EAGLE GEOPHYSICAL INC, 10-Q, 1999-08-16

EAGLE GEOPHYSICAL INC
10-Q, 1999-08-16
OIL & GAS FIELD EXPLORATION SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 0-22863
---------------------

EAGLE GEOPHYSICAL, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 76-0522659
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

2603 AUGUSTA
SUITE 1400
HOUSTON, TEXAS 77057
(Address of Principal (Zip Code)
Executive offices)
</TABLE>

Registrant's telephone number, including area code:
(713) 243-6100

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 14 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares outstanding of the issuer's common stock, as of August
16, 1999: 8,788,310
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EAGLE GEOPHYSICAL, INC.

INDEX TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION............................. 3
Item 1. Financial Statements................................ 3
Consolidated Balance Sheets -- December 31, 1998 and June
30, 1999 (unaudited)...................................... 3
Consolidated Statements of Operations for the three and six
month periods ended June 30, 1998 and 1999 (unaudited).... 4
Consolidated Statements of Cash Flows for the six month
periods ended June 30, 1998 and 1999 (unaudited).......... 5
Consolidated Statement of Stockholders' Equity.............. 6
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 19
Item 3. Quantitative and Qualitative Disclosure about Market
Risk...................................................... 25
PART II -- OTHER INFORMATION
Item 3. Defaults Upon Senior Securities..................... 26
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 26
Item 6. Exhibits and Reports on Form 8-K.................... 26
</TABLE>

2
<PAGE> 3

PART I -- FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS

EAGLE GEOPHYSICAL, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 10,331 $ 2,768
Restricted Cash........................................... 5,000 5,000
Receivables:
Trade, billed........................................... 4,029 5,178
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 7,075 463
Other................................................... 1,076 1,285
Due from former affiliate................................. 25,756 21,009
Inventory................................................. 2,230 2,137
Prepaid expenses and other assets......................... 3,370 2,133
-------- --------
Total current assets............................... 58,867 39,973
PROPERTY AND EQUIPMENT, AT COST:
Vessels and geophysical equipment......................... 148,489 203,712
Construction in Progress.................................. 56,782 --
Furniture, fixtures and other............................. 1,528 1,701
-------- --------
206,799 205,413
Less: Accumulated depreciation.............................. (31,561) (39,172)
-------- --------
Net property and equipment......................... 175,238 166,241
MULTI-CLIENT DATA LIBRARY................................... 15,910 17,797
GOODWILL, NET............................................... 19,176 --
OTHER LONG-TERM ASSETS...................................... 4,004 3,453
-------- --------
TOTAL ASSETS....................................... $273,195 $227,464
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 1,830 $135,731
Current portion of capital lease obligations.............. 6,063 25,927
Accounts payable.......................................... 17,073 14,327
Accrued liabilities....................................... 19,614 5,076
Accrued interest.......................................... 4,845 5,146
Accrued restructuring costs............................... -- 4,821
Billings in excess of costs and estimated earnings on
uncompleted contracts................................... 3,367 5,003
-------- --------
Total current liabilities.......................... 52,792 196,031
LONG-TERM DEBT.............................................. 105,385 --
CAPITAL LEASE OBLIGATIONS................................... 22,343 --
DEFERRED INCOME TAXES AND OTHER OBLIGATIONS................. 2,875 2,687
-------- --------
TOTAL LIABILITIES.................................. 183,395 198,718
-------- --------
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued
and outstanding......................................... -- --
Common stock, par value $.01 per share; authorized
25,000,000 shares; 8,788,310 shares issued and
outstanding at December 31, 1998 and June 30, 1999
(unaudited)............................................. 88 88
Additional paid-in capital................................ 84,412 84,412
Retained earnings (deficit)............................... 5,725 (55,329)
Note receivable from Stockholder.......................... (425) (425)
-------- --------
TOTAL STOCKHOLDERS' EQUITY......................... 89,800 28,746
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......... $273,195 $227,464
======== ========
</TABLE>

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

3
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EAGLE GEOPHYSICAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTH SIX MONTH
PERIODS ENDED PERIODS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1998 1999 1998 1999
------- -------- ------- --------
<S> <C> <C> <C> <C>
REVENUES.......................................... $34,336 $ 17,947 $58,216 $ 46,082
EXPENSES
Operating expenses.............................. 22,527 19,315 39,966 40,123
Depreciation and amortization................... 4,799 8,387 7,687 15,085
Selling, general and administrative expenses.... 2,877 1,465 5,373 3,930
Restructuring and asset impairment charges...... -- 43,661 -- 43,661
Interest expense................................ 468 3,817 656 6,091
Interest income................................. (174) (130) (395) (208)
Other, net...................................... 44 314 90 307
------- -------- ------- --------
30,541 76,829 53,377 108,989
------- -------- ------- --------
Income (loss) before provision (benefit) for
income taxes.................................... 3,795 (58,882) 4,839 (62,907)
Provision (benefit) for income taxes.............. 1,537 (1,253) 1,960 (1,853)
------- -------- ------- --------
NET INCOME (LOSS)................................. $ 2,258 $(57,629) $ 2,879 $(61,054)
======= ======== ======= ========
Basic earnings (loss) per share................... $ .26 $ (6.56) $ .34 $ (6.95)
======= ======== ======= ========
Weighted average number of common shares
(basic)......................................... 8,587 8,788 8,543 8,788
======= ======== ======= ========
Diluted earnings (loss) per share................. $ .26 $ (6.56) $ .34 $ (6.95)
======= ======== ======= ========
Weighted average number of common shares
(diluted)....................................... 8,598 8,788 8,553 8,788
======= ======== ======= ========
</TABLE>

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

4
<PAGE> 5

EAGLE GEOPHYSICAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTH PERIODS
ENDED JUNE 30,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 2,879 $(61,054)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 7,687 15,085
(Gain) on sale of property and equipment............... (10) --
Restructuring and asset impairment charges............. -- 38,584
Deferred income tax provision (benefit)................ 386 (88)
Bad debt expense....................................... 450 500
Decrease in receivables................................ 1,930 3,598
(Increase) decrease in other assets.................... (2,717) 7,343
Increase in accounts payable and other liabilities..... 20,993 6,943
-------- --------
Total adjustments................................. 28,719 71,965
-------- --------
Net cash provided by operating activities......... 31,598 10,911
-------- --------
Cash flows from investing activities:
Purchase of equipment and vessel upgrades................. (45,159) (23,345)
Cash received on disposal of property and equipment....... 152 29
Cash paid for multi-client data library, net.............. (7,685) (5,208)
Cash paid for shot-hole drilling company, net of cash
acquired............................................... (3,516) --
-------- --------
Net cash used in investing activities............. (56,208) (28,524)
-------- --------
Cash flows from financing activities:
Borrowings under credit facility.......................... 30,500 39,420
Repayments under credit facility.......................... (8,000) (26,009)
Principal payments on term loans.......................... (81) (882)
Principal payments on capital leases...................... (1,199) (2,479)
Other net................................................. (180) --
-------- --------
Net cash provided by financing activities......... 21,040 10,050
-------- --------
Net decrease in cash and cash equivalents................... (3,570) (7,563)
Cash and cash equivalents at beginning of period............ 19,482 10,331
-------- --------
Cash and cash equivalents at end of period.................. $ 15,912 $ 2,768
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................... $ 628 $ 5,790
======== ========
Income taxes paid (received)........................... $ 1,741 $ (1,200)
======== ========
Noncash investing and financing activities:
Vessel upgrade financed through a capital lease........... $ 21,707 $ --
======== ========
Accounts payable converted to Debt........................ $ -- $ 15,989
======== ========
Equipment purchase through term loan...................... $ 5,864 $ --
======== ========
Noncash equipment sale.................................... $ -- $ 1,584
======== ========
Purchase of Seismic Drilling and Services Company for
98,360 shares of Common stock.......................... $ 1,125 $ --
======== ========
</TABLE>

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

5
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EAGLE GEOPHYSICAL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOTE
COMMON STOCK ADDITIONAL RETAINED RECEIVABLE TOTAL
--------------- PAID-IN EARNINGS/ FROM STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) STOCKHOLDER EQUITY
------ ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998....... 8,788 $88 $84,412 $ 5,725 $(425) $ 89,800
Unaudited:
Net Loss....................... -- -- -- (61,054) -- (61,054)
----- --- ------- -------- ----- --------
Balance, June 30, 1999........... 8,788 $88 $84,412 $(55,329) $(425) $ 28,746
</TABLE>

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

6
<PAGE> 7

EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 1999
1. BASIS OF PRESENTATION

The accompanying unaudited interim condensed consolidated financial
statements of Eagle Geophysical, Inc. (the "Company") for the six months ended
June 30, 1998 and 1999 have been prepared without an audit pursuant to the rules
and regulations of the Securities and Exchange Commission. Accordingly, certain
information and notes required by generally accepted accounting principles for
complete financial statements have been condensed or omitted. In the opinion of
management, all adjustments, which consist of normal recurring adjustments
except as otherwise noted herein, necessary to present fairly the financial
position, results of operations, and cash flows for the interim periods
presented have been made. Operating results for the interim period are not
necessarily indicative of the results that can be achieved for a full year.
These interim condensed financial statements should be read in conjunction with
the audited financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has experienced recent
operating losses, debt covenant failures and related events of default, and
significantly decreased liquidity that raise substantial doubt about its ability
to meet future expected expenditures and obligations in the near term as they
become due necessary to continue as a going concern. The debt covenant failures
and related events of default could cause the counterparties to seek remedies
including asset seizure and/or asset liquidation. The financial statements do
not reflect any adjustments that might result from the outcome of this
uncertainty. In this regard, the Company is currently pursuing a financial
recapitalization to enable it to continue as a going concern. The financial
recapitalization could include negotiations with bond holders to defer interest
payments, property sales on an acceptable basis, conversion of some or all of
the Company's debt to equity, new third party equity investments, or some
combination of the foregoing, as well as other recapitalization opportunities
which may become available. There can be no assurance that the Company will
actually conclude any financial recapitalization. In the absence of a
satisfactory recapitalization, the Company anticipates that its liquidity
problems will likely continue, and the Company may be forced to seek protection
from its creditors through bankruptcy.

2. RESTRUCTURING CHARGE, FINANCIAL RECAPITALIZATION AND INDUSTRY CONDITIONS

The Company had a working capital deficit at June 30, 1999 of $(156.1)
million. The Company's total revenues declined from $28.2 million in the first
quarter of 1999 to $17.9 million in the second quarter of 1999, and the
Company's results of operations declined from a net loss of $(3.4) million in
the first quarter of 1999 to a net loss of $(57.6) million in the second quarter
of 1999. The decline in revenues was primarily a result of a significant
decrease in demand and prices for the Company's services. The decreased revenues
combined with a restructuring and asset impairment charge of approximately $43.7
million were the primary causes of the decline in results of operations. The
Company projects that 1999 third and fourth quarter demand and prices for its
services will not improve significantly from second quarter 1999 levels.

The continued weakened business conditions in the oil and gas services
industry during the second quarter of 1999 was a primary factor in the Company's
decision to implement an operational restructuring plan. The management approved
restructuring plan, which resulted in restructuring and asset impairment charges
totaling approximately $43.7 million resulting in a charge of $1.0 million for
the termination of approximately 22 percent of the Company's workforce, an
impairment charge of $18.5 million for the write-off of goodwill from the
acquisitions of Energy Research International and Seismic Drilling & Service
Company, an impairment charge of $5.3 million related to the impairment of
in-water seismic equipment, an impairment charge of $4.3 million for the vessel
Atlantic Horizon, charter termination provisions and asset write-offs of $10.1
million related to the decommissioning of the Discoverer, Celtic Horizon, and
Pacific Horizon, an impairment charge of $3.3 million for the Company's
multi-client data library, and a $1.2 million charge for disposal of excess land
seismic equipment and office lease consolidations. The Company estimates
approxi-
7
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EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

mately $5.1 million of the total $43.7 million in charges will be cash costs.
The Company anticipates the operational restructuring will be completed by the
end of 1999.

The following provides additional information regarding the Company's
restructuring plan and financial recapitalization efforts:

- In April 1999, due to lack of demand for offshore seismic services, the
Company began to assess the impact of cancelling its vessel charters
early. During the quarter, the Company began negotiations with a vessel
owner for the decommissioning and release of the charter for the seismic
vessel Discoverer. In July 1999, the company obtained a release of both
its charter obligation and unpaid amounts totaling approximately $1.8
million in exchange for a seismic recording system, related equipment,
and amounts payable of approximately $.3 million.

- In April 1999, in an effort to reduce costs and improve utilization of
Company owned vessels, the Company decommissioned the Celtic Horizon, one
of the Company's chartered vessels. Negotiations are underway with the
charter operator to terminate the current charter commitment.

- On July 15, 1999, the Company, through its wholly owned subsidiary
Atlantic Horizon, Inc., entered into a term loan with Heller Financial
Leasing, Inc. for an aggregate amount of $12.5 million. This loan bears
interest at 10.25% per annum, and is payable over seven years with a
balloon payment of $3.1 million principal and unpaid interest due at
maturity. Heller retained a cash deposit of $1.0 million as security for
this loan. This loan is further secured by a mortgage on the Company's
Atlantic Horizon seismic vessel. The Company used $4.0 million of the
proceeds of this loan to pay for equipment used in the upgrade of its
seismic vessel Atlantic Horizon. The Company delivered a promissory note
for $12.0 million payable to an equipment supplier to evidence the
balance due on the equipment used in the upgrade of the Atlantic Horizon,
which bears interest at 11.25% per annum and is payable over five years
with a balloon payment of $7.0 million due at maturity. This note is
secured by a guarantee of Atlantic Horizon, Inc. and a second mortgage on
the Atlantic Horizon. In addition, if the Company does not make a $1.5
million prepayment on this note by December 31, 1999, the interest rate
on this loan will increase to 15%. The entire $16.0 million (the $12.0
million note and the $4.0 million paid from the proceeds of the Heller
financing) is classified as a current liability due to covenant defaults
under certain of the Company's other debt agreements. At the same time,
the Company renegotiated the terms of its revolving credit facility with
Wells Fargo Business Credit, Inc. (formerly Norwest Business Credit,
Inc.) to waive certain defaults, reduce the amount of the facility, and
amend certain covenants. Prior to such amendment, the Company granted to
Wells Fargo, as additional security for the loan pursuant to the existing
credit agreement, a mortgage on the Company's Austral Horizon seismic
vessel. The Company also paid approximately $3.0 million on the Wells
Fargo Credit Facility from the proceeds of the Heller financing, leaving
proceeds from the financing of $4.5 million for working capital as of
July 15, 1999.

- On July 15, 1999, the Company announced that it did not make the $5.375
million interest payment on its outstanding $100 million 10 3/4% Senior
Notes due 2008 (the "Notes") due on that date. Under the indenture
governing the Notes, the Company has a 60-day grace period in which to
make this interest payment. Given the uncertainty of the Company's
ability to make the interest payment within the allowable grace period,
the Company has classified the Notes as a current liability.

- The Company has defaulted on certain financial covenants for the period
ended June 30, 1999 related to the Wells Fargo Credit Facility, the Fleet
Capital term loan and its other notes payable assumed in connection with
the NRG Acquisition. The Company is currently seeking waivers for these
defaults, although there can be no assurance that the Company will be
able to obtain these waivers. The entire balance relating to these
obligations totaling $19.7 million is classified as a current liability.

8
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EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

- The Company has also defaulted on a covenant under its $25.9 million
capital lease for the seismic vessel Labrador Horizon with British Linen
Shipping Limited. The Company is currently seeking a waiver of the
default under this capital lease, although there can be no assurance that
the Company will be able to obtain this waiver. The Company has
classified the entire obligation with British Linen as a current
liability.

- The Company believes that its cash on hand as a result of the Heller
financing, available borrowings under its revolving line of credit with
Wells Fargo, plus the expected normal cash flow from operations will not
be sufficient to fund its working capital needs for the remainder of
1999. The Company does not currently have the resources to meet its
interest payment obligations on the Notes on or before the expiration of
the 60-day grace period for such payment.

- As previously reported, the Company has engaged CIBC World Markets
("CIBC") as the Company's exclusive financial advisor in connection with
the possible financial recapitalization of the Company. In its capacity
as financial advisor, CIBC will investigate and evaluate such
possibilities as negotiations with bond holders to defer interest
payments, property sales on an acceptable basis, conversion of some or
all of the Company's debt to equity, new third party equity investments,
or some combination of the foregoing, as well as other recapitalization
opportunities which may become available. There can be no assurance that
the Company will actually conclude any financial recapitalization. In the
absence of a satisfactory recapitalization, the Company anticipates that
its liquidity problems will likely continue. The liquidity problems, if
unresolved, will impact the Company's ability to make required interest
payments on the Notes and its ability to continue as a going concern and
conduct business in the normal course of operations.

The foregoing discussion includes many forward looking statements which are
subject to the risks and uncertainties described elsewhere in this quarterly
report which could cause the actual results to differ materially from the
Company's expectations.

3. EARNINGS PER COMMON SHARE

Net income (loss) per share of common stock has been computed on the basis
of the weighted average number of common shares outstanding during the period
and, where dilutive, the effect of common stock contingently issuable, which
arises primarily from the exercise of stock options, in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS"), No. 128
"Earnings Per Share". The weighted average shares of common stock outstanding
for the calculation of basic earnings per share was 8,587,000, 8,543,000,
8,788,000 and 8,788,000 for the three and six month periods ending June 30, 1998
and 1999 respectively. The weighted average shares of common stock outstanding
for the calculation of diluted earnings per share was 8,587,000 and 8,543,000
for the three and six month periods ended June 30, 1998. Diluted earnings per
share for the three and six month periods ended June 30, 1999 is equal to basic
earnings per share due to the antidilutive effect of stock options on the net
loss for the period.

9
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EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

The Company had the following indebtedness outstanding as of December 31,
1998 and June 30, 1999 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Borrowings pursuant to a revolving credit
facility with Wells Fargo Business Credit,
Inc. ....................................... $ -- $ 13,411
Fleet Capital Term Loan....................... 5,286 4,770
Accounts Payable refinanced with notes
payable..................................... -- 15,989
Other Term Loans.............................. 1,929 1,561
British Linen Capital Lease................... 28,406 25,927
10 3/4% Senior Notes Due 2008................. 100,000 100,000
-------- --------
$135,621 $161,658
Less amounts due within one year.............. (7,893) (161,658)
-------- --------
Total long-term debt and capital
lease obligations................. $127,728 $ --
======== ========
</TABLE>

The Company has covenant violations or events of default under
substantially all of its long-term debt and capital lease obligations. As such
the Company is at risk of having its debt accelerated by the lenders. One of the
many remedies under certain of these agreements is asset seizure by the lenders.
If this were to occur, the normal course of operations would be severely
impacted.

On July 15, 1999, the Company's wholly owned subsidiary, Atlantic Horizon,
Inc., entered into a term loan with Heller Financial Leasing, Inc. for an
aggregate amount of $12.5 million. This loan bears interest at 10.25% per annum,
and is payable in 83 monthly payments of principal and interest of approximately
$183,000, with a final payment of all remaining principal of $3.1 million and
accrued and unpaid interest due at maturity in seven years. Heller retained a
cash deposit of $1.0 million as security for this loan. This loan is further
secured by a first priority mortgage on the Company's Bahamian flag seismic
vessel Atlantic Horizon and a pledge by the Company of all of the stock of
Atlantic Horizon, Inc. The Company used $4.0 million of the proceeds of this
loan to pay a portion of amounts owed for equipment used in the upgrade of its
seismic vessel Atlantic Horizon. The Company also paid approximately $3.0
million on the Wells Fargo Credit Facility from the proceeds of the Heller
financing, leaving proceeds from the financing of $4.5 million for working
capital as of July 15, 1999.

On July 15, 1999, the Company also delivered a promissory note for $12.0
million payable to an equipment supplier to evidence the balance due on the
equipment used in the upgrade of the Atlantic Horizon. This note bears interest
at 11.25% per annum and is payable in 59 monthly payments of approximately
$85,000 of principal plus accrued and unpaid interest, commencing January 1,
2000, with a final payment of principal of $7.0 million plus all accrued and
unpaid interest due at maturity on January 1, 2005. This note is secured by a
guarantee of the Company's subsidiary Atlantic Horizon, Inc. and a second
mortgage on the Atlantic Horizon. In addition, if the Company does not make a
$1.5 million prepayment on this note by December 31, 1999, the interest rate on
this loan will increase to 15%. The entire $16.0 million (the $12.0 million note
and the $4.0 million paid from the proceeds of the Heller financing), is
classified as a current liability due to covenant defaults under some of the
Company's other debt.

On March 26, 1999, the Company and a number of its subsidiaries executed an
agreement with Wells Fargo Business Credit, Inc. (formerly Norwest Business
Credit, Inc.), for a $20.0 million revolving credit facility secured by accounts
receivable, inventory, and certain equipment of the Company and a number of its
subsidiaries (the "Wells Fargo Credit Facility"). On March 26, 1999, the Company
borrowed $14.0 million from Wells Fargo and repaid $14.0 million of borrowings
under a revolving credit facility with Bank One

10
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EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

Texas, N.A. and terminated the agreement related to the Bank One credit
facility. On July 15, 1999, the Company renegotiated the terms of the Wells
Fargo Credit Facility to waive certain defaults, reduce the amount of the
facility to $15.0 million, and amend certain covenants. Prior to such amendment,
the Company granted to Wells Fargo, as additional security for the loan pursuant
to the existing credit agreement, a first naval mortgage on the Company's
Panamanian flag seismic vessel Austral Horizon. The amount the Company may
borrow is limited to a borrowing base that is equal to 85% of eligible U.S.
accounts receivable. Interest accrues under the facility at the bank's base rate
plus 2.5% or LIBOR plus 2.5%. Interest only is payable monthly or at the end of
applicable LIBOR interest periods. If all borrowings under the facility are not
repaid annually, then an additional fee of .5% of the average outstanding
borrowings is payable. The Wells Fargo Credit Facility matures on March 26,
2002. As of August 3, 1999, the Company had borrowings outstanding of $5.3
million and had $1.4 million of borrowing availability remaining under the Wells
Fargo Credit Facility. The Company has defaulted on certain financial covenants
for the period ended June 30, 1999 related to the Wells Fargo Credit Facility.
The Company is currently seeking a waiver for this default, although there can
be no assurance that the Company will be able to obtain this waiver. The entire
balance relating to these obligations totaling $13.4 million is classified as a
current liability as of June 30, 1999.

In connection with the acquisition of NRG Services, Inc. in November 1998,
the Company assumed approximately $2.0 million of term loans payable. These term
loans have monthly payments ranging from approximately $5,300 to $26,000,
interest rates ranging from 5.75% to 9.7%, and maturities ranging from April
2000 to August 2002. These loans has been classified as current liabilities due
to covenant defaults under these loans as of June 30, 1999.

In July 1998, the Company completed an offering of $100 million of 10 3/4%
Senior Notes due 2008 resulting in net proceeds to the Company of approximately
$96.4 million after deducting offering-related expenses. The Company used the
proceeds to fund upgrades on two seismic vessels, the Austral Horizon and the
Atlantic Horizon. On July 15, 1999, the Company announced that it did not make
the $5.375 million interest payment on the Notes due on that date. Under the
indenture governing the Notes, the Company has a 60-day grace period in which to
make this interest payment. Given the uncertainty of the Company's ability to
make the interest payment within the allowable grace period, the Company has
classified the Notes as a current liability.

In April 1998, the Company obtained a term loan with Fleet Capital
Corporation for the financing of an Opseis system for approximately $5.9
million. The loan is for a period of five years and bears interest at a fixed
rate of 7.36%. Monthly payments of approximately $117,000 are due under the loan
with the Opseis system pledged as security for the loan. The Company has
defaulted on certain financial covenants for the period ended June 30, 1999
related to the Fleet Capital term loan. The Company is currently seeking a
waiver for these defaults, although there can be no assurance that the Company
will be able to obtain this waiver. The entire balance relating to these
obligations totaling $4.8 million is classified as a current liability.

In April 1998, the Company entered into an agreement with British Linen
Shipping Limited to finance upgrades to the Company's seismic vessel Labrador
Horizon and to refinance the existing capital lease of this vessel. As part of
this financing, British Linen purchased the vessel from the previous owner,
funded approximately $20.0 million of the upgrades to the vessel, and entered
into a capital lease of the vessel to the Company for a five-year term
commencing upon completion of the upgrades, for a total commitment of
approximately $31.3 million. The facility bears interest at a rate of LIBOR plus
1.375% and required the Company to post a security deposit of approximately $5
million with scheduled amounts to be refunded based upon a predetermined
formula. Additionally, the Company has the option to acquire the vessel at the
end of the term of the capital lease for a price of 0.1% of the total facility
commitment. The Company has defaulted on a covenant under this capital lease.
The Company is currently seeking a waiver of the default under this capital
lease, although there can be no assurance that the Company will be able to
obtain this waiver. The

11
<PAGE> 12
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

Company has classified the entire balance of $25.9 million as a current
liability in the June 30, 1999 consolidated balance sheet.

5. COMMITMENTS AND CONTINGENCIES

The Company is involved in or threatened with various legal proceedings
from time to time arising in the normal course of business. Management of the
Company does not believe that any liabilities resulting from such proceedings
will have a material adverse effect on its operations or financial position.

The Company generally provides services to a relatively small number of
customers, so that individual customers account for significant portions of the
Company's accounts receivable at any given time. Credit losses incurred on
receivables have historically been immaterial to the Company. The Company
currently has one receivable from a customer of $2,384,000 that is approximately
twenty-four months old which has been fully reserved for as of June 30, 1999.

6. RELATED PARTY TRANSACTIONS AND SIGNIFICANT CUSTOMER

Prior to the Company's initial public offering in July 1997, the Company
was a wholly-owned subsidiary of Seitel, Inc. During the second quarter of 1999,
Seitel dividended its remaining shares of the Company to Seitel's stockholders,
so Seitel no longer has an ownership interest in the Company. The Company enters
into various types of transactions with Seitel and its subsidiaries.

The Company performs seismic data acquisition services for Seitel's seismic
data library subsidiary and its exploration and production subsidiary. The
Company recognized revenue of $18,237,000 and $13,345,000, respectively, for the
three months ended June 30, 1998 and 1999, and $32,546,000 and $31,465,000 for
the six months ended June 30, 1998 and 1999 for seismic data acquisition
services performed for Seitel's subsidiaries.

7. OPERATING SEGMENT DISCLOSURES

The following is a summary of business segment information prepared in
accordance with the requirements of SFAS No. 131 "Disclosure about Segments of
an Enterprise and Related Information" for the six months ended June 30, 1998
and 1999. Management of the Company reviews the financial information primarily
by its two seismic operating segments, onshore seismic data acquisition and
offshore seismic data acquisition.

<TABLE>
<CAPTION>
ONSHORE OFFSHORE CORPORATE
OPERATIONS OPERATIONS OFFICE TOTAL
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
JUNE 30, 1998
Operating Revenue.................................... 40,258 17,958 -- 58,216
Operating Income (loss) before depreciation and
amortization....................................... 11,327 4,211 (2,661) 12,877
Identifiable Assets.................................. 46,103 152,952 1,806 200,862
JUNE 30, 1999
Operating Revenue.................................... 25,427 20,655 -- 46,082
Operating Income (loss) before depreciation and
amortization*...................................... 4,178 (1,088) (1,061) 2,029
Identifiable Assets.................................. 40,546 180,117 6,801 227,464
</TABLE>

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

* Excludes $43.7 million of restructuring and asset impairment charges recorded
in the quarter ended June 30, 1999

12
<PAGE> 13
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

8. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

On July 20, 1998, the Company completed the offering of its $100 million
10 3/4% Senior Notes due 2008 to pay for upgrades on two seismic vessels, the
Austral Horizon and Atlantic Horizon. Certain of the Company's wholly-owned
subsidiaries (the "Guarantor Subsidiaries") agreed to fully and unconditionally
guarantee the Company's obligations under the Notes. Certain other subsidiaries
(the "Non-Guarantor Subsidiaries") are not required to guarantee the Notes.
There are no restrictions on the Company's ability to obtain dividends or other
distribution of funds from the Guarantor Subsidiaries, except those imposed by
applicable law.

The following tables present the condensed consolidating balance sheets of
Eagle Geophysical, Inc. as a parent company, its Guarantor Subsidiaries and its
Non-Guarantor Subsidiaries as of December 31, 1998 and June 30, 1999 (unaudited)
and the related condensed consolidating statements of operations and cash flows
for the six months ended June 30, 1998 and 1999 (unaudited). The Company has not
presented separate financial statements and other disclosure concerning each of
the Guarantor Subsidiaries because management has determined that such
information is not material to investors.

13
<PAGE> 14
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

EAGLE GEOPHYSICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion of debt and
capital lease
obligations............... $ -- $ 1,830 $ 6,063 $ -- $ 7,893
Accounts payable............ -- 13,193 5,045 (1,165) 17,073
Intercompany payables,
net....................... (157,828) 149,091 25,418 (16,681) --
Accrued liabilities......... 632 4,895 18,932 -- 24,459
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... -- 3,367 -- -- 3,367
--------- -------- ------- -------- --------
Total Current
Liabilities..... (157,196) 172,376 55,458 (17,846) 52,792
Long-term debt.............. 100,000 5,385 -- -- 105,385
Capital leases
obligations............... -- -- 22,343 -- 22,343
Deferred income taxes and
other obligations......... 1,353 1,522 -- -- 2,875
--------- -------- ------- -------- --------
Total
Liabilities..... (55,843) 179,283 77,801 (17,846) 183,395
--------- -------- ------- -------- --------
Stockholders' Equity........ 78,874 10,995 2,402 (2,471) 89,800
--------- -------- ------- -------- --------
Total Liabilities
and
Stockholders'
Equity.......... $ 23,031 $190,278 $80,203 $(20,317) $273,195
========= ======== ======= ======== ========
</TABLE>

14
<PAGE> 15
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

EAGLE GEOPHYSICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion of debt and
capital lease
obligations............... $ 113,411 $ 6,332 $ 41,915 $ -- $161,658
Accounts payable............ -- 9,353 4,974 -- 14,327
Intercompany payables,
net....................... (164,394) 163,176 17,900 (16,682) --
Accrued liabilities......... 2,511 3,769 8,763 -- 15,043
Billings in excess of costs
and estimated earnings on
uncompleted contracts..... -- 5,003 -- -- 5,003
--------- -------- -------- -------- --------
Total Current
Liabilities..... (48,472) 187,633 73,552 (16,682) 196,031
Deferred income taxes and
other obligations......... 1,943 744 -- -- 2,687
--------- -------- -------- -------- --------
Total
Liabilities..... (46,529) 188,377 73,552 (16,682) 198,718
--------- -------- -------- -------- --------
Stockholders' Equity........ 70,503 (11,223) (28,063) (2,471) 28,746
--------- -------- -------- -------- --------
Total Liabilities
and
Stockholders'
Equity.......... $ 23,974 $177,154 $ 45,489 $(19,153) $227,464
========= ======== ======== ======== ========
</TABLE>

15
<PAGE> 16
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

EAGLE GEOPHYSICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
EAGLE RECLASSIFICATIONS EAGLE
GEOPHYSICAL, INC. GUARANTOR NON-GUARANTOR AND GEOPHYSICAL, INC.
PARENT COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
----------------- ------------ ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
1998
REVENUES...................... $ -- $ 43,995 $ 15,188 $(897) $ 58,216
EXPENSES
Operating Expenses.......... -- 31,741 9,122 (897) 39,966
Depreciation and
amortization............. 13 4,407 3,267 -- 7,687
Selling, general and
administrative
expenses................. 1,753 1,923 1,697 -- 5,373
Interest and other expense,
net...................... 156 8 187 -- 351
------- -------- -------- ----- --------
1,922 38,079 14,273 (897) 53,377
------- -------- -------- ----- --------
Income (loss) before provision
for income taxes............ (1,922) 5,916 845 -- 4,839
Provision (benefit) for income
taxes....................... (721) 2,228 453 -- 1,960
------- -------- -------- ----- --------
NET INCOME (LOSS)............. $(1,201) $ 3,688 $ 392 $ -- $ 2,879
======= ======== ======== ===== ========
1999
REVENUES...................... $ -- $ 39,238 $ 7,592 $(748) $ 46,082
EXPENSES
Operating Expenses.......... -- 34,554 6,317 (748) 40,123
Depreciation and
amortization............. -- 10,060 5,025 -- 15,085
Selling, general and
administrative
expenses................. -- 2,205 1,725 -- 3,930
Restructuring and asset
impairment charge........ -- 18,495 25,166 -- 43,661
Interest and other expense,
net...................... 4,737 681 772 -- 6,190
------- -------- -------- ----- --------
4,737 65,995 39,005 (748) 108,989
------- -------- -------- ----- --------
Income (loss) before provision
for income taxes............ (4,737) (26,757) (31,413) -- (62,907)
Benefit for income taxes...... (1,853) -- -- -- (1,853)
------- -------- -------- ----- --------
NET INCOME (LOSS)............. $(2,884) $(26,757) $(31,413) $ -- $(61,054)
======= ======== ======== ===== ========
</TABLE>

16
<PAGE> 17
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

EAGLE GEOPHYSICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
EAGLE RECLASSIFICATIONS EAGLE
GEOPHYSICAL, INC. GUARANTOR NON-GUARANTOR AND GEOPHYSICAL, INC.
PARENT COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
----------------- ------------ ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............. $ (1,201) $ 3,688 $ 392 $ -- $ 2,879
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities.................. (2,248) 23,448 10,732 (3,213) 28,719
-------- -------- -------- ------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES........ (3,449) 27,136 11,124 (3,213) 31,598
-------- -------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase and upgrades of
property and equipment...... -- (4,633) (40,526) -- (45,159)
Cash received on disposal of
property and equipment...... -- 152 -- -- 152
Cash paid for multi-client
Data Library, net........... -- (7,685) -- -- (7,685)
Cash paid for shot-hole
drilling company, net of
cash acquired............... -- (3,516) -- -- (3,516)
-------- -------- -------- ------- --------
NET CASH USED IN INVESTING
ACTIVITIES.................. (15,682) (40,526) -- (56,208)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under credit
facility.................... 30,500 -- -- -- 30,500
Repayments under credit
facility.................... (8,000) -- -- -- (8,000)
Principal payments on term
loans....................... -- (81) -- -- (81)
Principal payments on capital
leases...................... -- (1,199) -- (1,199)
Proceeds (payments) on
intercompany advances....... (22,702) (13,244) 35,946 -- --
Other, net.................... (180) -- -- -- (180)
-------- -------- -------- ------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES........ (382) (13,325) 34,747 -- 21,040
-------- -------- -------- ------- --------
Net decrease in cash and cash
equivalents................. (3,831) (1,871) 5,345 (3,213) (3,570)
Cash and cash equivalents,
beginning of period......... 8,450 1,871 9,161 -- 19,482
-------- -------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END
OF PERIOD................... $ 4,619 $ -- $ 14,506 $(3,213) $ 15,912
======== ======== ======== ======= ========
</TABLE>

17
<PAGE> 18
EAGLE GEOPHYSICAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)

EAGLE GEOPHYSICAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING GUARANTOR, NON-GUARANTOR AND
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
EAGLE RECLASSIFICATIONS EAGLE
GEOPHYSICAL, INC. GUARANTOR NON-GUARANTOR AND GEOPHYSICAL, INC.
PARENT COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS AND SUBSIDIARIES
----------------- ------------ ------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............. $ (2,884) $(26,757) $(31,413) $ -- $(61,054)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities................ 9,799 34,910 26,684 572 71,965
-------- -------- -------- ------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES........ 6,915 8,153 (4,729) 572 10,911
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from Sale of
Equipment................... -- 29 -- -- 29
Purchase and upgrades of
property and equipment...... -- (23,345) -- -- (23,345)
Cash paid for multi-client
data library................ -- (5,208) -- -- (5,208)
-------- -------- -------- ------- --------
NET CASH USED IN INVESTING
ACTIVITIES.................. -- (28,524) -- -- (28,524)
-------- -------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under credit
facility.................... 39,420 -- -- -- 39,420
Repayments under credit
facility.................... (26,009) -- -- -- (26,009)
Principal payments on term
loans....................... -- (882) -- -- (882)
Principal payments on capital
leases...................... -- -- (2,479) -- (2,479)
Proceeds (payments) on
intercompany advances....... (19,977) 15,904 4,073 -- --
-------- -------- -------- ------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES........ (6,566) 15,022 1,594 -- 10,050
-------- -------- -------- ------- --------
Net increase (decrease) in
cash and cash equivalents... 349 (5,349) (3,135) 572 (7,563)
Cash and cash equivalents,
beginning of period......... 352 7,597 3,547 (1,165) 10,331
-------- -------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END
OF PERIOD................... $ 701 $ 2,248 $ 412 $ (593) $ 2,768
======== ======== ======== ======= ========
</TABLE>

18
<PAGE> 19

ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL

The accompanying financial statements included in this Quarterly Report on
Form 10-Q have been prepared assuming that the Company will continue as a going
concern. The Company has experienced recent operating losses and significantly
decreased liquidity that raise substantial doubt about its ability to meet
future expected expenditures necessary to continue as a going concern. The
financial statements do not reflect any adjustments that might result from the
outcome of this uncertainty. In this regard, the Company is currently pursuing a
financial recapitalization to enable it to continue as a going concern. The
financial recapitalization could include negotiations with bond holders to defer
interest payments, property sales on an acceptable basis, conversion of some or
all of the Company's debt to equity, new third party equity investments, or some
combination of the foregoing, as well as other recapitalization opportunities
which may become available. There can be no assurance that the Company will
actually conclude any financial recapitalization. In the absence of a
satisfactory recapitalization, the Company anticipates that its liquidity
problems will likely continue, and the Company may be forced to seek protection
from its creditors through bankruptcy.

The Company's revenues are generated from the sale of onshore and offshore
seismic data acquisition services and, commencing in March 1998, the sale of
seismic shot-hole drilling and front-end services. The Company focuses its
onshore operations and front-end services in logistically difficult wetland
environments along the U.S. Gulf Coast, Canada and commencing in the second
quarter of 1999, in Argentina. The Company focuses its offshore operations in
congested areas in the U.S. Gulf of Mexico, the Atlantic Coast of South America,
and the North Sea. Onshore operations including front-end services accounted for
approximately 65% and 52% of the Company's consolidated revenues for the three
months ended June 30, 1998 and 1999, respectively, with offshore operations
accounting for the remaining 35% and 48% of consolidated revenues for the three
months ended June 30, 1998 and 1999, respectively.

The Company generally provides its onshore seismic data acquisition
services under fixed fee contracts with its customers. The Company provides its
offshore seismic data acquisition services under either distance-or time-based
contracts (or a combination of both methods) or turnkey contracts that provide
for a fixed fee. Although the Company generally does not retain rights to the
data acquired, an increasing percentage of the Company's offshore data
acquisition projects are multi-client surveys.

In a multi-client survey, the Company retains an interest in the acquired
data. Conducting multi-client surveys normally has little effect on operating
margins in the short term because the Company will capitalize most of the costs
relating to the acquisition of the multi-client data that are not offset by
pre-funding. However, since revenues from multi-client projects only include
pre-funding amounts during the acquisition of the data, and these pre-funding
amounts are normally less than revenues for proprietary data acquisition
projects, total revenues and net income tend to be less during multi-client
acquisition projects than during proprietary acquisition projects. If the
Company is able to make sales of the multi-client data after full amortization
of the acquisition cost of the data (up to four years), the additional sales
will result in revenues with little or no cost, increasing net income.
Conversely, if the sales of the multi-client data are less than originally
projected by management, the asset value of the data will be adjusted to equal
the estimated net realizable value of the data (total estimated future sales
less selling expenses), resulting in decreased net income. The Company has
recorded an asset impairment charge of approximately $3.3 million related to
various multi-client library projects during the quarter ended June 30, 1999.

Because the Company derives a portion of its offshore revenues from sales
internationally, the Company is subject to risks relating to fluctuations in
currency exchange rates. The Company's costs and revenues from offshore
operations have historically been evenly divided between the U.S. dollar and the
British pound. The Company's financial statements are prepared using the U.S.
dollar as the functional currency, and, therefore, fluctuations in the exchange
rate between the U.S. dollar and the British pound affect the Company's costs
and revenues. Historically, fluctuations in exchange rates have not had a
material impact on the Company's results of operations, and the Company does not
currently engage in any currency hedging activities. As the Company expands its
operations into new geographic markets, such as Latin America, which may involve

19
<PAGE> 20

more extensive currency risks, the Company intends to protect itself against
foreign currency fluctuations by generally attempting to match foreign currency
revenues and expenses in order to balance its net position of receivables and
payables denominated in foreign currencies, by endeavoring to require its
customers to pay for services in U.S. dollars and, to a lesser extent, by
purchasing foreign exchange contracts and other foreign exchange instruments to
counteract currency fluctuations.

The Company generally provides services to a relatively small group of key
customers that account for a significant percentage of the accounts receivable
of the Company at any given time. The Company's key customers vary over time,
but have historically included Seitel and its subsidiaries. The Company extends
credit to various companies in the oil and gas industry, including its key
customers, for the acquisition of seismic data, which results in a concentration
of credit risk. This concentration of credit risk may be affected by changes in
the economic or other conditions of the Company's key clients and may
accordingly impact the Company's overall credit risk. As of June 30, 1999, the
Company had one receivable from a customer of approximately $2.4 million that is
approximately 24 months old. In light of the age of this receivable, the Company
has provided a valuation reserve for this receivable of $2.4 million as of June
30, 1999. Historical credit losses incurred on receivables by the Company have
been immaterial.

RESULTS OF OPERATIONS

The current state of the oil and gas services industry in which the Company
operates has been adversely impacted by sustained declines in oil and natural
gas commodity prices which first appeared in the second quarter of 1998 and have
continued through the second quarter of 1999, when commodity prices began to
show signs of a recovery. These price declines have adversely impacted the cash
flows of major and independent oil and gas companies and seismic data library
companies, which comprise the Company's customer base. The Company's customers
have reacted to this environment by reducing capital spending on oil and gas
exploration projects and purchases of seismic data. The Company was first
impacted by these industry factors in the fourth quarter of 1998 when several
projects experienced delays as customers chose to delay commencement of
previously committed projects. The Company continued to be affected by these
industry factors in the first and second quarters of 1999 with fewer new
projects commencing and with delays on existing projects. The Company does not
expect this environment to improve significantly through the end of 1999, when
the current recovery in energy commodity prices may begin to have a positive
impact on the oil and gas service sector.

The continued weakened business conditions in the oil and gas services
industry during the second quarter of 1999 was a primary factor in the Company's
decision to implement an operational restructuring plan. The restructuring plan,
which resulted in a restructuring and asset impairment charge of approximately
$43.7 million, included a $1.0 million charge for the termination of
approximately 22 percent of the Company's workforce, an impairment charge of
$18.5 million for the write-off of goodwill from the acquisitions of Energy
Research International and Seismic Drilling & Service Company, an impairment
charge of $5.3 million for the impairment of in-water seismic equipment, an
impairment charge of $4.3 million for the vessel Atlantic Horizon, asset write
off and charter termination provisions of $10.1 million related to the
decommissioning of the Discoverer, Celtic Horizon, and Pacific Horizon, an
impairment charge of $3.3 million for the Company's multi-client data library,
and a $1.2 million charge for disposal of excess land seismic equipment and
office lease consolidations. The Company estimates approximately $5.1 million of
the total $43.7 million in nonrecurring charges will be cash costs. The Company
anticipates the operational restructuring will be completed by the end of 1999.

20
<PAGE> 21

The following discussion of the results of operations is divided into a
discussion of the Company's onshore operations, which includes front-end
services, and the Company's offshore operations. The following results exclude
the effect of a $43.7 million restructuring and asset impairment charge taken as
a result of the Company's operational restructuring plan in the second quarter
of 1999. The following tables summarize the results of operations by operating
entity for the three and six month periods ended June 30, 1998 and 1999
respectively:

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30
---------------------------------------------------------------------
1998 1999
--------------------------------- ---------------------------------
ONSHORE OFFSHORE ONSHORE OFFSHORE
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues............. $22,422 $11,914 $34,336 $ 9,355 $ 8,592 $17,947
Operating Expenses*............ 15,819 6,708 22,527 9,979 9,336 19,315
Gross Margin*.................. 6,603 5,206 11,809 (624) (744) (1,368)
Gross Margin %................. 29.4% 43.7% 34.4% (6.7)% (8.7)% (7.6)%
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
---------------------------------------------------------------------
1998 1999
--------------------------------- ---------------------------------
ONSHORE OFFSHORE ONSHORE OFFSHORE
OPERATIONS OPERATIONS TOTAL OPERATIONS OPERATIONS TOTAL
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues............. $40,258 $17,958 $58,216 $25,427 $20,655 $46,082
Operating Expenses*............ 28,903 11,063 39,966 20,133 19,990 40,123
Gross Margin*.................. 11,355 6,895 18,250 5,294 665 5,959
Gross Margin %................. 28.2% 38.4% 31.3% 20.8% 3.2% 12.9%
</TABLE>

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

* Excludes restructuring and asset impairment charges of $43.7 million for the
quarter ended June 30, 1999.

ONSHORE OPERATIONS

Quarter Ended June 30, 1998 Compared to June 30, 1999

Revenues decreased 58.0% from $22.4 million in the second quarter of 1998
to $9.4 million in the second quarter of 1999, primarily due to fewer projects
in progress during the 1999 quarter as compared to the 1998 quarter. The Company
also experienced delays due to client mineral and land permit delays that
lowered production on the jobs in progress.

Operating expenses (excluding depreciation and restructuring and asset
impairment charges) decreased 36.7% from $15.8 million in the second quarter of
1998 to $10.0 million in the second quarter of 1999, primarily due to fewer
projects in progress during the 1999 quarter as compared to the 1998 quarter.
However, the decrease in costs did not offset the decrease in revenues which
included unforeseen client mineral and land permit delays. These factors
unfavorably impacted the operating margin percentage which decreased from 29.4%
for the second quarter of 1998 compared to an operating margin of (6.7)% for the
1999 quarter.

Depreciation and amortization remained the same at $2.5 million for the
second quarter of 1998 and 1999 respectively.

Selling, general and administrative expenses decreased 57.9% from $1.9
million in the second quarter of 1998 to $0.8 million in the second quarter of
1999, due to savings in division and corporate overhead.

Net interest and other expense excluding restructuring and asset impairment
charges increased from $0.3 million in the 1998 period to $0.8 million in the
1999 period primarily due to borrowings under the Company's revolving credit
facility with Wells Fargo Business Credit, Inc. (the "Wells Fargo Credit
Facility") and interest paid on the Company's term loans acquired with the
acquisition of NRG in the fourth quarter of 1998.

Income tax expense decreased from $1.2 million in the 1998 period to a
$(1.6) million income tax benefit in the 1999 period due to benefitting losses
based on estimated loss carryback amounts.

21
<PAGE> 22

Year-to-date Ended June 30, 1998 Compared to June 30, 1999

Revenues decreased 37.0% from $40.3 million in the 1998 period to $25.4
million in the 1999 period, primarily due to fewer projects in progress during
the first half of 1999 as compared to the first half of 1998. The Company also
experienced delays due to client mineral and land permit delays that lowered
production on the jobs in progress.

Operating expenses (excluding depreciation and restructuring and asset
impairment charges) decreased 30.4% from $28.9 million in the 1998 period to
$20.1 million in the 1999 period, primarily due to fewer projects in progress
during the 1999 period as compared to the 1998 period. However, the decrease in
costs did not offset the decrease in revenues which included unforeseen client
mineral and land permit delays. These factors unfavorably impacted the operating
margin percentage which decreased from 28.2% for the 1998 period compared to an
operating margin of 20.8% for the 1999 period.

Depreciation and amortization increased 15.9% from $4.4 million in the 1998
period to $5.1 million in the 1999 period. This increase resulted from
depreciation on equipment for the Company's fourth onshore seismic crew which
commenced operations in April 1998 and equipment from the assets acquired in the
NRG Acquisition in November 1998.

Selling, general and administrative expenses decreased 38.9% from $3.6
million in the 1998 period to $2.2 million in the 1999 period, due to savings in
division and corporate overhead.

Net interest and other expense excluding restructuring and asset impairment
charges increased from $0.2 million in the 1998 period to $1.1 million in the
1999 period primarily due to borrowings under the Wells Fargo Credit Facility
and interest paid on the Company's term loans acquired with the acquisition of
NRG in the fourth quarter of 1998.

Income tax expense decreased from $1.8 million in the 1998 period to a
$(2.2) million income tax benefit in the 1999 period due to pre-tax losses
incurred during the 1999 period.

OFFSHORE OPERATIONS

Quarter Ended June 30, 1998 Compared to June 30, 1999

Revenue decreased 27.7% from $11.9 million in the second quarter of 1998 to
$8.6 million in the second quarter of 1999, primarily due to decreases in vessel
availability and lower contract rates for work in all markets worldwide. The
Company's vessel the Labrador Horizon was working on multi-client projects in
the Gulf of Mexico for the entire 1999 quarter compared to contract work at
higher rates in the 1998 quarter. The Austral Horizon, which began service in
the fourth quarter of 1998, worked for only a portion of the quarter prior to
transiting to a North Sea port to be temporarily idled. The vessels Discoverer
and Celtic Horizon performed contract work in the Gulf of Mexico for a portion
of the 1999 quarter prior to being decommissioned and returned to their
respective charter owners as compared to multi-client work in the Gulf of Mexico
for the 1998 quarter. The Pacific Horizon was fully utilized during both the
1999 and 1998 periods working off the coast of Argentina. These declines were
partially offset by the Atlantic Horizon which commenced operations in the 1999
quarter.

Operating expenses (excluding depreciation and restructuring and asset
impairment charges) increased 38.8% from $6.7 million in the second quarter of
1998 to $9.3 million in the second quarter of 1999 due to the increase in the
number of vessels operating during the 1999 quarter. Downtime, decreases in
rates available for contract work, and start-up costs for the Atlantic Horizon
contributed to a lower operating margin which decreased from 43.7% for the 1998
quarter compared to (8.7)% for the 1999 quarter.

Depreciation and amortization increased significantly from $2.3 million in
the second quarter of 1998 to $5.8 million in the second quarter of 1999,
resulting from the upgraded Labrador Horizon, depreciation for the Austral
Horizon which began service in the fourth quarter of 1998, depreciation for the
Atlantic Horizon which began service during the second quarter of 1999, and
additional equipment purchased for the Celtic Horizon in the 1998 quarter.

22
<PAGE> 23

Selling, general and administrative expenses decreased from $1.0 million in
the second quarter of 1998 to $0.9 million in the second quarter of 1999 due to
down-sizing of staff levels in the offshore administrative office.

Net interest and other expense increased significantly from $95,000 in the
second quarter of 1998 to $3.2 million in the second quarter of 1999 primarily
due to interest on the Labrador Horizon's capital lease for the entire 1999
quarter and interest on the $100 million 10 3/4% Senior Notes which were issued
in July 1998.

Income tax expense increased from $323,000 in the second quarter of 1998 to
$353,000 in the second quarter of 1999 as a result of a valuation allowance
recorded on foreign net operating loss carryforwards in the 1999 period.

Year-to-date Ended June 30, 1998 Compared to June 30, 1999

Revenue increased 15.0% from $18.0 million in the 1998 period to $20.7
million in the 1999 period, primarily due to the utilization of the vessels
Labrador Horizon and Austral Horizon during the first six months of 1999. The
Company's vessel the Labrador Horizon was undergoing a major upgrade in 1998 and
did not commence service until April 1998. The Company's vessel the Austral
Horizon was also undergoing a major upgrade and was not in service during the
1998 period. Additionally, the Company completed the major upgrade of the
Atlantic Horizon which commenced service in May 1999. These increases in vessel
availability were offset by lower rates for contract work in all markets and the
Company's decision in the second quarter of 1999 to shut down all three
chartered vessels and return them to the respective owners. The Austral Horizon,
which began service in the fourth quarter of 1998, worked for only a portion of
the second quarter of 1999 prior to transiting to a North Sea port to be
temporarily idled. The vessels Discoverer and Celtic Horizon performed contract
work in the Gulf of Mexico through a portion of the second quarter of 1999
quarter prior to being decommissioned and returned to their respective charter
owners. The Pacific Horizon was fully utilized during both the 1999 and 1998
periods working off the coast of Argentina although the Company has since
commenced shutdown and return of the vessel.

Operating expenses (excluding depreciation and restructuring and asset
impairment) increased 80.2% from $11.1 million in the 1998 period to $20.0
million in the 1999 period due to the increase in the number of vessels
operating during the 1999 period. Downtime, decreases in rates available for
contract work, and start-up costs for the Atlantic Horizon contributed to a
lower operating margin which decreased from 38.4% for the 1998 period compared
to 3.2% for the 1999 period.

Depreciation and amortization increased significantly from $3.3 million in
the 1998 period to $9.9 million in the 1999 period, resulting from the upgraded
Labrador Horizon, depreciation for the Austral Horizon which began service in
the fourth quarter of 1998, depreciation for the Atlantic Horizon which began
service during the second quarter of 1998, and additional equipment purchased
for the Celtic Horizon in the 1998 period.

Selling, general and administrative expenses increased from $1.8 million in
the 1998 period to $1.9 million in the 1999 period due to higher marketing costs
partially offset by the down-sizing of staff levels in the offshore
administrative office.

Net interest and other expense increased significantly from $.2 million in
the 1998 period to $5.1 million in the 1999 period primarily due to interest on
the Labrador Horizon's capital lease for the entire 1999 period and interest on
the $100 million 10 3/4% Senior Notes which were issued in July 1998.

Income tax expense increased from $0.2 million in the second quarter of
1998 to $0.3 million in the second quarter of 1999 as a result of a valuation
allowance recorded on foreign net operating loss carryforwards in the 1999
period.

LIQUIDITY

The current industry environment and debt incurred during the expansion of
the Company in 1998 have contributed to a decline in the Company's working
capital position. The Company had a net working capital deficit of ($156.1)
million as of June 30, 1999. The indebtedness of the Company as of such date
consisted of

23
<PAGE> 24

the $13.4 million of borrowings under the Wells Fargo Credit Facility, $100
million of 10 3/4% Senior Notes due 2008, borrowings under the Fleet Term Loan
of $4.8 million, accounts payable with an equipment supplier of $16.0 million, a
capital lease obligation with British Linen totaling $25.9 million, and other
term loans of $1.5 million. This indebtedness totaled approximately $161.6
million as of June 30, 1999, and has been classified entirely as a current
liability due to various debt covenant defaults.

The Company has initiated several actions to reduce costs and secure
financing during this difficult period.

On July 15, 1999, the Company, through its wholly owned subsidiary Atlantic
Horizon, Inc., entered into a term loan with Heller Financial Leasing, Inc. for
an aggregate amount of $12.5 million. This loan bears interest at 10.25% per
annum, and is payable over seven years with a balloon payment due at maturity.
Heller retained a cash deposit of $1.0 million as security for this loan. This
loan is further secured by a mortgage on the Company's Atlantic Horizon seismic
vessel. The Company used $4.0 million of the proceeds of this loan to pay for
equipment used in the upgrade of its seismic vessel Atlantic Horizon. The
Company delivered a promissory note for $12.0 million payable to an equipment
supplier to evidence the balance due on the equipment used in the upgrade of the
Atlantic Horizon, which bears interest at 11.25% per annum and is payable over
five years with a balloon payment due at maturity. This note is secured by a
guarantee of Atlantic Horizon, Inc. and a second mortgage on the Atlantic
Horizon. In addition, if the Company does not make a $1.5 million prepayment on
this note by December 31, 1999, the interest rate on this loan will increase to
15%. The entire $16.0 million (the $12.0 million note and the $4.0 million paid
from the proceeds of the Heller financing) is classified as a current liability
due to covenant defaults under some of the Company's other debt. At the same
time, the Company renegotiated the terms of its revolving credit facility with
Wells Fargo Business Credit, Inc. (formerly Norwest Business Credit, Inc.) to
waive certain defaults, reduce the amount of the facility to $15.0 million, and
amend certain covenants. Prior to such amendment, the Company granted to Wells
Fargo, as additional security for the loan pursuant to the existing credit
agreement, a mortgage on the Company's Austral Horizon seismic vessel. The
Company also paid approximately $3.0 million on the Wells Fargo Credit Facility
from the proceeds of the Heller financing, leaving proceeds from the financing
of $4.5 million for working capital as of July 15, 1999.

On July 15, 1999, the Company announced that it did not make the $5.375
million interest payment on its outstanding $100 million 10 3/4% Senior Notes
due 2008 (the "Notes") due on that date. Under the indenture governing the
Notes, the Company has a 60 day grace period in which to make this interest
payment. Given the uncertainty of the Company's ability to make the interest
payment within the allowable grace period, the Company has classified the Notes
as a current liability.

The Company has defaulted on certain financial covenants for the period
ended June 30, 1999 related to the Wells Fargo Credit Facility, the Fleet
Capital term loan and its notes payable assumed in connection with the NRG
Acquisition. The Company is currently seeking waivers for these defaults
although there can be no assurance that the Company will be able to obtain this
waiver. The entire balance relating to these obligations totaling $19.7 million
is classified as a current liability.

The Company has also defaulted on a covenant under its $25.9 million
capital lease for the seismic vessel Labrador Horizon with British Linen
Shipping Limited. The Company is currently seeking a waiver of the default under
this capital lease, although there can be no assurance that the Company will be
able to obtain this waiver. The Company has therefore classified the entire
$25.9 million obligation with British Linen as a current liability.

The Company believes that its cash on hand as a result of the Heller
financing, available borrowings under its revolving line of credit with Wells
Fargo, plus the expected normal cash flow from operations will not be sufficient
to fund its working capital needs for the remainder of 1999. The Company does
not currently have the resources to meet its interest payment obligations on the
Notes on or before the expiration of the 60 day grace period for such payment.

As previously reported, the Company has engaged CIBC World Markets ("CIBC")
as the Company's exclusive financial advisor in connection with the possible
financial recapitalization of the Company. In its

24
<PAGE> 25

capacity as financial advisor, CIBC will investigate and evaluate such
possibilities as negotiations with the bond holders to defer interest payments,
property sales on an acceptable basis, conversion of some or all of the debt to
equity, new third party equity investments, or some combination of the
foregoing, as well as other recapitalization opportunities which may become
available. There can be no assurance that the Company will actually conclude any
financial recapitalization. In the absence of a satisfactory recapitalization,
the Company anticipates that its liquidity problems will likely continue. The
liquidity problems, if unresolved, may impact the Company's ability to make
required interest payments on the Notes in the future.

YEAR 2000

The Company is currently in the process of evaluating its computer hardware
and software systems to ensure such programs and systems will be able to process
transactions in the year 2000 ("Y2K"). The Company is also currently identifying
other equipment which contains embedded electronics that may render the
equipment inoperable in the year 2000 and is evaluating the plans of its
material suppliers and vendors to become Y2K compliant. The Company anticipates
it will have hardware and software critical to its operation Y2K compliant
before the end of 1999. The Company is currently evaluating the time table upon
which all other hardware, software, and equipment can be made Y2K compliant and
will target a date when the evaluation is complete.

Although it is not possible to accurately estimate the costs of this
information analysis, at this time the Company expects that such costs will not
be material to the Company's financial position or the results of operations.
There can be no assurance, however, that the Company, its suppliers and vendors
or their respective software vendors will complete all modifications to all
material information technology systems in a timely manner, or as to the costs
associated with the Company becoming Y2K compliant, or the costs of the failure
of any of the Company's vendors failing to become Y2K compliant.

The Company's risks due to failure of computer hardware and software not
being Y2K compliant include the risk that the Company's seismic recording
systems will not operate properly or as efficiently, thus causing an unexpected
decline in revenue. The Company also risks not being able to record and process
transactions properly in its accounting system. Such risks could lead to a
material business interruption and could have a material adverse impact on the
Company's results of operations, although the amount can not be estimated. The
Company will continue to consider the likelihood of a material business
interruption due to the Year 2000 Problem, and if necessary, implement an
appropriate contingency plan.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, changes in the exploration budgets of the Company's
seismic data and related services customers, actual customer demand for the
Company's seismic acquisition services, and the timing and extent of changes in
commodity prices for natural gas, crude oil and condensate and natural gas
liquids and conditions in the capital markets and equity markets during the
periods covered by the forward looking statements.

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk, including adverse changes in
interest rates and foreign currency exchange rates. Refer to the Company's Form
10-K for the year ended December 31, 1998 for a detailed discussion of these
risks. Changes in the Company's market risk exposures since December 31, 1998
are discussed below.

The Company has a revolving credit facility with Wells Fargo Business
Credit, Inc. (formerly Norwest Business Credit, Inc.). Interest accrues under
the Wells Fargo facility at the bank's base rate plus 2.5% or LIBOR plus 2.5%.
As of August 3, 1999 approximately $5.3 million was borrowed under this
facility. The
25
<PAGE> 26

carrying value and fair value of this debt are the same. Changes in interest
rates under the Wells Fargo credit facility would effect the Company's results
of operations and cash flow requirements for interest expense.

PART II -- OTHER INFORMATION

ITEMS 1-2 -- NOT APPLICABLE

ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

On July 15, 1999, the Company announced that it did not make its semiannual
interest payment on its 10 3/4% Senior Notes due 2008. This event caused a
covenant default under the Hire Purchase Agreement and Corporate Guarantee
Agreement dated April 1, 1998 with British Linen Shipping Limited. The balance
owed to British Linen as of June 30, 1999 was approximately $25.9 million. The
Company is currently seeking a waiver of the default under this capital lease,
although there can be no assurance that the Company will be able to obtain this
waiver.

The Company did not meet certain financial covenants as of June 30, 1999
with respect to the Credit and Security Agreement dated March 26, 1999 and as
amended on July 14, 1999 between Wells Fargo Business Credit, Inc. and the
Company. This caused an event of default under the terms of the agreement. The
balance owed to Wells Fargo Business Credit, Inc. as of June 30, 1999 was
approximately $13.4 million. The Company is currently seeking a waiver of the
default under this agreement, although there can be no assurance that the
Company will be able to obtain this waiver.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Stockholders was held on May 26, 1999.
Matters voted upon at the Annual Meeting, and the results of the votes, are as
follows:

1. The election of five directors to serve until the 2000 Annual
Meeting.

<TABLE>
<CAPTION>
NO. OF NO. OF
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
<S> <C> <C>
William L. Lurie............................ 7,497,028 104,625
Jay N. Silverman............................ 7,498,278 103,375
George Purdie............................... 7,490,384 111,269
Paul G. Somerville.......................... 7,556,328 45,325
Douglas B. Thompson......................... 7,556,778 44,875
</TABLE>

2. To approve the appointment of Arthur Andersen LLP as independent
certified public accountants for the Company for the year ending December
31, 1999.

<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF
VOTES FOR VOTES AGAINST VOTES ABSTAINING
- --------- ------------- ----------------
<S> <C> <C>
7,574,714 10,520 16,419
</TABLE>

ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

(a) 27 -- Financial Data Schedule

(b) Not applicable.

26
<PAGE> 27

SIGNATURES

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

EAGLE GEOPHYSICAL, INC

/s/ JAY N. SILVERMAN President
- -----------------------------------------------------
Jay N. Silverman

/s/ RICHARD W. MCNAIRY Chief Financial Officer
- -----------------------------------------------------
Richard W. McNairy

/s/ DAVID H. SAINDON Chief Accounting Officer
- -----------------------------------------------------
David H. Saindon
</TABLE>

27
<PAGE> 28

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27 -- Financial Data Schedule
</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 1.,
FINANCIAL STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,768
<SECURITIES> 0
<RECEIVABLES> 27,935
<ALLOWANCES> 0
<INVENTORY> 2,137
<CURRENT-ASSETS> 39,973
<PP&E> 205,413
<DEPRECIATION> (39,172)
<TOTAL-ASSETS> 227,464
<CURRENT-LIABILITIES> 196,031
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 28,658
<TOTAL-LIABILITY-AND-EQUITY> 227,464
<SALES> 17,947
<TOTAL-REVENUES> 17,947
<CGS> 19,315
<TOTAL-COSTS> 29,167
<OTHER-EXPENSES> 314
<LOSS-PROVISION> 43,661
<INTEREST-EXPENSE> 3,687
<INCOME-PRETAX> (58,882)
<INCOME-TAX> (1,253)
<INCOME-CONTINUING> (57,629)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,629)
<EPS-BASIC> (6.56)
<EPS-DILUTED> (6.56)

</TABLE>