losses of $92,000 for the year ended December 31,
1994.

MISCELLANEOUS INCOME (EXPENSE). The Company recognized pro forma
miscellaneous income of $415,000 for the year ended December 31, 1995 compared
to pro forma miscellaneous income of $77,000 for the year ended December 31,
1994. The increase is primarily the result of interest income in Mexico due to
high interest rates and a gain on sale of equipment in Mexico.

INCOME TAX EXPENSE (BENEFIT). The Company recognized a pro forma income tax
benefit of $357,000 for the year ended December 31, 1995 compared to a pro forma
income tax expense of $1.2 million for the year ended December 31, 1994. The tax
benefit is attributable to losses incurred in the United States at an effective
tax rate of 37% partially offset by earnings from the Mexican Operations taxed
at an adjusted effective tax rate of 7.5%. The effective tax rate in Mexico for
the year ended December 31, 1995 was lower than the 34% statutory rate due to
favorable inflation adjustments.

COMBINED RESULTS OF OPERATIONS

Nine Months Ended September 30, 1996 compared to Nine Months Ended September
30, 1995

NET REVENUES. Net revenues for the Company increased 405.1% to $36.2
million in the nine months ended September 30, 1996 from $7.2 million in the
nine months ended September 30, 1995. The increase is primarily attributable to
the inclusion of $27.0 million of net revenues of the Company's operations in
the United States and a 27.0% increase to $9.1 million in the nine months ended
September 30, 1996, from $7.2 million in the nine months ended September 30,
1995, for the Mexican Operations. Net revenues for the Mexican Operations in the
nine months ended September 30, 1995 include $2.6 million of contractual
adjustments related to increased costs due to the devaluation of the peso which
occurred in December 1994. Net revenues for the Mexican Operations in the nine
months ended September 30, 1996 include similar contractual adjustments of $1.1
million.

COST OF DATA ACQUISITION. Cost of data acquisition for the Company
increased 606.7% to $26.6 million in the nine months ended September 30, 1996
from $3.8 million in the nine months ended September 30, 1995. The increase is
primarily attributable to the inclusion of $19.6 million of cost of data
acquisition of the Company's operations in the United States and a 86.4%
increase to $7.0 million in the nine months ended September 30, 1996, from $3.8
million in the nine months ended September 30, 1995, for the Mexican Operations.
The decrease in gross margin for the Mexican Operations is primarily
attributable to larger price adjustments realized in the nine months ended
September 30, 1995 and the impact in the nine months ended September 30, 1996 of
a drilling and field services crew operating in Southern Mexico which did not
commence work in 1995 until November.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
Company increased 425.0% to $2.8 million in the nine months ended September 30,
1996 from $531,000 in the nine months ended September 30, 1995. The increase is
primarily attributable to the inclusion of $2.0 million of depreciation and
amortization of the Company's operations in the United States, including
$260,000 of goodwill amortization attributable to the acquisitions of Northern
and Kemp. This is in addition to a 27.1% increase to $675,000 in the nine months
ended September 30, 1996, from $531,000 in the nine months ended September 30,
1995, for the Mexican Operations.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the Company increased 369.0% to $3.9 million in the nine months ended
September 30, 1996 from $833,000 in the nine months ended September 30, 1995.
The increase is primarily attributable to the inclusion of $2.9 million of
general and administrative expenses from the Company's operations in the United
States, and a 4.0% increase to $866,000 in the nine months ended September 30,
1996, from $833,000 in the nine months ended September 30, 1995, for the Mexican
Operations. General and administrative expenses for the Company have also
increased due to the establishment of a 3-D Geophysical headquarters, added
costs associated with being a publicly traded company and increased marketing
costs.

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<PAGE> 22

OPERATING INCOME. Operating income for the Company increased 42.2% to $2.9
million in the nine months ended September 30, 1996 from $2.0 million in the
nine months ended September 30, 1995. The operating income of the Mexican
Operations decreased 73.4% to $540,000 in the nine months ended September 30,
1996 from $2.0 million in the nine months ended September 30, 1995. The decrease
in the operating income of the Mexican Operations in the nine months ended
September 30, 1996 is due to contractual revenue adjustments of $2.6 million,
which were realized in the nine months ended September 30, 1995, attributable to
increased costs resulting from the devaluation of the peso during December 1994.
This is contrasted with contractual adjustments of $1.1 million in the nine
months ended September 30, 1996. The decrease in the operating income of the
Mexican Operations was partially offset by the inclusion of $2.3 million of
operating income for the Company's operations in the United States in the nine
months ended September 30, 1996.

INTEREST EXPENSE. The Company's interest expense increased 18.9% to
$668,000 in the nine months ended September 30, 1996 from $562,000 in the nine
months ended September 30, 1995. The increase is due to interest charges on
borrowings of approximately $12 million in May 1996 under a credit facility with
the Company's principal lender compared to interest charges on borrowings of
approximately $300,000 and financing charges in connection with the factoring of
receivables arising out of the Mexican Operations in the nine months ended
September 30, 1995.

FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). The Company recognized a
foreign currency gain of $8,000 in the nine months ended September 30, 1996
compared to a foreign currency loss of $83,000 in the nine months ended
September 30, 1995. These gains and losses are primarily attributable to the
reduction of dollar liabilities of the Mexican Operations and the fluctuation of
the peso to dollar exchange rate.

MISCELLANEOUS INCOME (EXPENSE). The Company recognized miscellaneous income
of $437,000 in the nine months ended September 30, 1996 compared to
miscellaneous income of $38,000 in the nine months ended September 30, 1995. The
increase is primarily the result of interest income in Mexico due to the high
investment interest rates available in Mexico, interest income from the
investment of the proceeds of the Initial Public Offering and interest income
from the conversion of a trade receivable to an interest-bearing note receivable
which was paid in July 1996.

INCOME TAX EXPENSE (BENEFIT). The Company recognized income tax expense of
$645,000 in the nine months ended September 30, 1996 compared to income tax
expense of $81,000 in the nine months ended September 30, 1995. The increase is
primarily attributable to earnings of the Company's operations in the United
States taxed at a 26% effective tax rate, partially offset by an 18% effective
tax rate for earnings from the Mexican Operations. The lower tax rate in Mexico
is due to inflation adjustments. The effective tax rate for the Company's
operations in the United States is lower than the statutory tax rate due to the
anticipated change in the valuation allowance previously established with
respect to certain net operating loss carryforwards.

EXTRAORDINARY ITEM NET OF INCOME TAX EXPENSE. The Company recognized a
$57,000 extraordinary item in the nine months ended September 30, 1996, net of
tax expense of $36,000. The extraordinary item is due to a gain recognized on
the early extinguishment of debt. No extraordinary items were recognized in the
nine months ended September 30, 1995.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

NET REVENUES. Net revenues decreased 44.4% to $9.8 million in the year
ended December 31, 1995 from $17.7 million in the year ended December 31, 1994.
The decline in net revenues was attributable primarily to the devaluation of the
peso as well as the decline in demand for seismic surveys by PEMEX in 1995 due
to the economic turmoil in Mexico in 1995 as well as PEMEX's internal transition
from 2-D to 3-D as its primary seismic survey technique.

COST OF DATA ACQUISITION. Cost of data acquisition decreased 45.8% to $6.0
million in the year ended December 31, 1995 from $11.0 million in the year ended
December 31, 1994. The decline in cost of data

22
<PAGE> 23

acquisition in the Mexican Operations is attributable primarily to the
devaluation of the peso and to a lesser extent decreases in personnel due the
decline in demand for seismic surveys by PEMEX in 1995.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased
54.9% to $662,000 in the year ended December 31, 1995 from $1.5 million in the
year ended December 31, 1994. The decline in depreciation and amortization in
the Mexican Operations is attributable primarily to the devaluation of the peso
and to a lesser extent decreases in capital expenditures.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 42.8% to $1.0 million in the year ended December 31, 1995 from $1.8
million in the year ended December 31, 1994. The decline in general and
administrative expenses in the Mexican Operations is attributable primarily to
the devaluation of the peso and to a lesser extent decreases in personnel due to
the decline in demand for seismic surveys by PEMEX in 1995.

OPERATING INCOME. Operating income decreased 36.1% to $2.2 million in the
year ended December 31, 1995 from $3.4 million in the year ended December 31,
1994. The decline in operating income in the Mexican Operations is attributable
primarily to the devaluation of the peso as well as the decline in demand for
seismic surveys by PEMEX in 1995 due to the economic turmoil in Mexico in 1995
as well as PEMEX's internal transition from 2-D to 3-D as its primary seismic
survey technique.

INTEREST EXPENSE. Interest expense increased 72.3% to $803,000 in the year
ended December 31, 1995 from $466,000 in the year ended December 31, 1994. The
increase in interest expense is attributable to higher borrowing costs in 1995
due to the economic impact of the devaluation of the peso and financing charges
in connection with the factoring of receivables arising out of the Mexican
Operations in the nine months ended September 30, 1995.

FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). Foreign currency losses of
$120,000 were recognized in the year ended December 31, 1995 compared to foreign
currency losses of $92,000 in the year ended December 31, 1994.

MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income of $503,000 was
recognized in the year ended December 31, 1995 compared to miscellaneous income
of $87,000 in the year ended December 31, 1994. The increase is primarily the
result of interest income in Mexico due to high interest rates and a gain on the
sale of equipment.

INCOME TAX EXPENSE (BENEFIT). Income tax expense was $130,000 in the year
ended December 31, 1995 compared to income tax expense of $1.0 million in the
year ended December 31, 1994. The decline is attributable to lower earnings and
inflation adjustments to the 35% tax rate in Mexico which reduced the effective
tax rate to 7.5%.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

NET REVENUES. Net revenues of $17.7 million in 1994 remained relatively
unchanged from 1993 due to greater utilization of Geoevaluaciones' heliportable
crew operating in Central Mexico and Geoevaluaciones' vibroseis crew operating
in Northern Mexico, offset by the 12% increase in the average peso to dollar
exchange rate for 1994 compared to 1993.

COST OF DATA ACQUISITION. Cost of data acquisition decreased 16.3% to $11.0
million in 1994 from $13.1 million in 1993 as a result of improved efficiencies
in operations of the heliportable crew which resulted in lower rental costs and
Geoevaluaciones' decision in 1994 to end subcontracting of processing services
and to perform such services itself through its arrangement with PIASA which
reduced technical assistance costs. These costs also decreased as a result of
the increase in the average peso to dollar exchange rate for 1994 compared to
1993.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased 48.3% to $1.5 million in 1994 from $1.0 million in 1993 as a result of
the acquisition of additional seismic equipment offset by the 12% increase in
the average peso to dollar exchange rate in 1994 compared to 1993.

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<PAGE> 24

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 41.7% to $1.8 million in 1994 from $1.3 million in 1993 as a result of
higher personnel costs and Geoevaluaciones' decision in 1994 to end
subcontracting of processing services and to perform such services itself
through its arrangement with PIASA, partially offset by decreases as a result of
the increase in the average peso to dollar exchange rate for 1994 compared to
1993.

OPERATING INCOME. Operating income increased 51.8% to $3.4 million in 1994
from $2.2 million in 1993 as a result of improved efficiencies in the operations
of the heliportable crew and Geoevaluaciones' decision in 1994 to end
subcontracting of processing services and to perform such services itself
through its arrangement with PIASA.

INTEREST EXPENSE. Interest expense decreased 54.8% to $466,000 in 1994 from
$1.0 million in 1993. The decrease in the interest expense resulted from lower
borrowing costs and a decrease in capital leases.

FOREIGN CURRENCY TRANSACTION GAINS (LOSSES). Foreign currency transaction
losses were $92,000 in 1994 compared to gains of $33,000 in 1993 due to the
increase in the average peso to dollar exchange rate in 1994 compared to 1993.

MISCELLANEOUS INCOME (EXPENSE). Miscellaneous income, which consists of the
interest income and miscellaneous non-operating expense line items, decreased
67.8% to $87,000 in 1994 from $270,000 in 1993. The decrease is primarily a
result of taxes (other than income taxes) related to prior years that were
refunded during 1993.

INCOME TAX EXPENSE (BENEFIT). Income tax expense increased 139.2% to $1.0
million in 1994 from $418,000 in 1993 as a result of increased earnings in 1994.

LIQUIDITY AND CAPITAL RESOURCES

From December 31, 1995 to September 30, 1996, total assets of the Company
increased from $4.5 million to $54.4 million, total liabilities increased from
$2.7 million to $27.4 million and total stockholders' equity increased from $1.8
million to $27.0 million. These increases resulted from the Initial Public
Offering, the acquisition of the Operating Subsidiaries and new capital
expenditures partially financed by the Term Loan.

On February 9, 1996, the Company completed the Initial Public Offering of
4,000,000 shares of Common Stock at a price to the public of $7.50 per share.
Subsequently, on February 21, 1996, the underwriters exercised their
over-allotment option to purchase an additional 600,000 shares at a price to the
public of $7.50 per share. The net proceeds to the Company (after deducting
underwriting discounts and commissions and offering expenses) were approximately
$28.7 million. Of this amount, approximately $3.5 million was treated, for
accounting purposes, as a dividend to the former stockholders of Geoevaluaciones
and PIASA, approximately $10.3 million was used to purchase the land seismic
assets of Northern and all of the capital stock of Kemp, approximately $4.6
million was used to repay indebtedness of the Operating Subsidiaries, $152,000
was used to retire capital leases and approximately $1.1 million was paid
subsequent to the acquisitions as a purchase price adjustment for the land-based
seismic data operations of Northern. The remaining proceeds were used primarily
for working capital and capital expenditures. See "Certain Transactions."

At September 30, 1996, the Company had $1.2 million of cash. The Company's
operating activities utilized $2.1 million net cash in the nine months ended
September 30, 1996 compared with providing $1.6 million of cash in the same
period of the prior year. The reduction in net cash provided by operating
activities was primarily attributable to a net increase in working capital.

Net cash used in investing activities increased to $22.5 million in the
nine months ended September 30, 1996 from $123,000 in the same period in the
prior year. This increase was due to the cash utilized to purchase Northern and
Kemp of $10.3 million and for capital expenditures of $12.3 million, offset by
cash proceeds of approximately $100,000 from the sale of equipment.

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<PAGE> 25

Net cash provided by financing activities increased to $25.2 million in the
nine months ended September 30, 1996 from net cash utilized of $663,000 in the
comparable period in the prior year due to the completion of the Initial Public
Offering and the closing of the Loan Agreement.

The Company used $12.3 million for capital expenditures in the nine months
ended September 30, 1996 compared to $123,000 in the same period of the prior
year. Simultaneously with the acquisition of the Operating Subsidiaries,
Northern and Paragon exercised options to purchase equipment which had been
rented. These capital expenditures reduced the Company's reliance on leased
equipment and improved the
Company's ability to meet the demand for 3-D data acquisition services. On May
31, 1996, the Company purchased approximately $8.5 million of equipment from
Input/Output. This purchase increased the Company's recording channel capacity
from approximately 7,500 to approximately 12,000 channels.

Simultaneously with the purchase of the equipment, the Company entered into
an $18 million credit facility with First Interstate Bank of Texas, N.A. The
Loan Agreement is for three years and includes $7.5 million of financing for the
above equipment and $4.5 million of refinancing of conditional sales agreements
acquired by the Operating Subsidiaries prior to the Initial Public Offering. The
new equipment has been utilized to meet the requirements of a contract with BP
Alaska, to increase the channel capacity of one of the Company's Mexican crews
for a 3-D contract with PEMEX and to increase the channel capacity of the
Company's two crews in the Rocky Mountain region.

The Loan Agreement provides for the Term Loan of $15.0 million, of which
$3.0 million is available for future capital expenditures, and a revolving
credit working capital facility (the "Revolving Credit Loan") of up to $3.0
million, of which $2.0 million was available as of September 30, 1996. The Term
Loan is payable in substantially equal monthly installments through July 31,
1999, bears interest at an annual rate equal to the prime rate plus 1% (9.25% at
September 30, 1996) and is secured by a lien on the Company's accounts, accounts
receivable, equipment, machinery, fixtures, inventory, goods, chattel paper,
documents, instruments, investment property, general intangibles, and other
personal property, whether then owned or thereafter acquired, and all products
and proceeds thereof, and by guarantees by certain of the Company's
subsidiaries. The Revolving Credit Loan may be drawn down from time to time
through May 29, 1997 in an amount of up to 70% of the Company's "Eligible
Accounts" (as defined in the Loan Agreement). The rate of interest and the
security for the Revolving Credit Loan are the same as those described above for
the Term Loan. In addition to certain customary affirmative covenants, the Loan
Agreement contains restrictions on the Company with respect to (i) incurring
Debt (as defined), incurring or permitting to exist Liens (as defined) on its
property, assets or revenues, (iii) declaring or paying any dividends or other
distributions on its capital stock (or acquiring any of its capital stock), (iv)
issuing capital stock, (v) entering into transactions with affiliates, (vi)
disposing of assets, and (vii) certain other matters. The Loan Agreement also
contains financial covenants with respect to minimum tangible net worth, the
ratio of tangible net worth to net liabilities and the ratio of earnings to debt
service.

On October 1, 1996, the Company entered into a termination agreement with
the Company's former Chief Financial Officer pursuant to which the Company
agreed to pay him $200,000 in January 1997 plus $5,000 per month through
December 31, 1998, to provide him with office space in the Company's New York
City facility through December 31, 1997 and to provide him with certain
insurance benefits through December 31, 1998. See "Certain Transactions."

Since September 30, 1996, the Company has entered into short-term leases
for seismic data acquisition equipment with aggregate lease payments of
approximately $3.8 million. See note 14 of notes to the consolidated financial
statements of the Company.

At November 11, 1996, the Company's estimated backlog of commitments for
services totaled approximately $42.2 million, of which approximately $2.8
million relates to a contract in Peru that is subject to the resolution of
certain uncertainties relating to obtaining required local permits. The Company
expects to complete substantially all of these commitments during 1996 and 1997;
however, commitments are subject to cancellation at the option of the Company's
customers on short notice and without penalty. Consequently, the Company's
backlog as of any particular date may not be indicative of the Company's actual
operating results for any succeeding fiscal period. Subject to the foregoing,
the Company anticipates that approximately 29% of

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<PAGE> 26

the orders and commitments included in backlog at November 11, 1996 will be
completed prior to the end of 1996 and it is expected that the balance will be
completed in 1997. See "Business -- Marketing and Customers -- Backlog."

The Company currently plans to continue to upgrade and expand its existing
data acquisition capabilities through the purchase of additional systems,
additional channel capacity for the six 24-bit seismic data acquisition systems
it presently owns and related vehicles and equipment. In addition, the Company
plans to repay $3.0 million of the indebtedness incurred in May 1996 under the
Loan Agreement to purchase two 24-bit seismic data acquisition systems and other
capital equipment and to acquire up to three additional I/O SYSTEM TWO(R)
seismic data acquisition systems. The Company believes that its planned capital
expenditures and operating requirements for the next 12 months will be funded
from a portion of the net proceeds of this Offering, cash from operations and,
to the extent available, borrowings under the Loan Agreement. The Company may
revise its plans in response to future changes in the oil and gas industry in
general and the demand for its services in particular, its results of
operations, its other capital requirements and other relevant factors. 3-D
Geophysical periodically evaluates opportunities to acquire businesses and
assets; however, the Company does not have any current understanding,
arrangement or agreement to acquire any such businesses or assets other than the
proposed acquisition of J.R.S. Exploration (and certain related equipment) for
cash and shares of Common Stock (see "Business -- Proposed Acquisition of J.R.S.
Exploration"). The Company believes that, in addition to cash from operations
and borrowings under the Loan Agreement, it may fund any such acquisitions
through the issuance of additional debt or equity securities. The issuance of
additional equity securities, including shares of Common Stock, in connection
with any such acquisitions would result in additional dilution to purchasers of
Common Stock in this Offering. See "Risk Factors -- Capital Intensive Business;
Rapid Obsolescence of Technology," "Use of Proceeds" and "Business -- Capital
Expenditures."

IMPACT OF MEXICAN ECONOMY

For the year ended December 31, 1995 and for the nine months ended
September 30, 1996, pro forma net revenues from the Mexican Operations were
26.0% and 22.7%, respectively, of pro forma net revenues of the Company. The
Company's financial performance is, and will continue to be, affected by
economic conditions in Mexico.

The level of land-based seismic data acquisition services in Mexico has in
the past been vulnerable to economic downturns and changes in government
policies and public spending. Since December 1994, Mexico has experienced an
economic crisis characterized by a significant devaluation of the peso, exchange
rate instability, increased inflation, high domestic interest rates, negative
economic growth, reduced consumer purchasing power and high unemployment.
Inflation in Mexico for the year ended December 31, 1995 and for the nine months
ended September 30, 1996 was approximately 52.0% and 20.3%, respectively, based
on the consumer price index.

The December 1994 devaluation of the peso has had a number of effects on
the Mexican economy that have adversely affected the financial condition of
Mexican companies, including Geoevaluaciones. The devaluation caused the peso
value of Geoevaluaciones' dollar denominated indebtedness, which consists
primarily of equipment financing, to increase significantly, and also greatly
increased the rate of inflation, resulting in a sharp rise in nominal interest
rates on peso denominated financing.

The prices Geoevaluaciones pays for certain equipment, energy and other
materials are set, in part, by reference to international prices denominated in
currencies other than pesos. Pursuant to Geoevaluaciones' contracts with PEMEX,
certain of the costs incurred by Geoevaluaciones may be adjusted to take into
account economic events such as inflation and devaluation of the peso (see
"Business -- Marketing and Customers -- Contracts"). Geoevaluaciones' results of
operations, denominated in pesos, are translated into dollars for inclusion in
the Company's financial statements. However, increases in the peso to dollar
exchange rate will result in a reduction of the dollar value of peso-based
revenues of the Company as well as the dollar value of peso-based expenses of
the Company. Likewise, decreases in such rate will result in increases in the
dollar value of such revenues and expenses. As a result, such fluctuations could
have a material adverse effect on the financial condition and results of
operations of the Company. The table below sets forth the peso to

26
<PAGE> 27

dollar exchange rate during the periods indicated (based on the average of the
closing rates published by Banco Mexicano de Comercio Exterior for each business
day during such period) and the closing rate for the last day of each such
period.

<TABLE>
<CAPTION>
PESO TO DOLLAR EXCHANGE RATES
----------------------------------------
NINE MONTHS
YEAR ENDED DECEMBER ENDED
31, SEPTEMBER 30,
---------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average......................................... 3.11 3.48 6.42 6.10 7.54
Period end...................................... 3.13 5.00 7.68 6.40 7.55
</TABLE>

While the Company may from time to time evaluate methods to reduce foreign
exchange risks, the adoption of any particular method will depend on existing
market conditions. The Company cannot reasonably predict what method, if any, it
will adopt to reduce foreign exchange risks, and there can be no assurance that
it will adopt any such method or that, if adopted, any such method will reduce
such risks.

The financial statements of Geoevaluaciones for the three years ended
December 31, 1995 and the nine months ended September 30, 1995 and 1996 have
been prepared using the peso as the functional currency as prescribed by
Statement of Financial Accounting Standards No. 52 ("Statement 52"). Statement
52 requires that an entity's reporting currency, which for Geoevaluaciones is
the dollar, should be used as the functional currency if inflation in the
primary economic environment exceeds 100% over a three-year period. If the
financial statements of Geoevaluaciones had been prepared using the dollar as
the functional currency for the year ended December 31, 1995 and the nine months
ended September 30, 1996, net income would have been lower.

The Company believes that it is probable that the inflation rate in Mexico,
as measured by the consumer price index, will exceed 100% for the three-year
period ending December 31, 1996. Accordingly, the Company will likely adopt the
dollar as the functional currency for the Mexican Operations beginning on
January 1, 1997 in accordance with Statement 52. Using the dollar as the
functional currency will result in adjustments to the consolidated statement of
operations in future periods for foreign currency translation gains and losses.

FEDERAL INCOME TAXES

Provisions for income taxes are based on pretax income reported for
financial statement purposes. Such provisions differ from amounts currently
payable because certain items of income and expenses are recognized for income
tax purposes in periods different from the periods for financial statement
purposes. The tax effects of these timing differences, primarily with respect to
depreciation and amortization, are reflected as deferred income taxes. The
Company's income from the Mexican Operations will be subject to the statutory
tax rate of 34% in Mexico net of applicable inflation adjustments. Any Mexican
income tax paid will be available as a credit against the Company's United
States federal income taxes upon the repatriation of any Mexican earnings to the
United States pursuant to tax treaties between Mexico and the United States.

IMPACT OF PRICING, INFLATION AND SEASONALITY

The general availability of seismic data, equipment and crews, and the
level of exploration activity in the oil and gas industry, directly affect the
cost of acquiring seismic data. The pricing of the Company's seismic data
acquisition services is primarily a function of these factors. The Company
believes that inflationary trends had no material impact on the results of its
operations in the United States during the year ended December 31, 1995 or the
nine months ended September 30, 1996. The Mexican Operations in these periods
were affected by the inflationary pressure on the Mexican economy insofar as the
peso was devalued, the cost of peso-denominated financing rose sharply and the
Mexican government sought to curb public spending. Inflation in Mexico for the
year ended December 31, 1995 and for the nine months ended September 30, 1996
was approximately 52.0% and 20.3%, respectively, based on the consumer price
index. As a result, net

27
<PAGE> 28

revenues decreased once revenues from Mexican Operations were translated from
pesos to dollars. See "Risk Factors -- Substantial Risks of Doing Business in
Latin America."

The Company's seismic data acquisition operations historically have been
subject to seasonal fluctuation, with the greatest volume of data acquisition
occurring during the summer and fall. The consolidation of the Operating
Subsidiaries, the expansion into Alaska and Latin America and the proposed
expansion into Canada, if completed successfully, may enable the Company to
deploy its crews and utilize its equipment in disparate regions. The Company
will attempt to conduct operations year round with fewer days of down-time
caused by inclement weather by working during the favorable operating seasons of
different regions. The Company believes that the geographical diversification of
its operations may reduce the impact of seasonal fluctuations.

28
<PAGE> 29

BUSINESS

GENERAL

Since the Initial Public Offering, the Company has:

- Increased its channel capacity from approximately 7,500 to approximately
12,000 channels;

- Expanded its operations in Alaska with seismic data acquisition contracts
with Arco Alaska Inc., a subsidiary of ARCO, BP Alaska and Marathon;

- Obtained two of the first group of 3-D seismic data acquisition contracts
awarded to date by PEMEX;

- Established a presence in Peru by opening a branch office and a seismic
data processing center and bidding on several contracts to provide
seismic data acquisition services in Peru; and

- Entered into a stock purchase agreement to acquire J.R.S. Exploration, a
seismic data acquisition business that has been operating in Western
Canada since 1978 using up to four crews and utilizing 24-bit seismic
data acquisition systems with a total of approximately 2,000 channels.

BUSINESS STRATEGY

- Optimizing the utilization of its state-of-the-art seismic data
acquisition systems by relocating equipment and crews among the regions
in which the Company operates;

- Expanding its operations in Mexico and elsewhere in Latin America by
seeking further contract opportunities with PEMEX and other oil companies
operating in Latin America;

- Expanding the Company's data processing and interpretation and reservoir
characterization services already being provided to PEMEX in Mexico into
other markets.

29
<PAGE> 30

INDUSTRY OVERVIEW

Seismic data is the principal source of information used by geoscientists
to map potential or existing oil and gas bearing formations and the geologic
structures that surround them. Seismic data is acquired over a specified area by
deploying a network of electronic cables over the area to which electronic
receivers, or geophones, are attached. Once this network is deployed, an energy
source, such as vibroseis or dynamite, is used to generate seismic waves through
a pre-determined set of frequencies that move through the rock formation under
the area and reverberate back to the surface in milliseconds. The geophones
capture the changing velocity and character of these seismic waves as they
travel down and back through the earth's surface and transmit this information a
short distance along a channel to a remote signal conditioner. The remote signal
conditioner digitizes the analog data and transmits it to a central electronics
unit that stores the acquired data. The data is then sent to a processing center
where mathematical algorithms are applied to separate signals from interference
and to correct distortion. Migration techniques are also applied to produce a
spatial representation of the subsurface formations that were surveyed. After
processing, the data is transferred to a computer workstation that allows the
data to be viewed and reconfigured by a geoscientist who interprets the data
with computer-aided exploration techniques in order to plot features and map the
structures of the subsurface area.

The oil and gas industry relies upon seismic data for the exploration of
new oil and gas reserves and for delineating the size and structure of
previously identified oil and gas fields to improve the development of those
fields. Seismic data, once acquired and processed, results in computer-generated
representations of the earth's subsurface. 2-D seismic data is collected in a
linear fashion along the surface of the earth (typically using 120 recording
channels). The acquisition of 3-D seismic data involves the use of at least 480
recording channels, allows a greater volume of seismic data to be gathered and
yields dense, 3-D grids, with a higher degree of resolution of the earth's
subsurface than a 2-D seismic survey can produce.

The amount of data that can be acquired and the ability to record, process
and represent seismic data are dependent upon the type of equipment used during
the seismic data acquisition process. Seismic acquisition systems are either
traditional or distributed systems. In traditional systems, such as a DFS-V(TM)
system, signals received from the energy source are transmitted to a central
electronics unit in analog (nondigital) form with each channel requiring its own
set of wires, consequently increasing the cable weight. Traditional systems are
limited to 480 channels and are used primarily for 2-D seismic surveys. The
traditional system uses a 16-bit converter to translate signals from analog to
digital data. This technology cannot eliminate distortion of the signal that may
be caused by noise in the area or weaknesses in the signal if it is remote from
the central electronics unit.

Alternatively, in a state-of-the-art distributed system, received signals
are amplified, filtered and converted into digital data by means of a 24-bit
analog-to-digital converter at remote signal conditioners before they are
transmitted to the central electronics unit on a single set of wires. Certain
distributed systems can be expanded to approximately 10,000 channels, although
the Company believes that the average distributed system currently used in the
land-based seismic data acquisition industry is significantly less than 10,000
channels. The 24-bit analog-to-digital converter extends the decibel range of
seismic recording and reduces system distortion to provide superior signal
fidelity. This technological innovation provides higher resolution data, which
is especially beneficial for 3-D surveys in geologically complex or noisy areas,
and

30
<PAGE> 31

substantially reduces power consumption. Distributed systems have flexible
configuration capability and improved digital signal quality. In addition, the
lighter weight cables allow a crew to acquire greater volumes of data, as
required in 3-D surveys, over a wider area with fewer people and in less time.
Distributed systems are used primarily for 3-D surveys.

SEISMIC DATA ACQUISITION SERVICES

The Company is engaged in land-based and shallow water seismic data
acquisition on a contract basis for its customers and not for its own account.
Seismic data acquisition projects typically begin at the time a customer
requests the Company to formulate a proposal to acquire seismic data on the
customer's behalf. The Company's geophysicists work with the customer in
designing the specifications of the proposed survey and, once the specifications
are agreed upon, the survey is taken to the field where one or more of the
Company's crews commence the process of acquiring data.

As of October 31, 1996, the Company operated a total of nine working
seismic crews, of which six were utilizing state-of-the-art, 24-bit seismic data
acquisition systems with a total of approximately 12,000 channels. Of the six
crews, one operates in Mexico, one in Alaska and four in the remainder of the
United States. In addition, the Company operated two crews in the United States
utilizing 16-bit seismic data acquisition systems with a total of approximately
480 channels and one crew providing drilling services in Mexico. Each crew is
either land transportable or heliportable, or both. The Company attempts to
shift entire crews and equipment from one geographic location to another in
order to capitalize on the varying seismic operating seasons in the Company's
regions of operation and to maximize the Company's efficient use of human
resources and equipment. Most of the Company's data acquisition systems, which
include remote signal conditioners, cables, geophones and central electronics
units, can be readily interchanged and relocated, depending upon the needs of
the Company's customers.

A seismic crew typically consists of a supervisor, permitting agents who
secure permission to enter a landowner's property, surveyors who mark the
locations for the placement of geophones and other equipment, general laborers
who place and move the geophones and other equipment, a drill crew to drill
holes and shooters to detonate the dynamite, if dynamite is used as the energy
source, or a vibroseis crew to operate the vibroseis trucks, if vibroseis is
used as the energy source, and an observer who operates the central electronics
unit and controls the recording of the seismic data. A fully staffed seismic
crew in the United States typically has from 10 to 25 personnel for 2-D seismic
surveys and from 20 to 60 personnel for 3-D seismic surveys, depending upon the
size and nature of the survey requested by the customer. Vehicles assigned to
each crew consist of a recording truck, two or more cable and geophone trucks, a
dynamite or vibroseis truck, several personnel vehicles with off-road capability
and, where necessary, helicopters.

The Company utilizes helicopters to facilitate seismic data acquisition in
a wide range of terrains, including terrain that is inaccessible by wheeled or
tracked vehicles. The Company's experience is that helicopter use reduces the
overall cost and environmental impact of seismic data acquisition projects
through improved productivity, as crews and equipment can be more rapidly
deployed with less surface disturbance.

SEISMIC DATA PROCESSING AND INTERPRETATION

The processing of seismic data involves the conversion of such data, by
means of sophisticated computer software designed for this purpose, into graphic
representations of cross-sections of the earth's subsurface. PIASA and
Geoevaluaciones currently provide data processing and interpretation services to
PEMEX and the Company has opened a processing center at its branch location in
Peru. The Company intends to expand its processing and interpretation capacity
in the future and to offer such services to its customers in other geographic
regions. However, the Company has not yet developed a formal business plan to
implement this intention, and there can be no assurance that any such attempted
expansion will be successful.

GEOGRAPHIC AREAS OF OPERATION

The Company's seismic data acquisition operations are conducted throughout
the United States (including Alaska) and in Mexico. Geoevaluaciones primarily
conducts its operations in Mexico and provides

31
<PAGE> 32

its primary customer, PEMEX, a full complement of seismic data acquisition,
processing and interpretation services and reservoir characterization. The
Company has established a presence in Peru by opening a branch office and a
seismic data processing center and bidding on several contracts to provide
seismic data acquisition services in Peru. In addition, the Company is seeking
to expand its operations into Canada and has entered into a stock purchase
agreement to acquire J.R.S. Exploration, a Calgary-based provider of land-based
seismic data acquisition services (see "-- Proposed Acquisition of J.R.S.
Exploration").

The following table presents certain pro forma financial information about
the operations of the Company during the year ended December 31, 1995 and the
nine months ended September 30, 1995 and 1996:

NINE MONTHS ENDED SEPTEMBER 30,
YEAR ENDED ---------------------------------------
DECEMBER 31, 1995 1995 1996
----------------- ----------------- -----------------
(PRO FORMA)(1) (PRO FORMA)(1)
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. $37,835 100.0% $25,669 100.0% $39,974 100.0%
United States.............. 28,010 74.0 18,512 72.1 30,888 77.3
Mexico..................... 9,825 26.0 7,157 27.9 9,086 22.7
Operating income............. 1,175 * 983 * 2,552 100.0
United States.............. (982) * (1,051) * 2,012 78.8
Mexico..................... 2,157 * 2,034 * 540 21.2
Total assets(2).............. * * * * 54,396 100.0
United States.............. * * * * 39,883 73.3
Mexico..................... * * * * 14,513 26.7
</TABLE>

- ---------------

* Not applicable

(1) For a discussion of the assumptions made and adjustments applied in the
preparation of this information, see the pro forma consolidated balance
sheet of 3-D Geophysical contained in the pro forma consolidated financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus.

(2) Balance sheet items are presented as of the last day of the period
indicated.

CAPITAL EXPENDITURES

There are many competitors in the land-based seismic data acquisition
business and substantial financial and other resources are required to maintain
the state-of-the-art technology necessary to permit effective competition in
bidding for contracts. Seismic data acquisition technology has progressed
rapidly over recent years and the Company expects this trend to continue. The
cost of sophisticated seismic data acquisition equipment and related crew
training has increased significantly over the last several years. The cost of
equipping a crew with a state-of-the-art system, such as an I/O SYSTEM TWO(R)
(including training and ancillary equipment), can range from approximately $3.0
to $10.0 million, the largest component of which is attributable to the channel
boxes. The Company's strategy is to update its data acquisition systems as often
as necessary to maintain its competitive position. To do so, however, may
require large expenditures of capital in addition to the Company's planned
capital expenditures. There can be no assurance that the Company will have the
capital necessary to upgrade its equipment to maintain its competitive position
or to acquire any additional required equipment, or that any required financing
therefor will be available on favorable terms. Furthermore, the Company may
require additional capital expenditures in the event that the level of its
operations increases significantly. If the Company is unable to raise the
capital necessary to update or increase the capacity of its data acquisition
systems to the extent necessary, it will be unable to update such systems or
increase its level of operations and may be materially and adversely affected as
a result.

The Company's current plan is to expand significantly its data acquisition
systems after the consummation of this Offering. Specifically, the Company
intends to increase its channel capacity by up to 5,000 channels through the
purchase of additional systems and equipment, including a 1,000 channel seismic
data acquisition system currently being rented from The Andrews Group
International, Inc. (see "Use of Proceeds" and "Certain Transactions") and the
purchase of equipment currently being rented and used in the

32
<PAGE> 33

Rocky Mountain region. The Company anticipates that the funds for such
expenditures will come from a portion of the net proceeds of this Offering (see
"Use of Proceeds") and cash from operations. The Company may revise its plans in
response to future changes in the oil and gas industry in general and the demand
for its services in particular, its results of operations, its other capital
requirements and other relevant factors. See "Risk Factors -- Capital Intensive
Business; Rapid Obsolescence of Technology," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "-- Competition."

OPERATING CONDITIONS

The Company's crews often conduct operations in extreme weather, in
difficult terrain that is not easily accessible and under other hazardous
conditions. Accordingly, the Company's operations are subject to risks of injury
to personnel and loss of equipment. Fixed costs, including costs associated with
operating leases, labor costs and depreciation, account for more than half of
the Company's costs and expenses. As a result, low productivity resulting from
weather interruptions, equipment failures or other causes such as fires and
accidental explosions resulting from the handling of equipment and supplies can
result in significant operating losses. In addition, while the Company has
insurance policies that protect it against liabilities that may be incurred in
the ordinary course of its business, the Company is unable to insure fully
against all possible loss or liability. For example, no insurance is available
at a cost deemed reasonable by the Company for war, nationalization,
appropriation or other extreme events.

The Company's seismic data acquisition operations historically have been
subject to seasonal fluctuations, with the greatest volume of data acquisition
occurring during the summer and fall in the United States. The consolidation of
the Operating Subsidiaries and the expansion into Latin America has enabled the
Company to deploy its crews and utilize its equipment in disparate regions. As a
result, the Company expects to conduct its operations year round with fewer days
of down-time caused by inclement weather by working during the favorable
operating seasons of different regions. The Company believes that by widening
the geographical scope of its operations, the impact of seasonal fluctuations
may be reduced.

MARKETING AND CUSTOMERS

Marketing. Since the Initial Public Offering, the Company has continued
marketing to existing customers on a regional basis in order to preserve these
long-term relationships. The Company has established a corporate marketing
center in Englewood, Colorado, which is responsible for (i) coordinating
marketing and communication activities, (ii) expanding the Company's marketing
to integrated and multinational oil and gas companies, and (iii) standardizing
and coordinating the submission of bids.

Contracts. The Company provides its services to customers pursuant to
contracts which are occasionally varied or modified by mutual consent. In many
instances, such contracts are cancelable by the customer on short notice without
penalty. Contracts are obtained by the Company either through competitive
bidding, in response to invitations for bids, or by direct negotiation with a
prospective customer.

Most of the Company's contracts result from competitive bidding. Most
frequently, customers invite bidders to provide quotations on the cost to gather
seismic data over a specified region within a specified period of time. Some
customers, primarily large oil companies, require at least three bids in order
to award a contract. Contracts are awarded primarily on the basis of price, crew
experience and equipment availability, technological expertise and reputation
for dependability and safety.

Contract terms, whether bid or negotiated, generally provide for payment by
the customer on either a "turnkey" or a "term" basis or on a combination of both
methods. Under a turnkey contract, payments for data acquisition services are
based upon a fixed fee for each unit of data collected, and the Company bears
substantially all of the risk of business interruption due to inclement weather
and other hazards. Term contracts, on the other hand, provide for payment based
on agreed rates per unit of time, which may be expressed in periods ranging from
days to months, and most of the risk of business interruption (except for
interruptions caused by failure of the Company's equipment) is borne by the
customer. When a combination turnkey and term contract is used, the risk of
business interruption is shared in an agreed percentage by the

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<PAGE> 34

Company and the customer. In each case, progress payments are usually required
unless it is anticipated that the job will be completed in less than 30 days.

Geoevaluaciones' contracts are procured from a bidding process that is
regulated by Mexican law. PEMEX, as a government-owned company, prepares
specifications of projects for which seismic-related services are required. All
potential bidders that meet certain technical, legal and other requirements
submit bids which must include seismic data acquisition, processing and
interpretation services. Geoevaluaciones and PIASA submit a single bid for their
combined services. PEMEX places no restrictions on the participation of
foreign-owned companies in the bidding process. Geoevaluaciones' contracts with
PEMEX contain price terms which are fixed at the time the contracts are signed
and in the past have been denominated in pesos. These contracts contain cost
adjustment provisions which are triggered upon the occurrence of certain
economic events such as a devaluation of the peso, a change in the rate of
inflation or an increase in the statutory minimum wage rate. The adjustments may
be requested by Geoevaluaciones, but only with respect to the direct costs
incurred by Geoevaluaciones under a contract that are affected by the economic
event. While these adjustment features protect Geoevaluaciones against partial
declines in its peso-denominated profit margin, they do not protect
Geoevaluaciones from a decline in the dollar value of its profits or net assets.
See "Risk Factors -- Substantial Risks of Doing Business in Latin America" and
note 2 to the financial statements of Geoevaluaciones.

The Company's contracts specify that the seismic data acquired by the
Company belongs to the Company's customer, and the Company does not acquire any
seismic data for its own account. All of the customer's information is
maintained in confidence.

Customers. The Company's customers include and have included a number of
major oil companies and their affiliates, including PEMEX, ARCO, BP Alaska and
Marathon, as well as many smaller, independent oil and gas companies. In the
year ended December 31, 1995 and the nine months ended September 30, 1996, the
Company's net revenues attributable to PEMEX were approximately $9.8 million and
$9.1 million, or 26.0% and 22.7%, respectively, of the Company's pro forma net
revenues in those periods. In the year ended December 31, 1995, Duncan Oil, Inc.
accounted for $4.3 million, or 11.4%, of the Company's pro forma net revenues.
In the nine months ended September 30, 1996, Seitel, Inc. and BP Alaska
accounted for $5.9 million, or 14.8%, and $6.5 million, or 16.3%, of the
Company's pro forma net revenues, respectively. No other single customer
accounted for more than 10% of the pro forma net revenues in those periods. The
loss of PEMEX as a customer would have a material adverse effect on the
Company's financial condition and results of operations.

A large portion of the Company's net revenues in any period may be
attributable to a limited number of customers, even though the mix of customers
changes over time as contracts are awarded and completed. Each of the Operating
Subsidiaries has a number of customers for which, over the years, services have
been repeatedly provided.

Safety and Environmental Program. Certain of the Company's customers,
including PEMEX and other large oil and gas companies, require, as a condition
of awarding contracts, that a safety program designed to reduce the hazards
associated with the seismic data acquisition business be in place. The Company
employs a full-time safety officer who is in charge of implementing a
Company-wide health, safety and environmental program intended to comply with
the requirements of major oil and gas companies and applicable regulatory
authorities.

Backlog. At November 30, 1996, the Company's backlog of data acquisition
surveys was approximately $42.6 million. Approximately 61% of the backlog was
attributable to the Company's operations in the United States, and approximately
39% of such backlog related to the operations in Mexico and Peru. The majority
of such backlog consisted of written orders or commitments; however, contracts
for services are occasionally varied or modified by mutual consent and, in many
instances, are subject to cancellation by the customer on short notice without
penalty. In addition, a contract in Peru for $2.8 million is subject to the
resolution of certain uncertainties relating to obtaining required local
permits. Consequently, the Company's backlog as of any particular date may not
be indicative of the Company's actual operating results for any succeeding
fiscal period. Subject to the foregoing, the Company anticipates that
approximately 29% of the orders and

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<PAGE> 35

commitments included in backlog at November 30, 1996 will be completed prior to
the end of 1996 and it is expected that the balance will be completed in 1997.

COMPETITION

The Company has extensive competition in each of the regions in which it
operates. Contracts for seismic data acquisition services generally are awarded
on the basis of price, crew experience, equipment availability, technological
expertise and reputation for dependability and safety. Competition is
particularly intense for providers of more technologically advanced seismic
data. Certain of the Company's major competitors have more crews and operate
data acquisition systems having significantly more channels than the Company,
provide integrated data acquisition, processing and interpretation services and
have far greater financial and other resources than the Company and more
extensive relationships with major integrated and multinational oil and gas
companies. These resources enable these competitors to maintain state-of-the-art
technology and certain other advantages relating to costs that may provide them
with an advantage over the Company in bidding for contracts. In addition,
certain competitors of the Company take an economic interest in oil and gas
exploration and development projects for which they perform services for their
customers. There can be no assurance that the Company will be able to compete
successfully against its competitors for contracts to conduct seismic surveys.
See "Risk Factors -- Dependence Upon Energy Industry Spending," "Risk
Factors -- Capital Intensive Business; Rapid Obsolescence of Technology" and
"Risk Factors -- Substantial Competition."

EMPLOYEES

As of November 15, 1996, the Company employed approximately 1,284 people,
of whom 16 performed management and marketing functions, 52 performed
administrative services or clerical functions, 160 were geophysicists or
rendered engineering or other technical services and approximately 1,056 were
members of the Company's seismic crews or performed other functions. None of the
Company's employees is represented by a labor union or is a direct or indirect
party to a collective bargaining agreement. The Company believes it has good
relations with its employees.

PROPERTIES

The Company occupies 13 leased and two owned facilities. The owned
facilities are both located in Ohio and are utilized by Paragon to house its
administrative and maintenance operations. Of the 13 leased facilities, 4 are
located in Mexico, 2 are located in each of Colorado and Texas and 1 is located
in each of Alaska, New York, Peru, North Dakota and Ohio. These properties are
utilized for administration, maintenance and storage and range in size from
approximately 2,000 to approximately 26,000 square feet. The terms of the leases
range from month-to-month to leases that expire in 2002 and provide for annual
rents ranging from approximately $7,200 to approximately $165,000. The Company's
annual lease expense under these leases totals approximately $470,000.
Approximately 60% of the Company's New York City offices is utilized by persons
unrelated to the Company. Mr. Joel Friedman, the Chairman of the Board of
Directors of the Company, has agreed to reimburse the Company for any amounts
under the New York City lease (which provides for an aggregate annual rental of
$165,000) that are payable with respect to space that is not utilized by the
Company and which have not been paid by sub-lessees (see
"Management -- Employment Agreements; Non-Competition Agreements" and "Certain
Transactions").

The Company believes that its facilities are adequate for its present and
reasonably foreseeable needs.

LEGAL PROCEEDINGS

The Company is a defendant in or party to a number of lawsuits arising in
the ordinary course of its business, which lawsuits the Company believes have
little substantive merit. While the outcome of these lawsuits cannot be
predicted with certainty, the Company does not believe that any of these
lawsuits will have a material adverse effect on its operations or financial
position.

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<PAGE> 36

Geoevaluaciones has a dispute, and may be threatened with litigation, in
connection with certain agreements it entered into with Capilano International
Inc., a Canadian company ("Capilano"). The dispute concerns a certain Letter of
Intent and a Technical Assistance Agreement, dated June 3, 1991 and June 1,
1992, respectively (the "Capilano Agreements"). Capilano stated in its 1994
Annual Report to Shareholders that it has had difficulty in collecting amounts
owing from a Mexican company (presumably, Geoevaluaciones) to which Capilano
supplied technical assistance and stated in its 1995 Annual Report that it had
written down by approximately C$1.9 million accounts receivable in Mexico.
Geoevaluaciones maintains that it is not obligated to compensate Capilano for
certain services Geoevaluaciones believes were either inadequately provided or
not provided at all by Capilano. Representatives of Capilano and Geoevaluaciones
have had ongoing discussions since May 1996 in an effort to resolve this
dispute. The Company currently is not able to estimate the effect, if any, on
its results of operations and financial position which may result from the
resolution of this matter. Therefore, the financial statements of the Company do
not reflect any adjustments related to this matter. A portion of the amounts
payable to the former stockholders of Geoevaluaciones in connection with the
acquisition by 3-D Geophysical of the stock of Geoevaluaciones owned by such
stockholders is held in escrow and available to pay amounts in settlement or
otherwise in connection with the dispute with Capilano. See "Certain
Transactions."

REGULATION

Seismic data acquisition operations are subject to various laws and
regulations in the United States, Mexico, Peru and Canada, as well as other
countries in which the Company may operate in the future. Such laws and
regulations govern various aspects of operations, including the discharge of
explosive materials into the environment, requiring removal and cleanup of
materials that may harm the environment or otherwise relating to the protection
of the environment, access to private and governmental land to conduct seismic
surveys and use of local employees and suppliers by foreign contractors. The
Company believes that it has conducted its operations in substantial compliance
with applicable environmental laws and regulations governing its activities.

PROPOSED ACQUISITION OF J.R.S. EXPLORATION

On December 10, 1996, the Company entered into a stock purchase agreement
(the "Stock Purchase Agreement") pursuant to which it agreed to purchase J.R.S.
Exploration, a land-based seismic data acquisition business headquartered in
Calgary, Alberta, Canada. J.R.S. Exploration has been operating in Western
Canada since 1978 using up to four seismic crews utilizing 24-bit seismic
recording systems manufactured by Sercel that have a total of approximately
2,000 channels. J.R.S. Exploration's two principal customers accounted in the
aggregate for over 50% of J.R.S. Exploration's revenues in its fiscal year ended
November 30, 1995. J.R.S. Exploration is currently a party to seismic data
acquisition services contracts with these two customers which expire on June 30,
1997 and September 30, 1998. For its fiscal year ended November 30, 1995, J.R.S.
Exploration had revenues of approximately C$11.0 million and earnings before
interest, taxes and depreciation of approximately C$2.3 million. As of December
11, 1996, the exchange rate was approximately $.73 per Canadian dollar.

If the acquisition is consummated, the Company will seek to expand J.R.S.
Exploration's business during winter, the peak Canadian operating season, by
shifting certain of the Company's equipment to Canada during the period from
January through April, and the Company believes that it will be able to utilize
J.R.S. Exploration's equipment in the United States (including Alaska) during
the other months of the year.

Under the terms of the Stock Purchase Agreement, the Company will acquire
all of the issued and outstanding shares of capital stock of the intermediate
holding companies that own all of the issued and outstanding capital stock of
J.R.S. Exploration for C$3.5 million in cash and a number of shares of Common
Stock having a value of approximately C$3.4 million in the aggregate. In
addition the Company will repay approximately C$1.4 million of debt J.R.S.
Exploration owes to a commercial bank. Also under the terms of the Stock
Purchase Agreement, on or before the closing thereunder, Messrs. Donald Janveau
and W. Garnet Mueller, the principal stockholders and executive officers of
J.R.S. Exploration, will enter into three-year employment agreements (the
"Employment Agreements") with J.R.S. Exploration pursuant to which

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<PAGE> 37

Mr. Janveau will serve as President and Chief Executive Officer of J.R.S.
Exploration and Mr. Mueller will serve as Vice President of Operations of J.R.S.
Exploration. The Employment Agreements each provide for an annual salary of
C$150,000. Each of Messrs. Janveau and Mueller have agreed to enter into a
five-year covenant not to compete with the Company or any of its subsidiaries in
the provision of seismic data acquisition or analysis services or any services
related thereto. In connection with the acquisition of J.R.S. Exploration, the
Company also proposes to acquire all of the issued and outstanding capital stock
of Siegfried & Siegfried Resource Consultants, Ltd. ("Siegfried & Siegfried"),
an Alberta corporation that is wholly-owned by an employee of J.R.S. Exploration
and owns certain seismic data acquisition equipment presently being leased to
J.R.S. Exploration. The proposed purchase price for Siegfried & Siegfried is
C$150,000 in cash and a number of shares of Common Stock having a value of
C$150,000 in the aggregate.

In connection with the acquisition of Siegfried & Siegfried, J.R.S.
Exploration will enter into a three-year employment agreement with David
Siegfried, pursuant to which Mr. Siegfried will serve as Sales Manager and
Operations Supervisor of J.R.S. Exploration for an annual salary of C$100,000.
Upon the closing of the acquisition of Siegfried & Siegfried, the Company will
grant to Mr. Siegfried a ten-year option to purchase 15,000 shares of Common
Stock at the closing price for such stock on the Nasdaq National Market on that
day. The option, which will be granted under the Plan, will be exercisable in
four equal cumulative installments commencing one year after the date of grant.

The consummation of the acquisitions, which is expected to occur in January
1997, is subject to customary conditions. There can be no assurance that the
Company will consummate the acquisitions of J.R.S. Exploration and Siegfried &
Siegfried. Pursuant to an agreement with the Company, J.D. White will provide
certain advice and assistance to the Company in connection with the proposed
acquisitions. See "Certain Transactions." The Company also has engaged one of
the representatives of the underwriters of this Offering to act as its exclusive
financial advisor in connection with the proposed acquisition of J.R.S.
Exploration. See "Underwriting."

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<PAGE> 38

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The table below provides information concerning the executive officers and
directors of the Company, and sets forth their respective ages as of November
30, 1996, and the positions they hold with the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
------------------------------------ --- ------------------------------------------------
<S> <C> <C>
Mr. Joel Friedman(a)(b)............. 57 Chairman of the Board of Directors
Mr. Richard D. Davis(b)............. 62 President, Chief Executive Officer and Director;
President of Kemp
Mr. Wayne P. Widynowski............. 51 Executive Vice President and Chief Operating
Officer; President of Northern
Mr. Luis H. Ferran(b)............... 48 Executive Vice President -- Latin American
Operations and Director; President of
Geoevaluaciones, PIASA and 3-D Geophysical of
Latin America, Inc.
Mr. Ronald L. Koons................. 49 Vice President, Chief Financial Officer,
Secretary and Treasurer
Mr. G.C.L. Kemp..................... 63 Vice President
Mr. Charles O. Merchant............. 46 Vice President; President of Paragon
Mr. Robert P. Andrews(c)............ 41 Director
Mr. Ralph M. Bahna(c)(d)............ 54 Director
Mr. Douglas W. Brandrup(a)(d)....... 56 Director
Mr. Arthur D. Emil(c)............... 71 Director
Mr. P. Dennis O'Brien(a)(c)(d)...... 55 Director
Mr. Emir L. Tavella................. 67 Director
Mr. John D. White, Jr.(b)........... 38 Director
</TABLE>

- ---------------

(a) Member of the Audit Committee

(b) Member of the Executive Committee

(d) Member of the Stock Option Committee

Mr. Joel Friedman has served as Chairman of the Board of 3-D Geophysical
since February 1996 and as Chairman of the Board of Paragon since August 1994.
He was President and Chief Executive Officer of 3-D Geophysical from March 1995
until February 1996. Mr. Friedman has been since August 1994 a director of and
from August 1994 to October 1996 was the chairman of Consolidated Health Care
Associates, Inc., a Nasdaq National Market listed company, and was the chief
executive officer of that company from August 1994 until March 1996. Since 1969,
he has been an officer, director and shareholder of Founders Property
Corporation and its affiliated companies ("Founders"), a private real estate
concern. From 1975 to 1986, Mr. Friedman was president and a director of Kenai
Corporation, a publicly-held company engaged in contract drilling for oil and
natural gas, wellhead equipment manufacturing and remanufacturing and oil and
gas exploration and production.

Mr. Richard D. Davis has served as President and Chief Executive Officer of
3-D Geophysical since February 1996 and as President of Kemp since June 1996.
From March 1994 to June 1996, Mr. Davis was Vice President of Operations of
Kemp. From 1988 to March 1994, as president and sole owner of D-Cube
International Inc., he was an independent consultant to several major oil
companies in the area of seismic acquisition services. From 1983 to 1988, Mr.
Davis was a director of Seismic Enterprises, Inc. (now Seitel, Inc.) and
president and chief operating officer of Triangle Geophysical Co. From 1979 to
1983, he was executive vice president of Geo Seismic Services, Inc., which at
one time operated 38 seismic data acquisition crews.

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<PAGE> 39

Mr. Wayne P. Widynowski has served as the Executive Vice President and
Chief Operating Officer of 3-D Geophysical and as President of Northern since
February 1996. From 1981 to February 1996, Mr. Widynowski was employed by
Northern's predecessors, most recently as Executive Vice President. Prior to
1981, Mr. Widynowski was employed as an operations manager by United
Geophysical, Inc., a subsidiary of the Bendix Corporation. Mr. Widynowski is the
current chairman of the Rocky Mountain operations of the International
Association of Geophysical Contractors.

Mr. Luis H. Ferran has served as Executive Vice President -- Latin American
Operations and a Director of 3-D Geophysical and as President of Geoevaluaciones
and PIASA since February 1996 and as President of 3-D Geophysical of Latin
America, Inc., a wholly-owned subsidiary of the Company, since its formation by
the Company in May 1996. Mr. Ferran was one of the founding shareholders of
Geoevaluaciones in 1977 and has been General Manager of Geoevaluaciones since
1982. Prior to forming Geoevaluaciones, Mr. Ferran was a supervisor with
Compania Mexicana de Exploraciones, S.A. de C.V., a Mexican company associated
with PEMEX.

Mr. Ronald L. Koons has served as Vice President, Chief Financial Officer,
Secretary and Treasurer of 3-D Geophysical since September 30, 1996. Mr. Koons
was the executive vice president, chief financial officer and treasurer of
Tuboscope Vetco International Corp. ("Tuboscope"), an oilfield service company,
from October 1993 to April 1996 and senior vice president, chief financial
officer and treasurer of Tuboscope from November 1991 to October 1993. From
August 1988 to November 1991, Mr. Koons was the vice president, chief financial
officer and treasurer of Eastman Christensen Company ("Eastman"), an oilfield
service company. He served as controller of Eastman from June 1987 to August
1988 and treasurer of Eastman from September 1986 to June 1987.

Mr. G.C.L. Kemp has served as a Vice President of 3-D Geophysical since
February 1996. Mr. Kemp founded Kemp and was its Chairman and President from
1978 until June 1996. From 1974 to 1978, Mr. Kemp was worldwide geophysical
operations supervisor for Phillips Petroleum. From 1964 to 1974, he was manager
for Petty Geophysical Engineering Company. From 1953 to 1964, he was a surveyor
and manager of a number of international seismic operations for Mobil Corp.,
Shell Oil Co. and British Petroleum Co., PLC.

Mr. Charles O. Merchant has served as a Vice President of 3-D Geophysical
since February 1996. He has been employed as an executive officer of Paragon
since 1989, most recently since August 1994 as President. Prior thereto, he was
employed by various geophysical service-related companies, including Frontier
Exploration, Inc. from 1988 to 1989 and Professional Geophysics, Inc., Precision
Geophysical, Inc. and Rogers Exploration from 1983 to 1986. Mr. Merchant has
held positions in technical, marketing, supervisory and managerial areas in the
geophysical industry.

Mr. Robert P. Andrews has served as the president of The Andrews Group
International Inc., a Texas corporation which supplies goods and services to the
oil and gas industry in Central and South America, in particular Mexico, since
1987 and as the president of A.G.I. Mexicana, S.A. de C.V., a Mexican company
which sells goods and services relating to computer hardware and software for
use in the oil and gas industry in Mexico, since 1991. Until February 1996, Mr.
Andrews was also the President and Chairman of the Board of PIASA. A.G.I.
Mexicana conducts the business of The Andrews Group International, Inc. in
Mexico and acts as the exclusive representative for several companies in Mexico,
including Input/Output and Landmark Graphics Corp. A.G.I. Mexicana also acts as
a non-exclusive distributor for various corporations in Mexico. See "Certain
Transactions."

Mr. Ralph M. Bahna currently serves as president of Masterworks Development
Corporation ("Masterworks"), a company that he founded in 1990 to develop a
series of hotels called Club Quarters. Between 1981 and 1988, Mr. Bahna was
chief executive officer of Cunard Line Limited, which owns, among other cruise
liners and hotels, the Queen Elizabeth 2, and was also a divisional managing
director of Trafalgar House PLC, the parent company of Cunard Line Limited. From
1988 until he became president of Masterworks in 1990, he pursued investment and
non-profit endeavors.

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<PAGE> 40

Mr. Douglas W. Brandrup is a practicing attorney and senior partner at the
law firm of Griggs, Baldwin & Baldwin in New York City, where he has practiced
since 1974. Mr. Brandrup is chairman of Equity Oil Company, a publicly-held oil
and gas production and exploration company, and has been a director of that
company since 1975.

Mr. Arthur D. Emil is a practicing attorney and currently of counsel to the
law firm of Kramer, Levin, Naftalis & Frankel in New York City. Between 1986 and
1993, he was a senior partner of and, upon retirement, of counsel to the law
firm of Jones, Day, Reavis & Pogue. He served as an executive officer, director
and chairman of the executive committee of North European Oil Company from 1955
to 1979. In addition, he served as general counsel for various companies,
including the New England Patriots and Bartell Media Corp., a communications
company. He is a trustee of various philanthropic institutions. Kramer, Levin,
Naftalis & Frankel provides legal services to 3-D Geophysical and will render
its opinion on the legality of the Common Stock offered hereby. Mr. Emil is a
general partner of South Norwalk Redevelopment Limited Partnership ("SNRLP"), a
Connecticut limited partnership formed in 1981 to rehabilitate a portion of
Norwalk, Connecticut. On July 25, 1994, a creditor of SNRLP, Scirocco Partners
("SP"), sought to foreclose on a SNRLP mortgage it held and SNRLP, seeking to
avoid the foreclosure, filed a voluntary petition for reorganization on August
15, 1994 in the United States Bankruptcy Court, District of Connecticut (Case
No. 94-51676). In a related case, SP has sued Mr. Emil in connection with a
personal guarantee limited to interest and certain expenses he gave in
connection with the mortgage. No determination has been made in either the
bankruptcy proceeding or the private suit.

Mr. P. Dennis O'Brien served as the president and chief operating officer
of Advance Geophysical Corp. ("Advance"), a company that develops software for
the geophysical industry, from 1988 to 1994. In March 1994, Advance merged with
a subsidiary of Landmark Graphics Corporation, a major software developer in the
geophysical industry. From April 1994 to June 1995, Mr. O'Brien served as the
chief operating officer of Advance. Since July 1995, Mr. O'Brien has provided
consulting services to software development companies serving the petroleum
industry.

Mr. Emir L. Tavella is a founder, and since May 1995 a partner and
director, of Sagoil S.A., an Argentinian petroleum supply company associated
with Sagoil Inc., a Canadian company. From February 1987 to April 1995, Mr.
Tavella was the general manager for exploration activities for PLUSPetrol S.A.,
an Argentinian petroleum exploration and production company.

Mr. John D. White, Jr., a co-founder of the Company, has been president of
Megansett Capital, Inc., a private investment firm, and associated with Founders
since August 1993. Mr. White was Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of 3-D Geophysical from March 1995 to October
1, 1996, when he resigned. Mr. White has agreed to render financial and advisory
services to the Company in connection with this Offering and the proposed
acquisition of J.R.S. Exploration. See "Certain Transactions." From January 1995
to February 1996 he was acting Chief Financial Officer of Paragon. From 1991 to
1993, he was a senior vice president of Laidlaw International, Inc., a
subsidiary of the investment bank Laidlaw Holdings, Inc. From 1987 to 1990, he
was a vice president in the mergers and acquisitions group of PaineWebber,
Incorporated and for five years prior thereto he was employed by Digital
Equipment Corporation where he held a variety of finance positions.

Messrs. Friedman and White have served as Directors of the Company since
its inception, Messrs. Bahna, Brandrup, Davis, Emil and Ferran have served as
Directors since October 1995, Messrs. Andrews and O'Brien have served as
Directors since January 1996, and Mr. Tavella has served as a Director since
April 1996.

ELECTION OF DIRECTORS

The Certificate of Incorporation provides for the Board of Directors to be
divided into three classes. The members of the first class of directors will
serve until the 1997 annual meeting of stockholders and that class consists of
Messrs. Andrews, Brandrup and White. The members of the second class of
directors will serve until the 1998 annual meeting of the stockholders and that
class consists of Messrs. Bahna, Davis, Emil and

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<PAGE> 41

Tavella. The members of the third class of directors will serve until the 1999
annual meeting of stockholders and that class consists of Messrs. Ferran,
Friedman and O'Brien.

BOARD COMMITTEES

The Board has established an Executive Committee consisting of Messrs.
Davis, Ferran, Friedman and White. The Executive Committee has the authority to
exercise all the powers of the Board in the management of the business and
affairs of the Company, subject to certain limitations under the General
Corporation Law of the State of Delaware.

The Board has established an Audit Committee consisting of Messrs.
Brandrup, Friedman and O'Brien. The Audit Committee annually will recommend to
the Board the appointment of the independent public accountants to serve as
auditors for the Company. In addition, the Audit Committee will discuss and
review the scope and fees of the prospective annual audit and review the results
with the auditors, review compliance with existing major accounting and
financial policies of the Company, review the adequacy of the financial
organization of the Company and consider comments by the auditors regarding
controls and accounting procedures and management's response to those comments.

The Board has established a Compensation Committee consisting of Messrs.
Andrews, Bahna, Emil and O'Brien. The Compensation Committee meets periodically
to determine the compensation of certain of the Company's executive officers and
other significant employees and the Company's personnel policies.

The Board has established a Stock Option Committee consisting of Messrs.
Bahna, Brandrup and O'Brien to administer the Plan and to grant options
thereunder.

DIRECTOR COMPENSATION

Each member of the Board who is not an employee of the Company receives:
(i) an annual retainer of $10,000; (ii) $750 per meeting of the Board of
Directors or any committee thereof at which such Director is present in person;
and (iii) reimbursement of all ordinary and necessary expenses incurred in
attending any meeting of the Board of Directors or committee thereof. Directors
who are full-time employees of the Company do not receive any compensation for
serving as directors. Any newly elected or appointed non-employee director
automatically receives a nonqualified option under the Plan to purchase 10,000
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant. Such option vests in cumulative
installments of one-third on each of the first, second and third anniversaries
of the date of grant and expire on the tenth anniversary of the date of such
grant.

On February 9, 1996, non-employee directors (Messrs. Andrews, Bahna,
Brandrup, Emil and O'Brien) were awarded nonqualified stock options to purchase
10,000 shares of Common Stock pursuant to the Plan. The exercise price of these
options was equal to the price to the public in the Initial Public Offering of
$7.50 per share. Upon joining the Board in April 1996, Mr. Tavella was granted
an option under the Plan to purchase 10,000 shares of Common Stock at an
exercise price of $12.3125 per share. On September 30, 1996, each non-employee
director (Messrs. Andrews, Bahna, Brandrup, Emil, O'Brien and Tavella) was
granted a nonqualified ten year option to purchase 6,667 shares of Common Stock
at an exercise price of $8.50 per share, subject to the approval of the
Company's stockholders at the next annual meeting of stockholders. These
options, which were not granted pursuant to the Plan, vest in full on February
6, 1997, subject to the approval of the Company's stockholders at the next
annual meeting of stockholders.

EXECUTIVE COMPENSATION

3-D Geophysical was incorporated in March 1995 and conducted no operations
until February 1996, when it consummated the Initial Public Offering and
acquired the Operating Subsidiaries and PIASA. No salaries were paid during 1995
by 3-D Geophysical. Compensation to be paid to the Company's chief executive
officer and the four other most highly compensated executive officers during
1996 is disclosed below (see "Management -- Employment Agreements;
Non-Competition Agreements" and "Management --

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<PAGE> 42

Long-Term Incentive Compensation Plan"). The Board has not adopted a bonus plan,
but anticipates that it will adopt and implement a performance-based cash bonus
plan in 1997.

EMPLOYMENT AGREEMENTS; NON-COMPETITION AGREEMENTS

Each of Messrs. Friedman, Davis, Widynowski, Ferran, Koons, Kemp and
Merchant has entered into an employment agreement with the Company that expires
on December 31, 1998, except for the agreement with Mr. Koons, which expires on
September 30, 1999, and for the agreement with Mr. Ferran, which expires on
December 31, 2000. The employment agreements provide for base annual salaries as
follows: Mr. Friedman: $125,000 plus an annual office allowance of $75,000, a
portion of which is being applied to payments under the Company's New York City
lease (see "Business -- Properties"); Mr. Davis: $155,000; Mr. Widynowski:
$140,000; Mr. Ferran: $140,000; Mr. Koons: $125,000; Mr. Kemp: $75,000; and Mr.
Merchant: $82,500. Certain of the Company's executive officers are entitled to
an automobile allowance, and, in addition, each executive officer who has
entered into an employment agreement will be eligible pursuant to his employment
agreement for a bonus to be determined in the discretion of the Board or a
committee thereof.

Each of the employment agreements with Messrs. Friedman, Ferran, Koons and
Kemp contains a covenant not to compete during the employee's employment with
the Company or its subsidiaries and for one year thereafter unless the Company
terminates the employee's employment without cause. Each of the agreements with
Messrs. Davis, Merchant and Widynowski contains a similar covenant not to
compete but provides that upon termination of the agreement, other than by the
Company for cause (as defined in the agreement) or by the employee without good
reason (as defined in the agreement), the employee's covenant not to compete
will lapse unless the Company pays the employee 80% of the employee's base
salary in the year following such termination. These employment agreements and
covenants not to compete were entered into in the ordinary course of business.
Mr. Davis' agreement also provides that upon termination under certain
circumstances he will receive a payment for certain relocation expenses and the
continuation of certain benefits for a one-year period. Mr. Kemp receives a
monthly payment of $4,167 for 36 months, ending in January 1999, in
consideration of the covenant not to compete contained in his employment
agreement. With the exception of Mr. Kemp's agreement, the employment agreements
entered into with the Company's executive officers do not provide for any
separate payment to be made with respect to the covenants not to compete during
the term of the agreements. In addition, in connection with the acquisition by
3-D Geophysical of Geoevaluaciones, Mr. Ferran and the other former stockholders
of Geoevaluaciones entered into the Geoevaluaciones Non-Competition Agreement
(defined below) under which Mr. Ferran and such former stockholders were
entitled to certain additional consideration (see "Certain Transactions").

Until September 30, 1996, Mr. White served as the Company's Executive Vice
President and Chief Financial Officer under an employment agreement that was to
expire on December 31, 1998 and provided for a base salary of $150,000. Upon his
resignation as an officer of the Company, Mr. White and the Company entered into
an agreement terminating this employment agreement (see "Certain Transactions").

LONG-TERM INCENTIVE COMPENSATION PLAN

The purpose of the Plan is to provide directors, officers, and other key
employees and consultants of the Company and its subsidiaries with additional
incentives by providing them with the opportunity to increase their ownership
interests in the Company. The maximum number of shares of Common Stock that may
be subject to awards granted under the Plan is 720,000 shares, which may be
authorized and unissued shares, treasury shares or shares acquired by the
Company for purposes of the Plan. Shares of Common Stock which are attributable
to awards which have expired, terminated or been cancelled or forfeited during
any calendar year, in addition to shares in respect of which a stock
appreciation right ("SAR") is settled for cash or shares tendered in payment
upon the exercise of an option or SAR, are available for issuance or use in
connection with future awards. In the event of a stock split, stock dividend,
recapitalization or the like, the Stock Option Committee will equitably adjust
the number of shares available under the Plan and subject to outstanding awards
and the exercise prices of outstanding awards.

Awards under the Plan are granted by a Committee of the Board of Directors
appointed for that purpose (the "Stock Option Committee") and may include: (i)
options to purchase shares of Common Stock,

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<PAGE> 43

including incentive stock options ("ISOs"), nonqualified stock options or both;
(ii) SARs, whether in conjunction with the grant of stock options or independent
of such grant; and (iii) restricted stock. To the extent necessary to comply
with Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), awards granted under the Plan are not assignable or
transferable except by the laws of descent and distribution.

The Stock Option Committee consists of two or more directors who qualify as
disinterested persons under Rule 16b-3 under the Exchange Act. Subject to the
terms of the Plan, the Stock Option Committee has the authority, among other
things, to: (i) select the persons entitled to receive awards under the Plan;
(ii) determine the form of awards; (iii) determine the number of shares of
Common Stock covered by an award; and (iv) determine the terms and conditions of
awards, including any restrictions or limitations on transfer, any vesting
schedules or the acceleration thereof and any forfeiture provisions or waivers
thereof. The exercise price of stock options is determined by the Stock Option
Committee subject to the requirement that the exercise price of an ISO cannot be
less than the fair market value of the shares of Common Stock covered by such
grant at the time of grant. The option exercise price is payable in cash, or,
with the consent of the Stock Option Committee, by surrender of shares of Common
Stock held at least six months by the optionee and having a fair market value on
the date of the exercise equal to part or all of the option exercise price, or
by such other payment method as the Stock Option Committee may prescribe. The
exercise price of options granted to non-employee directors under the Plan may
be payable, at the discretion of the non-employee director, in cash or by
surrender of shares of Common Stock held at least six months by such
non-employee director.

All options and SARs not yet exercised shall terminate upon termination of
the grantee's employment for cause. Unless the Stock Option Committee otherwise
specifies: (i) if a grantee's employment terminates for reasons other than
cause, disability or death, the grantee's options or SARs or both generally will
remain exercisable for three months after termination to the extent that they
were exercisable at termination, but will not be exercisable after the scheduled
expiration date of the award; and (ii) if a grantee's employment terminates by
reason of disability, the grantee's options or SARs or both generally will
remain exercisable for one year after termination to the extent that they were
exercisable at termination, but will not be exercisable after the scheduled
expiration date of the award. If a grantee's employment terminates for any
reason, the Company generally will have the right to require forfeiture of
restricted shares in exchange for any amount paid by the grantee for such
shares.

Unless sooner terminated by the Board of Directors, the authority to grant
awards under the Plan will terminate on the tenth anniversary of its adoption.
All awards made under the Plan prior to its termination will remain in effect
until they are satisfied or terminated. The Board of Directors may, without
stockholder approval, suspend, discontinue, revise or amend the Plan at any time
or from time to time; provided, however, that stockholder approval must be
obtained for any amendment for which such approval is required by Rule 16-3
promulgated under the Exchange Act, to the extent that the Board of Directors
believes it is appropriate to qualify under Rule 16b-3. The Stock Option
Committee may make certain amendments to outstanding awards, including any
amendments that change or waive the Plan provisions applicable at employment
termination.

The grant of an option or SAR will create no tax consequences for the
grantee or the Company. A grantee will not have taxable income upon exercising
an ISO (except that the alternative minimum tax may apply) and the Company will
receive no deduction at that time. Upon exercising an option other than an ISO,
the participant must generally recognize ordinary income equal to the difference
between the exercise price and fair market value of the stock acquired on the
date of exercise, and, upon exercising an SAR, the participant must generally
recognize ordinary income equal to the cash (or the fair market value of the
stock) received. In each case, the Company will be entitled to a deduction equal
to the amount recognized as ordinary income by the grantee. An award of
restricted shares of Common Stock will not result in taxable income to the
grantee or in a tax deduction for the Company until such time as the shares are
no longer subject to forfeiture (unless the grantee elects an earlier date). At
that time, the grantee generally will recognize ordinary income equal to the
fair market value of the shares less any amount paid for them, and the Company
generally will be entitled to a

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<PAGE> 44

tax deduction in the same amount. Dividends paid on forfeitable restricted
shares are treated as compensation for federal income tax purposes.

A grantee's disposition of shares acquired under the Plan generally will
result in short-term or long-term capital gain or loss measured by the
difference between the sale price and the participant's tax basis in such shares
(or the exercise price of the option in the case of shares acquired by exercise
of an ISO and held until a date at least two years after grant and one year
after exercise). Generally, there will be no tax consequences to the Company in
connection with a disposition of shares acquired under an option or other award,
except that the Company will be entitled to a deduction (and the grantee will
recognize ordinary taxable income) if shares acquired upon exercise of an ISO
are disposed of before the applicable ISO holding periods have been satisfied.

Section 162(m) to the Code generally disallows a public company's tax
deduction for compensation to the chief executive officer or any of the four
other most highly compensated executive officers in excess of $1 million in any
tax year. Compensation that qualifies as "performance-based compensation" is
excluded from the $1 million deductibility cap, and therefore remains fully
deductible by the company that pays it. The Company expects that options granted
with an exercise price at least equal to 100% of fair market value of the
underlying stock at the date of grant, and any restricted stock award
conditioned upon achievement of performance goals, will qualify as such
"performance-based compensation," although other awards under the Plan may not
so qualify. However, there can be no assurance that any awards under the Plan
will qualify as "performance-based compensation" that is fully deductible by the
Company under Section 162(m) of the Code.

The Plan also provides for automatic option grants to directors who are not
otherwise employed by the Company or its subsidiaries. See "-- Director
Compensation."

The Stock Option Committee has granted pursuant to the Plan options to
purchase an aggregate of 385,000 shares of Common Stock to executive officers of
the Company in the amounts and on the terms described below:

<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE
NAME OF OFFICER DATE OF GRANT COVERED BY OPTIONS PER SHARE
--------------------------------- -------------------- ------------------ --------------
<S> <C> <C> <C>
Mr. Ferran....................... February 9, 1996 250,000 $ 7.50
Mr. Davis........................ February 9, 1996 50,000 7.50
Mr. Widynowski................... February 9, 1996 45,000 7.50
Mr. Koons........................ September 30, 1996 30,000 8.25
Mr. Merchant..................... February 9, 1996 10,000 7.50
</TABLE>

Each of the options vests in cumulative installments of one-third of the number
of shares subject thereto on each of the first three anniversaries of the grant
date and expires on the tenth anniversary of the date of grant. In addition, the
Stock Option Committee granted pursuant to the Plan options to purchase an
aggregate of 179,350 shares of Common Stock to other key employees of the
Company at prices ranging from $7.375 to $12.3125 per share. Each of these
options vests in cumulative installments of one-fourth of the number of shares
subject thereto on each of the first four anniversaries of the grant date and
expires in 2006.

On April 26, 1996 the Stock Option Committee granted nonqualified options
to each of Messrs. Friedman, Davis and Widynowski to purchase 75,000 shares of
Common Stock. These options, which were not granted under the Plan, have an
exercise price of $12.3125 per share, were granted on the same terms and
conditions as are provided for in the Plan, vest in cumulative installments of
18,750 shares on each of the first four anniversaries of the date of grant and
expire ten years after the date of grant.

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<PAGE> 45

SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to beneficial
ownership of Common Stock as of November 15, 1996, and after giving effect to
this Offering, by: (i) all persons known to the Company to be the beneficial
owner of 5% or more of the outstanding Common Stock; (ii) each director; (iii)
each executive officer; and (iv) all officers and directors of the Company as a
group.

<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED COMMON STOCK
PRIOR TO OFFERING BENEFICIALLY OWNED
--------------------- AFTER OFFERING
NUMBER ------------------
NAME OF SHARES PERCENT PERCENT
--------------------------------------------------- --------- ------- ------------------
<S> <C> <C> <C>
Joel Friedman(1)................................... 438,159 5.8% 4.0%
599 Lexington Avenue
New York, New York 10022
Richard D. Davis(2)................................ 13,588 * *
Wayne P. Widynowski(3)............................. -- -- --
Luis H. Ferran(4).................................. 1,150,916 15.1 10.4
Rio Churubusco 522
El Retono 09440
Mexico, D.F.
Ronald L. Koons(5)................................. -- -- --
G.C.L. Kemp(6)..................................... 45,829 * *
Charles O. Merchant(7)............................. 13,588 * *
Ralph M. Bahna(8).................................. 5,802 * *
Douglas W. Brandrup(8)............................. 10,000 * *
Arthur D. Emil(8).................................. 5,789 * *
P. Dennis O'Brien(8)............................... 5,000 * *
Robert P. Andrews(8)............................... 113,859 1.5 1.0
Emir L. Tavella(8)................................. -- -- --
John D. White, Jr.................................. 160,342 2.1 1.5
All officers and directors as a group
(14 persons)(1)(2)(3)(4)(5)(6)(7)(8)............. 1,962,872 25.8 17.7
</TABLE>

- ---------------

* Less than 1%.

(1) Includes an aggregate of 109,540 shares of Common Stock, of which (a) 21,908
shares are owned by Friedman Enterprises, (b) 43,816 shares are owned by
Mr. Friedman's wife, in which shares Mr. Friedman disclaims any beneficial
ownership, and (c) 21,908 shares are owned by each of Mr. Friedman's two
adult children, in which shares Mr. Friedman disclaims any beneficial
ownership. Excludes 75,000 shares of Common Stock issuable upon exercise of
a stock option that was not granted under the Plan (see
"Management -- Long-Term Incentive Compensation Plan").

(2) Excludes 50,000 shares of Common Stock issuable upon exercise of a stock
option granted under the Plan and 75,000 shares of Common Stock issuable
upon exercise of a stock option that was not granted under the Plan (see
"Management -- Long-Term Incentive Compensation Plan").

(3) Excludes 45,000 shares of Common Stock issuable upon exercise of a stock
option granted under the Plan and 75,000 shares of Common Stock issuable
upon exercise of a stock option that was not granted under the Plan (see
"Management -- Long-Term Incentive Compensation Plan").

(4) Excludes (a) 15,235 shares of Common Stock owned by Mr. Ferran's wife, all
of which shares are held in trust by a Mexican bank for her benefit, and in
which shares Mr. Ferran disclaims any beneficial

45
<PAGE> 46

ownership; and (b) 250,000 shares of Common Stock issuable upon exercise of
a stock option granted under the Plan (see "Management -- Long-Term
Incentive Compensation Plan"). Includes 57,394 shares of Common Stock, all
of which shares are held in trust by a Mexican bank for Mr. Ferran's
benefit.

(5) Excludes 30,000 shares of Common Stock issuable upon exercise of a stock
option granted under the Plan (see "Management -- Long-Term Incentive
Compensation Plan").

(6) Includes 8,705 shares of Common Stock owned by Mr. Kemp's wife.

(7) Excludes 10,000 shares of Common Stock issuable upon exercise of a stock
option granted under the Plan (see "Management -- Long-Term Incentive
Compensation Plan").

(8) Excludes 10,000 shares of Common Stock issuable upon exercise of a stock
option granted under the Plan and 6,667 shares of Common Stock issuable
upon the exercise of a stock option not granted under the Plan (see
"Management -- Director Compensation").

CERTAIN TRANSACTIONS

Simultaneously with the consummation of the Initial Public Offering, 3-D
Geophysical acquired in separate transactions, in exchange for cash, notes and
shares of Common Stock, the Operating Subsidiaries and PIASA, as described
below. Of the approximately $28.7 million of net proceeds to the Company from
the Initial Public Offering, (i) approximately $13.8 million was used to pay the
cash portion of the purchase price to certain former stockholders of the
Operating Subsidiaries and PIASA; and (ii) approximately $5.9 million was used
to repay indebtedness of the Operating Subsidiaries, including approximately
$1.9 million of indebtedness that was guaranteed by or was owed to certain
former stockholders of the Operating Subsidiaries. In addition, the former
stockholders of the Operating Subsidiaries and PIASA received an aggregate of
1,599,319 shares of Common Stock having a market value, based on the price to
the public in the Initial Public Offering of $7.50 per share, of approximately
$12.0 million in the aggregate.

Under a stock purchase agreement (the "Geoevaluaciones Stock Purchase
Agreement"), 3-D Geophysical purchased from Mr. Ferran, his wife, his
father-in-law and his mother-in-law (collectively, the "Former Geoevaluaciones
Stockholders") all of the issued and outstanding shares of capital stock of
Geoevaluaciones. In connection with this acquisition, 3-D Geophysical entered
into a separate non-competition agreement with each of the Former
Geoevaluaciones Stockholders (collectively, the "Geoevaluaciones Non-Competition
Agreement"). The Geoevaluaciones Stock Purchase Agreement and the
Geoevaluaciones Non-Competition Agreement were entered into on the basis of
arm's-length negotiations among the Former Geoevaluaciones Stockholders and, on
behalf of 3-D Geophysical, Messrs. Friedman and White. Neither 3-D Geophysical
nor the Former Geoevaluaciones Stockholders obtained an appraisal of
Geoevaluaciones or such non-competition covenants in connection with this
transaction; at September 30, 1995, the net book value of Geoevaluaciones was
approximately $2.1 million. Pursuant to the Geoevaluaciones Stock Purchase
Agreement, 3-D Geophysical paid to the Former Geoevaluaciones Stockholders: (i)
$2.45 million in cash at closing; and (ii) $1.0 million by delivery at closing
of four promissory notes, payable in installments at six, 12, 18 and 24 months
after the closing in the following aggregate amounts (which amounts include
interest at 8% per annum): $290,000, $280,000, $270,000 and $260,000,
respectively. Pursuant to the Geoevaluaciones Non-Competition Agreement, 3-D
Geophysical paid to the Former Geoevaluaciones Stockholders: (i) 100,000 shares
of Common Stock that was issued at closing to trusts with Mexican banks for the
benefit of the Former Geoevaluaciones Stockholders, and is to be released
February 9, 1998; and (ii) $1.9 million, reduced by the amount of any
liabilities Geoevaluaciones had not disclosed to the Company and by any amount
paid by Geoevaluaciones to settle or otherwise in connection with
Geoevaluaciones' dispute with a supplier (see "Business -- Legal Proceedings"),
such portion of the consideration consisting of (a) $1.0 million in cash that
was deposited at the closing in a bank account, and which, subject to any such
reduction, may be disbursed only upon the approval of (1) either Mr. Ferran or
another Former Geoevaluaciones Stockholder, and (2) either Mr. Friedman or Mr.
White; and (b) 117,647 shares of Common Stock that were delivered at closing to
trusts with Mexican banks for the benefit of the Former Geoevaluaciones
Stockholders, and which may not be

46
<PAGE> 47

released until June 30, 1997 and then only upon the approval of a designated
representative of the Former Geoevaluaciones Stockholders and Mr. Friedman. Mr.
Ferran entered into an employment agreement with the Company and serves as
Executive Vice President -- Latin American Operations, President of
Geoevaluaciones and a Director of the Company. In addition, Mr. Ferran may
receive, pursuant to the Geoevaluaciones Non-Competition Agreement, as described
above, up to a maximum of 57,394 of the shares of Common Stock payable to the
Former Geoevaluaciones Stockholders. Of the amounts paid by the Company to the
Former Geoevaluaciones Stockholders, Mr. Ferran received, as described above,
$645,167 in cash, a note in the principal amount of $263,333, with interest of
8% per annum thereon payable over two years, and will receive up to $263,334 in
cash that may not be released until June 30, 1997 (see "Management -- Employment
Agreements; Non-Competition Agreements" and "Security Ownership of Management
and Principal Stockholders").

Under a stock purchase agreement, 3-D Geophysical purchased from Robert P.
Andrews, Luis H. Ferran and five other stockholders of PIASA all of the issued
and outstanding shares of capital stock of PIASA for approximately $300,000,
consisting of $60,000 in cash and approximately 28,235 shares of Common Stock.
The stock purchase agreement with the former stockholders of PIASA was entered
into on the basis of arm's-length negotiations among Mr. Andrews, the President
and Chairman of the Board of PIASA, and Mr. Ferran, a director and Secretary of
PIASA, on behalf of the former stockholders of PIASA, and Messrs. Friedman and
White, on behalf of 3-D Geophysical. Neither 3-D Geophysical nor PIASA obtained
an appraisal of PIASA in connection with this transaction; at September 30,
1995, the net book value of PIASA was approximately $288,000. Mr. Ferran
received 9,176 shares of Common Stock and $19,500 in connection with the sale of
PIASA, and Mr. Andrews received 10,588 shares of Common Stock and $22,500 in
connection with the sale of PIASA.

Although the acquisitions of Geoevaluaciones and PIASA were made on an
arm's-length basis, Mr. Ferran was the holder of 77% of the outstanding shares
of Common Stock prior to the acquisitions and for accounting purposes the
acquisitions of Geoevaluaciones and PIASA have been treated as a
recapitalization of Geoevaluaciones and PIASA with Geoevaluaciones (combined
with PIASA) as the acquiror of 3-D Geophysical.

Under an asset purchase agreement between Northern's predecessor ("Old
Northern") and 3-D Geophysical, 3-D Geophysical purchased substantially all of
Old Northern's assets related to its land-based seismic data acquisition
business. Neither 3-D Geophysical nor Old Northern obtained an appraisal of the
assets of Old Northern to be acquired by 3-D Geophysical in connection with this
transaction; at September 30, 1995, the net book value of such assets was
approximately $2.0 million. Such asset purchase agreement was the result of
arm's-length negotiations among representatives of 3-D Geophysical and
representatives of Old Northern. The aggregate consideration paid by the Company
was $10.9 million in cash. Wayne P. Widynowski, the Vice President of Marketing
of Old Northern, entered into an employment agreement with the Company and
serves as Executive Vice President and Chief Operating Officer of the Company
and as President of Northern (see "Management -- Employment Agreements;
Non-Competition Agreements," and "Security Ownership of Management and Principal
Stockholders").

Under a merger agreement among Paragon, 3-D Geophysical and a subsidiary of
3-D Geophysical, Paragon merged with the subsidiary with Paragon being the
surviving entity (the "Paragon Merger"). Mr. Friedman, two other individuals and
members of their respective immediate families (the "Former Paragon
Stockholders") each owned one-third of the issued and outstanding capital stock
of Paragon. In August 1994, Paragon purchased all of the net assets of Paragon
Geophysical, Inc., an Ohio corporation, for $1.1 million in cash and, in
addition, assumed long-term liabilities of $1.9 million. To finance the
purchase, Paragon borrowed $1.1 million from a commercial bank that was
guaranteed by the Former Paragon Stockholders and the Former Paragon
Stockholders contributed approximately $150,000 in cash. The Former Paragon
Stockholders received approximately 1,314,261 shares of Common Stock in
connection with the Paragon Merger. In addition, the Company assumed an
aggregate of $4.8 million of Paragon's debt, of which $1.7 million had been
personally guaranteed by Mr. Friedman and certain other Former Paragon
Stockholders. All of this debt was repaid upon consummation of the Initial
Public Offering with a portion of the net proceeds therefrom. The terms of the
Paragon Merger were not determined through arm's-length negotiations

47
<PAGE> 48

and may have been significantly greater than would have resulted from
arm's-length negotiations. The Company did not obtain an appraisal of Paragon in
connection with the Paragon Merger; at September 30, 1995, the net book value of
Paragon was negative by approximately $496,000. Mr. Friedman, who, prior to the
Paragon Merger, was the President and Chief Executive Officer of 3-D Geophysical
and Chairman of the Board and Chief Executive Officer of Paragon, together with
members of his family, owns a total of 438,159 shares of Common Stock as a
result of the Paragon Merger. Mr. White, who, prior to the Paragon Merger, was
acting Chief Financial Officer of Paragon, served as Executive Vice President,
Chief Financial Officer, Secretary, Treasurer and a Director of 3-D Geophysical
until September 30, 1996 and currently serves as a Director of and financial
advisor to the Company. Mr. Merchant, who serves as Vice President of the
Company and President of Paragon, owns 13,588 shares of Common Stock as a
founder of 3-D Geophysical. In connection with the Paragon Merger, Messrs.
Friedman, White and Merchant entered into employment agreements. Mr. White
entered into a termination agreement with the Company following his resignation
in September 1996 (see "Management -- Employment Agreements; Non-Competition
Agreements," "Security Ownership of Management and Principal Stockholders" and
"Certain Transactions").

Under a stock purchase agreement among G.C.L. Kemp and his wife (the
"Former Kemp Stockholders") and 3-D Geophysical (the "Kemp Stock Purchase
Agreement"), 3-D Geophysical purchased all of the issued and outstanding shares
of capital stock of Kemp. The Kemp Stock Purchase Agreement was entered into on
the basis of arm's-length negotiations among G.C.L. Kemp, on behalf of the
Former Kemp Stockholders, and Messrs. Friedman and White, on behalf of 3-D
Geophysical, and the consideration payable to the Former Kemp Stockholders
thereunder represents the value the Former Kemp Stockholders deemed appropriate
for their business. Neither the Company nor the Former Kemp Stockholders
obtained an appraisal of Kemp in connection with this transaction; at September
30, 1995 the net book value of Kemp was $422,000. The aggregate consideration
paid by the Company to the Former Kemp Stockholders, as modified by amendments
in June 1996, was approximately $919,000, consisting of $625,000 in cash and
$294,000 paid by delivery of 39,176 shares of Common Stock. In addition, the
Company assumed and repaid approximately $152,000 in debt owed by Kemp, of which
$135,000 was guaranteed by Mr. Kemp. In addition, the Company assumed $50,000 of
debt owed by Kemp to Mr. Kemp, of which $25,000 was forgiven by Mr. Kemp in June
1996. Mr. Kemp entered into an employment agreement pursuant to which he serves
as a Vice President of the Company. Mr. Davis entered into an employment
agreement with the Company, pursuant to which he serves as President, Chief
Executive Officer and a Director of the Company. Mr. Davis was appointed as
President of Kemp by the Board of Directors in June 1996.

In connection with its formation in March 1995, 3-D Geophysical issued
1,400,681 shares of Common Stock to the founding stockholders, including
1,084,346 shares to Mr. Ferran, 160,342 shares to Mr. White, 103,271 shares to
Mr. Andrews, 13,588 shares to each of Messrs. Davis and Merchant, 8,153 shares
to Mr. Kemp and 4,620 shares to each of Messrs. Bahna and Brandrup. The amounts
paid by each of these stockholders for the foregoing shares are as follows: Mr.
Ferran -- $399; Mr. White -- $59; Mr. Andrews -- $38; Messrs. Davis and
Merchant -- $5; Mr. Kemp -- $3; Messrs. Bahna and Brandrup -- $1.70. The
founding stockholders (including the individuals named in the preceding
sentence) paid an aggregate of $515 for the foregoing shares. Based on the price
to the public in the Initial Public Offering of $7.50 per share, such number of
shares owned by the founding stockholders had a market value immediately
following the consummation of the Initial Public Offering of $8.1 million in the
case of Mr. Ferran, $1.2 million in the case of Mr. White, $775,000 in the case
of Mr. Andrews, $102,000 in the case of each of Messrs. Davis and Merchant,
$61,000 in the case of Mr. Kemp and $35,000 in the case of each of Messrs. Bahna
and Brandrup.

Mr. Andrews is the sole stockholder of The Andrews Group International,
Inc. ("Andrews Group") which, through its Mexican affiliate, A.G.I. Mexicana,
S.A. de C.V. (collectively, the "Andrews Companies"), acts as the exclusive
representative for several companies in Mexico, including Input/Output and
Landmark Graphics Corporation. Geoevaluaciones and PIASA purchase goods and
services from A.G.I. Mexicana and during the nine months ended September 30,
1996 such purchases totalled approximately $464,000. In addition, as of
September 30, 1996 PIASA owed A.G.I. Mexicana $115,000 for goods and services
purchased prior to the Initial Public Offering. The Company also leases
approximately 1,000 channels of 3-D seismic data acquisition equipment and
geophones from Andrews Group under two separate six-month lease agreements with
automatic monthly renewals thereafter that provide for deposits of approximately

48
<PAGE> 49

$293,000 and $77,000, respectively, and for monthly payments of approximately
$110,000 and $29,000, respectively. The leases provide the Company with options
to purchase the equipment for approximately $2,445,000 and $642,000,
respectively, subject to offsets of 80% of the rental payments during the six
months ending March 1, 1997 and a 10% discount if the options are exercised
during such period. The Company intends to use a portion of the proceeds of this
Offering to purchase the equipment (see "Use of Proceeds" and
"Business -- Customers and Contracts"). The Company anticipates that it will
continue to purchase goods and services from the Andrews Companies. The Company
believes that the past transactions with the Andrews Companies have been, and
that any future transactions with the Andrews Companies will be, on terms no
less favorable to the Company than could be obtained from an unaffiliated third
party.

The Company agreed to pay to a consulting company owned by Mr. White
$250,000 for financial advisory and other consulting services in connection with
the structuring, negotiation and consummation of the acquisitions of the
Operating Subsidiaries and PIASA, of which $125,000 was paid upon the
consummation of the Initial Public Offering and $125,000 is payable on January
3, 1997. In connection with Mr. White's resignation as an executive officer of
the Company and the termination of his employment agreement on October 1, 1996,
the Company agreed to pay Mr. White $200,000 in January 1997 plus $5,000 per
month through December 31, 1998, the expiration date of the employment
agreement, to provide him with office space in the Company's New York City
facility through December 31, 1997, provided he does not serve as an officer of
a competitor of the Company during that period, and to provide him with certain
insurance benefits through December 31, 1998. In exchange therefor, Mr. White
has agreed to render financial and advisory services to the Company in
connection with this Offering and the proposed acquisition of J.R.S.
Exploration.

The Company leases space in New York City at an annual base rental of
$165,000 to provide offices for Messrs. Friedman and White. Mr. Friedman has
agreed to reimburse the Company for any amounts under the lease that are payable
with respect to space that is not utilized by the Company and which have not
been paid by sub-lessees (see "Business -- Properties").

In the future, transactions with affiliates of the Company are anticipated
to be minimal. Any such transaction will be approved by a majority of the Board
of Directors, including a majority of the disinterested members of the Board of
Directors, and will be made on terms no less favorable to the Company than could
be obtained from an unaffiliated third party.

DESCRIPTION OF CAPITAL STOCK

3-D Geophysical's Certificate of Incorporation provides for authorized
capital stock of 25,000,000 shares of Common Stock, par value $.01 per share, of
which 11,100,000 shares will be issued and outstanding upon completion of this
Offering, and 1,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock"), of which no shares will be outstanding upon completion of
this Offering.

COMMON STOCK

As of the date hereof, 7,600,000 shares of Common Stock are issued and
outstanding. All of the issued and outstanding shares of Common Stock are, and
the shares of Common Stock offered hereby, when issued in this Offering, will
be, validly issued, fully paid and nonassessable.

The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, and, except as otherwise required by law or as
provided in any resolution adopted by the Board of Directors with respect to any
series of Preferred Stock (as defined below), the holders of shares of Common
Stock exclusively possess all voting power.

The Certificate of Incorporation and By-laws provide that the Board of
Directors will be divided into three classes of directors, with the classes to
be as nearly equal in number as possible (see "Management -- Directors and
Executive Officers").

Subject to any preferential rights of any outstanding series of Preferred
Stock created by the Board of Directors from time to time, the holders of Common
Stock are entitled to such dividends as may be declared from time to time by the
Board of Directors from funds available therefor, and upon liquidation will be
entitled

49
<PAGE> 50

to receive pro rata all assets of the Company available for distribution to such
holders. The Common Stock is not convertible or redeemable and there are no
sinking fund provisions therefor. Holders of the Common Stock are not entitled
to any preemptive rights.

As of November 15, 1996, there were 73 holders of record of Common Stock.

PREFERRED STOCK

The Board of Directors of the Company, without any action by the
stockholders of the Company, is authorized to issue up to 1,000,000 shares of
Preferred Stock, in one or more series and to determine the voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and in liquidation and the conversion and other rights of each such
series. There are no shares of Preferred Stock outstanding. See "-- Certain
Anti-Takeover Effects of Certain Provisions of the Certificate of Incorporation,
By-laws and Delaware General Corporation Law."

CERTAIN ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, BY-LAWS AND DELAWARE GENERAL CORPORATION LAW

The Certificate of Incorporation and By-laws contain a number of provisions
that could make more difficult the acquisition of the Company by means of a
tender or exchange offer, a proxy contest or otherwise. The description of such
provisions set forth below is intended only as a summary and is qualified in its
entirety by reference to the pertinent sections of the Certificate of
Incorporation and the By-laws, forms of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.

Classified Board of Directors; Removal of Directors. The classification of
directors will have the effect of making it more difficult for stockholders to
change the composition of the Board of Directors. At least two annual meetings
of stockholders generally will be required to effect a change in a majority of
the Board of Directors. Such a delay may help ensure that the Company's
directors, if confronted by a stockholder attempting to force a proxy contest, a
tender or exchange offer or an extraordinary corporate transaction, would have
sufficient time to review the proposal as well as any available alternatives to
the proposal and to act in what they believe to be the best interest of the
stockholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
Board of Directors would be beneficial to the Company and its stockholders and
whether a majority of the Company's stockholders believes that such a change
would be desirable.

The Certificate of Incorporation provides that directors of the Company may
only be removed for cause by the affirmative vote of the holders of 80% of the
voting power of all of the then outstanding shares of stock entitled to vote
generally in the election of directors (the "Voting Stock").

The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender or exchange offer
or otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and its stockholders. These
provisions could thus increase the likelihood that incumbent directors will
retain their positions. In addition, the classification provisions may
discourage accumulations of large blocks of the Common Stock by purchasers whose
objective is to take control of the Company and remove a majority of the Board
of Directors, and thus could tend to reduce the likelihood of fluctuations in
the market price of the Common Stock that might result from accumulations of
large blocks for such purpose. Accordingly, stockholders could be deprived of
certain opportunities to sell their shares of Common Stock at a higher market
price than might otherwise be the case.

Preferred Stock. The Certificate of Incorporation authorizes the Board of
Directors to establish one or more series of Preferred Stock and to determine,
with respect to any series of Preferred Stock, the terms and rights of such
series, including (i) the designation of the series, (ii) the number of shares
of the series, which number the Board may thereafter (except where otherwise
provided in the certificate of designation) increase or decrease (but not below
the number of shares thereof then outstanding), (iii) whether dividends, if any,
will be cumulative or noncumulative and the dividend rate of the series, (iv)
the dates at which dividends, if any, will be payable, (v) the redemption rights
and price or prices, if any, for shares of the series, (vi) the

50
<PAGE> 51

terms and amounts of any sinking fund provided for the purchase or redemption of
shares of the series, (vii) the amounts payable on shares of the series in the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, (viii) whether the shares of the series will be
convertible into shares of any other class or series, or any other security, of
the Company or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion price or prices or
rate or rates, any adjustments thereof, the date or dates as of which such
shares shall be convertible and all other terms and conditions upon which such
conversion may be made, (ix) restrictions, if any, on the issuance of shares of
the same series or of any other class or series, and (x) the voting rights, if
any, of the stockholders of such series, which may include the right of such
stockholders to vote separately as a class on any matter.

The Company believes that the ability of the Board of Directors to issue
one or more series of Preferred Stock will provide the Company with flexibility
in structuring possible future financing and acquisitions and in meeting other
corporate needs which might arise. The authorized shares of Preferred Stock, as
well as shares of Common Stock, will be available for issuance without further
action by the Company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the Company's securities may be listed or traded.

Although the Board of Directors has no intention at the present time of
doing so, it could issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The Board of Directors will make any determination to
issue such shares based on its judgment as to the best interests of the Company
and its stockholders. The Board of Directors, in so acting, could issue
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquiror may be otherwise able to change the composition of the
Board of Directors, including a tender or exchange offer or other transaction
that some, or a majority, of the Company's stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price of such stock.

No Stockholder Action by Written Consent; Special Meetings. The Certificate
of Incorporation provides that, subject to the rights of any holders of
Preferred Stock to elect additional directors under specified circumstances,
stockholder action can be taken only at an annual or special meeting of
stockholders and prohibit stockholder action by written consent in lieu of a
meeting. The Certificate of Incorporation and the By-laws provide that special
meetings of stockholders can be called only upon a written request stating the
purpose of such meeting delivered to the Chairman of the Board, the President or
the Secretary, and signed by a majority of the Board of Directors or by
resolution of the Board or the Executive Committee thereof. Stockholders are not
permitted to call a special meeting or to require that the Board call a special
meeting. Moreover, the business permitted to be conducted at any special meeting
of stockholders is limited to the business brought before the meeting pursuant
to the notice of meeting given by the Company.

The provisions of the Certificate of Incorporation and the By-laws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal, including a stockholder
proposal that a majority of the stockholders believes to be in the best interest
of the Company, until the next annual meeting unless a special meeting is called
at the request of a majority of the Board of Directors or by resolution of the
Board or the Executive Committee thereof. These provisions would also prevent
the holders of a majority of the Voting Stock from unilaterally using the
written consent procedure to take stockholder action. Moreover, a stockholder
could not force stockholder consideration of a proposal over the opposition of
the Board by calling a special meeting of stockholders prior to the time a
majority of the Board believes such consideration to be appropriate.

Amendment of Certain Provisions of the Certificate of Incorporation and
By-laws. Under the Delaware General Corporation Law (the "DGCL"), the
stockholders have the right to adopt, amend or repeal the By-laws and, with the
approval of the Board of Directors, the Certificate of Incorporation. The
Certificate of Incorporation provides that the affirmative vote of the holders
of at least 80% of the voting power of the then outstanding shares of Voting
Stock, voting together as a single class, and in addition to any other vote
required by the Certificate of Incorporation or By-laws, is required to amend
provisions of the Certificate of

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<PAGE> 52

Incorporation or By-laws relating to: (i) the prohibition of stockholder action
without a meeting; (ii) the prohibition of stockholders calling a special
meeting; (iii) the number, election and term of the Company's directors; or (iv)
the removal of directors. The vote of the holders of a majority of the voting
power of the then outstanding shares of Voting Stock is required to amend all
other provisions of the Certificate of Incorporation. The Certificate of
Incorporation further provides that the By-laws may be amended by the Board of
Directors or by the affirmative vote of the holders of at least a majority of
the voting power of the then outstanding shares of Voting Stock, voting together
as a single class. These super-majority voting requirements will have the effect
of making more difficult any amendment by stockholders of the By-laws or of any
of the provisions of the Certificate of Incorporation described above, even if a
majority of the Company's stockholders believes that such amendment would be in
their best interests.

Anti-Takeover Legislation. Section 203 of the DGCL provides that, subject
to certain exceptions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the date that such stockholder becomes an interested stockholder
unless (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares), or (iii) on or subsequent to such date, the business
combination is approved by the board of directors of the corporation and at an
annual or special meeting of stockholders by the affirmative vote of a least
two-thirds of the outstanding voting stock which is not owned by the interested
stockholder. Section 203 of the DGCL provides that, except as specified, an
interested stockholder is defined to include (x) any person that is the owner of
15% or more of the outstanding voting stock of the corporation, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within three years
immediately prior to the relevant date, and (y) the affiliates and associates of
any such person.

Under certain circumstances, Section 203 of the DGCL makes it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation does not
exclude the Company from the restrictions imposed under Section 203 of the DGCL.
The provisions of Section 203 of the DGCL may encourage companies interested in
acquiring the Company to negotiate in advance with the Board of Directors of the
Company, since the stockholder approval requirement would be avoided if a
majority of the directors then in office approve, prior to the time the
stockholder becomes an interested stockholder, either the business combination
or the transaction which results in the stockholder becoming an interested
stockholder.

LIMITATION ON DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Certificate of Incorporation and By-laws each contain a provision that
eliminates, to the extent currently allowed under the DGCL, the personal
monetary liability of a director to the Company and its stockholders for breach
of his fiduciary duty of care as a director. If a director were to breach the
duty of care in performing his duties as a director, neither the Company nor its
stockholders could recover monetary damages from the director, and the only
course of action available to the Company's stockholders would be equitable
remedies, such as an action to enjoin or rescind a transaction involving a
breach of the fiduciary duty of care. To the extent certain claims against
directors are limited to equitable remedies, this provision of the Certificate
of Incorporation may reduce the likelihood of derivative litigation and may
discourage stockholders or management from initiating litigation against
directors for breach of their duty of care. Additionally, equitable remedies may
not be effective in many situations. If a stockholder's only remedy is to enjoin
the completion of the Board of Directors' action, this remedy would be
ineffective if the stockholder does not become aware of a transaction or event
until after it has been completed. In such a situation, such stockholder would
have no effective remedy against the directors. Liability for monetary damages
remains for (i) any breach of the duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payment of an
improper dividend or

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<PAGE> 53

improper repurchase or redemption of the Company's stock under Section 174 of
the DGCL or (iv) any transaction from which the director derived an improper
personal benefit. The Certificate of Incorporation further provides that in the
event the DGCL is amended to allow the further elimination or limitation of the
liability of directors, then the liability of the Company's directors shall be
limited to the fullest extent permitted by the amended DGCL. The DGCL permits a
corporation to indemnify certain persons, including officers and directors, who
are (or are threatened to be made) parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of their being officers or directors of the corporation. The indemnity
may include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by an indemnified officer or
director, provided he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests and, in the case of
criminal proceedings, provided he had no reasonable cause to believe that his
conduct was unlawful. The By-laws provide indemnification to the fullest extent
allowed pursuant to the foregoing provisions of the DGCL.

The DGCL further permits a corporation to indemnify certain persons,
including officers and directors, who are (or are threatened to be made) parties
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of their being officers
or directors of the corporation. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by the indemnified officer or
director, provided he acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the corporation's best interests. However, no such
person will be indemnified as to matters for which he is found to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless, and only to the extent that, indemnification is ordered by a court. The
Certificate of Incorporation and By-laws provide indemnification of the
Company's directors and officers to the fullest extent allowed pursuant to the
foregoing provisions of the DGCL.

Delaware corporations also are authorized to obtain insurance to protect
officers and directors from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors and officers. The Company
intends to obtain a directors' and officers' liability insurance policy prior to
the closing of this Offering.

All of the foregoing indemnification provisions include statements that
such provisions are not to be deemed exclusive of any other right to indemnity
to which a director or officer may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American
Securities Transfer, Incorporated.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
11,100,000 shares of Common Stock. The 3,500,000 shares to be sold in this
Offering (plus any additional shares sold upon exercise of the Underwriters'
over-allotment option) will be, and the 4,600,000 shares sold in the Initial
Public Offering are, freely tradeable in the public market without restriction
or further registration under the Securities Act, except for any shares
purchased by "affiliates" of the Company, as that term is defined in Rule 144.
The remaining 3,000,000 outstanding shares of Common Stock (the "Restricted
Shares") which were issued in connection with the formation of 3-D Geophysical
and the acquisitions of the Operating Subsidiaries and PIASA are deemed to be
"restricted securities" within the meaning of Rule 144 and may be publicly
resold only if registered under the Securities Act or sold in accordance with an
eligible exemption from registration, such as Rule 144. Of the Restricted
Shares, 1,400,681 shares will be eligible for resale in the public market
commencing in March 1997 and 1,599,319 shares will be eligible in February 1998,
subject in each case to certain volume and other restrictions under Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate of the
Company, who beneficially owns "restricted securities" acquired

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<PAGE> 54

from the Company or an affiliate of the Company at least two years prior to the
sale is entitled to sell within any three-month period a number of shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock (111,000 shares based on the number of shares outstanding
immediately after completion of this Offering, assuming no exercise of the
Underwriters' over-allotment option), and (ii) the average weekly reported
trading volume of the Common Stock during the four calendar weeks immediately
preceding the date on which notice of such sale is filed with the SEC, provided
certain manner of sale and notice requirements and requirements as to the
availability of current public information concerning the Company are satisfied.
Under Rule 144(k), a person who has not been an affiliate of the Company for a
period of three months preceding a sale of securities by him, and who
beneficially owns such "restricted securities" acquired from the Company or an
affiliate of the Company at least three years prior to such sale, would be
entitled to sell such shares without regard to volume limitations, manner of
sale provisions, notification requirements or requirements as to the
availability of current public information concerning the Company. Shares held
by persons who are deemed to be affiliates of the Company, including any shares
acquired by affiliates in this Offering, are subject to such volume limitations,
manner of sale provisions, notification requirements and requirements as to
availability of current public information concerning the Company, regardless of
how long the shares have been owned or how they were acquired, and, in addition,
the sale of any "restricted securities" beneficially owned by affiliates is
subject to the two-year holding period requirement. As defined in Rule 144, an
"affiliate" of an issuer is a person that directly or indirectly through the use
of one or more intermediaries controls, or is controlled by, or is under common
control with, such issuer.

The Company and its officers and directors have agreed that for a period of
120 days from the date of this Prospectus they will not without the prior
written consent of Smith Barney Inc. (i) sell, offer to sell, solicit an offer
to buy, contract to sell or otherwise transfer or dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for, or any rights to purchase or acquire, shares of Common Stock, or (ii) grant
any options or warrants to purchase shares of Common Stock (other than the grant
of options under the Plan and Common Stock issuable upon the exercise of options
granted under the Plan or otherwise to officers, directors and other key
employees of the Company).

The Company has outstanding options to purchase an aggregate of 889,352
shares of Common Stock (see "Management -- Director Compensation" and
"Management -- Long-Term Incentive Compensation Plan"), of which options to
purchase approximately 215,000 shares become exercisable in February 1997
(approximately 40,000 of which are subject to stockholder approval at the next
annual meeting of stockholders), options to purchase approximately 70,000 shares
become exercisable in April 1997, options to purchase 4,450 shares become
exercisable in August 1997 and options to purchase 10,000 shares become
exercisable in September 1997. The Company intends to register under the
Securities Act the shares issuable upon exercise of options granted under the
Plan and otherwise and, upon such registration, such shares will be eligible for
resale in the public market, except that any such shares issued to affiliates
are subject to the volume limitations and other restrictions of Rule 144.

No prediction can be made as to the effect, if any, that the sale of shares
or the availability of shares for sale will have on the market price of the
Common Stock prevailing from time to time. Nevertheless, sales of substantial
amounts of the Common Stock in the public market could adversely affect
prevailing market prices and the ability of the Company to raise equity capital
in the future. See "Underwriting."

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<PAGE> 55

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase and the Company has agreed to sell to such Underwriter, the
number of shares of Common Stock set forth opposite the name of such
Underwriter:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- -------------------------------------------- ---------
<S> <C>
Smith Barney Inc............................ 853,500
Rauscher Pierce Refsnes, Inc. .............. 853,250
Simmons & Company International............. 853,250
Credit Suisse First Boston Corporation...... 65,000
Dain Bosworth Incorporated.................. 35,000
Dean Witter Reynolds Inc. .................. 65,000
Dominick & Dominick, Incorporated........... 35,000
Donaldson, Lufkin & Jenrette
Securities Corporation................... 65,000
Fahnestock & Co. Inc. ...................... 35,000
Gaines, Berland Inc. ....................... 35,000
Hanifen & Imhoff Inc. ...................... 35,000
Huntleigh Securities Corporation............ 35,000

<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- -------------------------------------------- ---------
<S> <C>
Ladenburg Thalmann & Co. Inc. .............. 35,000
Lehman Brothers Inc. ....................... 65,000
McDonald & Company Securities, Inc. ........ 35,000
Morgan Stanley & Co. Incorporated........... 65,000
Oppenheimer & Co., Inc. .................... 65,000
PaineWebber Incorporated.................... 65,000
Principal Financial Securities, Inc. ....... 35,000
The Robinson-Humphrey Company, Inc. ........ 35,000
Salomon Brothers Inc ....................... 65,000
Scott & Stringfellow, Inc. ................. 35,000
Wm. Smith Securities, Incorporated.......... 35,000
---------
Total............................... 3,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all of shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., Rauscher Pierce Refsnes, Inc.
and Simmons & Company International are acting as representatives (collectively,
the "Representatives"), propose to offer part of the shares of Common Stock
directly to the public at the public offering price set forth on the cover page
of this Prospectus and part of the shares of Common Stock to certain dealers at
a price which represents a concession not in excess of $.26 per share under the
public offering price. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $.10 per share to certain other dealers. After the
initial offering of the shares to the public, the public offering price and such
concessions may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 525,000 additional
shares of Common Stock at the price to public set forth on the cover page of
this Prospectus, less the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this Offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite each Underwriter's name in the
preceding table bears to the total number of shares listed in such table.

By letter agreement dated November 14, 1996, the Company engaged Rauscher
Pierce Refsnes, Inc. ("Rauscher Pierce"), one of the Representatives, to act as
its exclusive financial advisor in connection with the Company's proposed
acquisition of J.R.S. Exploration. Pursuant to the letter agreement, the Company
has agreed to pay Rauscher Pierce a $100,000 transaction fee upon the closing of
the acquisition and to reimburse Rauscher Pierce for up to $15,000 for
out-of-pocket expenses incurred in connection with such services.

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<PAGE> 56

convertible into or exercisable or exchangeable for, or any rights to purchase
or acquire, shares of Common Stock, or (ii) grant any options or warrants to
purchase shares of Common Stock (other than the grant of options under the Plan
and Common Stock issuable upon the exercise of options granted under the Plan or
otherwise to officers, directors and other key employees of the Company).

Certain of the Underwriters and selling group members that currently act as
market makers for the Common Stock may engage in "passive market making" in the
Common Stock on the Nasdaq National Market in accordance with Rule 10b-6A under
the Exchange Act. Rule 10b-6A permits, upon the satisfaction of certain
conditions, underwriters and selling group members participating in a
distribution that are also Nasdaq market makers in the security being
distributed to engage in limited market making transactions during the period
when Rule 10b-6 under the Exchange Act would otherwise prohibit such activity.
Rule 10b-6A prohibits underwriters and selling group members engaged in passive
market making generally from entering a bid or effecting a purchase at a price
that exceeds the highest bid for those securities reported on the Nasdaq
National Market by a market maker that is not participating in the distribution.
Under Rule 10b-6A, each underwriter or selling group member engaged in passive
market making is subject to a daily net purchase limitation equal to 30% of such
entity's average daily trading volume during the two full consecutive calendar
months immediately preceding the date of the filing of the registration
statement under the Securities Act pertaining to the security to be distributed.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for 3-D
Geophysical by Kramer, Levin, Naftalis & Frankel, New York, New York. Arthur D.
Emil, who is of counsel to that firm, is a Director of 3-D Geophysical, has been
granted ten-year options to purchase an aggregate of 16,667 shares of Common
Stock and owns 5,789 shares of Common Stock (see "Management -- Directors and
Executive Officers" and "Management -- Director Compensation"). Certain legal
matters for the Underwriters will be passed upon by Fulbright & Jaworski L.L.P.,
Houston, Texas.

EXPERTS

The consolidated financial statements of 3-D Geophysical as of December 31,
1995 and 1994, for the nine months in the period ended September 30, 1995, for
the three years in the period ended December 31, 1995, and the financial
statements of Northern (Land-Based Seismic Data Operations) and Paragon as of
December 31, 1994 and September 30, 1995 and for the two years in the period
ended December 31, 1994 and the nine-month period ended September 30, 1995,
included in this Prospectus, have been included herein in reliance on the
reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.

The balance sheet of J.R.S. Exploration at November 30, 1995 and the
statements of operations and retained earnings and changes in financial position
for the year then ended, included in this Prospectus, have been included herein
in reliance on the reports of Garrett Power, Chartered Accountants, given on the
authority of that firm as experts in Canadian accounting and auditing.

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<PAGE> 57

ADDITIONAL INFORMATION

The Company has filed with the SEC a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered by
this Prospectus. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. The
Registration Statement and the exhibits and schedules thereto filed with the SEC
may be inspected, without charge, and copies may be obtained at prescribed
rates, at the public reference facilities maintained by the SEC at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549 and at the regional offices or public reference facilities of the SEC
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. For further information pertaining to the Company and to
the shares of Common Stock offered hereby, reference is made to the Registration
Statement including the exhibits and schedules thereto. The SEC also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the SEC.

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<PAGE> 58

GLOSSARY

Certain words and terms commonly used in the seismic business which are
used throughout this Prospectus are defined below.

"2-D SEISMIC" Seismic data representing a vertical plane of subsurface
information.

"3-D SEISMIC" Seismic data representing a cube of subsurface information
that can be sliced into numerous planes offering different views of the target.

"ACOUSTIC WAVE" A sonic wave travelling through the earth's subsurface
induced by a release of energy, normally dynamite or vibroseis.

"ACQUISITION SYSTEM" The electronic field instruments and associated
equipment required for seismic acquisition.

"CHANNEL" The electrical path from a geophone to a remote signal
conditioner over which data captured by the geophone is transmitted to the
remote signal conditioner.

"CHANNEL BOX" A remote data collection unit which receives seismic data
from a multi-conductor cable attached to the geophones.

"DFS-V(TM)" Traditional seismic acquisition systems for land applications
manufactured by Texas Instruments, Inc.

"DISTRIBUTED SYSTEM" A seismic acquisition system in which received signals
are transmitted to remote signal conditioners, where they are amplified,
filtered and digitized before transmission to a central recording unit.

"ENERGY SOURCE" Typically a small charge of dynamite or a mechanically
produced vibration.

"GEOPHONES" Electro-magnetic coils placed on the earth's surface to receive
the acoustic waves reflected by subsurface geological layers.

"I/O SYSTEM TWO(R)" Technologically advanced, distributed seismic
acquisition systems for land applications manufactured by Input/Output, Inc.

"REMOTE SIGNAL CONDITIONER" Electronic device that converts the analog
signals captured by a geophone into a digital signal and transmits the converted
signal to a central electronic processing unit.

"SEISMIC PROCESSING SYSTEM" The computer hardware and software required to
convert seismic records to seismic cross-sections.

"SEISMIC RECORD" Seismic data received from one release of energy.

"SEISMIC CROSS-SECTION" A graphic representation of processed seismic
records representing subsurface structural and stratigraphic features.

"VIBROSEIS" An energy source whereby the acoustic waves are mechanically
produced by machinery that vibrates on the earth's surface.

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<PAGE> 59

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3-D GEOPHYSICAL, INC. AND SUBSIDIARIES:
Pro Forma Consolidated Financial Statements......................................... F-2
Pro Forma Consolidated Balance Sheet................................................ F-4
Pro Forma Consolidated Statement of Operations for the year ended December 31,
1995............................................................................. F-5
Pro Forma Consolidated Statement of Operations for the nine months ended September
30, 1995......................................................................... F-6
Pro Forma Consolidated Statement of Operations for the nine months ended September
30, 1996......................................................................... F-7
Notes to Pro Forma Consolidated Financial Statements................................ F-8
3-D GEOPHYSICAL, INC. AND SUBSIDIARIES:
Report of Independent Accountants................................................... F-11
Consolidated Balance Sheet.......................................................... F-12
Consolidated Statement of Operations................................................ F-13
Consolidated Statement of Stockholders' Equity...................................... F-14
Consolidated Statement of Cash Flows................................................ F-15
Notes to Consolidated Financial Statements.......................................... F-16
NORTHERN GEOPHYSICAL OF AMERICA, INC. (LAND-BASED SEISMIC DATA OPERATIONS):
Report of Independent Accountants................................................... F-26
Balance Sheet....................................................................... F-27
Statement of Operations............................................................. F-28
Statement of Changes in Net Equity.................................................. F-29
Statement of Cash Flows............................................................. F-30
Notes to Financial Statements....................................................... F-31
PARAGON GEOPHYSICAL, INC.:
Report of Independent Accountants................................................... F-37
Balance Sheet....................................................................... F-38
Statement of Operations............................................................. F-39
Statement of Stockholders' Deficit.................................................. F-40
Statement of Cash Flows............................................................. F-41
Notes to Financial Statements....................................................... F-42
J.R.S. EXPLORATION COMPANY LIMITED:
Auditors' Report.................................................................... F-47
Balance Sheet....................................................................... F-48
Statement of Operations and Retained Earnings....................................... F-49
Statement of Changes in Financial Position.......................................... F-50
Notes to Financial Statements....................................................... F-51
</TABLE>

F-1
<PAGE> 60

3-D GEOPHYSICAL, INC.

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following pro forma consolidated financial statements of 3-D
Geophysical, Inc. (the "Company") include the pro forma consolidated balance
sheet as of September 30, 1996 and the pro forma consolidated statement of
operations for the year ended December 31, 1995 and the nine months ended
September 30, 1995 and 1996.

On February 9, 1996, simultaneously with the consummation of the Company's
Initial Public Offering (the "Initial Public Offering"), the Company acquired in
separate transactions, in exchange for cash, notes and shares of Common Stock,
Geoevaluaciones, PIASA, Northern's land-based seismic data operations, Paragon
and Kemp. See "Certain Transactions." For accounting purposes, the acquisitions
of Geoevaluaciones and PIASA were treated as a recapitalization of
Geoevaluaciones and PIASA with Geoevaluaciones (combined with PIASA) as the
acquiror and predecessor of 3-D Geophysical. Accordingly, the combined net
assets of Geoevaluaciones and PIASA were valued at historical cost and the
consideration given to the former stockholders of Geoevaluaciones and PIASA was
treated for accounting purposes as a dividend. The acquisitions of Northern's
land-based seismic data operations, Paragon and Kemp (the "U.S. Operating
Subsidiaries") were treated as business combinations accounted for by the
purchase method of accounting as prescribed by Accounting Principles Board
Opinion No. 16 and Staff Accounting Bulletin No. 48 (as applied prior to the
issuance of SAB 97) and are included within the Company's historical
consolidated statement of operations commencing February 9, 1996. The
acquisition of Paragon's common stock in exchange for shares of Common Stock was
accounted for at Paragon's historical cost. Northern's land-based seismic data
operations and Kemp were valued at the fair market value of consideration given.
In connection with the acquisitions of Northern's land-based seismic data
operations and Kemp, the excess of consideration given over the fair market
value of net assets is being amortized on a straight-line basis over 15 years.

On December 10, 1996, the Company entered into a stock purchase agreement
pursuant to which it agreed to purchase J.R.S. Exploration Company Limited
("J.R.S. Exploration") (see "Business -- Proposed Acquisition of J.R.S.
Exploration"). The consummation of the acquisition is subject to customary
conditions. The proposed acquisition of J.R.S. Exploration and certain related
equipment is being treated as a probable business combination which will be
accounted for by the purchase method of accounting as prescribed by Accounting
Principles Board Opinion No. 16. The excess of consideration being offered over
the fair market value of the net assets acquired is recorded in the following
pro forma consolidated financial statements as goodwill and is being amortized
on a straight-line basis over 15 years.

The pro forma consolidated balance sheet as of September 30, 1996 gives
effect to the acquisition of J.R.S. Exploration and certain related equipment as
if such transaction had occurred on September 30, 1996. The pro forma
consolidated statements of operations for the year ended December 31, 1995 and
the nine months ended September 30, 1995 and 1996 assume the Company had
completed the recapitalization, the acquisition of the U.S. Operating
Subsidiaries, the Initial Public Offering and the acquisition of J.R.S.
Exploration and certain related equipment on January 1, 1995.

The pro forma consolidated financial statements have been derived from: (i)
the audited statement of operations of Geoevaluaciones (as predecessor of the
Company) for the year ended December 31, 1995 appearing elsewhere in this
Prospectus; (ii) the unaudited interim consolidated financial statements of the
Company as of and for the nine months ended September 30, 1996 and 1995
appearing elsewhere in this Prospectus; (iii) the audited statements of
operations for Northern's land-based seismic data operations and Paragon for the
nine months ended September 30, 1995 are included elsewhere in this Prospectus;
(iv) the unaudited statement of operations of Kemp for the nine months ended
September 30, 1995 and for the year ended December 31, 1995 not included in this
Prospectus; (v) the unaudited statement of operations of Northern's land-based
seismic data operations and Paragon for the year ended December 31, 1995
appearing elsewhere in this Prospectus; (vi) the unaudited interim statements of
operations of Northern's land-based seismic data operations, Paragon and Kemp
for the period from January 1, 1996 through February 8, 1996 not

F-2
<PAGE> 61

included in this Prospectus; and (vii) the U.S. dollar financial statements of
J.R.S. Exploration as of and for the nine months ended August 31, 1996, for the
year ended November 30, 1995 and the nine months ended August 31, 1995 not
included in this Prospectus. The Canadian dollar J.R.S. Exploration financial
statements, appearing elsewhere in this Prospectus, have been translated into
U.S. dollars using the current rate method (i.e., assets and liabilities were
translated at the August 31, 1996 exchange rate and revenues and expenses have
been translated at the appropriate average exchange rate for the period). The
translation is not included in this Prospectus. The J.R.S. Exploration financial
statements include all adjustments necessary to conform to U.S. Generally
Accepted Accounting Principles ("GAAP"). The principal difference between U.S.
and Canadian GAAP is accounting for income taxes. This difference, as it relates
to J.R.S. Exploration, does not produce a material difference and therefore no
adjustment has been made.

The following sets forth the rates (in U.S. dollars) used to translate the
J.R.S. Exploration financial statements.

<TABLE>
<CAPTION>
CLOSING RATE AVERAGE RATE
------------ ------------
<S> <C> <C>
Nine Months Ended August 31, 1995............................ .7446 .7237
Year Ended November 30, 1995................................. .7362 .7279
Nine Months Ended August 31, 1996............................ .7289 .7310
</TABLE>

These pro forma consolidated statements of operations may not be indicative
of actual results that would have been achieved if the transactions had occurred
on the dates indicated or the results which may be realized in the future.

F-3
<PAGE> 62

3-D GEOPHYSICAL, INC.

PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
J.R.S.
U.S. $
3-D U.S. PRO FORMA
GEOPHYSICAL G.A.A.P. ADJUSTMENTS(A) PRO FORMA
----------- ------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 1,206 $ 409 $ (2,665)(i) $(1,050)
Accounts receivable:
Trade....................................... 17,478 916 -- 18,394
Other....................................... 259 -- -- 259
Notes receivable................................. -- 49 -- 49
Deferred income tax asset........................ 68 -- -- 68
Prepaid expenses and other assets................ 1,912 35 (49)(ii) 1,898
------- ------- ------- -------
Total current assets................... 20,923 1,409 (2,714) 19,618
Property and equipment, net...................... 26,931 3,322 124(iii) 30,377
Goodwill......................................... 5,850 -- 2,641(iv) 8,491
Other assets..................................... 692 24 (24)(ii) 692
------- ------- ------- -------
Total assets........................... $54,396 $4,755 $ 27 $59,178
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and
capital
leases...................................... $ 6,517 $1,422 $ $ 7,939
Accounts payable............................... 9,035 301 -- 9,336
Accrued liabilities............................ 1,536 -- -- 1,536
Deferred revenue............................... 418 -- -- 418
Income taxes payable........................... 568 137 -- 705
------- ------- ------- -------
Total current liabilities.............. 18,074 1,860 19,934
Long-term debt and capital leases................ 8,682 146 8,828
Deferred income tax liability.................... 653 222 -- 875
Stockholder's equity
Preferred stock................................ -- -- -- --
Common stock................................... 76 -- 3(v) 79
Additional paid-in capital..................... 28,173 -- 2,551(vi) 30,724
Retained earnings.............................. 1,934 2,623 (2,623)(vii) 1,934
Cumulative foreign currency translation
adjustments................................. (3,196) (96 ) 96(vii) (3,196)
------- ------- ------- -------
Total stockholders' equity....................... 26,987 2,527 27 29,541
------- ------- ------- -------
Total liabilities and stockholders'
equity............................... $54,396 $4,755 $ 27 $59,178
======= ======= ======= =======
</TABLE>

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

F-4
<PAGE> 63

3-D GEOPHYSICAL, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
RECAPITALIZED
3-D U.S. OPERATING SUBSIDIARIES
GEOPHYSICAL --------------------------- PRO FORMA PRO J.R.S. U.S.$ PRO FORMA ADJUSTED
(AA) NORTHERN PARAGON KEMP ADJUSTMENTS FORMA U.S. G.A.A.P. ADJUSTMENTS PRO FORMA
------------- -------- ------- ------- ----------- ------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues................ $ 9,825 $19,903 $4,695 $ 3,605 $ (193)(II) $37,835 $ 8,061 $ -- $45,896
Expenses:
Cost of data acquisition.. 5,968 16,465 3,897 2,794 (193)(II) 28,931 5,841 (52)(EE) 34,720
Depreciation and
amortization............. 662 1,755 566 238 422 (CC) 3,431 1,435 211 (DD) 5,077
(212)(GG)
General and administrative
expenses................. 1,038 1,458 464 838 500 (JJ) 4,298 599 -- 4,897
------- ------- ------ ------ ---- ------- ----- ----- -------
Total operating
expenses............. 7,668 19,678 4,927 3,870 517 36,660 7,875 159 44,694
Operating income (loss)..... 2,157 225 (232) (265) (710) 1,175 186 (159) 1,202
Other income (expense):
Interest expense.......... (803) (265) (393) (88) 425 (FF) (1,124) (303) -- (1,427)
Foreign currency
transaction losses...... (120) -- -- -- -- (120) -- -- (120)
Miscellaneous............. 503 (67) (30) 9 -- 415 55 -- 470
------- ------- ------ ------ ---- ------- ----- ----- -------
Income (loss) before
provision for income
taxes...................... 1,737 (107) (655) (344) (285) 346 (62) (159) 125
Provision (benefit)
for income taxes........... 130 (40) -- -- (447)(HH) (357) (47) (56)(HH) (460)
------- ------- ------ ------ ---- ------- ----- ----- -------
Net income (loss)...... $ 1,607 $ (67) $ (655) $ (344) $162 $ 703 $ (15) $(103) $ 585
======= ======= ====== ====== ==== ======= ===== ===== =======
Earnings per share...... $ 0.11 $ 0.08
======= =======
Number of shares....... 6,232 (KK) 6,907(KK)
</TABLE>

The accompanying notes are an integral part of the pro forma consolidated
financial statements.

F-5
<PAGE> 64

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
RECAPITALIZED
3-D U.S. OPERATING SUBSIDIARIES
GEOPHYSICAL --------------------------- PRO FORMA
(AA) NORTHERN PARAGON KEMP ADJUSTMENTS
------------- -------- ------- ------ -----------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $7,157 $12,734 $3,910 $1,868 $ --
Expenses:
Cost of data acquisition........ 3,759 10,715 3,146 1,443 --
Depreciation and amortization... 531 1,350 423 104 317(CC)
(195)(GG)
General and administrative
expenses...................... 833 957 296 632 375(JJ)
------ ------- ------ ------ -----
Total operating expenses.. 5,123 13,022 3,865 2,179 497
Operating income (loss)........... 2,034 (288) 45 (311) (497)
Other income (expense):
Interest expense................ (562) (204) (294) (11) 319(FF)
Foreign currency transaction
losses........................ (83) -- -- -- --
Miscellaneous................... 38 (100) (6) -- --
------ ------- ------ ------ -----
Income (loss) before provision
for income taxes................ 1,427 (592) (255) (322) (178)
Provision (benefit) for income
taxes........................... 81 (219) -- -- (252)(HH)
------ ------- ------ ------ -----
Net income (loss)......... $1,346 $ (373) $ (255) $ (322) $ 74
====== ======= ====== ====== =====
Earnings per share........

Number of shares..........
</TABLE>

<TABLE>
<CAPTION>
PRO J.R.S. U.S.$ PRO FORMA ADJUSTED
FORMA U.S. G.A.A.P. ADJUSTMENTS PRO FORMA
------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues......................... $25,669 $6,800 $ -- $32,469
Expenses:
Cost of data acquisition........... 19,063 4,627 (45)(EE) 23,645
Depreciation and amortization...... 2,530 1,070 158(DD) 3,758

General and administrative
expenses......................... 3,093 448 -- 3,541
------ ------ ----- -------
Total operating expenses..... 24,686 6,145 113 30,944
Operating income (loss).............. 983 655 (113) 1,525
Other income (expense):
Interest expense................... (752) (219) -- (971)
Foreign currency transaction
losses........................... (83) -- -- (83)
Miscellaneous...................... (68) 42 -- (26)
------ ------ ----- -------
Income (loss) before provision
for income taxes................... 80 478 (113) 445
Provision (benefit) for income
taxes.............................. (390) 176 (40)(HH) (254)
------ ------ ----- -------
Net income (loss)............ $ 470 $ 302 $ (73) $ 699
====== ====== ===== =======
Earnings per share........... $ 0.08 $ 0.10
====== =======
Number of shares............. 6,232(KK) 6,907(KK)
</TABLE>

The accompanying notes are an integral part of this pro forma consolidated
financial statements.

F-6
<PAGE> 65

3-D GEOPHYSICAL, INC.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

U.S. OPERATING
SUBSIDIARIES(BB)
3-D -------------------------- PRO FORMA PRO
GEOPHYSICAL NORTHERN PARAGON KEMP ADJUSTMENTS FORMA
----------- -------- ------- ----- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................... $36,151 $2,768 $ 285 $ 770 $-- $39,974
Expenses:

Cost of data acquisition............. 26,563 2,442 263 814 -- 30,082
Depreciation and amortization........ 2,788 178 49 74 (21)(CC) 3,068
General and administrative
expenses............................ 3,907 154 49 162 -- 4,272
------- ------ ----- ----- --- -------
Total operating expenses............... 33,258 2,774 361 1,050 (21) 37,422
Operating income (loss)................ 2,893 (6) (76) (280) 21 2,552
Other income (expense):
Interest expense..................... (668) (15) (38) (34) 45 (FF) (710)
Foreign currency transaction gains... 8 -- -- -- -- 8
Miscellaneous........................ 437 -- -- -- -- 437
------- ------ ----- ----- --- -------
Income (loss) before provision
for income taxes..................... 2,670 (21) (114) (314) 66 2,287
Provision (benefit) for income taxes... 645 (7) (40) (110) 23 (HH) 511
------- ------ ----- ----- --- -------
Income (loss) before extraordinary
item................................. $ 2,025 $ (14) $ (74) $(204) $43 $ 1,776
======= ====== ===== ===== === =======
Earnings per share before
extraordinary item............ $ 0.28
=======
Number of shares................. 6,232 (KK)
</TABLE>

J.R.S. U.S.$ PRO FORMA ADJUSTED
U.S. G.A.A.P. ADJUSTMENTS PRO FORMA
------------- ----------- ---------
<S> <C> <C> <C>
Net revenues........................... $ 6,515 $ -- $46,489
Expenses:
Cost of data acquisition ............ 4,356 (60)(EE) 34,378
Depreciation and amortization........ 1,107 158 (DD) 4,333
General and administrative
expenses........................... 507 -- 4,779
------- ----- -------
Total operating expenses............... 5,970 98 43,490
Operating income (loss)................ 545 (98) 2,999
Other income (expense):
Interest expense..................... (144) -- (854)
Foreign currency transaction gains... -- -- 8
Miscellaneous........................ 14 -- 451
------- ----- -------
Income (loss) before provision
for income taxes..................... 415 (98) 2,604
Provision (benefit) for income taxes... 153 (34)(HH) 630
------- ----- -------
Income (loss) before extraordinary
item................................. $ 262 $ (64) $ 1,974
======= ===== =======
Earnings per share before
extraordinary item............ $ 0.29
=======
Number of shares................. 6,907 (KK)
</TABLE>

The accompanying notes are an integral part of this pro forma consolidated
financial statements.

F-7
<PAGE> 66

3-D GEOPHYSICAL, INC.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

1. PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS

The accompanying pro forma consolidated balance sheet as of September 30,
1996 gives effect to the acquisition of J.R.S. Exploration and certain related
equipment of Siegfried & Siegfried Resource Consultants, Ltd. as if such
transaction had occurred on September 30, 1996. See "Business -- Proposed
Acquisition of J.R.S. Exploration."

(A) Adjustments to reflect the acquisition of J.R.S. Exploration for
approximately C$6,850,000, comprised of C$3,500,000 in cash and C$3,350,000 in
Common Stock valued at $8.00 per share (305,688 shares). An exchange rate of
$.73 to C$1.00 is utilized in the translation of these amounts. In addition,
adjustments reflect the acquisition of certain related equipment through the
acquisition of Siegfried & Siegfried Resource Consultants, Ltd. for C$150,000 in
cash and C$150,000 in Common Stock valued at $8.00 per share (13,688 shares).
The accompanying pro forma consolidated balance sheet assumes that the Company
will assume the debt of J.R.S. Exploration. Specific adjustments are as follows:

(i) Cash consideration for the purchase of J.R.S. Exploration and Siegfried
& Siegfried Resource Consultants, Ltd.
(ii) Reflects the elimination of a current receivable and long term
receivable included in other assets in the accompanying pro forma balance
sheet due from Siegfried & Siegfried Resource Consultants, Ltd. totalling
C$100,000 (approximately $73,000) that is eliminated upon the acquisition
of Siegfried & Siegfried Resource Consultants, Ltd.
(iii) Estimated fair market value of recording assets acquired through the
acquisition of Siegfried & Siegfried Resource Consultants, Ltd.
(iv) Associated goodwill generated through the acquisition of J.R.S.
Exploration and Siegfried & Siegfried Resource Consultants, Ltd. calculated
as follows:

<TABLE>
<CAPTION>
$CANADIAN $U.S.
--------- -------
(IN THOUSANDS)
<S> <C> <C>
Total Purchase Price of J.R.S. Exploration.......... $ 6,850 $ 5,000
Total Purchase Price of Siegfried & Siegfried
Ltd............................................... 300 219
Receivable eliminated through acquisition of
Siegfried & Siegfried Ltd......................... 100 73
------- -------
Total Purchase Price.............................. $ 7,250 $ 5,292
Fair market value of underlying net assets and
liabilities of J.R.S. Exploration................. 3,462 2,527
Estimated fair market value of Siegfried & Siegfried
Resource Consultants, Ltd. assets................. 170 124
------- -------
$ 3,632 $ 2,651
Goodwill............................................ $ 3,618 $ 2,641
</TABLE>

(v) Par value of shares issued ($.01 per share).
(vi) Additional paid-in capital.
(vii) Purchase price adjustments eliminating existing retained earnings and
translation adjustments at J.R.S. Exploration.

The consummation of the acquisition is subject to customary conditions,
including the negotiation and execution of mutually satisfactory definitive
documentation and the completion of a satisfactory due diligence review by the
Company.

2. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTMENTS

The accompanying pro forma consolidated statements of operations assume
that the Company had completed the recapitalization, the acquisition of the U.S.
Operating Subsidiaries, the Initial Public Offering and the acquisition of
J.R.S. Exploration and certain related equipment of Siegfried & Siegfried
Resource Consultants, Ltd. on January 1, 1995.

F-8
<PAGE> 67

(AA) As discussed in "Selected Historical and Pro Forma Financial and
Operating Data," the acquisitions of Geoevaluaciones and PIASA were treated as a
recapitalization of Geoevaluaciones and PIASA with Geoevaluaciones (combined
with PIASA) deemed to be the acquiror and predecessor of 3-D Geophysical.

(BB) To record the results of operations of the U.S. Operating Subsidiaries
for the period from January 1, 1996 through February 8, 1996.

(CC) To record the amortization of goodwill associated with the U.S.
Operating Subsidiaries over 15 years, and the depreciation associated with the
step-up in basis of the U.S. Operating Subsidiaries:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Northern............................ $ 387 $290 $(27)
Kemp................................ 35 27 6
---- ---- ----
$ 422 $317 $(21)
==== ==== ====
</TABLE>

(DD) To record amortization of goodwill associated with J.R.S. Exploration
and Siegfried & Siegfried Resource Consultants Ltd. over 15 years and
incremental depreciation associated with the acquisition of the recording assets
of Siegfried & Siegfried Resource Consultants Ltd.:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Goodwill amortization............... $ 176 $132 $132
Depreciation associated with
recording assets of Siegfried &
Siegfried Resource Consultants
Ltd............................... 35 26 26
---- ---- ----
$ 211 $158 $158
==== ==== ====
</TABLE>

(EE) Elimination of rental expense paid by J.R.S. Exploration to Siegfried
& Siegfried Resource Consultants Ltd.:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Rental expense eliminated........... $ 52 $ 45 $ 60
</TABLE>

(FF) To reflect the elimination of interest expense related to debt that
was extinguished from proceeds of the Initial Public Offering:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1995 SEPTEMBER 30, 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Northern............................ $ 319 $239 $ 7
Paragon............................. 106 80 38
---- ---- ---
$ 425 $319 $ 45
==== ==== ===
</TABLE>

(GG) To reduce Northern's depreciation to standardize depreciable life of
3-D data acquisition equipment with other U.S. Operating Subsidiaries.

(HH) To reflect an incremental adjustment in income tax expenses as a
result of items (CC)-(JJ), assuming a statutory tax rate of 35% in the U.S.,
Mexico and Canada and consolidated returns for U.S. federal income tax purposes
and the benefits of the utilization of the pro forma net operating losses of the
U.S. Operating Subsidiaries. Does not include the effects of potential
limitations in the utilization of pro forma U.S. net operating losses.

F-9
<PAGE> 68

(II) To reflect the eliminations of intercompany accounts as of December
31, 1995:

<TABLE>
<S> <C>
Elimination of Accounts Receivable:
Geoevaluaciones-Kemp joint venture rental to Kemp............. $169
Geoevaluaciones services to Kemp.............................. 24
----
$193
====
</TABLE>

(JJ) To reflect additional general and administrative expenses associated
with the establishment of the Company's corporate headquarters, public company
expenses and increased marketing costs.

(KK) The number of shares used in the pro forma earnings per share
calculation is determined as follows:

<TABLE>
<S> <C>
Shares Issued to 3-D Geophysical Stockholders............................. 1,400,681
Shares Issued to Acquire Geoevaluaciones.................................. 217,647
Shares Issued to Acquire PIASA............................................ 28,235
Shares Issued to Acquire Paragon.......................................... 1,314,261
Shares Issued to Acquire Kemp............................................. 39,176
Shares Issued to Fund Dividend to the former Stockholders of
Geoevaluaciones and PIASA as Required by Securities and Exchange
Commission Staff Accounting Bulletin No. 55............................. 601,333
Shares Issued to Fund Northern Acquisition................................ 1,174,667
Shares Issued to Fund Cash Portion of Kemp Acquisition.................... 83,333
Share Issued to Fund Repayment of Purchased Companies' Debt............... 613,200
Shares Issued to Fund Underwriting Discount and Offering Costs............ 759,333
---------
Pro forma shares outstanding.............................................. 6,231,866
Shares issued to acquire J.R.S. Exploration and certain related
equipment of Seigfried & Seigfried Resource Consultants, Ltd. (See
Note A).............................................................. 674,643
---------
Adjusted pro forma shares outstanding..................................... 6,906,509
=========
</TABLE>

F-10
<PAGE> 69

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
3-D Geophysical, Inc. and Subsidiaries:

We have audited the accompanying combined balance sheet of 3-D Geophysical,
Inc. and Subsidiaries, (the "Predecessor Company" as defined in Note 1) as of
December 31, 1995 and 1994, and the related combined statements of operations,
changes in stockholders' equity and cash flows for the nine months in the period
ended September 30, 1995 and for each of the three years in the period ended
December 31, 1995. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of 3-D
Geophysical, Inc. and Subsidiaries (as defined in Note 1) as of December 31,
1995 and 1994 and the results of their operations and their cash flows for the
nine months in the period ended September 30, 1995 and for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.

Mexico City, Mexico COOPERS & LYBRAND
May 1, 1996

F-11
<PAGE> 70

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------- SEPTEMBER 30,
1994 1995 1996
------------ ------------ ---------------
PREDECESSOR PREDECESSOR SUCCESSOR
------------ ------------ ---------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash.......................................... $ 241,823 $ 609,480 $1,205,999
Accounts receivable:
Trade, billed, net of the allowance for
doubtful accounts of $0, $0, and $49,000
as of December 31, 1994 and 1995 and
September 30, 1996, respectively......... 2,326,635 1,786,364 13,348,763
Trade, unbilled............................ -- -- 4,129,020
Other...................................... 99,580 157,690 259,241
Deferred income tax assets.................... -- -- 68,254
Prepaid expenses and other assets............. 304,884 238,730 1,912,609
----------- ----------- -----------
Total current assets.................. 2,972,922 2,792,264 20,923,886
Goodwill, net of accumulated amortization of $0,
$0, and $260,000 as of December 31, 1994 and
1995 and September 30, 1996, respectively..... -- -- 5,849,850
Property and equipment, net..................... 3,460,008 1,746,044 26,930,988
Other assets.................................... 14,769 9,610 691,144
----------- ----------- -----------
Total assets.......................... $ 6,447,699 $ 4,547,918 $54,395,868
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital
leases..................................... $ 621,997 $ 181,744 $6,516,704
Accounts payable.............................. 2,137,719 1,003,511 9,035,351
Accrued liabilities........................... 967,329 1,005,673 1,536,223
Deferred revenue.............................. -- -- 418,190
Income taxes payable.......................... 26,283 -- 567,798
----------- ----------- -----------
Total current liabilities............. 3,753,328 2,190,928 18,074,266
Long-term debt and capital leases............... 309,000 -- 8,682,423
Deferred income tax liability................... 752,409 530,250 652,842
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred Stock, $.01 par value per share;
1,000,000 shares authorized; none issued
and outstanding............................ -- -- --
Common Stock, $.01 par value per share;
25,000,000 shares authorized; 7,600,000
shares issued and outstanding.............. -- -- 76,000
Common stock (predecessor company), 1,000
pesos par value, 1,200 shares authorized,
issued and outstanding; .50 pesos par
value, 200 shares authorized, issued and
outstanding................................ 292,133 319,796 --
Additional paid-in capital.................... -- -- 28,172,810
Retained earnings............................. 3,457,670 4,362,577 1,933,981
Cumulative foreign currency translation
adjustments................................ (2,116,841) (2,855,633) (3,196,454)
----------- ----------- -----------
Total stockholders' equity............ 1,632,962 1,826,740 26,986,337
----------- ----------- -----------
Total liabilities and stockholders'
equity.............................. $ 6,447,699 $ 4,547,918 $54,395,868
=========== =========== ===========
</TABLE>

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

F-12
<PAGE> 71

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ --------------------------
1993 1994 1995 1995 1996
----------- ----------- ---------- ---------- -----------
PREDECESSOR PREDECESSOR PREDECESSOR PREDECESSOR SUCCESSOR
----------- ----------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues........................ $17,638,376 $17,660,155 $9,824,541 $7,157,449 $36,151,454
Expenses:
Cost of data acquisition.......... 13,146,011 11,003,937 5,967,924 3,759,415 26,562,539
Depreciation and amortization..... 989,992 1,468,357 661,657 530,518 2,787,897
General and administrative
expenses....................... 1,280,335 1,814,000 1,037,658 833,443 3,906,740
----------- ----------- ---------- ---------- -----------
Operating income.................... 2,222,038 3,373,861 2,157,302 2,034,073 2,894,278
Other income (expense):
Interest income................... 151,504 164,598 264,648 157,061 368,558
Interest expense.................. (1,031,902) (466,463) (803,149) (561,823) (668,211)
Foreign currency transaction gains
or (losses).................... 32,778 (92,118) (119,722) (82,950) 7,267
Miscellaneous..................... 118,510 (76,816) 237,774 (119,225) 68,016
----------- ----------- ---------- ---------- -----------
Income before provision for income
tax............................... 1,492,928 2,903,062 1,736,853 1,427,136 2,669,908
Provision for income tax............ 417,815 1,000,402 130,044 81,255 645,101
----------- ----------- ---------- ---------- -----------
Income before extraordinary item.... 1,075,113 1,902,660 1,606,809 1,345,881 2,024,807
Extraordinary item, net of tax
expense of $36,000 (Note 9)....... -- -- -- -- 57,000
----------- ----------- ---------- ---------- -----------
Net income.......................... $ 1,075,113 $ 1,902,660 $1,606,809 $1,345,881 $ 2,081,807
=========== =========== ========== ========== ===========
Per share information:
Income before extraordinary item.... $ .29
Extraordinary item, net of tax
expense........................... .01
-----------
Net earnings........................ $ .30
===========
Weighted average common shares
outstanding....................... 6,926,795
===========
</TABLE>

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

F-13
<PAGE> 72

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Predecessor:
Balance, January 1, 1993............ $ 58,049 -- $ 979,575 $ (54,287) $ 983,337
Capital contribution................ 4,502 -- -- -- 4,502
Dividend paid to shareholders....... -- -- (270,096) -- (270,096)
Stock dividend issued to
shareholders..................... 229,582 -- (229,582) -- --
Foreign currency translation
adjustments...................... -- -- -- 13,724 13,724
Net income for the year............. -- -- 1,075,113 -- 1,075,113
--------- ----------- ----------- ----------- -----------
Predecessor:
Balance, December 31, 1993.......... $ 292,133 -- $1,555,010 $ (40,563) $1,806,580
Foreign currency translation
adjustments...................... -- -- -- (2,076,278) (2,076,278)
Net income for the year............. -- -- 1,902,660 -- 1,902,660
--------- ----------- ----------- ----------- -----------
Predecessor:
Balance, December 31, 1994.......... $ 292,133 -- $3,457,670 $(2,116,841) $1,632,962
Foreign currency translation
adjustments...................... -- -- (738,792) (738,792)
Net income for the year............. -- -- 1,606,809 -- 1,606,809
Capital contribution................ 27,663 -- -- -- 27,663
Dividend paid to shareholders....... -- -- (701,902) -- (701,902)
--------- ----------- ----------- ----------- -----------
Predecessor:
Balance, December 31, 1995.......... $ 319,796 -- $4,362,577 $(2,855,633) $1,826,740
Successor:
Foreign currency translation
adjustments (unaudited).......... -- -- -- (340,821) (340,821)
Recapitalization of predecessor
company (unaudited).............. (303,330) 303,330 -- -- --
Acquisition of Paragon
(unaudited)...................... 13,143 (1,033,442) (1,020,299)
Acquisition of Kemp (unaudited)..... 391 293,429 293,820
Initial public offering of common
stock net of underwriting
discount and offering costs
(unaudited)...................... 46,000 28,609,493 -- -- 28,655,493
Dividend to predecessor company
shareholders (unaudited)......... -- -- (4,510,403) -- (4,510,403)
Net income for the period
(unaudited)...................... -- -- 2,081,807 -- 2,081,807
--------- ----------- ----------- ----------- -----------
Balance, September 30, 1996
(unaudited)...................... $ 76,000 $28,172,810 $1,933,981 $(3,196,454) $26,986,337
========= =========== ========== =========== ===========
</TABLE>

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

F-14
<PAGE> 73

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------- ---------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------
PREDECESSOR PREDECESSOR PREDECESSOR PREDECESSOR SUCCESSOR
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 1,075,113 $ 1,902,660 $ 1,606,809 $ 1,345,881 $ 2,081,807
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and
amortization................. 989,992 1,468,357 661,657 530,518 2,787,897
Gain on sale of fixed assets... -- -- (350,430) -- (87,442)
Changes in operating assets and
liabilities:
Effect of change in exchange
rate on operating assets and
liabilities.................. 108,854 (61,328) 197,319 148,863 20,748
(Increase) decrease in
receivables.................. (1,065,155) 368,591 504,363 637,411 (9,060,630)
(Increase) decrease in other
assets....................... 299,238 (56,098) 66,154 254,142 (1,517,583)
Increase (decrease) in accounts
payable...................... 70,175 356,398 (1,156,410) (970,241) 3,029,824
Increase (decrease) in accrued
liabilities.................. 669,373 (484,815) 38,744 (234,280) (405,879)
Increase in deferred
revenues..................... -- -- -- -- 418,190
Provision for deferred
income taxes................. 7,779 962,628 130,044 (404,186) 76,156
Increase (decrease) in
taxes payable................ 43,729 (57,249) (26,283) 276,565 567,798
----------- ----------- ----------- ----------- ------------
Total adjustments......... 1,123,985 2,496,484 65,158 238,792 (4,170,921)
----------- ----------- ----------- ----------- ------------
Net cash provided by (used
in) operating
activities.............. 2,199,098 4,399,144 1,671,967 1,584,673 (2,089,114)
Cash flows from investing
activities:
Cash consideration paid to acquire
Operating Subsidiaries and
PIASA.......................... -- -- -- -- (10,328,000)
Purchase of property and
equipment, net................. (714,601) (3,262,335) (146,776) (123,229) (12,269,880)
Proceeds on sale of equipment..... -- -- 350,430 -- 113,860
Investment in securities.......... (31,959) -- -- -- --
----------- ----------- ----------- ----------- ------------
Net cash provided by (used
in) investing
activities.............. (746,560) (3,262,335) 203,654 (123,229) (22,484,020)
Cash flows from financing
activities:
Payment of dividends to owners of
predecessor company............ (270,096) -- (701,902) -- (3,510,000)
Proceeds from initial public
offering, net of underwriting
discounts...................... -- -- -- -- 32,085,000
Costs in connection with initial
public offering................ -- -- -- -- (3,430,669)
Cash paid to retire indebtedness
of Operating Subsidiaries and
PIASA.......................... -- -- -- -- (4,599,000)
Net (payments on) borrowings under
factor agreements.............. 1,300,465 (1,314,965) (206,782) (206,782)
Issuance of Common Stock of
predecessor company............ 4,502 -- 27,663 27,663 --
Cash proceeds from borrowings
under notes payable and capital
leases......................... -- -- -- -- 12,933,947
Payments on borrowings and capital
leases......................... (1,097,450) (742,972) (542,471) (483,825) (8,316,835)
----------- ----------- ----------- ----------- ------------
Net cash provided by (used
in) financing
activities.............. (62,579) (2,057,937) (1,423,492) (662,944) 25,162,443
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash..... 1,389,959 (921,128) 452,129 798,500 589,309
Cash at beginning of period......... 469,886 1,858,343 241,823 241,823 609,480
Effect of change in exchange rate on
cash balance...................... (1,502) (695,392) (84,472) (53,023) 7,210
----------- ----------- ----------- ----------- ------------
Cash at end of period............... $ 1,858,343 $ 241,823 $ 609,480 $ 987,300 $ 1,205,999
=========== =========== =========== =========== ============
</TABLE>

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

F-15
<PAGE> 74

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

On February 9, 1996, 3-D Geophysical, Inc. ("Company") consummated an
initial public offering (the "Initial Public Offering") and simultaneously
acquired in separate transactions, in exchange for cash, notes and shares of
Common Stock, Geoevaluaciones, S.A. de C.V. ("Geoevaluaciones"), certain assets
and liabilities of the land-based seismic data operations of Northern
Geophysical of America, Inc. ("Northern"), Paragon Geophysical, Inc. ("Paragon")
and Kemp Geophysical Corporation ("Kemp") (collectively referred to as the
"Operating Subsidiaries") and Procesos Interactivos Avanzados, S.A. de C.V.
("PIASA"),

For accounting purposes the acquisitions of Geoevaluaciones and PIASA have
been treated as a recapitalization of Geoevaluaciones and PIASA with
Geoevaluaciones (combined with PIASA) deemed to be the acquiror of the Company
and considered the predecessor company. For purposes of identification and
description, the Company is referred to as the "Predecessor" for the period
prior to the Initial Public Offering and the acquisition of the Operating
Subsidiaries and PIASA as described below, the "Successor" for the period
subsequent to the Initial Public Offering and the acquisition of the Purchased
Companies and the "Company" for both periods.

The acquisitions of Northern, Paragon and Kemp have been treated as
business combinations accounted for by the purchase method of accounting as
prescribed by Accounting Principles Board Opinion No. 16 and SEC Staff
Accounting Bulletin No. 48. Northern and Kemp were valued at the fair market
value of consideration given. In connection with the acquisitions of Northern
and Kemp, the excess of consideration given over the fair market value of net
assets acquired are being amortized on a straight-line basis over 15 years. The
acquisition of Paragon's common stock in exchange for shares of the Company's
Common Stock was accounted for at Paragon's historical costs. The accompanying
consolidated financial statements include the accounts of Northern, Kemp and
Paragon from February 9, 1996, the effective date of the acquisitions. As a
result, the Company's statement of operations for the nine months ended
September 30, 1996 is not comparable to the statement of operations for the nine
months ended September 30, 1995, and the Company's balance sheet as of September
30, 1996 is not comparable to its balance sheet as of December 31, 1995.

The consideration paid to the former owners of Northern, Kemp and Paragon
and the allocation of such consideration to the acquired assets is as follows:

<TABLE>
<S> <C>
Cash paid for the stock and assets of the Operating Subsidiaries and
PIASA................................................................. $10,328,000
Debt payable to former owner of Northern................................ 1,149,000
Common Stock issued to the former owners of Kemp at the Initial Public
Offering price of $7.50 per share..................................... 294,000
Assumption of the liabilities in excess of assets of Paragon............ (1,020,000)
Liabilities assumed:
Bank overdraft.......................................................... 162,000
Accounts payable........................................................ 4,984,000
Accrued and other current liabilities................................... 1,130,000
Debt assumed:
Current............................................................... 8,007,000
Non-current........................................................... 3,187,000
-----------
Amounts allocated to acquired assets.................................... $28,221,000
===========
</TABLE>

F-16
<PAGE> 75

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND BASIS OF PRESENTATION, CONTINUED
Allocation of the purchase price to the acquired assets:

<TABLE>
<S> <C>
Accounts receivable:
Trade.................................................................. $6,575,000
Other.................................................................. 123,000
Deferred income tax assets............................................... 108,000
Prepaid expenses and other current assets................................ 209,000
Property and equipment................................................... 14,106,000
Goodwill................................................................. 6,147,000
Other assets............................................................. 953,000
-----------
$28,221,000
===========
</TABLE>

UNAUDITED INTERIM FINANCIAL INFORMATION

In the opinion of management, the accompanying unaudited interim financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position of the Successor as of
September 30, 1996 and the results of the operations and cash flows for the
nine-month periods ended September 30, 1995 and 1996 for the Predecessor and the
Successor, respectively. The results of operations for all interim periods
presented are not necessarily indicative of the results to be expected for the
full year.

CONDENSED CONSOLIDATED PRO FORMA INFORMATION (UNAUDITED)

The accompanying condensed consolidated pro forma information for the
Company for the nine months ended September 30, 1995 and 1996 and for the year
ended December 31, 1995 represents the operations of the Company as if the
acquisitions of the Operating Subsidiaries and PIASA and the Company's Initial
Public Offering had occurred on January 1, 1995.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
------------ -------------------
1995 1995 1996
------------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues............................................. $ 37,835 $25,669 $39,974
======= ======= =======
Net earnings............................................. $ 703 $ 470 $ 1,776
======= ======= =======
Earnings per share....................................... $ .11 $ .08 $ .28
======= ======= =======
</TABLE>

The pro forma results described above assume weighted average common shares
outstanding of 6,232,000 shares.

The condensed consolidated pro forma information is not necessarily
indicative of the actual results that would have been achieved if the Initial
Public Offering, recapitalization and acquisitions had occurred on the date
indicated or which may be realized in the future.

2. INITIAL PUBLIC OFFERING OF COMMON STOCK

On February 9, 1996, the Company completed the offering of 4,000,000 shares
of Common Stock at a price to the public of $7.50 per share. Subsequently, on
February 21, 1996, the underwriters exercised their overallotment option to
purchase an additional 600,000 shares at a price to the public of $7.50 per
share. The proceeds, net of the underwriters' discounts and the Company's
offering costs, were approximately $28,654,000. Of those net proceeds,
$3,510,000 was treated, for accounting purposes, as a dividend to the

F-17
<PAGE> 76

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

former stockholders of GEO and PIASA, approximately $10,328,000 was used to
purchase Northern and all of the capital stock of Kemp, approximately $4,599,000
was used to retire certain indebtedness of the Operating Subsidiaries, $152,000
was used to retire capital leases and $1,149,000 was paid subsequent to the
closing of the acquisitions as a purchase price adjustment for the purchase of
the land-based seismic data operations of Northern. The Company recognized
$57,000 of extraordinary gain, net of tax, from the retirement of a certain
portion of this debt.

3. SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

The Company generates revenue through performing seismic data acquisition.
Revenues from seismic data services are recognized as the work progresses on the
percentage of completion method.

Net revenues for the nine months ended September 30, 1995 and 1996 included
contractual revenue adjustments from the Mexican operations for which the
related seismic data acquisition and geophysical services have been provided.
These revenue adjustments are based on independent economic data, primarily the
Mexican inflation rate as measured by the consumer price index. Certain of these
revenue adjustments recognized for the nine months ended September 30, 1996, for
which the Company has the contractual right to invoice, have not been invoiced
pending final review by the Company's major customer in Mexico. The Company,
historically, has not experienced difficulty in collecting these revenue
adjustments and, accordingly, the Company has not recorded a valuation allowance
against these amounts as of December 31, 1995 or September 30, 1996.

MAJOR CUSTOMER

One customer, PEMEX, which is owned by the Mexican government, accounted
for approximately 98% of the revenues of the Predecessor for the year ended
December 31, 1995. As of December 31, 1994 and 1995, this customer accounted for
approximately 100% and 99%, respectively, of the Predecessor's trade accounts
receivable. As of September 30, 1996, two customers accounted for 29.1%, and
28.0% of the Successor's trade accounts receivable.

During the nine months ended September 30, 1995, one customer accounted for
100% of net revenues of the Predecessor and during the nine months ended
September 30, 1996, three customers accounted for 25.1%, 18.1% and 16.4% of the
Successor's net revenues, respectively.

FOREIGN CURRENCY TRANSLATION

The financial statements of the Predecessor and the operations of the
Successor in Mexico use the Mexican peso as the functional currency. Assets and
liabilities are translated into U.S. dollars at the prevailing exchange rate at
the respective balance sheet date. The resulting translation adjustments are
included in stockholders' equity. Income and expenses are translated at the
average exchange rate during the respective reporting period. Gains and losses
resulting from foreign currency transactions are included in income currently.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost, adjusted for accumulated
depreciation and amortization. Equipment held under capital leases is stated at
the present value of future minimum lease payments at the inception of the
leases. Property and equipment are depreciated on the straight-line method over
the estimated useful lives of the assets, which range from three to seven years.
Equipment held under capital leases is amortized on the straight-line method
over the estimated useful life of the assets or the terms of the lease.

F-18
<PAGE> 77

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheets for cash, accounts
receivable, accounts payable and notes payable approximate fair value because of
the immediate or short-term maturity of these financial instruments. The
carrying amount of the obligation under capital lease approximates fair value
because the lease agreements bear interest at variable rates which are adjusted
monthly. The carrying amounts reported for long-term debt approximates fair
value based on current replacement values.

ACCOUNTING FOR INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying value of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured by using enacted tax
rates that are applicable to the future years in which deferred tax assets or
liabilities are expected to be realized or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in earnings in
the period in which the tax rate change was enacted. The Company establishes a
valuation allowance when it is more likely than not that a deferred tax asset
will not be recovered.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of ("Statement 121"). Statement 121 addresses the
accounting for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used. It also
addresses the accounting for long-lived assets and certain identifiable
intangibles to be disposed of. Statement 121 establishes guidance for
recognizing and measuring impairment losses and requires that the carrying
amount of impaired assets be reduced to fair value. Statement 121 will be
effective for fiscal years beginning after December 15, 1995. Management does
not expect the impact of the adoption of Statement 121 to have a material
adverse effect on the Successor's financial condition or results of operations.

During the fourth quarter of 1995, "Statement of Financial Accounting
Standards No. 123" (SFAS 123) was issued by the FASB. The Company will continue
to account for future grants of Common Stock options using the intrinsic value
method under Accounting Principles Board Opinion No. 25, "Accounting for Stock
issued to Employees" and will adopt the disclosure requirements of SFAS 123.

EARNINGS PER SHARE

Earnings per share is computed using weighted average common shares
outstanding for the period. The number of shares used in the earnings per share
calculation for the nine months ended September 30, 1996 is determined as
follows:

<TABLE>
<S> <C>
Shares issued to 3-D stockholders giving effect to the 2,717.66
for 1 stock split............................................... 1,400,681
Shares deemed to have been issued to fund cash portion of
Geoevaluaciones dividend........................................ 468,000
Shares issued to acquire Operating Subsidiaries and PIASA......... 1,406,677
Shares sold in the Initial Public Offering........................ 3,515,401
Common stock equivalents, principally common stock options........ 136,036
---------
Weighted average common shares outstanding........................ 6,926,795
=========
</TABLE>

F-19
<PAGE> 78

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities on December 31, 1994 and 1995
for the combined financial statements, and September 30, 1996 for the
consolidated financial statements and the reported amounts of revenue and
expenses during the reporting periods. A significant estimate in the preparation
of the Company's financial statements is related to the percentage of revenue
recognized based on the stage of completion of the Company's contracts. Actual
results could differ from those estimates.

4. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following:

DECEMBER 31, SEPTEMBER
--------------------------- 30,
1994 1995 1996
----------- ----------- ----------
PREDECESSOR PREDECESSOR SUCCESSOR
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid equipment rental................. $ -- $ -- $ 293,392
Prepaid income tax....................... 235,805 153,434 --
Prepaid mobilization cost................ -- -- 756,464
Prepaid insurance........................ 26,965 28,097 659,132
Other miscellaneous assets............... $ 42,114 $ 57,199 203,621
----------- ----------- -----------
$ 304,884 $ 238,730 $1,912,609
=========== =========== ===========
</TABLE>

5. PROPERTY AND EQUIPMENT, NET

Equipment consists of the following:

DECEMBER 31, SEPTEMBER
--------------------------- 30,
1994 1995 1996
----------- ----------- ----------
PREDECESSOR PREDECESSOR SUCCESSOR
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Field equipment.......................... $3,580,676 $2,403,711 $25,812,570
Transportation equipment................. 1,119,131 698,379 3,470,877
Computer equipment....................... 1,146,548 352,221 1,099,632
Office equipment, furniture and
fixtures............................... 50,330 35,330 173,060
Buildings and property................... -- -- 555,677
----------- ----------- -----------
5,896,685 3,489,641 31,111,816
Less accumulated depreciation............ (2,436,677) (1,743,597) (4,180,828)
----------- ----------- -----------
Property and equipment, net.............. $3,460,008 $1,746,044 $26,930,988
=========== =========== ===========
</TABLE>

6. ACCRUED LIABILITIES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- ---------
PREDECESSOR
-----------------------
<S> <C> <C>
Value added tax payable..................................... $273,558 $ 328,094
Accrued salaries, wages and payroll taxes................... 335,027 226,818
Other accrued expenses...................................... 358,744 450,761
-------- ----------
$967,329 $1,005,673
========= ==========

</TABLE>

F-20
<PAGE> 79

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Notes payable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER
1994 1995 30, 1996
-------- -------- ----------
PREDECESSOR SUCCESSOR
---------------------- (UNAUDITED)
<S> <C> <C> <C>
Notes payable to Mexican banks under accounts
receivable factoring agreements bearing
interest at 24.0%........................... $206,782 $ -- $ --
Note payable to First Interstate Bank of
Texas, N.A., due in monthly installments
through July 31, 1999 at a variable interest
rate of 9.25% at September 30, 1996......... 11,716,553
Note payable to former shareholders of the
Predecessor, due in semi-annual installments
through February 9, 1998 at a fixed interest
rate of 8.0%................................ 750,000
Note payable to Input/Output, due in monthly
installments through October, 1996 at a
fixed interest rate of 9.5%................. 249,955
Capital lease obligations payable to Century
Geophysical, due in monthly installments
through May, 1997 at a fixed interest rate
of 12.0%.................................... 86,351
Note payable to the Chubb Group of Insurance
Companies, due in monthly installments
through December 1, 1996 at a fixed interest
rate of 9.0%................................ 85,156
Notes payable to LTI Wire Services, due in
monthly installments through February, 1997
at a fixed interest rate of 10.0%........... 196,963
Capital lease obligations to Southwest Leasing
Company, due in monthly installments through
June, 2000 at fixed interest rates varying
from 9.6% to 12.2%.......................... 878,427
Revolving Credit Loan with First Interstate
Bank of Texas, N.A., at an interest rate of
9.25% at September 30, 1996................. 1,000,000
Capital lease obligation to Softech Financial
at a fixed interest rate of 9.4%............ 149,184
Capital lease obligation to Input/Output due
in monthly installments through 1996 at a
fixed interest rate of 10.0%................ 309,000 181,744
Capital lease obligations to various Mexican
financial institutions due in monthly
installments through 1995 at variable
interest rates ranging from 18.0% to 20.0%
at December 31, 1994........................ 415,215
Miscellaneous notes payable and capital lease
obligations, interest payable from 5.9% to
10.75%, due in monthly installments through
January, 2000............................... 203,591
-------- -------- -----------
$930,997 $181,744 $15,316,180
======== ======== ===========
Current portion............................... $621,997 $181,744 $ 6,593,625
Less: Debt issuance costs allocated to current
portion..................................... (76,921)
-----------
$ 6,516,704
===========
Non-current portion........................... $309,000 -- $ 8,722,555
Less: Debt issuance costs allocated to
non-current portion......................... (40,132)
-----------
$ 8,682,423
===========
</TABLE>

F-21
<PAGE> 80

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The total accounts receivable serving as collateral under the factoring
agreements was approximately $260,000 at December 31, 1994. These invoices are
all stated in Mexican pesos which amounted to 1,300,000 pesos at December 31,
1994.

On May 31, 1996, the Company acquired seismic data acquisition equipment
(the "Equipment") from the manufacturer thereof, Input/Output, Inc. for an
aggregate of approximately $8.5 million in cash and refinanced certain
conditional sales agreements with Input/Output, Inc. for an additional $4.5
million of equipment. A portion of the purchase price for the Equipment and the
funds for the refinancing were paid from the proceeds of a $12 million borrowing
under a $15 million term loan (the "Term Loan") from First Interstate Bank of
Texas, N.A. (the "Bank") pursuant to a Loan Agreement between the Company and
the Bank, dated as of May 29, 1996 (the "Loan Agreement"). The Term Loan is
payable in substantially equal monthly installments through July 31, 1999, bears
interest at an annual rate equal to the prime rate plus 1% (9.25% at September
30, 1996) and is secured by a lien on the Company's accounts, accounts
receivable, equipment, machinery, fixtures, inventory, goods, chattel paper,
documents, instruments, investment property, general intangibles, and other
personal property, whether then owned or thereafter acquired, and all products
and proceeds thereof, and by guarantees by certain of the Company's
subsidiaries. The Loan Agreement also provides for a $3 million revolving credit
loan (the "Revolving Credit Loan") which may be drawn down from time to time
through May 29, 1997 in an amount of up to 70% of the Company's "Eligible
Accounts" (as defined in the Loan Agreement). The rate of interest and the
security for the Revolving Credit Loan are the same as those described above for
the Term Loan. In addition to certain customary affirmative covenants, the Loan
Agreement contains restrictions on the Company with respect to (i) incurring
Debt (as defined), incurring or permitting to exist Liens (as defined) on its
property, assets or revenues, (iii) declaring or paying any dividends or other
distributions on its capital stock (or acquiring any of its capital stock), (iv)
issuing capital stock, (v) entering into transactions with affiliates, (vi)
disposing of assets, and (vii) certain other matters. The Loan Agreement also
contains financial covenants with respect to minimum tangible net worth, the
ratio of tangible net worth to net liabilities and the ratio of earnings to debt
service.

8. COMMITMENTS AND CONTINGENCIES

The Predecessor rents office facilities under annual operating leases. Rent
expense was $489,512, $302,140 and $298,900 for the years ended December 31,
1993, 1994 and 1995, respectively.

F-22
<PAGE> 81

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. EXTRAORDINARY ITEM

The Company recognized a $57,000 extraordinary item in the nine months
ended September 30, 1996, net of tax expense of $36,000. The extraordinary item
is due to a gain recognized on the early extinguishment of debt.

10. INCOME TAXES

The classifications of the provision for income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
PREDECESSOR PREDECESSOR PREDECESSOR
----------- ----------- -----------
<S> <C> <C> <C>
Current........................................ $ 410,036 $ 37,774 $ --
Deferred -- tax depreciation greater (less)
than depreciation for financial reporting.... 7,779 962,628 130,044
---------- ----------- ---------
Provision for income taxes..................... $ 417,815 $ 1,000,402 $ 130,044
========== =========== =========
</TABLE>

The difference between the statutory federal income tax rate of 34% on
income before taxes and the Predecessors' reported provision for income taxes,
is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
PREDECESSOR PREDECESSOR PREDECESSOR
----------- ----------- -----------
<S> <C> <C> <C>
Tax expense at statutory rate.................. $ 507,596 $ 987,041 $ 546,346
Non-deductible profit sharing expense.......... 62,325 65,166 42,500
Net effects of inflation....................... (152,106) (51,805) (458,802)
----------- ----------- ---------
Tax expense at actual rate..................... $ 417,815 $ 1,000,402 $ 130,044
========== =========== =========
</TABLE>

The deferred tax liability at December 31, 1993, 1994 and 1995 and
September 30, 1996 (unaudited) is the result of differences between the
financial statement carrying value and the tax basis of property and equipment.

The effective income tax rates for the nine months ended September 30, 1995
and 1996 are 6% and 24%, respectively. The differences between the statutory
federal income tax rate on income before provision for income taxes and
extraordinary item, and the Company's effective income tax rate, result
primarily from the tax benefits associated with inflation adjustments with
respect to the operations of Geoevaluaciones and PIASA for the nine months ended
September 30, 1995 and the anticipated change in the valuation allowance
previously established with respect to net operating loss carryforwards and
inflation adjustments in Mexico for the nine months ended September 30, 1996.

11. COMMON STOCK

The Predecessor is required under Mexican law to establish a legal reserve
equal to 5% of each company's earnings until such time as the reserve equals 20%
of the minimum capital of the company. In 1993, Geoevaluaciones capitalized
$229,582 of earnings.

On February 9, 1996, the former stockholders of Geoevaluaciones (the
"Former Geoevaluaciones Stockholders") sold all of the issued and outstanding
shares of capital stock of Geoevaluaciones to the Company. Pursuant to the
Geoevaluaciones stock purchase agreement, the aggregate consideration paid to
the Former Geoevaluaciones Stockholders by the Company was: (i) $2.45 million
paid in cash at closing; and (ii) $1.0 million paid by delivery at closing of
four promissory notes, payable in installments at six, 12, 18 and 24 months
after the closing in following aggregate amounts (which amounts include interest
at 8% per

F-23
<PAGE> 82

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. COMMON STOCK, CONTINUED

annum): $290,000, $280,000, $270,000 and $260,000, respectively. In connection
with this acquisition, each of the Former Geoevaluaciones Stockholders entered
into a separate non-competition agreement with the Company pursuant to which the
Company paid to the Former Geoevaluaciones Stockholders: (i) 100,000 shares of
Common Stock held in trusts with Mexican banks for the benefit of the Former
Geoevaluaciones Stockholders, and to be released February 9, 1998; and (ii) $2.0
million, reduced by the amount of any liabilities Geoevaluaciones had not
disclosed to 3-D and by any amount paid by Geoevaluaciones to settle or
otherwise in connection with Geoevaluaciones' dispute with Capilano, such
portion of the consideration consisting of (a) $1.0 million in cash deposited at
the closing in a bank account, and which, subject to any such reduction, may be
disbursed only upon the approval of certain individuals; and (b) 117,647 shares
of Common Stock to be delivered at closing to trusts with Mexican banks for the
benefit of the Former Geoevaluaciones Stockholders, and which may not be
released until June 30, 1997 and then only upon the approval of certain
individuals. Pursuant to such stock purchase agreement, the Company agreed to
assume up to an aggregate of $600,000 of the obligations under any borrowings of
Geoevaluaciones from a bank or other financial institution for working capital
purposes.

On February 6, 1996, the former stockholders of PIASA, pursuant to a stock
purchase agreement dated November 7, 1995, sold all of the shares of capital
stock of PIASA to the Company. The aggregate consideration paid by the Company
was approximately $300,000, consisting of $60,000 in cash and approximately
28,235 shares of Common Stock.

In October 1995, the Predecessor and Kemp Geophysical Corporation formed a
joint venture to perform certain land-based seismic data acquisition activities.
In November, the joint venture incurred debt (bearing interest at an annual rate
of 10.75% payable over three years) of $3.9 million to acquire an I/O SYSTEM
TWO(R) system. On July 1, 1996, the Company signed a dissolution agreement
terminating the joint venture which provided for the assets to be transferred to
Geoevaluacines. The debt was repaid in connection with the execution of the
Credit Facility as discussed in Note 7.

12. SUPPLEMENTARY CASH FLOW INFORMATION

The following supplementary cash flow transactions occurred for the periods
indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
PREDECESSOR PREDECESSOR PREDECESSOR
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid........................................ $ 680,200 $ 449,950 $ 788,900
Income taxes paid.................................... 366,307 209,006 26,283
Equipment acquired under capital leases.............. 118,176 556,985 --
Equipment acquisitions financed under long term
finance plan....................................... -- 306,000 --
</TABLE>

F-24
<PAGE> 83

3-D GEOPHYSICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. STOCK OPTIONS (UNAUDITED)

The Company has granted the following stock options to its employees,
officers and directors:

<TABLE>
<CAPTION>
NUMBER VESTING
GRANT DATE OF SHARES EXERCISE PRICE PERIOD
- ----------------------------------------------------------- --------- -------------- -------
<S> <C> <C> <C>
February 8, 1996........................................... 525,000 $ 7.50 3 years
April 26, 1996............................................. 41,400 7.375 4 years
April 26, 1996............................................. 225,150 12.3125 4 years
April 26, 1996............................................. 10,000 12.3125 3 years
August 9, 1996............................................. 17,800 7.375 4 years
September 30, 1996......................................... 40,002 8.50 1 year
September 30, 1996......................................... 30,000 8.25 3 years
-------
Total............................................ 889,352
=======
</TABLE>

At September 30, 1996, there are no exercisable options.

14. SUBSEQUENT EVENTS (UNAUDITED)

On December 10, 1996, the Company entered into a stock purchase agreement
(the "Stock Purchase Agreement") to acquire J.R.S. Exploration Company Limited
("J.R.S. Exploration"), a land-based seismic data acquisition business
headquartered in Calgary, Alberta. Under the terms of the Stock Purchase
Agreement, the Company proposes to acquire all of the issued and outstanding
shares of capital stock of the intermediate holding companies that own all of
the issued and outstanding capital stock of J.R.S. Exploration for Canadian $3.5
million (approximately U.S. $2.6 million) in cash and a number of shares of the
Common Stock having a value of Canadian $3.35 million (approximately U.S. $2.5
million) valued on the basis of the average closing price of the Common Stock
prior to the closing. The acquisition is subject to certain customary
conditions. The closing of this proposed acquisition is anticipated to occur in
January 1997.

On October 8, 1996, the Company filed a Registration Statement on Form S-1
(No. 333-13665) with the Securities and Exchange Commission relating to a
proposed underwritten sale to the public of 4,000,000 shares of Common Stock
(plus an over-allotment option of 600,000 shares). On November 19, 1996, the
Company filed an amendment to such registration statement and increased the
number of shares of Common Stock to be offered to 4,300,000 (plus an
over-allotment option of 645,000).

In October 1996, the Company signed four separate lease agreements for the
lease of seismic data acquisition equipment with rental terms ranging from three
to six months and providing for aggregate minimum lease payments of
approximately $3.8 million. Two of the leases are with Andrews Group
International, a related party. Each of these two leases has a six month minimum
lease term and provides that the Company has the option to purchase the
equipment being leased, with 80% of rental payments applying towards the
purchase price. Minimum lease payments under these leases are approximately
$660,000 and $173,000, respectively.

The Company also entered into two lease agreements with Geco-Prakla, a
division of Schlumberger Technology Corporation. One lease has a three-month
minimum lease term and provides that the Company has the option to purchase the
equipment being leased, with 75% of rental payments applying towards the
purchase price. Minimum lease payments under this lease are approximately
$338,000. The other lease has a three-month minimum lease term and contains no
option to purchase the equipment being leased. Minimum lease payments under this
lease are approximately $2.6 million.

F-25
<PAGE> 84

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Northern Geophysical of America, Inc.:

We have audited the accompanying balance sheet of the Land-Based Seismic
Data Operations of Northern Geophysical of America, Inc. (the "Company") as of
December 31, 1994 and September 30, 1995, and the related statements of
operations, changes in net equity and cash flows for each of the two years in
the period ended December 31, 1994 and the nine month period ended September 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Land-Based Seismic Data
Operations of Northern Geophysical of America, Inc. as of December 31, 1994 and
September 30, 1995, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 1994 and the nine month
period ended September 30, 1995, in conformity with generally accepted
accounting principles.

Denver, Colorado COOPERS & LYBRAND L.L.P.
December 19, 1995

F-26
<PAGE> 85

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER DECEMBER
31, 30, 31,
1994 1995 1995
---------- --------- --------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash............................................... $ -- $ -- $ --
Accounts receivable, trade:
Billed.......................................... 1,162,051 3,860,383 4,949,456
Unbilled........................................ 461,696 1,629,655 2,139,195
Employee advances.................................. 12,289 99,161 58,920
Prepaid expenses................................... 131,431 191,798 62,580
Other current assets............................... 6,646 -- --
---------- ---------- -----------
Total current assets....................... 1,774,113 5,780,997 7,210,151
Property and equipment, net.......................... 4,725,610 3,753,539 3,415,755
Other assets, net.................................... 20,508 23,662 15,209
---------- ---------- -----------
Total assets............................... $6,520,231 $9,558,198 $10,641,115
========== ========== ===========
LIABILITIES AND NET EQUITY
Current liabilities:
Accounts payable................................... $1,998,335 $5,078,939 $5,533,995
Notes payable, current portion..................... 3,201,595 1,525,308 927,389
Obligations under capital leases, current
portion......................................... 107,953 144,529 138,362
Accrued liabilities................................ 232,973 349,022 537,516
---------- ---------- -----------
Total current liabilities.................. 5,540,856 7,097,798 7,137,262
Notes payable, less current portion.................. 41,667 18,289 15,642
Obligations under capital leases, less current
portion............................................ 184,360 305,348 278,305
Deferred income tax liability........................ 248,862 102,824 105,656
Commitments and contingencies (Note 6)
Net equity........................................... 504,486 2,033,939 3,104,250
---------- ---------- -----------
Total liabilities and net equity........... $6,520,231 $9,558,198 $10,641,115
========== ========== ===========
</TABLE>

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

F-27
<PAGE> 86

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

STATEMENT OF OPERATIONS

FOR THE
NINE FOR THE
MONTHS YEAR
FOR THE YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER DECEMBER
-------------------------- 30, 31,
1993 1994 1995 1995
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues.............................. $13,595,840 $15,423,893 $12,734,391 $19,903,147
Cost of data acquisition.................. 9,484,957 10,654,165 10,714,692 16,465,216
----------- ----------- ----------- -----------
4,110,883 4,769,728 2,019,699 3,437,931
General and administrative expenses....... 1,144,958 1,383,506 956,741 1,458,231
Depreciation and amortization............. 1,631,314 1,980,422 1,350,381 1,754,590
Interest expense.......................... 291,077 329,656 204,295 265,415
(Gain) loss on disposal of equipment...... (32,707) 4,588 100,410 66,817
Interest income........................... -- -- (192) --
----------- ----------- ----------- -----------
3,034,642 3,698,172 2,611,635 3,545,053
Income (loss) before income taxes......... 1,076,241 1,071,556 (591,936) (107,122)
Provision (benefit) for income taxes...... -- 321,840 (219,016) (39,635)
----------- ----------- ----------- -----------
Net income (loss)......................... $ 1,076,241 $ 749,716 $ (372,920) $ (67,487)
=========== =========== =========== ===========
</TABLE>

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

F-28
<PAGE> 87

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

STATEMENT OF CHANGES IN NET EQUITY

<TABLE>
<S> <C>
Net equity, January 1, 1993.................................................... $ 74,063
Increase in net equity......................................................... 3,936,653
Net income..................................................................... 1,076,241
----------
Net equity, December 31, 1993.................................................. 5,086,957
----------
Decrease in net equity......................................................... (5,332,187)
Net income..................................................................... 749,716
----------
Net equity, December 31, 1994.................................................. 504,486
----------
Increase in net equity......................................................... 1,902,373
Net loss....................................................................... (372,920)
----------
Net equity, September 30, 1995................................................. 2,033,939
----------
Increase in net equity (unaudited)............................................. 764,878
Net income (unaudited)......................................................... 305,433
----------
Net equity, December 31, 1995 (unaudited)...................................... $3,104,250
==========
</TABLE>

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

F-29
<PAGE> 88

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE
MONTHS YEAR
ENDED ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER DECEMBER
----------------------- 30, 31,
1993 1994 1995 1995
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $1,076,241 $ 749,716 $ (372,920) $ (67,487)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 1,631,314 1,980,422 1,350,381 1,754,590
(Gain) loss on sale of equipment.......................... (32,707) 4,588 100,410 66,817
Changes in assets and liabilities:
(Increase) decrease in total accounts receivable,
trade.............................................. (2,248,157) 1,810,901 (3,866,291) (5,464,903)
(Increase) decrease in employee advances............. 31,109 (7,404) (86,872) (46,631)
Decrease in prepaid expenses and other current
assets............................................. 58,436 37,474 (53,721) 80,795
Increase (decrease) in accounts payable, trade and
accrued liabilities................................ 897,727 128,263 3,196,653 3,840,203
Increase (decrease) in deferred income tax
liability.......................................... -- 248,862 (146,038) (143,206)
----------- ----------- ----------- -----------
Net cash provided (used) by operating activities..... 1,413,963 4,952,822 121,602 20,178
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment.......................... (1,635,872) (298,914) (215,413) (266,052)
Proceeds from sale of equipment............................. 22,045 8,110 -- 22,218
Other....................................................... (8,796) (7,650) (3,154) (4,230)
----------- ----------- ----------- -----------
Net cash used by investing activities................ (1,622,623) (298,454) (218,567) (248,064)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Principal payments on notes payable......................... (8,190,753) (3,476,880) (4,420,443) (6,041,753)
Borrowings on notes payable................................. 4,535,400 4,285,776 2,720,778 3,742,500
Principal payments on capital leases........................ (72,640) (131,077) (105,743) (140,112)
Increase (decrease) in net equity........................... 3,936,653 (5,332,187) 1,902,373 2,667,251
----------- ----------- ----------- -----------
Net cash used by financing activities................ 208,660 (4,654,368) 96,965 227,886
----------- ----------- ----------- -----------
Net change in cash and cash equivalents....................... -- -- -- --
Cash and cash equivalents:
Beginning of period......................................... -- -- -- --
----------- ----------- ----------- -----------
End of period............................................... $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................................. $ 280,992 $ 292,839 $ 277,939 $ 236,580
Income taxes paid to Northern............................. -- 72,978 (72,978) 103,571
Supplemental schedule of noncash financing and investing
activities:
Purchase of equipment through the assumption of notes
payable and capital lease obligations................... $3,700,898 $ 599,836 $ 263,307 $ 263,307
Acquisition of property and equipment..................... 93,000 -- -- --
</TABLE>

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

F-30
<PAGE> 89

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation:

The financial statements presented herein include the accounts of the
land-based seismic data operations (the "Company") of Northern Geophysical of
America, Inc. ("Northern"). Net equity presented in the accompanying financial
statements is principally the result of the Company's cash receipts and
disbursements which were processed through Northern's centralized cash
management system. Additionally, the accompanying financial statements do not
include certain debt obligations of Northern to its Parent (as defined below)
and related interest expense, which are collateralized by certain of the
Company's seismic equipment, because such debt was not specifically allocated to
the land-based seismic data operations in the past.

At December 31, 1994, September 30, 1995 and December 31, 1995 (unaudited),
Fairwater Capital Corporation ("Fairwater" or the "Parent") held 81% of the
outstanding common stock of Northern, and all of the outstanding preferred stock
of Northern. The remaining outstanding common stock of Northern is held by
employees. The Company is engaged in land-based seismic data acquisition.

On February 9, 1996, Northern sold certain of its assets and operations to
3-D Geophysical, Inc. ("3-D Geophysical"). The aggregate consideration paid by
3-D Geophysical was approximately $10.9 million cash, reduced by the amount of
any and all outstanding indebtedness of Northern secured by the assets acquired
by 3-D Geophysical other than indebtedness owed to affiliates of Northern, and
further reduced to the extent the net working capital, as defined, of the assets
acquired on the day of the closing was negative, or, alternatively, increased to
the extent such net working capital was positive. The sale of these assets
occurred simultaneously in conjunction with an initial public offering of
securities by 3-D Geophysical. Commencing February 9, 1996, the results of
operations of the Company are included in the financial statements of 3-D
Geophysical, Inc. and Subsidiaries.

Revenue Recognition:

Revenues from seismic and geophysical services are recorded based on the
percentage of completion method.

Property and Equipment:

Property and equipment are carried at cost and include assets under capital
leases which are carried at the lower of cost or present value of future minimum
lease payments at the inception of the lease. Maintenance and repairs are
charged to expense as incurred and expenditures for major improvements are
capitalized. Gains and losses from retirement or replacement are included in
operations.

Depreciation and amortization of equipment, furniture and assets under
capital leases are provided over the estimated useful lives of the assets or the
term of the lease using the straight-line method.

Concentration of Credit Risk:

During the years ended December 31, 1993 and 1994, for the nine months
ended September 30, 1995 and for the year ended December 31, 1995, one customer
accounted for approximately 33%, 26%, 29% and 19.4% (unaudited), respectively,
of seismic and geophysical revenues.

The Company has not incurred any credit losses relating to its seismic and
geophysical services. Allowances for potential credit losses relating to seismic
and geophysical revenues are not maintained nor does the Company require
collateral.

F-31
<PAGE> 90

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

General and Administrative Expenses:

General and administrative expenses represent actual costs incurred by
Northern, except for certain costs not related to the land-based seismic data
operations which were determined based on number of employees. Management of the
Company believes the allocation method is reasonable.

Income Taxes:

Northern files federal and certain state income tax returns which include
the operations of the Company. For financial reporting purposes, the Company
computes its provision for income taxes on a separate company basis utilizing
the tax elections made by Northern.

Unaudited Financial Information:

In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring items)
necessary to present fairly the financial condition, results of operations and
cash flows of the Company as of and for the year ended December 31, 1995.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. A significant estimate in the preparation of the Company's financial
statements is related to the percentage of revenue recognized based on the stage
of completion of the Company's contracts. Actual results could differ from those
estimates.

2. COST AND BILLINGS ON UNCOMPLETED CONTRACTS:

<TABLE>
<CAPTION>
DECEMBER SEPTEMBER DECEMBER
31, 30, 31,
1994 1995 1995
-------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cost incurred and estimated earnings on
uncompleted contracts....................... $461,696 $4,500,278 $7,330,524
Billings on uncompleted contracts............. -- 2,870,623 5,191,329
-------- ---------- ----------
Unbilled accounts receivable.................. $461,696 $1,629,655 $2,139,195
======== ========== ==========
</TABLE>

Unbilled accounts receivable under customer contracts represents revenue
earned under the percentage of completion method but not yet billable under the
terms of the contract.

F-32
<PAGE> 91

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT:

The major classifications of property and equipment are as follows:

<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
USEFUL LIVES 1994 1995 1995
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Recording instruments.......... 2 - 5 years $10,387,927 $10,185,537 $10,222,644
Field equipment................ 2 - 5 years 1,837,972 1,775,366 1,773,007
Vehicles....................... 3 - 5 years 765,576 750,393 750,393
Office furniture and
fixtures..................... 7 years 131,921 77,883 78,727
Buildings and property......... 15 years 193,986 151,952 46,348
----------- ----------- ------------
13,317,382 12,941,131 12,871,119
Less accumulated depreciation
and amortization............. (8,591,772) (9,187,592) (9,455,364)
----------- ----------- ------------
$ 4,725,610 $ 3,753,539 $ 3,415,755
=========== =========== ============
</TABLE>

4. NOTES PAYABLE AND OTHER DEBT:

Notes payable and other debt at December 31, 1994, September 30, 1995 and
December 31, 1995 (unaudited) consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to Century Geophysical Corp.,
interest payable at 12%, due in monthly
installments through February, 1996,
collateralized by certain property and
seismic equipment............................ $ 1,982,481 $ 739,930 $ 298,932

Note payable to Century Geophysical Corp.,
interest payable at 12% due in monthly
installments through August, 1995,
collateralized by certain seismic
equipment.................................... 76,151 -- --

Note payable to First Interstate Bank,
interest payable at prime, (8.5% at December
31, 1995, due in full March 31, 1995
(subsequently extended to March, 1996),
collateralized by trade accounts receivable
and a letter of credit from the Parent in the
amount of $750,000........................... 740,000 640,000 590,000

Note payable to B.O.T. Financial, interest
payable at 10.00%, due in monthly
installments through August 31, 1995,
collateralized by certain seismic
equipment.................................... 152,900 -- --

Notes payable to AFCO, interest payable from
6.04% to 8.244%, due in monthly installments
through April, 1996, collateralized by paid
and unearned insurance premiums.............. 165,960 122,429 19,922
</TABLE>

F-33
<PAGE> 92

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. NOTES PAYABLE AND OTHER DEBT, CONTINUED:
<TABLE>
<CAPTION>

DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to Pelton Company, Inc.,
interest payable at 9%, due in monthly
installments through March 1995,
collateralized by certain seismic
equipment.................................... 57,355 -- --
Miscellaneous notes payable, interest from
prime to 10.75%, due in monthly installments
through
October 31, 1997, collateralized by certain
seismic equipment............................ 68,415 41,238 34,177
----------- ----------- ---------
3,243,262 1,543,597 943,031
Less current portion......................... (3,201,595) (1,525,308) (927,389)
----------- ----------- ---------
$ 41,667 $ 18,289 $ 15,642
=========== =========== =========
</TABLE>

Covenants on notes payable outstanding at December 31, 1995 include
Northern maintaining a minimum amount of shareholders' equity, the maintenance
of certain property insurance coverages and the requirement of informing debtors
of the physical location of the collateral.

The Company was not in compliance with a covenant on a note payable as of
September 30, 1995 and December 31, 1995. The balance of this note, $739,930 and
$298,932 (unaudited), is classified as a current liability at September 30, 1995
and December 31, 1995, respectively.

Annual maturities on the Company's notes payable as of December 31, 1995
(unaudited) are as follows:

<TABLE>
<S> <C>
Current........................................... $927,389
1997.............................................. 4,607
1998.............................................. 11,035
1999.............................................. --
2000.............................................. --
</TABLE>

F-34
<PAGE> 93
NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES:

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
NINE
MONTHS YEAR
YEAR ENDED DECEMBER ENDED ENDED
31, SEPTEMBER DECEMBER
-------------------- 30, 31,
1993 1994 1995 1995
-------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal............................... $ -- $ 67,061 $ (67,061) $ 95,182
State................................. -- 5,917 (5,917) 8,389
-------- -------- -------- ---------
-- 72,978 (72,978) 103,571
Deferred:
Federal............................... $ -- 228,684 (134,197) (131,606)
State................................. -- 20,178 (11,841) (11,600)
-------- -------- -------- ---------
-- 248,862 (146,038) (143,206)
-------- -------- -------- ---------
$ -- $321,840 $(219,016) $ (39,635)
======== ======== ======== =========
</TABLE>

The effective income tax rate on income before income taxes differed from
the U.S. federal statutory income tax rate for the following reasons:

<TABLE>
<CAPTION>
NINE
MONTHS YEAR
YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER DECEMBER
---------------- 30, 31,
1993 1994 1995 1995
---- ---- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
U.S. federal statutory rate.................... 34% 34% (34)% (34)%
State taxes, net of federal benefit............ 3 3 (3) (3)
Change in valuation allowance.................. (37) (7) -- --
--- --- --- ---
--% 30% (37)% (37)%
=== === === ===
</TABLE>

The temporary differences which give rise to deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER SEPTEMBER DECEMBER
31, 30, 31,
1994 1995 1995
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Vacation accrual............................ $ 16,058 $ 25,425 $ 54,589
Net operating loss carryovers............... -- 232,660 232,660
Less valuation allowance.................... -- -- --
--------- --------- ---------
16,058 258,085 287,249
Deferred tax liabilities:
Property, plant and equipment............... (264,920) (360,909) (392,905)
--------- --------- ---------
Net deferred tax assets (liabilities)......... $(248,862) $(102,824) $(105,656)
========= ========= =========
</TABLE>

As of December 31, 1995, the Company has incurred approximately $630,000
(unaudited) of net operating loss carryforwards available to reduce income taxes
in future periods. These carryforwards will expire in 2010. The net operating
loss carryforwards will not be available to 3-D Geophysical, Inc. as a result of
the transaction discussed in Note 1.

F-35
<PAGE> 94

NORTHERN GEOPHYSICAL OF AMERICA, INC.
(LAND-BASED SEISMIC DATA OPERATIONS)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES:

Capital Leases:

The following schedule sets forth the future minimum lease payments under
capital leases, together with the present value of the minimum lease payments as
of December 31, 1995 (unaudited):

<TABLE>
<S> <C>
Year ending December 31:
1996.................................................................... $180,758
1997.................................................................... 146,220
1998.................................................................... 114,591
1999.................................................................... 59,260
2000.................................................................... --
--------
Total lease payments...................................................... 500,829
Less amount representing interest and executory costs..................... 84,162
--------
Present value of minimum lease payments................................... 416,667
Less current portion...................................................... 138,362
--------
Long-term obligations under capital lease................................. $278,305
========
</TABLE>

Operating Leases:

The Company leases premises, vehicles and equipment under operating leases.
One of the premises' lease has a three-year renewal option with a planned rental
increase of 5%. Rent expense was $654,230, $1,815,135, $1,044,667 and $2,798,113
(unaudited), for the years ended December 31, 1993, 1994, for the nine months
ended September 30, 1995 and for the year ended December 31, 1995 (unaudited),
respectively.

Minimum lease payments under operating leases in effect at December 31,
1995 (unaudited) are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1996.................................................................. $ 72,469
1997.................................................................. 24,235
1998.................................................................. --
1999.................................................................. --
2000.................................................................. --
--------
$ 96,704
========
</TABLE>

F-36
<PAGE> 95

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders of
Paragon Geophysical, Inc.:

We have audited the accompanying balance sheet of Paragon Geophysical, Inc.
(as defined in Note 1) as of December 31, 1994 and September 30, 1995 and the
related statements of operations, stockholders' deficit and cash flows for the
period from August 25, 1994 through December 31, 1994, the period from January
1, 1994 through August 24, 1994, for the year ended December 31, 1993 and the
nine months ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.

As explained in Note 1 to the financial statements, the Successor Company
purchased substantially all of the net assets of the Predecessor Company as of
August 25, 1994. The transaction was accounted for as a purchase whereby the
purchase price was allocated to the assets and liabilities of the Predecessor
based upon their estimated fair value as of August 25, 1994. Accordingly, the
financial statements of the Successor Company are not comparable to those of the
Predecessor Company.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paragon Geophysical, Inc.
(as defined in Note 1) as of December 31, 1994 and September 30, 1995, and the
results of its operations and its cash flows for the period from August 25, 1994
through December 31, 1994, the period from January 1, 1994 through August 24,
1994, for the year ended December 31, 1993 and the nine months ended September
30, 1995 in conformity with generally accepted accounting principles.

Cleveland, Ohio COOPERS & LYBRAND L.L.P.
December 6, 1995

F-37
<PAGE> 96

PARAGON GEOPHYSICAL, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 67,285 $ 141,113 $ 244,002
Receivables:
Trade, net of allowance for doubtful accounts of
$61,964, $50,331 and $48,786 (unaudited),
respectively................................... 884,349 685,530 389,093
Other............................................ 53,965 95,266 73,019
Inventory........................................... 29,050 17,363 15,585
Prepaid expenses.................................... 4,829 4,749 4,391
---------- ---------- -----------
Total current assets........................ 1,039,478 944,021 726,090
---------- ---------- -----------
Property and equipment, net........................... 1,964,028 3,151,035 3,016,219
Other assets.......................................... 48,036 318,877 536,899
---------- ---------- -----------
Total assets................................ $3,051,542 $4,413,933 $ 4,279,208
========== ========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt................... $1,427,146 $2,501,134 $ 4,608,861
Accounts payable.................................... 81,349 194,751 215,865
Accrued liabilities................................. 229,474 248,815 301,210
Deposits............................................ 21,480 6,200 6,200
---------- ---------- -----------
Total current liabilities................... 1,759,449 2,950,900 5,132,136
---------- ---------- -----------
Long-term liabilities:
Long-term debt...................................... 1,532,616 1,959,034 41,836
---------- ---------- -----------
Stockholders' deficit:
Common stock, 40 shares issued and outstanding,
recorded at stated value......................... 3,000 3,000 3,000
Additional paid-in capital.......................... 150,000 150,000 150,000
Accumulated deficit................................. (393,523) (649,001) (1,047,764)
---------- ---------- -----------
Total stockholders' deficit................. (240,523) (496,001) (894,764)
---------- ---------- -----------
Total liabilities and stockholders'
deficit................................... $3,051,542 $4,413,933 $ 4,279,208
========== ========== ===========
</TABLE>

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

F-38
<PAGE> 97

PARAGON GEOPHYSICAL, INC.

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD FOR THE NINE
FOR THE FROM JANUARY 1, FROM AUGUST 25, MONTHS FOR THE
YEAR ENDED 1994 THROUGH 1994 THROUGH ENDED YEAR ENDED
DECEMBER 31, AUGUST 24, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1994 1995 1995
------------ --------------- --------------- ------------- ------------
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR SUCCESSOR
------------ --------------- --------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................................... $4,462,931 $3,336,863 $1,955,088 $3,909,528 $4,694,711
Cost of data acquisition........................... 3,427,360 2,693,024 1,632,845 3,146,189 3,896,579
---------- --------- --------- --------- ----------
1,035,571 643,839 322,243 763,339 798,132
---------- --------- --------- --------- ----------
General and administrative expenses................ 347,172 184,628 195,548 295,817 463,735
Depreciation and amortization...................... 409,411 251,064 363,708 422,923 565,686
Miscellaneous...................................... (20,140) 512 -- -- 22,500
Interest expense................................... 144,843 11,411 155,810 293,660 393,195
Loss on sale of assets............................. 13,018 4,401 700 6,417 7,257
---------- --------- --------- --------- ----------
894,304 452,016 715,766 1,018,817 1,452,373
---------- --------- --------- --------- ----------
Income (loss) before income taxes.................. $ 141,267 $ 191,823 (393,523) (255,478) (654,241)
========= =========
Provision for income taxes......................... -- -- --
--------- --------- ----------
Net loss................................... $(393,523) $(255,478) $ (654,241)
========= ========= ==========
</TABLE>

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

F-39
<PAGE> 98

PARAGON GEOPHYSICAL, INC.

STATEMENT OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT
------ ------ ---------- -----------
<S> <C> <C> <C> <C>
Predecessor:
Balance December 31, 1992................................. 100 $ 500 $ 283,423 $ (459,445)
Distribution to stockholder............................... -- -- -- (65,000)
Net income for the year................................... -- -- -- 141,267
---- ------ --------- -----------
Predecessor:
Balance December 31, 1993................................. 100 500 283,423 (383,178)
Net income for the period................................. -- -- -- 191,823
---- ------ --------- -----------
Predecessor:
Balance August 24, 1994................................... 100 $ 500 $ 283,423 $ (191,355)
==== ====== ========= ===========
Successor:
Issuance of common stock on August 25, 1994............... 40 $3,000 $ 150,000 --
Net loss for the period................................... -- -- -- $ (393,523)
---- ------ --------- -----------
Successor:
Balance December 31, 1994................................. 40 3,000 150,000 (393,523)
Successor:
Net loss for the period................................... -- -- -- (255,478)
---- ------ --------- -----------
Successor:
Balance September 30, 1995................................ 40 $3,000 $ 150,000 $ (649,001)
Successor:
Net loss for the period(unaudited)........................ -- -- -- (398,763)
---- ------ --------- -----------
Successor:
Balance December 31, 1995(unaudited)...................... 40 $3,000 $ 150,000 $(1,047,764)
==== ====== ========= ==========
</TABLE>

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

F-40
<PAGE> 99

PARAGON GEOPHYSICAL, INC.

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FOR THE FROM JANUARY 1, FROM AUGUST 25, FOR THE NINE FOR THE
YEAR ENDED 1994 THROUGH 1994 THROUGH MONTHS ENDED YEAR ENDED
DECEMBER 31, AUGUST 24, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1994 1995 1995
------------ --------------- --------------- ------------- ------------
PREDECESSOR PREDECESSOR SUCCESSOR SUCCESSOR SUCCESSOR
------------ --------------- --------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................. $ 141,267 $ 191,823 $ (393,523) $(255,478) $ (654,241)
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities:
Depreciation and
amortization................. 409,411 251,064 363,708 422,923 565,686
Loss on sale of assets......... 13,018 4,401 700 6,417 7,257
(Increase) decrease in
receivables.................. (3,539) (304,492) (253,077) 157,518 495,256
(Increase) decrease in
inventory.................... -- -- (29,050) 11,687 13,465
(Increase) decrease in prepaid
expenses..................... (9,952) 1,678 10,729 80 438
(Increase) decrease in other
assets and liabilities....... 112,348 (112,348) 20,490 (10,732) (12,447)
Increase (decrease) in accounts
payable...................... (17,422) 70,531 (400) 113,402 134,516
Increase (decrease) in accrued
liabilities.................. 63,925 (26,909) 146,913 19,341 71,736
---------- --------- ----------- --------- ----------
Total adjustments......... 567,789 (116,075) 260,013 720,636 1,275,907
---------- --------- ----------- --------- ----------
Net cash provided (used)
by operating
activities.............. 709,056 75,748 (133,510) 465,158 621,666
Cash flows from investing
activities:
Purchase of business, net of cash
acquired....................... -- -- (1,100,000) -- --
Payments of organizational cost... -- -- (23,650) -- --
Loan to affiliate................. -- -- -- (275,389) (517,093)
Proceeds from the sale of
equipment...................... 5,850 3,050 20,200 90,318 91,318
Purchase of property and
equipment...................... (239,334) (426,324) (35,852) (190,835) (194,279)
---------- --------- ----------- --------- ----------
Net cash used by investing
activities.............. (233,484) (423,274) (1,139,302) (375,906) (620,054)
Cash flows from financing
activities:
Proceeds from capital
contributions of new owners.... -- -- 153,000 -- --
Proceeds from borrowings.......... -- -- 1,100,000 291,500 621,500
Distribution to stockholder....... (65,000) -- -- -- --
Payments on borrowings............ (21,888) (17,482) (57,360) (306,924) (446,395)
---------- --------- ----------- --------- ----------
Net cash provided (used)
by financing
activities.............. (86,888) (17,482) 1,195,640 (15,424) 175,105
---------- --------- ----------- --------- ----------
Net (decrease) increase............. 388,684 (365,008) (77,172) 73,828 176,717
Cash beginning of period............ 120,781 509,465 144,457 67,285 67,285
---------- --------- ----------- --------- ----------
Cash at end of period............... $ 509,465 $ 144,457 $ 67,285 $ 141,113 $ 244,002
========== ========= =========== ========= ==========
</TABLE>

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

F-41
<PAGE> 100

PARAGON GEOPHYSICAL, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company: On August 25, 1994, Paragon Geophysical, Inc., a Delaware
corporation (the "Buyer"), purchased substantially all of the net assets of
Paragon Geophysical, Inc., an Ohio corporation (the "Seller"), for $1,100,000
and accounted for the transaction by the purchase method of accounting (the
"Acquisition").

The assets and liabilities purchased in this transaction are as follows:

<TABLE>
<S> <C>
Current assets.................................................. $ 864,654
Property and equipment.......................................... 2,292,989
Other assets.................................................... 23,790
Current liabilities............................................. (189,311)
Long-term liabilities........................................... (1,892,122)
----------
Purchase price.................................................. $1,100,000
==========
</TABLE>

In connection with the Acquisition, the Seller relinquished the rights to
its name to the Buyer. Concurrent with the Acquisition, the Buyer sold certain
assets to the sole shareholder of the Seller for $19,400. For purposes of
identification and description, the Company is referred to as the "Predecessor"
for the period prior to the Acquisition, the "Successor" for the period
subsequent to the Acquisition and the "Company" for both periods.

The Company is a land geophysical services company primarily engaged in the
contract acquisition of two and three dimensional seismic data. The Company was
founded in 1987 and has grown to include two offices (one in Mount Gilead, Ohio
and a second located in Millersburg, Ohio). As of December 31, 1995, the Company
employs approximately 50 workers and operates two crews primarily in the
Appalachian Basin. The main customers for seismic data are oil and gas
exploration companies.

The unaudited pro forma results of operations for the year ended December
31, 1994 assuming the Successor had acquired the net assets of the Predecessor
as of the beginning of the year ended December 31, 1994 are as follows:

<TABLE>
<CAPTION>
TOTAL
PRO FORMA PRO FORMA
PREDECESSOR SUCCESSOR ADJUSTMENTS BALANCES
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues......................... $ 3,336,863 $1,955,088 $ -- $5,291,951
Operating, general and administrative
expenses, primarily depreciation of
property and equipment............. (3,128,716) (2,192,101) (417,515) (5,738,332)
Other expenses, primarily interest... (16,324) (156,510) (64,282) (237,116)
----------- ---------- ----------- ----------
Net income (loss).......... $ 191,823 $ (393,523) $(481,797) $ (683,497)
========== ========== ========= ==========
</TABLE>

Acquisition of the Company by 3-D Geophysical: In November 1995 the Company
entered into a merger agreement among the Company, 3-D Geophysical and a
subsidiary of 3-D Geophysical, Inc, ("3-D"). The Company merged with a
subsidiary of 3-D, with the Company being the surviving entity. The Company's
stockholders received approximately 1,314,261 shares of 3-D common stock in
connection with the merger. In addition, 3-D assumed approximately $4.8 million
of the Company's debt. Commencing February 9, 1996, the results of operations of
the Company are included in the financial statements of 3-D.

Receivables: The Company's trade and other receivables are primarily from
entities within the oil and gas industry. The Company has established an
allowance for doubtful accounts based upon the historical data of its customers
and other current information. Bad debt expense of $30,331, $25,125, $53,497,
$20,000, and $20,000 was charged to operations for the periods August 25, 1994
through December 31, 1994, January 1,

F-42
<PAGE> 101

PARAGON GEOPHYSICAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

1994 through August 24, 1994, the year ended December 31, 1993, the nine months
ended September 30, 1995, and the year ended December 31, 1995, respectively.

Property and Equipment: Property and equipment is recorded at cost.
Depreciation and amortization is provided over their estimated useful lives and
applied on the straight-line and declining-balance methods. Expenditures for
maintenance, repairs and minor renewals are charged to earnings as incurred.
Expenditures for additions, improvements, replacements, betterments and major
renewals are capitalized. Costs of property and equipment sold or retired and
the related accumulated depreciation are removed from the accounts; resulting
gains or losses are included in earnings.

Inventory: Inventory represents explosive material used by the Company in
order to obtain seismological data. The inventory is stated at the lower of cost
or market. Cost is determined using the first-in, first-out method. Management
has determined no valuation allowance is necessary as of December 31, 1995.

Organizational Costs: The Company has capitalized costs incurred in the
organization of the Successor and is amortizing these costs over a five year
period using the straight-line method.

Revenue Recognition: Revenues from seismic and geophysical services are
recorded based on the percentage of completion method.

Income Taxes: Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the financial
statement carrying value of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured by using enacted tax
rates that are applicable to the future years in which deferred tax assets or
liabilities are expected to be realized or settled. The effect of a change in
tax rates on deferred tax assets and liabilities is recognized in net earnings
in the period in which the tax rate change was enacted. The Company establishes
a valuation allowance when it is more likely than not that a deferred tax asset
will not be recovered.

Supplemental Cash Flows Information: The Successor paid interest of
$69,810 and $269,750 during the period August 25, 1994 through December 31, 1994
and the nine months ended September 30, 1995, respectively. The Predecessor paid
interest of $11,411 and $144,843 during the period January 1, 1994 through
August 25, 1994 and the year ended December 31, 1993, respectively. The
Predecessor financed the purchase of five vehicles in 1994 for $104,653 and
seven vehicles in 1993 for $100,305. The Successor financed the purchase of
equipment and vehicles for $1,515,830 during the twelve months ended December
31, 1995.

Unaudited Financial Information: In the opinion of management, the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring items) necessary to present fairly the financial
position of the Company as of December 31, 1995 and the results of their
operations and cash flows for the year ended December 31, 1995.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenue and expenses during the
reporting periods. A significant estimate in the preparation of the Company's
financial statements is related to the percentage of revenue recognized based on
the stage of completion of the Company's contracts. Actual results could differ
from those estimates.

F-43
<PAGE> 102

PARAGON GEOPHYSICAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Property and equipment, at cost:
Land....................................... $ 62,500 $ 62,500 $ 62,500
Building and improvements.................. 402,220 402,220 402,220
Furniture and fixtures..................... 15,093 15,093 15,093
Equipment.................................. 1,384,815 2,941,411 2,944,856
Vehicles................................... 462,713 502,863 499,413
Construction in progress................... -- -- --
---------- ---------- ----------
2,327,341 3,924,087 3,924,082
Less accumulated depreciation.............. 363,313 773,052 907,863
---------- ---------- ----------
Net property and equipment......... $ 1,964,028 $3,151,035 $3,016,219
========== ========== ==========
</TABLE>

3. OTHER ASSETS:

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Organizational costs, net of amortization.... $23,256 $ 19,708 $ 18,526
Loan to 3-D Geophysical...................... -- 275,389 517,093
Other........................................ 24,780 23,780 1,280
------- -------- --------
$48,036 $318,877 $536,899
======= ======== ========
</TABLE>

4. ACCRUED LIABILITIES:

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Accrued interest............................ $ 86,000 $109,910 $162,188
Accrued salaries, wages and payroll taxes... 143,474 138,905 139,022
-------- -------- --------
$229,474 $248,815 $301,210
======== ======== ========
</TABLE>

5. LONG-TERM DEBT:

In August 1994, the Company entered into a promissory note with Chase
Manhattan Bank for $1,100,000 due on October 31, 1996 with an interest rate
equal to the prime rate (8.5% as of December 31, 1995). This note is personally
guaranteed by three of the Company's stockholders.

Effective January 1, 1994, the Company issued a promissory note to a former
stockholder of the Predecessor, for $1,700,000 due February 15, 1996. The annual
interest rate on this note is 8%. This note is guaranteed by the Company and
collateralized by certain assets of the Company. This agreement superseded the
original promissory note between the Predecessor and the former stockholder in
the same amount.

F-44
<PAGE> 103

PARAGON GEOPHYSICAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT, CONTINUED:

In January 1995, the Company issued a promissory note for the purchase of
Input/Output equipment for $1,480,380 with an interest rate of 9.5%
collateralized by the Input/Output equipment.

During the second quarter of 1995, the Company obtained an unsecured line
of credit for $350,000 from Bank One of Ohio. Borrowings under the line of
credit are due on demand and bear interest at prime plus 1%. This line of credit
is personally guaranteed by three of the Company's stockholders.

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Promissory note payable to former stockholder
with an interest rate of 8%................. $ 1,700,000 $ 1,700,000 $ 1,700,000
Promissory note payable to Chase Manhattan
Bank with a variable interest rate (8.5% as
of December 31, 1995) due on October 31,
1996........................................ 1,100,000 1,100,000 1,400,000
Note payable to a financial institution with
an interest rate of 9.5% due March 1998,
collateralized by Input/Output equipment.... -- 1,231,149 1,116,445
Line of credit to Bank One collateralized by
accounts receivable with a variable interest
rate of 9.75% at September 30, 1995 and 9.5%
at December 31, 1995........................ -- 291,500 321,500
Various notes payable collateralized by
certain vehicles of the Company with
interest rates ranging from 5.9% to 10% due
in installments to January 2000, primarily
collateralized by vehicles.................. 159,762 137,519 112,752
----------- ----------- -----------
2,959,762 4,460,168 4,650,697
Current portion of long-term debt............. (1,427,146) (2,501,134) (4,608,861)
----------- ----------- -----------
$ 1,532,616 $ 1,959,034 $ 41,836
=========== =========== ===========
</TABLE>

Aggregate principal payments on long-term debt outstanding as of December
31, 1995 (unaudited) is as follows:

6. INCOME TAXES:

Prior to the Acquisition, the Predecessor elected to be treated as an S
corporation under the provisions of Section 1361 of the Internal Revenue Code.
As an S corporation, the Predecessor was not subject to tax on its

F-45
<PAGE> 104

PARAGON GEOPHYSICAL, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES, CONTINUED:

income; rather the shareholders of the Predecessor were taxed on their share of
the Predecessor's taxable income, whether or not the income was distributed.

Effective August 25, 1994, the Company rescinded its S corporation election
under the Internal Revenue Code and became subject to tax on its income.

A reconciliation of the differences between income taxes computed at the
U.S. federal statutory rate of 35% and the Company's reported federal income
taxes follows:

<TABLE>
<CAPTION>
AUGUST 25,
1994 NINE MONTHS
THROUGH ENDED YEAR ENDED
DECEMBER 31, SEPTEMBER DECEMBER 31,
1994 30, 1995 1995
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Income tax benefit at statutory rate at 35%....... $(137,700) $ (89,417) $(196,440)
Depreciation not recognized for books............. (1,430) (53,689) (72,584)
Net operating loss carryforward not recognized.... 139,130 143,106 269,024
--------- --------- ---------
Federal income taxes.............................. $ -- $ -- $ --
========= ========= =========
</TABLE>

The following is a summary of the deferred tax balances:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax asset (net operating loss
carryforward)................................... $ 139,130 $ 282,236 $ 339,472
Deferred tax liability (depreciation)............. (1,430) (55,119) (74,014)
Valuation allowance on the deferred tax asset..... (137,700) (227,117) (265,458)
--------- --------- ---------
Net deferred taxes................................ $ -- $ -- $ --
========= ========= =========
</TABLE>

At December 31, 1995 (unaudited) the Company has net operating loss
carryforwards of approximately $807,000 which expire in the years 2009 and 2010.

F-46
<PAGE> 105

AUDITORS' REPORT

To the Directors of J.R.S. Exploration Company Limited:

We have audited the balance sheet of J.R.S. Exploration Company Limited as at
November 30, 1995 and the statements of operations and retained earnings and
changes in financial position for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at November 30, 1995 and the
results of its operations and changes in its financial position for the year
then ended in accordance with generally accepted accounting principles in
Canada.

/s/ GARRETT POWER

Chartered Accountants

Calgary, Alberta
July 31, 1996

F-47
<PAGE> 106

J.R.S. EXPLORATION COMPANY LIMITED

BALANCE SHEET
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31,
1995 1996
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and term deposits............................................ $ 711,698 $ 560,936
Accounts receivable............................................... 1,855,745 1,255,887
Income taxes recoverable.......................................... 35,751 --
Prepaid expenses.................................................. 77,191 48,478
Current portion of agreement receivable........................... 66,666 66,667
---------- ----------
2,747,051 1,931,968
Fixed assets (Note 2)............................................... 5,430,531 4,556,526
Agreement receivable (Note 3)....................................... 33,334 33,333
---------- ----------
$8,210,916 $6,521,827
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loan (Note 4)................................................ $ 200,000 $ 175,000
Accounts payable (Note 10)........................................ 1,395,532 412,433
Income taxes payable.............................................. -- 188,304
Advances from related parties (Note 5)............................ 160,811 --
Current portion of long term debt................................. 1,552,533 1,774,507
---------- ----------
3,308,876 2,550,244
Long term debt (Note 6)............................................. 1,488,829 200,219
Deferred income taxes............................................... 304,538 304,538
Shareholders' equity:
Share capital (Note 7)............................................ 66 66
Retained earnings................................................. 3,108,607 3,466,760
---------- ----------
3,108,673 3,466,826
---------- ----------
$8,210,916 $6,521,827
========== ==========
</TABLE>

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

F-48
<PAGE> 107

J.R.S. EXPLORATION COMPANY LIMITED

STATEMENT OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
FOR THE FOR THE
FOR THE NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
NOVEMBER 30, AUGUST 31, AUGUST 31,
1995 1995 1996
----------- ---------------- ----------------
C $ C $
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Contract revenue............................ $11,074,354 $ 9,395,525 $ 8,911,495
Interest.................................... 71,002 57,932 19,362
----------- ------------ ------------
11,145,356 9,453,457 8,930,857
Direct expenses:
Consulting, management and bonuses.......... 425,785 337,785 418,268
Recording equipment repairs and
maintenance.............................. 1,205,215 713,929 1,195,734
Small tools and field supplies.............. 31,129 22,439 18,510
Turnkey costs............................... 2,459,422 2,041,163 1,014,837
Vehicle and equipment rentals............... 343,969 248,253 175,860
Vehicle repairs and fuel.................... 412,325 456,636 512,983
Wages and benefits, including office........ 3,146,860 2,572,481 2,622,701
Depreciation................................ 1,971,583 1,479,084 1,491,846
----------- ------------ ------------
9,996,288 7,871,770 7,450,739
----------- ------------ ------------
Gross profit.................................. 1,149,068 1,581,687 1,480,118
General and administrative costs (see note
11)......................................... 1,238,547 921,633 913,009
----------- ------------ ------------
Income (loss) before the following............ (89,479) 660,054 567,109
Gain on sale of fixed assets.................. 4,507 -- --
----------- ------------ ------------
Income (loss) before provision for income
taxes....................................... (84,972) 660,054 567,109
Provision for (recovery of) income taxes...... (64,940) 241,668 208,956
----------- ------------ ------------
Net income (loss) for the period.............. (20,032) 418,386 358,153
Retained earnings at beginning of period...... 3,128,639 3,128,639 3,108,607
----------- ------------ ------------
Retained earnings at end of period............ $ 3,108,607 $ 3,547,025 $ 3,466,760
=========== ============ ============
</TABLE>

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

F-49
<PAGE> 108

J.R.S. EXPLORATION COMPANY LIMITED

STATEMENT OF CHANGES IN FINANCIAL POSITION

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
NOVEMBER 30, AUGUST 31, AUGUST 31,
1995 1995 1996
------------ ----------- -----------
C $ C $ C $
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operations:
Net income (loss)................................... $ (20,032) $ 418,386 $ 358,153
Add: Items not requiring a current cash outlay
Depreciation..................................... 2,004,989 1,503,869 1,513,950
Deferred income taxes............................ (182,454) -- --
Gain on sale of fixed assets..................... (4,507) -- --
---------- ---------- ----------
Funds from operations................................. 1,797,996 1,922,255 1,872,103
Decrease (increase) in non-cash working capital....... (270,008) (1,227,623) (130,473)
---------- ---------- ----------
Cash provided by operations........................... 1,527,988 694,632 1,741,630
---------- ---------- ----------
Investing:
Acquisition of fixed assets......................... (285,410) (220,675) (639,945)
Proceeds on sale of fixed assets.................... 8,150 3,000 --
Decrease in investment tax credits.................. 55,843 -- --
---------- ---------- ----------
Cash used in investing................................ (221,417) (217,675) (639,945)
---------- ---------- ----------
Financing:
Decrease in long term debt.......................... (2,079,356) (1,646,685) (1,066,636)
Decrease in advances from related parties........... (326,000) (326,000) (160,811)
---------- ---------- ----------
Cash used in financing................................ (2,405,356) (1,972,685) (1,227,447)
---------- ---------- ----------
Increase (decrease) in cash*.......................... (1,098,785) (1,495,728) (125,762)
Cash at beginning of year............................. 1,610,483 1,610,483 511,698
---------- ---------- ----------
Cash at end of year................................... $ 511,698 $ 114,755 $ 385,936
========== ========== ==========
</TABLE>

- ---------------

* For the purpose of this statement, cash is defined as cash and term deposits,
net of bank loan.

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

F-50
<PAGE> 109

J.R.S. EXPLORATION COMPANY LIMITED

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

Financial statements are denominated in Canadian dollars and are presented
in accordance with Canadian generally accepted accounting principles.

DEPRECIATION

Depreciation is calculated using the straight-line (equipment -- 20%) and
declining balance (vehicles -- 30%; office -- 20%) methods at rates which will
depreciate the assets over their estimated useful lives.

INVESTMENT TAX CREDITS

Investment tax credits are recorded using the cost reduction method.

2. FIXED ASSETS:

Fixed assets are recorded at cost and are comprised of the following.

<TABLE>
<CAPTION>
1995
--------------------------
ACCUMULATED
COST DEPRECIATION
----------- ----------
<S> <C> <C>
Equipment.................................. $12,097,741 $7,224,900
Vehicles................................... 1,471,725 1,060,322
Office..................................... 315,448 169,161
----------- -----------
$13,884,914 $8,454,383
=========== ===========
</TABLE>

3. AGREEMENT RECEIVABLE:

The agreement receivable is unsecured, bears interest at 7% and is
repayable in annual installments of $33,333 plus interest. The 1995 installment
is in arrears.

4. BANK LOAN:

The revolving bank loan is payable on demand and bears interest at prime
plus 1/2%. Security on the loan is described in Note 6.

5. ADVANCES FROM RELATED PARTIES:

The advances from related parties, including shareholders and companies
controlled by shareholders, are non-interest bearing and have no fixed terms of
repayment.

F-51
<PAGE> 110

J.R.S. EXPLORATION COMPANY LIMITED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. LONG-TERM DEBT:

<TABLE>
<CAPTION>
1995
----------
<S> <C>
Bank loan, bearing interest at prime plus 1 1/2%, is payable on demand. The bank
has agreed to accept blended monthly installments of $133,000................. $2,711,997
Finance loan, bearing interest at 5 1/4%, is repayable in quarterly installments
of U.S.$19,115 to October 1996................................................ 101,998
Finance contracts, bearing interest at rates ranging from 12% to 13%, repayable
in blended monthly installments of $12,416 to July 1997....................... 227,367
----------
3,041,362
Less: amount due within one year................................................ 1,552,533
----------
$1,488,829
=========
</TABLE>

The bank loans are secured by a general security agreement, a debenture
providing a first charge on specific equipment and a floating charge on all
assets of the Company and postponement of claim by certain shareholders and
directors.

The finance loan and contracts are secured by specific equipment and
vehicles.

Estimated principal repayments over the next three years are as follows:

7. SHARE CAPITAL:

<TABLE>
<S> <C>
Authorized --
Unlimited number of Class A voting shares
Unlimited number of Class B non-voting shares
Unlimited number of Class D preferred shares
Issued --
Class A voting shares................................................ 33
Class B non-voting shares............................................ 33
---
66
==
</TABLE>

No Class D preferred shares were issued at November 30, 1995.

8. INCOME TAXES:

The income tax provision on the income statement differs from the expected
income tax provision as follows:

<TABLE>
<CAPTION>
1995
--------
<S> <C>
Expected income taxes @ 44.34%.................................... $(37,677)
Add (deduct) effects of:
Small business tax reduction.................................... (51,000)
Non deductible expenses......................................... 23,737
--------
$(64,940)
========
</TABLE>

F-52
<PAGE> 111

J.R.S. EXPLORATION COMPANY LIMITED

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS:

Subsequent to November 30, 1995, the Company entered into a lease
agreement, with a related company (see Note 10), for their business premises.
The lease calls for annual payments of $96,840 and expires in May 2001.

10. RELATED PARTY TRANSACTIONS:

The following summarizes transactions and balances with companies which are
owned by parties related to the shareholders:

<TABLE>
<CAPTION>
1995
--------
<S> <C>
Pavelow Investments Ltd.
Rent charged on premises........................................ $ 96,840
Malpaso Surveys Ltd.
Survey fees charged............................................. 280,707
Balance included in accounts payable............................ 28,109
C.M.J. Holdings Ltd.
Equipment lease charges......................................... 42,185
Balance included in accounts payable............................ 67,909
</TABLE>

11. GENERAL AND ADMINISTRATIVE COSTS:

General and administrative costs include interest expense of $416,082,
$303,116 (unaudited) and $197,501 (unaudited), and depreciation of $33,406,
$22,104 (unaudited), and $24,785 (unaudited), for the year ended November 30,
1995, the nine months ended August 31, 1995, and the nine months ended August
31, 1996, respectively.

F-53
<PAGE> 112
3-D GEOPHYSICAL, INC. currently operates nine crews with six state-of-the-art,
24-bit seismic data acquisition systems in the Western Hemisphere. The Company
utilizes a fleet of vibroseis units, as well as dynamite, for energy sources in
its land seismic surveys.

[Photograph of crew laying cable.]

[Photograph of vibroseis trucks in the field.]

[Photograph of 3-D image.]

The Company's personnel are considerate of the safety of people and the
importance of the natural surroundings. Safeguarding the public, protecting
the natural environment, and ensuring employee welfare and priorities.

Through its processing arm, PIASA (Procesos Interactivos Avanzados, S.A. de
C.V.), 3-D Geophysical provides advanced data processing and interpretation
services. The Company uses sophisticated systems to process seismic data in
regional offices in Mexico City and Lima.

Complex 3-D imaging requires the latest in design and mapping capabilities.
Using complex software, the Company's geophysicists can assist clients with
program design by balancing cost with proper imaging of geologic objectives.

[LOGO]
<PAGE> 113

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH AN OFFER IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Summary Historical and Pro Forma
Financial and Operating Data........ 6
Risk Factors.......................... 9
The Company........................... 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Price Range of Common Stock........... 14
Capitalization........................ 14
Selected Historical and Pro Forma
Financial and Operating Data........ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 29
Management............................ 38
Security Ownership of Management and
Principal Stockholders.............. 45
Certain Transactions.................. 46
Description of Capital Stock.......... 49
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 56
Experts............................... 56
Additional Information................ 57
Glossary.............................. 58
Index to Financial Statements......... F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,500,000 SHARES

3-D GEOPHYSICAL, INC.

COMMON STOCK

[3-D GEOPHYSICAL LOGO]

------------

PROSPECTUS

DECEMBER 17, 1996

------------

SMITH BARNEY INC.

RAUSCHER PIERCE REFSNES, INC.

SIMMONS & COMPANY
INTERNATIONAL

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------