VISION ENERGY INC, S-1, 1999-11-12

VISION ENERGY INC
S-1, 1999-11-12

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------

VISION ENERGY, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1311 76-0622581
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

50 BRIAR HOLLOW LANE, 7TH FLOOR, WEST BUILDING
HOUSTON, TEXAS 77027
(713) 881-8900
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

HORACE A. CALVERT
50 BRIAR HOLLOW LANE, 7TH FLOOR, WEST BUILDING
HOUSTON, TEXAS 77027
(713) 881-8900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------

Copies to:

<TABLE>
<S> <C>
W. MARK YOUNG R. JOEL SWANSON
GARDERE WYNNE SEWELL & RIGGS, L.L.P. BAKER & BOTTS, L.L.P.
1000 LOUISIANA, SUITE 3400 910 LOUISIANA
HOUSTON, TEXAS 77002-5007 HOUSTON, TEXAS 77002
(713) 276-5864 (713) 229-1330
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this registration
statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]

If this form is filed to registered additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] __________________

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the offering. [ ] _____________________

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the offering. [ ] _____________________

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF SHARES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------

Common Stock, par value $0.01 per share............. $207,928,000 $57,805
- --------------------------------------------------------------------------------------------------------
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</TABLE>

(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE> 2

SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1999

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

12,915,000 SHARES

[LOGO]

COMMON STOCK
$ PER SHARE
- --------------------------------------------------------------------------------

This is the initial public offering of common stock of Vision Energy, Inc. The
selling stockholder identified in this prospectus is offering 12,915,000 shares.
This is a firm commitment underwriting.

We expect that the price to the public in the offering will be between $ and
$ per share. The market price of the shares after the offering may be higher
or lower than the offering price.

We will apply to include the common stock on the Nasdaq National Market under
the symbol " ."

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 12.

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------- --------------------
<S> <C> <C>
Price to the public............ $ $
Underwriting discount..........
Proceeds to the selling
stockholder..................
</TABLE>

We and the selling stockholder have granted an over-allotment option to the
underwriters. Under this option, the underwriters may elect to purchase a
maximum of 1,937,000 additional shares (1,137,000 from us and 800,000 from the
selling stockholder) within 30 days following the date of this prospectus to
cover over-allotments.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

CIBC WORLD MARKETS A.G. EDWARDS & SONS, INC.

The date of this prospectus is , 2000.

LOGO
<PAGE> 3

[INSIDE FRONT COVER -- MAP DEPICTING VISION ENERGY'S PRINCIPAL PROPERTIES]
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 12
Cautionary Statement About Forward-Looking Statements....... 19
Use of Proceeds............................................. 20
Dividend Policy............................................. 20
Dilution.................................................... 20
Capitalization.............................................. 21
Selected Financial Data..................................... 22
Pro Forma Financial Statements.............................. 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 33
Management.................................................. 46
Arrangements with Seitel.................................... 51
Certain Transactions........................................ 53
Principal and Selling Stockholders.......................... 55
Description of Capital Stock................................ 56
Shares Eligible for Future Sale............................. 60
Underwriting................................................ 61
Legal Matters............................................... 63
Experts..................................................... 63
Where You Can Find More Information......................... 64
Glossary of Natural Gas and Oil Terms....................... 65
Index to Financial Statements............................... F-1
Annex A -- Report of Independent Petroleum Engineers........ A-1
</TABLE>

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

Our executive offices are located at 50 Briar Hollow Lane, 7th Floor, West
Building, Houston, Texas 77027, and our telephone number is (713) 881-8900.

Unless otherwise stated, all information contained in this prospectus assumes no
exercise of the over-allotment option granted to the underwriters.

The underwriters are offering the shares of common stock subject to various
conditions and may reject all or part of any order.

Unless otherwise stated, the historical financial and business information set
forth in this prospectus for Vision Energy includes the historical financial and
business information of DDD Energy, Inc., a wholly owned subsidiary of Seitel,
Inc. that we will acquire upon consummation of the offering.

3
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights selected information from this prospectus, but does not
contain all information that may be important to you. This prospectus includes
specific terms of the offering, information about our business and financial
data. We encourage you to read this prospectus, including the "Risk Factors"
section beginning on page 12, in its entirety before making an investment
decision. We have provided definitions for some of the natural gas and oil
industry terms used in this prospectus in the "Glossary of Natural Gas and Oil
Terms" on page 65 of this prospectus.

OVERVIEW OF VISION ENERGY

Vision Energy, Inc. is an independent energy company engaged in the exploration,
development and production of natural gas and oil from properties located
primarily in East and South Texas, Louisiana and California. We rely extensively
on the evaluation and interpretation of 3D seismic data from our own proprietary
3D seismic database for our natural gas and oil exploration and development
activities. From our inception in 1993 through September 30, 1999, we
participated in the drilling of 207 exploratory wells on prospects generated or
evaluated by our technical staff utilizing our proprietary 3D seismic database.
Of these exploratory wells, 123 have been completed as discoveries, which has
resulted in an overall success rate of 59% versus an industry average of
approximately 33%. During that period, we also participated in 90 development
wells with an overall success rate of 88% versus an industry average of
approximately 84%. Through our efforts, we have added 147.7 Bcfe to our proved
reserves as of June 30, 1999, of which 131.7 Bcfe was through exploration and
development activities. Our average finding cost for the three years ended
December 31, 1998 was $0.83 per Mcfe, excluding costs for our unevaluated
properties and reserve purchases.

From our inception in 1993 through June 30, 1999, we participated in the
acquisition of over 2,000 square miles of 3D seismic data at a total net cost to
us of approximately $47.3 million. Over 75% of this data was commissioned by us
and is proprietary. Our 3D seismic database covers over 95% of the well
locations that we intend to drill through the end of 2000. We have a technical
staff consisting of five geologists and four geophysicists with an average of 20
years of experience. Our technical staff assists the operators of our working
interests during the evaluation and well planning phase by interpreting and
applying our 3D seismic data to increase the probability of drilling a
successful well.

As of June 30, 1999, our estimated proved reserves totaled 64.6 Bcf of natural
gas and 6,048 MBbls of oil and natural gas liquids, for a total of 100.9 Bcfe.
Approximately 57% of these reserves, on an Mcfe basis, were proved developed
reserves. The PV-10 of our net proved reserves as of June 30, 1999, was $107.4
million, using realized prices of $2.55 per Mcf for natural gas and $16.83 per
Bbl for oil and natural gas liquids. The reserve-to-production ratio for our
reserves at June 30, 1999, using trailing 12 months' production from that date,
was 13 years. As of September 30, 1999, we owned interests in approximately
353,000 gross acres (109,000 net). For the six months ended June 30, 1999, our
average daily production was approximately 20.6 MMcfe per day. These figures
have been adjusted to exclude amounts related to properties in our North Gillis
project that we sold in July 1999.

OUR STRENGTHS

We believe that our historical success and future prospects are directly related
to the following combination of strengths:

-- High Historical Drilling Success Rate. From March 1993 through September
1999, we participated in 297 natural gas and oil wells, 68% of which were
completed as discoveries, and elected not to participate in 26 wells that
were proposed by partners, 81% of which were dry holes. Our drilling
success rate for exploratory wells is approximately 59% and for
development wells is approximately 88%, both of which are above industry
averages. We believe that our ability to effectively interpret and apply
3D seismic and other geophysical and geological data has contributed
significantly to our high drilling success rate.

4
<PAGE> 6

-- Substantial Seismic Database, Acreage and Prospect Inventory. Our
proprietary 3D seismic database covers over 1,500 square miles of
developed and undeveloped properties in our core areas. As of September
30, 1999, we had working interests in 353,000 gross acres, primarily
located onshore in the U.S. Gulf Coast region and in central California,
most of which were covered by our proprietary 3D seismic database. As of
September 30, 1999, our prospect inventory included over 125 exploratory
prospects that were being analyzed by our technical staff.

-- Experienced Technical Staff. Our staff of nine geologists and
geophysicists has an average of 20 years of natural gas and oil
exploration experience. We pay our technical staff annual bonuses based
on our financial performance, and we will further incentivize these key
employees with grants of employee stock options.

-- Conservative Capital Structure. After the offering, we expect to have no
long-term debt and to have borrowing availability equal to the full
amount of our proposed credit facility. We believe our low level of
leverage and available borrowing capacity will enable us to take
advantage of market opportunities.

OUR STRATEGY

We intend to expand our reserve base, cash flow and net income and to generate
an attractive return on invested capital. We emphasize the following elements in
our business strategy to achieve these objectives:

-- Focus on Exploration. We maintain an exploration program driven by our
technical analysis of 3D seismic and other geophysical and geological
data. As of September 30, 1999, we had an inventory of over 125
exploratory prospects. From June 30, 1999 to the end of 2000, we expect
to invest $42.1 million in exploration and development activities. During
this period, we intend to drill 48 wells with our industry partners. We
allocate our exploration spending between a small number of higher risk,
higher potential prospects that may result in significant increases in
proved reserves and a greater number of lower risk, moderate potential
prospects. We work closely with the operators of our properties by
providing detailed 3D seismic and other geotechnical analysis of the
prospects to more accurately determine the economic feasibility of, and
optimal exploratory and development programs for, our prospects.

-- Extensive Use of 3D Seismic Data. We have used 3D seismic data to
identify and plan approximately 70% of the wells in which we have
participated. We intend to utilize 3D seismic evaluation for all future
exploratory wells in which we participate. Although 3D seismic surveys
are expensive to perform and interpret, we believe that these surveys,
when coupled with our interpretation expertise, are cost-effective by
reducing the number of unsuccessful exploratory wells we drill. We
believe that our high historical drilling success rate and attractive
finding cost per Mcfe validate this strategy.

-- Maximize Return on Capital. We intend to maximize shareholder value by
continuously evaluating our proved reserve and exploration prospect
portfolio. We seek to prioritize our exploration prospects by drilling
wells that have the highest risk-adjusted present value first and to
mitigate drilling and production risks by using 3D seismic analysis. We
also seek to maximize the value of our proved reserves by evaluating
asset sale opportunities that will result in high rates of return for our
projects. For example, in July 1999, we sold our working interest in 11
wells in the North Gillis project for $13.2 million. We had invested a
total of $5.8 million in and had received $1.1 million of EBITDA from
this project during the 18 month period in which we owned this interest.
We retained our interest in three undrilled prospects in this project.

5
<PAGE> 7

SIGNIFICANT EXPLORATION DISCOVERIES

Since our inception, we have concentrated on the exploration for natural gas and
oil onshore in the U.S. Gulf Coast region. Our interests in our most significant
exploration discoveries as of June 30, 1999 are summarized in the table below.
Please also read "Business -- Reserves" for a more detailed discussion of our
natural gas and oil reserves. This table includes amounts related to our
interests in the 11 wells in the North Gillis project that we sold in July 1999
for $13.2 million.

<TABLE>
<CAPTION>
CUMULATIVE
WELLS -------------------------------- REMAINING
DRILLED RESERVES CAPEX CASH FLOW PV-10 FINDING COST
(GROSS/NET) (BCFE)(1) ($MM)(2) ($MM) ($MM) ($/MCFE)
----------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
North Gillis................ 11/2 19.3 $3.6 $1.0 n/a $0.19
S. Texas Vicksburg.......... 9/4 17.9 3.8 0.4 $18.5 0.21
E. Midland.................. 3/1 31.2 8.7 3.4 29.7 0.28
</TABLE>

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

(1) Cumulative reserves equals proved reserves as of June 30, 1999 plus
historical production.

(2) Capital expenditures are for evaluated properties only.

RELATIONSHIP WITH SEITEL; STRUCTURE OF OFFERING

Seitel, Inc., a leading seismic data library company, formed a subsidiary, DDD
Energy, Inc., in 1993 to capitalize on its seismic expertise through direct
investments in natural gas and oil properties. At the closing of the offering,
we will acquire all of the stock of DDD Energy from Seitel and will continue to
operate the business of DDD Energy.

We believe our separation from Seitel is a vital step in the evolution of our
business. Once separated, we will be able to better plan and execute our
exploration and development activities than we would have been able to as a
subsidiary of Seitel because, as a separate public business, we will not compete
with Seitel's other business units for available capital. In addition, we intend
to generate our own natural gas and oil exploration projects, which we have not
previously done because Seitel did not want us to compete directly with its
seismic data customers.

After the offering, Seitel will retain approximately 10% of our outstanding
common stock, or approximately 4% of our outstanding common stock if the
underwriters exercise their over-allotment option in full. We will not issue any
shares of our stock in the offering unless the underwriters exercise the
over-allotment option. If the underwriters exercise this option, we will sell up
to 1,137,000 shares of our stock and receive net proceeds of up to $
million. In addition, Seitel will make a capital contribution to DDD Energy of
$15.0 million immediately prior to our acquisition of DDD Energy at the closing
of the offering.

We and Seitel are structuring the offering so that we can elect to treat this
transaction as an asset sale for tax purposes. We describe this structure in
"Arrangements with Seitel" beginning on page 51 of this prospectus. This tax
election will result in a tax liability to be paid by Seitel based on the gain
on the sale. We, in turn, should have a tax basis in these assets equal to the
value of the consideration we have given for these assets. This should allow us
to take greater tax deductions in the future for depreciation and depletion of
these assets than if the transaction were treated as a sale of stock. We expect
to receive a tax opinion from Arthur Andersen LLP to the effect that under the
Internal Revenue Code of 1986 and the regulations and rulings published under
that code, we should have a tax basis in our assets equal to the purchase price
we pay for them. You should also read "Risk Factors -- Our separation from
Seitel may not have the intended tax consequences" on page 18 of this prospectus
for a description of the risks associated with the intended tax structure of the
offering.

6
<PAGE> 8

THE OFFERING

Common stock offered by the selling
stockholder........................... 12,915,000 shares (1)

Common stock to be outstanding after
the offering.......................... 14,350,000 shares (2)

Use of proceeds....................... The selling stockholder will receive
all of the proceeds of the offering,
unless the underwriters exercise the
over-allotment option. Seitel will
make a cash capital contribution to
DDD Energy of $15.0 million
immediately prior to our acquisition
of DDD Energy at the closing of the
offering. If the underwriters
exercise the over-allotment option,
we will sell up to 1,137,000 shares
of our common stock and receive net
proceeds of up to $ million,
while the selling stockholder will
sell up to 800,000 shares of our
common stock and receive net proceeds
of up to $ million. We will use
any net proceeds we receive from the
exercise of the over-allotment option
and the capital contribution to DDD
Energy to fund our exploration and
development program and for working
capital.

Proposed Nasdaq National Market
symbol................................

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

(1) Excludes up to 800,000 shares of our common stock that may be sold by Seitel
if the underwriters exercise the over-allotment option.

(2) Excludes 1,005,000 shares of common stock issuable on exercise of options to
be granted to our officers, directors and employees upon completion of the
offering, 400,000 shares of our common stock issuable upon exercise of
warrants to be granted to three of our executive officers under their
employment agreements, approximately 450 shares of our common stock to be
issued after consummation of the offering pursuant to restricted stock
grants to our non-employee directors and up to 1,137,000 shares of our
common stock that we may issue if the underwriters exercise the
over-allotment option.

7
<PAGE> 9

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following table presents a summary of DDD Energy's historical financial
information and our pro forma financial information giving effect to the
transactions that will occur at the closing of the offering as if they had
occurred at the beginning of the periods presented or as of the dates presented.
For a description of these pro forma adjustments, please read "Pro Forma
Financial Statements." You should read the following data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements included elsewhere in this prospectus.

<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED
-----------------------
SIX
SIX MONTHS ENDED MONTHS
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED ENDED
---------------------------- ----------------- DECEMBER 31, JUNE 30,
1996 1997 1998 1998 1999 1998 1999
------- -------- ------- ------- ------- ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................... $17,473 $ 25,680 $18,994 $ 9,810 $ 8,547 $18,994 $8,547
Expenses:
Production expenses....... 3,134 5,168 4,683 2,367 2,348 4,683 2,348
General and administrative
expenses................ 1,803 2,408 3,105 1,379 1,534 3,103 1,607
Depreciation, depletion
and amortization........ 7,333 12,852 12,110 6,490 4,275 12,110 4,275
Impairment of oil and gas
properties.............. -- 11,588 -- -- -- -- --
------- -------- ------- ------- ------- ------- ------
Total expenses....... 12,270 32,016 19,898 10,236 8,157 19,896 8,230
------- -------- ------- ------- ------- ------- ------
Income (loss) from
operations................ 5,203 (6,336) (904) (426) 390 (902) 317
Interest expense(1).......... (1,990) (3,162) (4,724) (2,341) (2,912) -- --
Interest income.............. 135 14 11 4 -- 11 --
Loss on extinguishment of
volumetric production
payment(2)................ -- (4,228) -- -- -- -- --
------- -------- ------- ------- ------- ------- ------
Income (loss) before income
taxes..................... 3,348 (13,712) (5,617) (2,763) (2,522) (891) 317
Provision (benefit) for
income taxes.............. 1,180 (4,909) (1,970) (969) (879) -- 115
------- -------- ------- ------- ------- ------- ------
Net income (loss)............ $ 2,168 $ (8,803) $(3,647) $(1,794) $(1,643) (891) 202
======= ======== ======= ======= =======
Preferred stock dividends.... 75 38
------- ------
Income (loss) attributable to
common stock.............. $ (966) $ 164
======= ======
Pro forma net income (loss)
per common share:(3)
Basic..................... $ (0.07) $ 0.01
======= ======
Diluted................... $ (0.07) $ 0.01
======= ======
Pro forma weighted average
number of common shares
outstanding(3)............ 14,350 14,350
======= ======
OTHER FINANCIAL DATA:
EBITDA(4).................... $12,536 $ 13,876 $11,206 $ 6,064 $ 4,665
Net cash provided by
operating activities...... 29,784 16,600 17,500 8,878 7,426
Net cash used in investing
activities................ (50,480) (54,708) (42,033) (24,887) (20,686)
Net cash provided by
financing activities...... 20,696 38,108 24,533 16,009 13,260
Capital expenditures......... 51,428 64,418 48,197 21,615 14,123
</TABLE>

8
<PAGE> 10

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ (828) $ 14,172
Total assets.............................................. 165,007 180,007
Long-term debt(1)......................................... 134,716 --
Stockholders' equity...................................... (8,027) 172,731
</TABLE>

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

(1) Seitel has historically funded DDD Energy's capital requirements with
intercompany loans rather than with equity contributions. All of these
intercompany loans will be converted to an equity contribution prior to the
offering. Therefore, DDD Energy's historical indebtedness and interest
expense may not be indicative of our future levels of indebtedness and
interest expense.

(2) In June 1996, DDD Energy sold a volumetric production payment for $19
million to certain unaffiliated limited partnerships. Under the terms of the
production payment agreements, it conveyed a mineral property interest of
approximately 7.6 Bcf of natural gas and approximately 363 MBbls of other
hydrocarbons to the purchasers. Effective on July 1, 1997, DDD Energy
entered into an agreement to extinguish the remaining portion of this
volumetric production payment. The cost to acquire the production payment
liability exceeded its book value. As a result of this transaction, DDD
Energy recorded a pre-tax loss of $4.2 million for the year ended December
31, 1997.

(3) Pro forma net income (loss) per common share and pro forma weighted average
number of common shares outstanding are based on the number of common shares
that are expected to be outstanding after the transactions occurring at the
time of the offering in which we will acquire all of the outstanding stock
of DDD Energy in exchange for our issuance of common stock and preferred
stock.

(4) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization, and impairment of oil and gas properties. We
have reported EBITDA because we believe EBITDA is a measure commonly
reported and widely used by investors as an indicator of a company's
operating performance and ability to incur and service debt. We believe
EBITDA assists investors in comparing a company's performance on a
consistent basis without regard to depreciation, depletion and amortization
and impairment of oil and gas properties, which can vary significantly
depending upon accounting methods or nonoperating factors such as historical
cost. EBITDA is not a calculation based on U.S. generally accepted
accounting principles and should not be considered an alternative to net
income (loss) in measuring our performance or used as an exclusive measure
of cash flow because it does not consider the impact of working capital
growth, capital expenditures, debt principal reductions and other sources
and uses of cash which are disclosed in our statements of cash flows.
Investors should carefully consider the specific items included in our
computation of EBITDA. While EBITDA has been disclosed herein to permit a
more complete comparative analysis of our operating performance and debt
servicing ability relative to other companies, investors should be cautioned
that EBITDA as reported by us may not be comparable in all instances to
EBITDA as reported by other companies. EBITDA amounts may not be fully
available for management's discretionary use, due to certain requirements to
conserve funds for capital expenditures, debt service and other commitments.

(5) Adjusted to give effect to our acquisition of the stock of DDD Energy from
Seitel and related transactions in connection with the offering and sale of
common stock in the offering.

9
<PAGE> 11

SUMMARY RESERVE AND OPERATING INFORMATION

The tables below present our summary reserve information and our summary
operating data for our natural gas and oil properties. Estimates of proved
reserves as of December 31, 1996, 1997 and 1998 are based on reserve reports
prepared by our independent petroleum engineering consultants. Forrest A. Garb &
Associates, Inc. prepared the report for our reserves as of December 31, 1998
and for a portion of our reserves as of December 31, 1997, and Miller & Lents,
Ltd. prepared the report for our reserves as of December 31, 1996 and for a
portion of our reserves as of December 31, 1997. We have based our estimated
proved reserves as of June 30, 1999 on our internal estimates of changes to our
proved reserves resulting from production and drilling activity since December
31, 1998. Appendix A to this prospectus contains a letter prepared by Forrest A.
Garb & Associates, Inc. summarizing the reserve report as of December 31, 1998.
For additional information, please read "Business -- Reserves," "-- Volume,
Prices and Production Costs" and the supplemental oil and gas information
following the notes to our financial statements.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------ JUNE 30,
1996 1997 1998 1999(1)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ESTIMATED PROVED NATURAL GAS AND OIL RESERVES:
Natural gas reserves (MMcf):
Proved developed........................................ 11,563 18,483 37,844 32,550
Proved undeveloped...................................... 12,198 28,511 36,215 32,030
-------- -------- -------- --------
Total.............................................. 23,761 46,994 74,059 64,580
======== ======== ======== ========
Oil and natural gas liquids reserves (MBbls):
Proved developed........................................ 902 1,744 5,265 4,086
Proved undeveloped...................................... 1,392 894 2,073 1,962
-------- -------- -------- --------
Total.............................................. 2,294 2,638 7,338 6,048
======== ======== ======== ========
Total proved natural gas and oil reserves
(MMcfe).......................................... 37,525 62,822 118,087 100,868
======== ======== ======== ========
PV-10 (IN THOUSANDS):
Proved developed.......................................... $ 44,690 $ 41,802 $ 66,889 $ 62,334
Proved undeveloped........................................ 28,072 41,480 40,760 45,054
-------- -------- -------- --------
Total PV-10(2)..................................... $ 72,762 $ 83,282 $107,649 $107,388
======== ======== ======== ========
STANDARDIZED MEASURE OF DISCOUNTED ESTIMATED FUTURE NET
CASH FLOWS AFTER INCOME TAXES (IN THOUSANDS)(2)......... $ 52,090 $ 64,597 $ 81,543
======== ======== ========
PRICES USED IN CALCULATING PROVED RESERVES AND PV-10:
Natural gas (per Mcf)..................................... $ 3.55 $ 2.66 $ 2.32 $ 2.55
Oil and natural gas liquids (per Bbl)..................... 22.22 16.23 10.47 16.83
OTHER RESERVE DATA:
Reserve replacement ratio(3).............................. 267% 345% 748% 146%
Natural gas as a % of total proved reserves............... 63% 75% 63% 64%
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf)(4)................................... 4,902 6,926 6,216 2,921 3,076
Oil and natural gas liquids (MBbls)(4).................. 363 420 386 198 181
Total production (MMcfe)................................ 7,080 9,446 8,532 4,109 4,162
AVERAGE REALIZED SALES PRICES (INCLUDING EFFECTS OF
HEDGING):
Natural gas (per Mcf)(4)................................ $ 2.14 $ 2.63 $ 2.27 $ 2.43 $ 2.00
Oil and natural gas liquids (per Bbl)(4)................ 18.29 16.83 11.78 12.87 12.44
SELECTED DATA PER MCFE:
Production expenses..................................... $ 0.44 $ 0.55 $ 0.55 $ 0.58 $ 0.56
General and administrative expense...................... 0.25 0.25 0.36 0.34 0.37
Depreciation, depletion and amortization of oil and gas
properties............................................ 1.02 1.34 1.39 1.55 0.99
Three year trailing average finding cost(5)............. 0.96 1.65 0.83
</TABLE>

10
<PAGE> 12

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

(1) Reserve information has been adjusted to exclude amounts related to our sale
of interests in 11 wells in the North Gillis project in July 1999.

(2) Excludes PV-10 related to sulfur reserves of $2.4 million as of December 31,
1996 and 1997 and $4.3 million as of December 31, 1998.

(3) Reserve replacement ratio is the sum of net additions to proved reserves as
a result of discoveries, revisions, purchases and sales for a period,
divided by the production for such period.

(4) Includes amounts delivered under the terms of a volumetric production
payment agreement of 2,094 MMcf and 84 MBbls in 1996 at an average price of
$1.83 per Mcf and $14.02 per Bbl and 1,795 MMcf and 56 MBbls in 1997 at an
average price of $1.84 per Mcf and $14.04 per Bbl.

(5) Finding costs are equal to the sum of all costs incurred relating to natural
gas and oil exploration and development activities for all evaluated
properties, excluding property acquisitions, divided by the sum of all
additions and revisions to estimated proved reserves, excluding reserve
purchases. Our three-year average finding cost for exploration and
development activities excluding property acquisitions, as typically
calculated by many of our competitors, was $1.70 per Mcfe, $2.25 per Mcfe
and $1.13 per Mcfe for the years ended December 31, 1996, 1997 and 1998.

11
<PAGE> 13

RISK FACTORS

Investing in our common stock will provide you with an equity ownership in
Vision Energy. As one of our stockholders, you will be subject to risks inherent
in our business. The trading price of your shares will be affected by the
performance of our business relative to, among other things, competition, market
conditions and general economic and industry conditions. The value of your
investment may decrease, resulting in a loss. You should carefully consider the
following factors as well as other information contained in this prospectus
before deciding to invest in shares of our common stock.

NATURAL GAS AND OIL PRICES ARE VOLATILE, AND LOW PRICES HAVE IN THE PAST AND
COULD IN THE FUTURE HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS.

Our revenues, profitability and future growth and the carrying value of our
properties depend substantially on prevailing natural gas and oil prices. Prices
also affect the amount of cash flow available for capital expenditures and our
ability to borrow and raise additional capital. The amount we will be able to
borrow under our proposed credit facility will likely be subject to periodic
re-determination based in part on changing expectations of future prices. Lower
prices may also reduce the amount of natural gas and oil that we can
economically produce.

Historically, the markets for natural gas and oil have been volatile, and they
are likely to continue to be volatile in the future. For example, natural gas
and oil prices declined significantly in 1998 and, for an extended period of
time, remained substantially below prices obtained in previous years. These
declines had a significant negative impact on our financial results for 1998 and
the first half of 1999, contributing to our losses for both periods. Among the
factors that can cause volatility are:

-- the level of consumer product demand;

-- weather conditions;

-- domestic and foreign governmental regulations;

-- the price and availability of alternative fuels;

-- political conditions in natural gas and oil producing regions;

-- the domestic and foreign supply of natural gas and oil;

-- the price of foreign imports; and

-- overall economic conditions.

WE DO NOT OPERATE ANY OF OUR PROPERTIES AND CANNOT CONTROL THE ACTIVITIES ON OUR
PROPERTIES.

We do not operate any of our natural gas and oil properties. In some
circumstances, our ability to exercise influence over operations for our
properties or their associated costs may be limited. Our dependence on the
operator and other working interest owners for these projects and our limited
ability to influence operations and associated costs could materially adversely
affect the realization of our targeted returns on capital in drilling
activities. The success and timing of our drilling and development activities
therefore depends upon a number of factors outside of our control, including:

-- timing and amount of capital expenditures;

-- the operator's expertise and financial resources;

-- approval of other participants in drilling wells; and

-- selection of technology.

12
<PAGE> 14

BECAUSE WE HAVE INCURRED LOSSES FROM OPERATIONS SINCE OUR FORMATION, OUR FUTURE
OPERATING RESULTS ARE DIFFICULT TO FORECAST. OUR FAILURE TO ACHIEVE OR SUSTAIN
PROFITABILITY IN THE FUTURE COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK.

We have incurred losses from operations every year but one since our formation
in 1993, and the unpredictable results of our exploration and development
operations make it difficult to forecast our operating results. Our failure to
achieve or sustain profitability in the future could adversely affect the market
price of our common stock.

We incurred net losses of $8.8 million in 1997, $3.6 million in 1998 and $1.6
million in the first six months of 1999. We expect to incur a loss for the third
quarter of 1999. Although these losses were due, in part, to interest payable to
Seitel under intercompany advances that will be converted into equity prior to
the offering, we may continue to incur losses after elimination of this interest
expense. Our development of and participation in an increasingly larger number
of prospects has required, and will continue to require, substantial capital
expenditures. We cannot assure you that we will achieve or sustain profitability
or positive cash flows from operating activities in the future.

OUR DRILLING ACTIVITIES MAY NOT BE SUCCESSFUL. THE 3D SEISMIC DATA AND OTHER
ADVANCED TECHNOLOGIES WE USE CANNOT ELIMINATE DRY HOLE RISK AND REQUIRE
EXPERIENCED TECHNICAL PERSONNEL WHOM WE MAY BE UNABLE TO ATTRACT OR RETAIN.

Our future success will depend on the success of our drilling program. Drilling
activities involve numerous risks, including the risk that no commercially
productive natural gas or oil reservoirs will be discovered. The cost of
drilling, completing and operating wells is often uncertain, and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including:

-- unexpected drilling conditions;

-- pressure or irregularities in formations;

-- equipment failures or accidents;

-- adverse weather conditions;

-- compliance with governmental requirements; and

-- shortages or delays in the availability of drilling rigs and the delivery
of equipment.

Even when properly interpreted, 3D seismic data and visualization techniques
only assist geoscientists in identifying subsurface structures and hydrocarbon
indicators. They do not allow the interpreter to know conclusively if
hydrocarbons are present or economically producible. We could incur losses as a
result of these drilling expenditures. Poor results from our drilling activities
could affect our future cash flows and results of operations materially and
adversely.

Our drilling success will depend, in part, on our ability to attract and retain
experienced explorationists and other professional personnel. Competition for
explorationists and engineers is extremely intense. If we cannot retain our
current personnel or attract additional experienced personnel, our ability to
compete could be adversely affected.

WE HAVE RECORDED WRITE-DOWNS BECAUSE OF FULL COST ACCOUNTING RULES AND MAY BE
REQUIRED TO DO SO AGAIN IN THE FUTURE.

Under the full cost accounting rules of the SEC, we review the carrying value of
our natural gas and oil properties each quarter. Under these rules, capitalized
costs of natural gas and oil properties (net of accumulated depreciation,
depletion and amortization, and deferred income taxes) may not exceed the
present value of estimated future net cash flows from proved natural gas and oil
reserves, discounted at 10 percent, plus the lower of cost or fair value of
unproved properties, net of related tax effects.

13
<PAGE> 15

These rules require pricing future natural gas and oil production at the
unescalated natural gas and oil prices in effect at the end of each fiscal
quarter. They also require a write-down if the "ceiling" is exceeded, even if
prices declined for only a short period of time. We recorded an $11.6 million
pre-tax -- $7.5 million after-tax -- non-cash write-down of the carrying value
of our proved natural gas and oil properties as of December 31, 1997, due to
these ceiling test limitations.

If natural gas and oil prices fall significantly, it is possible that additional
write-downs will occur again. Write-downs required by these rules do not impact
cash flow from operating activities.

RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY TURN OUT TO BE INACCURATE.
ANY MATERIAL INACCURACIES IN THESE RESERVE ESTIMATES OR UNDERLYING ASSUMPTIONS
WILL MATERIALLY AFFECT THE QUANTITIES AND PRESENT VALUE OF OUR RESERVES.

This prospectus contains estimates of our natural gas and oil reserves and the
future net cash flows from those reserves which we and our independent petroleum
consultants have prepared. Reserve engineering is a subjective process of
estimating our recovery from underground accumulations of natural gas and oil
that cannot be measured in an exact manner. The accuracy of our reserve
estimates is a function of the quality of available data and of engineering and
geological interpretation and judgment. Estimates of our economically
recoverable natural gas and oil reserves and of future net cash flows
necessarily depend upon a number of variable factors and assumptions, such as:

-- historical production from the area compared with production from other
producing areas;

-- the assumed effects of regulations by governmental agencies; and

-- assumptions concerning future natural gas and oil prices, future
operating costs, severance and excise taxes, development costs and costs
to restore or increase production on a producing well.

Because reserve estimates are to some degree speculative, our estimates of:

-- the quantities of natural gas and oil that we ultimately recover;

-- our production and operation costs;

-- the amount and timing of our future development expenditures; and

-- our future natural gas and oil sales prices

most likely will vary from those assumed in our estimates, and these variances
could be material. Any significant variance in these assumptions could
materially affect the estimated quantity and value of our reserves reported in
this prospectus. In addition, different reserve engineers may make different
estimates of reserve quantities and cash flows based upon the same available
data.

You should not assume that the present value of future net cash flows from our
proved reserves referred to in this prospectus is the current market value of
our estimated natural gas and oil reserves. In accordance with SEC requirements,
we base the estimated discounted future net cash flows from our proved reserves
on prices and costs on the date of the estimate. Actual future prices and costs
may differ materially from those used in the present value estimate.

THE FAILURE TO REPLACE OUR RESERVES WOULD ADVERSELY AFFECT OUR PRODUCTION AND
CASH FLOWS.

Our future natural gas and oil production depends on our success in finding
additional reserves. If we fail to replace reserves, our level of production and
cash flows would be adversely impacted. In general, production from natural gas
and oil properties declines as reserves are depleted, with the rate of decline
depending on reservoir characteristics. Our total proved reserves decline as
reserves are produced unless we conduct other successful exploration and
development activities. We must undertake these activities even during periods
of low natural gas and oil prices, when cash flow from operations may be reduced
and when

14
<PAGE> 16

it may be difficult to obtain external capital. We may not be successful in
exploring for and developing additional reserves. If we are not successful, our
future production and revenues will be adversely affected.

THE NATURAL GAS AND OIL BUSINESS INVOLVES MANY OPERATING RISKS THAT CAN CAUSE
SUBSTANTIAL LOSSES.

The natural gas and oil business involves a variety of operating risks,
including:

-- fires;

-- explosions;

-- blow-outs and surface cratering;

-- uncontrollable flows of underground natural gas, oil and formation water;

-- natural disasters;

-- pipe or cement failures;

-- casing collapses;

-- embedded oil field drilling and service tools;

-- abnormally pressured formations; and

-- environmental hazards such as natural gas leaks, oil spills, pipeline
ruptures and discharges of toxic gases.

If any of these events occur, we could incur substantial losses as a result of:

-- injury or loss of life;

-- severe damage to and destruction of property, natural resources and
equipment;

-- pollution and other environmental damage;

-- clean-up responsibilities;

-- regulatory investigation and penalties;

-- suspension of our operations; and

-- repairs to resume operations.

If we experience any of these problems, it could adversely affect our ability to
conduct operations.

We do not carry business interruption insurance. For some risks, we may not
obtain insurance if we believe the cost of available insurance is excessive
relative to the risks presented. In addition, pollution and environmental risks
generally are not fully insurable. If a significant accident or other event
occurs and is not fully covered by insurance, it could adversely affect our
operations.

SIGNIFICANT CAPITAL NEEDS MAY REQUIRE US TO OBTAIN ADDITIONAL FINANCING WHICH
MAY NOT BE AVAILABLE ON ATTRACTIVE TERMS.

Due to our plans for active exploration and development programs, we expect to
experience substantial capital needs. As a result, additional financing may be
required in the future to fund our growth and our developmental and exploratory
drilling. We cannot assure you as to whether any additional financing will be
available on attractive terms or whether financing will continue to be available
under existing or proposed new credit facilities. In the event sufficient
capital resources are not available to us, we may be forced to curtail our
drilling and other activities.

15
<PAGE> 17

COMPETITION IN OUR INDUSTRY IS INTENSE, AND WE ARE SMALLER AND HAVE A MORE
LIMITED OPERATING HISTORY THAN MANY OF OUR COMPETITORS.

We compete with major integrated oil and gas companies and independent oil and
gas companies in all areas of operation. In particular, we compete for property
acquisitions and for the equipment and labor required to operate and develop
these properties. Most of our competitors have substantially greater financial
and other resources than we have. In addition, larger competitors may be able to
absorb the burden of any changes in federal, state and local laws and
regulations more easily than we can, which would adversely affect our
competitive position. These competitors may be able to pay more for exploratory
prospects and may be able to define, evaluate, bid for and purchase a greater
number of properties and prospects than we can. Our ability to explore for
natural gas and oil prospects and to acquire additional properties in the future
will depend on our ability to conduct operations, to evaluate and select
suitable properties and to consummate transactions in this highly competitive
environment. In addition, most of our competitors have operated for a much
longer time than we have and have demonstrated the ability to operate through
industry cycles.

WE HAVE NO OPERATING HISTORY AS AN INDEPENDENT COMPANY.

We were formed to spin off DDD Energy from Seitel. Prior to the offering, DDD
Energy has been a wholly owned subsidiary of Seitel. Seitel has provided DDD
Energy with financial, management, administrative and other resources, and has
exercised substantial control over DDD Energy's operations. Accordingly, the
business we will own and operate after the offering has no history of operating
as an independent entity. After the offering, Seitel will neither provide these
services nor exercise significant control over us, and we may not be as
successful in accomplishing our business goals as DDD Energy has been under
Seitel's control.

OUR COMPETITORS MAY USE SUPERIOR TECHNOLOGY WHICH WE MAY BE UNABLE TO AFFORD OR
WHICH WOULD REQUIRE COSTLY INVESTMENT BY US IN ORDER TO COMPETE.

Our industry is subject to rapid and significant advancements in technology,
including the introduction of new products and services using new technologies.
As our competitors use or develop new technologies, we may be placed at a
competitive disadvantage, and competitive pressures may force us to implement
new technologies at a substantial cost. In addition, our competitors may have
greater financial, technical and personnel resources that allow them to enjoy
technological advantages and may in the future allow them to implement new
technologies before we can. We cannot be certain that we will be able to
implement technologies on a timely basis or at a cost that is acceptable to us.
One or more of the technologies that we currently use or that we may implement
in the future may become obsolete, and we may be adversely affected. For
example, seismic acquisition technology has been characterized by rapid
technological advancements in recent years and further significant technological
developments could substantially impair our 3D seismic data's value.

WE ARE SUBJECT TO COMPLEX LAWS AND REGULATIONS, INCLUDING ENVIRONMENTAL
REGULATIONS, THAT CAN ADVERSELY AFFECT THE COST, MANNER OR FEASIBILITY OF DOING
BUSINESS.

Our operations are subject to numerous laws and regulations governing the
operation and maintenance of our facilities and the discharge of materials into
the environment or otherwise relating to environmental protection. These laws
and regulations may:

-- require that we acquire permits before commencing drilling;

-- restrict the substances that can be released into the environment in
connection with drilling and production activities;

-- limit or prohibit drilling activities on protected areas such as wetlands
or wilderness areas; or

-- require remedial measures to mitigate pollution from former operations,
such as plugging abandoned wells.
16
<PAGE> 18

Under these laws and regulations, we could be liable for personal injury and
clean-up costs and other environmental and property damages, as well as
administrative, civil and criminal penalties. We maintain limited insurance
coverage for sudden and accidental environmental damages. We do not believe that
insurance coverage for environmental damages that occur over time is available
at a reasonable cost. Moreover, we do not believe that insurance coverage for
the full potential liability that could be caused by sudden and accidental
environmental damages is available at a reasonable cost. Accordingly, we may be
subject to liability or we may be required to cease production from properties
in the event of environmental damages.

These laws and regulations have been changed frequently in the past. In general,
these changes have imposed more stringent requirements that increase operating
costs or require capital expenditures in order to remain in compliance. It is
also possible that unanticipated factual developments could cause us to make
environmental expenditures that are significantly different from those we
currently expect. Existing laws and regulations could be changed and any such
changes could have an adverse effect on our business.

HEDGING OUR PRODUCTION MAY RESULT IN LOSSES.

From time to time, we hedge a portion of our natural gas production to reduce
our exposure to the volatility of natural gas prices. Hedging arrangements
expose us to risk of financial loss to the extent the other party to the hedging
contract defaults on its obligations.

In addition, these hedging arrangements may limit the benefit we would receive
from increases in the prices for natural gas. Alternatively, if we choose not to
engage in hedging arrangements in the future, we may be more adversely affected
by changes in natural gas prices than our competitors who engage in hedging
arrangements.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
DISCOURAGE AN ACQUISITION OR CHANGE OF CONTROL OF VISION ENERGY.

Our certificate of incorporation authorizes our board of directors to issue
preferred stock without stockholder approval. If our board of directors elects
to issue preferred stock, it could be more difficult for a third party to
acquire control of us, even if that change of control might be beneficial to
stockholders. In addition, provisions of the certificate of incorporation and
bylaws, such as those providing for a classified board of directors with
staggered terms, no stockholder action by written consent and limitations on
stockholder proposals at meetings of stockholders, could also make it more
difficult for a third party to acquire control of us. Please read "Description
of Capital Stock" for additional details concerning the provisions of our
certificate of incorporation and bylaws.

OUR COMPUTER SYSTEMS AND THE COMPUTER SYSTEMS OF OUR BUSINESS PARTNERS MAY NOT
BE YEAR 2000 COMPLIANT, WHICH MAY CAUSE SYSTEM FAILURES AND DISRUPTIONS
ADVERSELY AFFECTING OUR OPERATIONS.

The "Year 2000" issue is a general term used to refer to the business
implications of the arrival of the new millennium. In simple terms, on January
1, 2000, all computer hardware and software systems that use the two-digit year
convention could fail completely or create erroneous data as a result of the
system failing to recognize the two-digit internal date "00" as representing the
Year 2000. Our computer systems and the computer systems of our business
partners may not be Year 2000 compliant, which may cause system failures and
disruptions adversely affecting our operations. Please read "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Compliance."

We cannot assure you that our internal operations do not have any material
issues with respect to Year 2000 compliance. In addition, we may not properly
identify all potential problems or all potentially affected systems or remedy
all problems in our systems. Furthermore, the Year 2000 issue also affects our
customers, the suppliers of our 3D seismic data, and other third parties with
whom we do business. The

17
<PAGE> 19

failure of any of these entities to become Year 2000 compliant could adversely
affect our operations. The most reasonably likely "worst case" impacts would be
impairment of:

-- our ability to deliver our production to, or receive payment from, third
parties gathering and/or purchasing our production from affected
facilities;

-- the ability of third-party suppliers or service companies to provide
needed materials or services to our planned or ongoing operations,
necessitating deferral or shut-in of exploration, development or
production operations;

-- our ability to receive and process 3D seismic data, which would hinder
our ability to generate and drill exploratory prospects; and

-- our ability to execute financial transactions with our banks or other
third parties whose systems fail or malfunction.

OUR SEPARATION FROM SEITEL MAY NOT HAVE THE INTENDED TAX CONSEQUENCES.

We have structured the transactions relating to our separation from Seitel and
the offering so that we can elect to treat these transactions as an asset sale
for tax purposes. We believe that this tax structure will benefit us by giving
us a higher tax basis in our assets. This will allow us to minimize our tax
liability by increasing the tax deductions we can take for depreciation and
depletion of our assets. While we believe that the structure of these
transactions will result in this tax treatment, there is a risk that the
Internal Revenue Service could challenge all or any part of these transactions.
A successful challenge by the Internal Revenue Service may result in our having
a lower tax basis in our assets, which would result in reduced depreciation and
depletion rates. A lower tax basis would also result in higher tax gains upon
any sale of those assets in the future. Thus, the effect of a successful
challenge of our intended tax structure would be to increase our future tax
liability.

THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND WE EXPECT THAT
ITS PRICE WILL BE VOLATILE.

Prior to the offering, there has been no public market for our common stock, and
an active public market for our common stock may not develop or be sustained
after the offering. The initial public offering price of our common stock will
be determined by negotiation among us and the underwriters based upon a number
of factors and may not be indicative of the market price of our common stock
following the offering. The price at which the common stock will trade in the
public market after the offering may be less than the initial public offering
price you paid. In addition, we expect the market price of the common stock to
be volatile.

SUBSTANTIAL SALES OF SHARES MAY ADVERSELY IMPACT THE MARKET PRICE OF OUR COMMON
STOCK.

Sales of a substantial number of shares of common stock after the offering could
cause the market price of our common stock to fall. Such sales could make it
more difficult for us to raise capital through the sale of additional equity
securities. After completion of the offering, we will have approximately
15,755,000 shares of common stock outstanding or subject to options and
warrants. Seitel will hold 1,435,000 of these shares. Seitel and the holders of
these options and warrants will be limited by lock-up agreements that will
provide that they may not sell or otherwise dispose of our common stock for a
period of 180 days after the date of this prospectus. After that period, Seitel
and those holders may be eligible to sell their shares of our common stock under
Rule 144. In addition, we will be obligated under a registration rights
agreement to file a registration statement one year after the date of this
prospectus that will register for resale all 1,435,000 shares of our common
stock held by Seitel. Seitel has agreed in the registration rights agreement not
to sell more than 50% of the common stock it will hold after the offering under
that registration statement until two years after the date of this prospectus.

18
<PAGE> 20

WE DO NOT INTEND TO PAY DIVIDENDS.

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements
use forward-looking terms such as "believe," "expect," "may," "intend," "will,"
"project," "budget," "should" or "anticipate" or other similar words. These
statements discuss forward-looking information such as:

-- anticipated capital expenditures and budgets;

-- future cash flows and borrowings;

-- pursuit of potential future acquisition or drilling opportunities; and

-- sources of funding for exploration and development.

These forward-looking statements are based on assumptions that we believe are
reasonable, but they are open to a wide range of uncertainties and business
risks, including the following:

-- fluctuations of the prices received or demand for natural gas and oil;

-- uncertainty of drilling results, reserve estimates and reserve
replacement;

-- operating hazards;

-- acquisition risks;

-- unexpected substantial variances in capital requirements;

-- environmental matters;

-- our Year 2000 compliance program; and

-- general economic conditions.

When considering these forward-looking statements, you should keep in mind the
risk factors and other cautionary statements in this prospectus. Our
forward-looking statements speak only as of the date made.

19
<PAGE> 21

USE OF PROCEEDS

The net proceeds to the selling stockholder from the sale of the shares of
common stock are estimated to be $ million, after deducting underwriters'
discounts and commissions and estimated offering expenses. Seitel will make a
cash capital contribution to DDD Energy of $15.0 million immediately prior to
our acquisition of DDD Energy at the closing of the offering. If the
underwriters exercise the over-allotment option, we will sell up to 1,137,000
shares of our common stock and receive net proceeds of up to $ million, while
the selling stockholder will sell up to 800,000 additional shares of our common
stock and receive additional net proceeds of up to $ million, each after
deducting underwriters' discounts, commissions and estimated offering expenses.
We will use any net proceeds we receive from the exercise of the over-allotment
option and this capital contribution to DDD Energy to fund our exploration and
development program and for working capital.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock and do not
expect to do so in the foreseeable future. We anticipate that we will retain any
future earnings to develop and expand our business. Any future determination
with respect to the payment of dividends will be at the discretion of our board
of directors and will depend on, among other things, our operating results,
financial condition and capital requirements, the terms of then-existing
indebtedness, general business conditions and other factors our board of
directors deems relevant. Please read "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity, Capital Expenditures
and Capital Resources" for a discussion of our liquidity and anticipated future
operating expenses.

DILUTION

Our net tangible book value as of June 30, 1999, after giving pro forma effect
to the transactions that we will enter into immediately prior to or at the time
of the offering, was $172.7 million, or $12.04 per common share. "Net tangible
book value" is total assets minus total liabilities. "Net tangible book value
per share" is net tangible book value divided by the total number of shares
outstanding on a pro forma basis before the offering.

Our net tangible book value will not change as a result of the offering because
we are not issuing any new shares of our stock in the offering and are not
receiving any of the proceeds of the offering. Based on an assumed initial
public offering price of $ per share, which is the midpoint of the estimated
range of the initial public offering price, new investors will experience
immediate dilution of $ per share, which is equal to the difference between
the assumed initial public offering price and our net tangible book value per
share of common stock.

20
<PAGE> 22

CAPITALIZATION

The following table shows:

-- the capitalization of DDD Energy on June 30, 1999; and

-- the pro forma as adjusted capitalization of Vision Energy on June 30,
1999, assuming (1) the conversion of Seitel's intercompany loans to DDD
Energy into an equity investment in DDD Energy, (2) the elimination of
deferred income taxes as a result of the tax consequences of the
transactions that will occur at the consummation of the offering and (3)
Seitel's additional cash capital contribution of $15.0 million in DDD
Energy prior to our acquisition of DDD Energy, as if each of these
transactions had occurred on June 30, 1999.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -------------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C>
Cash and equivalents........................................ $ -- $ 15,000
========= ========
Long-term debt, net of current maturities................... $ 134,716 $ --
--------- --------
Redeemable preferred stock, $0.01 par value per share;
10,000 shares authorized; 10,000 shares issued and
outstanding, pro forma as adjusted........................ -- 1,000
--------- --------
Stockholders' equity:
DDD Energy common stock, $1.00 par value per share; 10,000
shares authorized; 1,000 shares issued and outstanding,
actual................................................. 1 --
Vision Energy common stock, $0.01 par value per share;
80,000,000 shares authorized; 14,350,000 shares issued
and outstanding, pro forma as adjusted................. -- 144
Additional paid-in capital................................ 4,768 185,383
Accumulated deficit....................................... (12,796) (12,796)
--------- --------
Total stockholders' equity............................. (8,027) 172,731
--------- --------
Total capitalization.............................. $ 126,689 $173,731
========= ========
</TABLE>

21
<PAGE> 23

SELECTED FINANCIAL DATA

The following table sets forth some of DDD Energy's historical financial data.
You should read the following data in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the financial
statements included elsewhere in this prospectus.

The statement of operations data for DDD Energy for the years ended December 31,
1996, 1997 and 1998 and balance sheet data as of December 31, 1997 and 1998 were
derived from the audited financial statements in this prospectus. The financial
data as of and for the years ended December 31, 1994 and 1995 and the balance
sheet data as of December 31, 1996 were derived from unaudited financial
statements not included in this prospectus. The financial data as of and for the
six months ended June 30, 1998 and 1999 was derived from the unaudited financial
statements included in this prospectus. Vision Energy believes that the
unaudited historical statements contain all adjustments needed to fairly present
the information included in those statements and that the adjustments made
consist only of normal recurring adjustments. The historical results are not
necessarily indicative of results to be expected for any future period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a more complete discussion and analysis of the selected
financial data presented below.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... $ 1,205 $ 4,806 $ 17,473 $ 25,680 $ 18,994 $ 9,810 $ 8,547
Expenses:
Production expenses..................... 341 1,571 3,134 5,168 4,683 2,367 2,348
General and administrative expenses..... 315 698 1,803 2,408 3,105 1,379 1,534
Depreciation, depletion and
amortization.......................... 320 1,698 7,333 12,852 12,110 6,490 4,275
Impairment of oil and gas properties.... -- -- -- 11,588 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total expenses.................... 976 3,967 12,270 32,016 19,898 10,236 8,157
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations............. 229 839 5,203 (6,336) (904) (426) 390
Interest expense(1)....................... (718) (1,773) (1,990) (3,162) (4,724) (2,341) (2,912)
Interest income........................... -- 33 135 14 11 4 --
Loss on extinguishment of volumetric
production payment(2)................... -- -- -- (4,228) -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes......... (489) (901) 3,348 (13,712) (5,617) (2,763) (2,522)
Provision (benefit) for income taxes...... (182) (304) 1,180 (4,909) (1,970) (969) (879)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (307) $ (597) $ 2,168 $ (8,803) $ (3,647) $ (1,794) $ (1,643)
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(3)................................. $ 549 $ 2,537 $ 12,536 $ 13,876 $ 11,206 $ 6,064 $ 4,665
Net cash provided by operating
activities.............................. 2,742 3,617 29,784 16,600 17,500 8,878 7,426
Net cash used in investing activities..... (16,038) (24,659) (50,480) (54,708) (42,033) (24,887) (20,686)
Net cash provided by financing
activities.............................. 13,296 21,042 20,696 38,108 24,533 16,009 13,260
Capital expenditures...................... 16,978 23,075 51,428 64,418 48,197 21,615 14,123
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................... $ (465) $ 1,698 $ 2,660 $ (2,153) $ (5,701) $ 823 $ (828)
Total assets.............................. 22,168 46,220 93,571 123,275 156,825 137,538 165,007
Long-term debt(1)......................... 17,968 38,906 59,592 97,673 122,259 113,739 134,716
Stockholder's equity...................... (273) (870) 1,298 (7,505) (7,208) (9,299) (8,027)
</TABLE>

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

22
<PAGE> 24

production payment liability exceeded its book value. As a result of this
transaction, DDD Energy recorded a pre-tax loss of $4.2 million for the year
ended December 31, 1997.

(3) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization, and impairment of oil and gas properties. We
have reported EBITDA because we believe EBITDA is a measure commonly
reported and widely used by investors as an indicator of a company's
operating performance and ability to incur and service debt. We believe
EBITDA assists investors in comparing a company's performance on a
consistent basis without regard to depreciation, depletion and amortization
and impairment of oil and gas properties, which can vary significantly
depending upon accounting methods or nonoperating factors such as historical
cost. EBITDA is not a calculation based on U.S. generally accepted
accounting principles and should not be considered an alternative to net
income (loss) in measuring our performance or used as an exclusive measure
of cash flow because it does not consider the impact of working capital
growth, capital expenditures, debt principal reductions and other sources
and uses of cash which are disclosed in our statements of cash flows.
Investors should carefully consider the specific items included in our
computation of EBITDA. While EBITDA has been disclosed herein to permit a
more complete comparative analysis of our operating performance and debt
servicing ability relative to other companies, investors should be cautioned
that EBITDA as reported by us may not be comparable in all instances to
EBITDA as reported by other companies. EBITDA amounts may not be fully
available for management's discretionary use, due to certain requirements to
conserve funds for capital expenditures, debt service and other commitments.

23
<PAGE> 25

PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma income statements of DDD Energy, our predecessor, for
the year ended December 31, 1998 and the six months ended June 30, 1999 and the
unaudited pro forma condensed balance sheet of DDD Energy as of June 30, 1999
presented below reflect the effects of adjustments to the historical financial
statements of DDD Energy necessary to give pro forma effect to the transactions
that will occur at the closing of the offering as if they had occurred at the
beginning of the periods presented or as of the date presented. The unaudited
pro forma financial statements and accompanying notes should be read in
conjunction with the historical financial statements of DDD Energy included
elsewhere in this prospectus.

The unaudited pro forma financial statements are based on certain assumptions
believed by management of DDD Energy to be reasonable. The unaudited pro forma
financial statements are not necessarily indicative of the financial position or
results of operations of DDD Energy had the transactions and events described
above been consummated on the dates assumed or for any future period or date.

PRO FORMA INCOME STATEMENTS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 SIX MONTHS ENDED JUNE 30, 1999
----------------------------------- -----------------------------------
PRO FORMA AS PRO FORMA AS
HISTORICAL ADJUSTMENTS ADJUSTED HISTORICAL ADJUSTMENTS ADJUSTED
---------- ----------- -------- ---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenue...................... $18,994 $ -- $18,994 $ 8,547 $ -- $ 8,547
Expenses:
Production expenses........ 4,683 -- 4,683 2,348 -- 2,348
General and administrative
expenses................ 3,105 (664)(1) 3,103 1,534 (286)(1) 1,607
662(2) 359(2)
Depreciation, depletion and
amortization............ 12,110 -- 12,110 4,275 -- 4,275
------- ------ ------- ------- ------- -------
Total expenses............. 19,898 (2) 19,896 8,157 73 8,230
------- ------ ------- ------- ------- -------
Income (loss) from
operations................. (904) 2 (902) 390 (73) 317
Interest expense............. (4,724) 4,724(3) -- (2,912) 2,912(3) --
Interest income.............. 11 -- 11 -- -- --
------- ------ ------- ------- ------- -------
Income (loss) before income
taxes...................... (5,617) 4,726 (891) (2,522) 2,839 317
Provision (benefit) for
income taxes............... (1,970) 1,970(4) -- (879) 994(4) 115
------- ------ ------- ------- ------- -------
Net income (loss)............ (3,647) 2,756 (891) (1,643) 1,845 202
Preferred stock dividends.... -- 75(5) 75 -- 38(5) 38
------- ------ ------- ------- ------- -------
Income (loss) attributable to
common stock............... $(3,647) $2,681 $ (966) $(1,643) $ 1,807 $ 164
======= ====== ======= ======= ======= =======
Net income (loss) per common
share:
Basic...................... $ (0.25) $ (0.07)(6) $ (0.11) $ 0.01(6)
Diluted.................... $ (0.25) $ (0.07)(6) $ (0.11) $ 0.01(6)
Weighted average number of
common shares
outstanding................ 14,350 14,350 14,350 14,350
</TABLE>

24
<PAGE> 26

PRO FORMA CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS

Total current assets....................................... $ 5,448 $ 15,000(7) $ 20,448
Net property and equipment................................. 159,559 -- 159,559
-------- --------- --------
Total assets........................................ $165,007 $ 15,000 $180,007
======== ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities.................................. $ 6,276 $ -- $ 6,276
Advances from Seitel....................................... 134,716 (134,716)(8) --
Deferred income taxes...................................... 32,042 (32,042)(9) --
-------- --------- --------
Total liabilities................................... 173,034 (166,758) 6,276
-------- --------- --------
Redeemable preferred stock................................. -- 1,000(10) 1,000
-------- --------- --------
Total stockholders' equity................................. (8,027) 15,000(7) 172,731
134,716(8)
32,042(9)
(1,000)(10)
-------- --------- --------
Total liabilities and stockholders' equity.......... $165,007 $ 15,000 $180,007
======== ========= ========
</TABLE>

NOTES TO PRO FORMA FINANCIAL STATEMENTS

(1) Reflects elimination of indirect general and administrative costs allocated
to DDD Energy by Seitel.

(2) Represents general and administrative expenses for incremental executive
compensation, accounting, legal, tax, insurance and other administrative
expenses that we estimate will be incurred when operating as a separate
public company.

(3) Reflects elimination of interest expense as a result of Seitel's
intercompany loans to DDD Energy being contributed to capital.

(4) Represents the income tax effects of the adjustments described in footnotes
(1), (2), and (3) above, assuming that a valuation allowance would be
provided for any net tax benefit generated on a stand-alone basis for the
year ended December 31, 1998.

(5) Reflects dividends on redeemable preferred stock issued in connection with
the transactions that will occur at the closing of the offering.

(6) Pro forma net income (loss) per common share for the year ended December
31, 1998 and for the six months ended June 30, 1999 has been computed based
on an assumption of 14,350,000 shares of common stock outstanding.

(7) Reflects Seitel's $15.0 million cash contribution to DDD Energy prior to
our acquisition of DDD Energy.

(8) Reflects the contribution of intercompany loans to capital by Seitel prior
to our acquisition of DDD Energy.

(9) Reflects the elimination of DDD Energy's deferred income tax liability as a
result of the tax consequences of the transactions that will occur upon
consummation of the offering.

(10) Reflects the issuance of Vision Energy common and preferred stock to Seitel
in exchange for the common stock of DDD Energy.

25
<PAGE> 27

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

OVERVIEW

You should read the following discussion and analysis in conjunction with our
audited consolidated financial statements included in this prospectus. The
following information contains forward-looking statements. See "Cautionary
Statement About Forward-Looking Statements."

Our revenue, profitability and future growth rate substantially depend on
factors beyond our control, such as economic, political and regulatory
developments and competition from other sources of energy. The energy markets
historically have been very volatile, and natural gas and oil prices may
fluctuate widely in the future. Sustained periods of low prices for natural gas
and oil could materially and adversely affect our financial position, our
results of operations, the quantities of natural gas and oil reserves that we
can economically produce and our access to capital.

We regularly enter into hedging transactions for our natural gas production and
intend to continue doing so. These transactions may limit our potential gains if
natural gas prices were to rise substantially over the price established by the
hedges.

We use the full cost method of accounting for our investments in natural gas and
oil properties. Under this methodology, all costs of exploration, development
and acquisition of natural gas and oil reserves are capitalized into a "full
cost pool" as incurred. Properties in the pool are depleted and charged to
operations using the unit-of-production method based on a ratio of current
production to total estimated proved natural gas and oil reserves. To the extent
that capitalized costs (net of accumulated depreciation, depletion and
amortization) less applicable deferred income taxes exceed the present value,
using a 10% discount rate, of future net cash flows from estimated proved
natural gas and oil reserves plus the lower of cost or fair value of unproved
properties, adjusted for the effects of related income taxes, the excess costs
are charged to operations. If a write-down were required, it would result in a
charge to earnings but would not have an impact on cash flows.

We conduct substantially all of our exploration and development activities
jointly with others and, accordingly, recorded amounts for our natural gas and
oil properties reflect only our proportionate interest in such activities.

Our results of operations may vary significantly from year to year based on the
factors discussed above and on other factors such as exploratory and development
drilling success and curtailments of production due to workover and recompletion
activities. Therefore, the results of any one year may not be indicative of
future results.

At the consummation of the offering, we will acquire all of the stock of
Seitel's subsidiary, DDD Energy, and we will continue to conduct the business of
DDD Energy after the offering. Because of this, DDD Energy will be considered
our predecessor, and our historical financial statements will be based on DDD
Energy's historical financial statements. The following discussion of results of
operations and historical liquidity, capital expenditures and capital resources
is based on the operations of DDD Energy.

26
<PAGE> 28

RESULTS OF OPERATIONS

The following table shows selected information related to our natural gas and
oil production, average sales price received and expenses per unit of production
during the periods indicated, and should be read in conjunction with the
discussion of results of operations below:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf) (1).......................... 4,902 6,926 6,216 2,921 3,076
Oil and natural gas liquids (MBbls) (1)......... 363 420 386 198 181
Total production (MMcfe)........................ 7,080 9,446 8,532 4,109 4,162
Average daily production (MMcfe)................ 19.3 25.9 23.4 22.7 23.0
AVERAGE REALIZED SALES PRICES
(INCLUDING EFFECTS OF HEDGING):
Natural gas (per Mcf) (1)....................... $ 2.14 $ 2.63 $ 2.27 $ 2.43 $ 2.00
Oil and natural gas liquids (per Bbl) (1)....... 18.29 16.83 11.78 12.87 12.44
EXPENSES (PER MCFE):
Production expenses............................. $ 0.44 $ 0.55 $ 0.55 $ 0.58 $ 0.56
General and administrative expense.............. 0.25 0.25 0.36 0.34 0.37
Depreciation, depletion and amortization of oil
and gas properties........................... 1.02 1.34 1.39 1.55 0.99
</TABLE>

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

(1) Includes amounts delivered under the terms of a volumetric production
payment agreement of 2,094 MMcf and 84 MBbls in 1996 at an average price of
$1.83 per Mcf and $14.02 per Bbl and 1,795 MMcf and 56 MBbls in 1997 at an
average price of $1.84 per Mcf and $14.04 per Bbl.

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Our average daily combined natural gas and oil production increased 1% to 23.0
MMcfe for the first six months of 1999 from 22.7 MMcfe for the corresponding
period in 1998. Natural gas comprised 74% of our production for the first six
months of 1999 and 71% for the corresponding period in 1998. For the first six
months of 1999, our natural gas production increased 5% to 3,076 MMcf compared
to 2,921 MMcf for the corresponding period in 1998. For the first six months of
1999, our oil and natural gas liquids production decreased 9% to 181 MBbls
compared to 198 MBbls for the corresponding period in 1998. Natural gas prices
averaged $2.00 per Mcf for the first six months of 1999 compared to $2.43 per
Mcf for the corresponding period in 1998. Oil and natural gas liquids prices
averaged $12.44 per Bbl for the first six months of 1999 compared to $12.87 per
Bbl for the corresponding period in 1998.

Revenue was $8.5 million in the first six months of 1999 compared to $9.8
million in the first six months of 1998. The decrease in revenue was primarily
caused by lower natural gas prices during the first six months of 1999.

Production costs amounted to $2.3 million, or $0.56 per Mcfe of production, in
the first six months of 1999, compared to $2.4 million, or $0.58 per Mcfe of
production, in the first six months of 1998. The decrease in this rate is
primarily due to lower workover costs in the second quarter of 1999 as compared
to 1998.

General and administrative expenses were $1.5 million for the first six months
of 1999 compared to $1.4 million for the first six months of 1998. This increase
was primarily a result of increased payroll costs due to addition of personnel.

Depreciation, depletion and amortization, or DD&A, of natural gas and oil
properties was $4.1 million for the six months ended June 30, 1999 and $6.4
million for the six months ended June 30, 1998. This

27
<PAGE> 29

amounted to DD&A per Mcfe of production of $0.99 in the first six months of 1999
and $1.55 in the first six months of 1998. The decrease in the DD&A rate was due
to the significant increase in our proved reserves as of January 1, 1999 as
determined by our independent reserve engineers resulting from both new
discoveries in 1998 and positive revisions to previous reserve estimates.

Interest expense, net of amounts capitalized to natural gas and oil properties,
was $2.9 million for the first six months of 1999 compared to $2.3 million for
the first six months of 1998. This increase was due to the increase in the
amounts we owed Seitel under the intercompany loans Seitel made to us to fund
our capital expenditures.

In July 1999, we sold our interest in 11 natural gas and oil wells, five of
which were producing, for $13.2 million. We had incurred costs of $5.8 million
on this project. In accordance with the full cost method of accounting, we will
not recognize any gain on this sale because it did not represent a significant
portion of our proved natural gas and oil reserves. The excess of proceeds
received over costs incurred will be accounted for as a reduction of capitalized
costs. We anticipate that the majority of loss in production from these wells
will be offset by production from new wells anticipated to come on-line in the
last half of 1999.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Our average daily combined natural gas and oil production decreased 10% to 23.4
MMcfe in 1998 from 25.9 MMcfe in 1997. Natural gas comprised 73% of our
production in both 1998 and 1997. In 1998, our natural gas production decreased
10% to 6,216 MMcf compared to 6,926 MMcf in 1997. In 1998, our oil and natural
gas liquids production decreased 8% to 386 MBbls compared to 420 MBbls in 1997.
Natural gas prices averaged $2.27 per Mcf in 1998 compared to $2.63 per Mcf in
1997. Oil and natural gas liquids prices averaged $11.78 per Bbl in 1998
compared to $16.83 per Bbl in 1997.

Revenue was $19.0 million in 1998 and $25.7 million in 1997. The decrease in
revenue from 1997 to 1998 was primarily due to lower realized commodity prices
along with lower natural gas production. The production decline from certain of
our shallow short-lived producing properties had not yet been offset by
production from new wells. Certain wells with high initial flow rates
experienced production declines earlier and greater than was expected.
Additionally, some development wells were not drilled in the time frame we
anticipated as a result of some of our partners' delaying plans to drill such
wells due to lower commodity prices, reallocation of budget funds and
consolidations within the industry.

Production costs amounted to $4.7 million, or $0.55 per Mcfe of production, in
1998, compared to $5.2 million, or $0.55 per Mcfe of production, in 1997.

General and administrative expenses were $3.1 million in 1998 and $2.4 million
in 1997. The increase was primarily due to an increase in compensation and
related expenses as a result of the addition of personnel resulting from our
growth.

DD&A of natural gas and oil properties, excluding the impairment in 1997
discussed below, was $11.9 million for the year ended December 31, 1998 and
$12.7 million for the year ended December 31, 1997. This amounted to DD&A per
Mcfe of production of $1.39 in 1998 and $1.34 in 1997. The increase in the DD&A
rate between 1997 and the first three quarters of 1998 reflects the amount of
exploration and development costs incurred increasing at a higher rate than the
proven reserve base. The DD&A rate in the fourth quarter of 1998 decreased to
$0.95 per Mcfe of production from $1.55 per Mcfe for the first three quarters of
1998. This decrease in the DD&A rate was due to the significant increase in our
proved reserves as determined by our independent petroleum engineers resulting
from both new discoveries in 1998 and positive revisions to previous reserve
estimates.

At December 31, 1997, we recorded a non-cash impairment of natural gas and oil
properties totaling $11.6 million ($7.5 million, net of taxes) based on our
December 31, 1997, estimated proved reserves valued at March 18, 1998 market
prices. The impairment was primarily due to substantially lower commodity
prices.

28
<PAGE> 30

Interest expense, net of amounts capitalized to natural gas and oil properties,
was $4.7 million in 1998 and $3.2 million in 1997. The increase was due to the
increase in the amounts we owed Seitel under the intercompany loans Seitel made
to us to fund our capital expenditures.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Our average daily combined natural gas and oil production increased 34% to 25.9
MMcfe in 1997 from 19.3 MMcfe in 1996. Natural gas comprised 73% of our
production in 1997 compared to 69% in 1996. In 1997 our natural gas production
increased 41% to 6,926 MMcf compared to 4,902 MMcf in 1996. In 1997, our oil and
natural gas liquids production increased 16% to 420 MBbls compared to 363 MBbls
in 1996. Natural gas prices averaged $2.63 per Mcf in 1997 compared to $2.14 per
Mcf in 1996. Oil and natural gas liquids prices averaged $16.83 per Bbl in 1997
compared to $18.29 per Bbl in 1996.

Revenue was $25.7 million in 1997 and $17.5 million in 1996. The increase in
revenue from 1996 to 1997 was primarily due to higher production resulting from
more wells being on line in 1997 along with higher realized natural gas prices.

Production costs amounted to $5.2 million, or $0.55 per Mcfe of production, in
1997, compared to $3.1 million, or $0.44 per Mcfe of production, in 1996. The
increase in the rate from 1996 to 1997 was primarily attributable to the number
of oil wells we have in relation to our total wells as oil wells typically have
higher associated production costs than natural gas wells. Additionally, in
1997, ad valorem taxes increased as a result of the increase in the value of
reserves.

General and administrative expenses were $2.4 million in 1997 and $1.8 million
in 1996. The increase was primarily due to an increase in compensation and
related expenses as a result of the addition of personnel resulting from our
growth.

DD&A of natural gas and oil properties, excluding the impairment in 1997, was
$12.7 million in 1997 and $7.2 million in 1996. This amounted to DD&A per Mcfe
of production of $1.34 in 1997 and $1.02 in 1996. The increase in the DD&A rate
between 1996 and 1997 reflects the amount of exploration and development costs
incurred increasing at a higher rate than the proven reserve base.

Interest expense, net of amounts capitalized to natural gas and oil properties,
was $3.2 million in 1997 and $2.0 million in 1996. The increase was due to the
increase in the amounts we owed Seitel under the intercompany loans Seitel made
to us to fund our capital expenditures.

LIQUIDITY, CAPITAL EXPENDITURES AND CAPITAL RESOURCES

Prior to the offering, DDD Energy has been a wholly owned subsidiary of Seitel.
DDD Energy historically did not maintain any cash balances because it used
Seitel's centralized cash management system and remitted all of its cash to
Seitel on a daily basis. Through intercompany loans, Seitel has provided all of
DDD Energy's liquidity and capital resources in excess of the cash provided by
its operations. Because Seitel will not provide us with any capital resources
after the offering, DDD Energy's historical liquidity and capital resources may
not be indicative of our future liquidity and capital resources.

From inception through June 30, 1999, Seitel made aggregate contributions to DDD
Energy of approximately $134.7 million in the form of intercompany loans. From
inception through June 30, 1999, DDD Energy incurred capital expenditures
totaling approximately $223.4 million. Of these expenditures, $47.3 million were
for the acquisition of 3D seismic data, $79.2 million were for exploratory and
developmental drilling, $95.2 million were for leasehold costs and property
acquisitions and $1.7 million for other capital expenditures.

We have experienced and expect to continue to experience substantial working
capital requirements. At June 30, 1999, we had a working capital deficit of
approximately $800,000, primarily due to our active exploration and development
programs. While we believe that Seitel's $15.0 million cash capital contribution
prior to the offering, our cash flow from operations and borrowings under our
proposed credit facility should allow us to implement our present business
strategy during 1999 and 2000, we may need

29
<PAGE> 31

additional financing in the future to fund our growth and exploration and
development programs. If we cannot obtain any necessary additional financing, we
may have to curtail our exploration and other activities or sell some of our
assets.

During the first six months of 1999, we incurred capital expenditures of $14.1
million. Of these expenditures, we incurred $5.6 million for the acquisition of
3D seismic data, $4.1 million for exploratory and developmental drilling, $4.1
million for leasehold costs and $300,000 for other capital expenditures. We have
budgeted to spend approximately $42.1 million in the last six months of 1999 and
in 2000 for the acquisition of 3D seismic data, exploration and development
drilling, leasehold costs and other capital expenditures.

Our budget includes development costs that are contingent on the success of
future exploratory drilling. We do not anticipate that our budgeted leasehold
costs will include the acquisition of producing properties. We do not anticipate
any significant abandonment or dismantlement costs through 2000. Actual levels
of capital expenditures may vary significantly due to many factors, including
drilling results, natural gas and oil prices, industry conditions, decisions of
operators and other industry owners and the prices of oil field goods and
services. We anticipate that these capital expenditures will be funded through
Seitel's cash capital contribution prior to the offering, our cash flow from
operations and borrowings under our proposed credit facility.

We intend to use cash flows from operations to fund a portion of our future
exploration and development activities. Net cash provided by operating
activities was $7.4 million for the six months ended June 30, 1999, $17.5
million for the year ended 1998, $16.6 million for the year ended 1997 and $29.8
million for the year ended 1996. The decrease in cash flows from operations from
1996 to 1997 primarily resulted from receipt of a nonrecurring volumetric
production payment of $19 million in 1996. The increase from 1997 to 1998 was
primarily due to an increase in cash collected from the sale of natural gas and
oil production partially offset by an increase in interest expense paid and a
decrease in the amount of current tax benefit received during 1998. For the six
month period ended June 30, 1999, we produced approximately 23.0 MMcfe per day
as compared to average production of 23.4 MMcfe per day in 1998, 25.9 MMcfe per
day in 1997, and 19.3 MMcfe per day in 1996. Our cash flow from operations will
depend on the prices of natural gas and oil and on our ability to increase
production through our exploration and development drilling program.

We are currently seeking a revolving credit facility to be secured by our
natural gas and oil reserves. The amount of the facility we are seeking would be
in the range of $20.0 million to $40.0 million. The amount we expect to be able
to borrow under the revolving credit facility will be limited to a borrowing
base determined by the lender based on its evaluation of our natural gas and oil
reserves. We expect to finalize a revolving credit facility before consummation
of the offering.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance, but systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.

Our computer systems and software products are maintained by Seitel's
information systems manager and, as such, our Year 2000 readiness has been
addressed as part of Seitel's overall assessment.

Compliance Program

In order to address the Year 2000 issue, Seitel appointed its Chief Operating
Officer to assure that key automated systems and related processors would remain
functional through 2000. The COO and Seitel's

30
<PAGE> 32

information systems manager addressed the project by reviewing the information
technology and non-information technology systems to determine whether they were
Year 2000 compliant. Also, they prepared a formal questionnaire for all
significant suppliers, customers, and service providers to determine the extent
to which Seitel was vulnerable to those third parties' failure to remediate the
Year 2000 problem.

State of Readiness

A review and assessment of the information technology and non-information
technology systems was completed as of January 31, 1999 and did not identify any
material systems which are not Year 2000 compliant. Seitel prepared and sent a
formal questionnaire to all significant suppliers, customers and service
providers to determine the extent to which Seitel was vulnerable to those third
parties' failure to remediate the Year 2000 problem. Seitel requested that these
companies respond no later than June 30, 1999. As of November 8, 1999, Seitel
has received written assurances of Year 2000 compliance from approximately 57%
of its suppliers, customers and service providers. Companies who have not
responded have been sent second requests to respond to the questionnaire. We
have received oral assurances of Year 2000 compliance from many of the third
parties with whom we have relationships. We believe that our operations will not
be significantly disrupted even if third parties with whom we have relationships
are not Year 2000 compliant.

Costs to Address Year 2000 Compliance Issues

We estimate our total costs already expended and to be expended to address our
Year 2000 issues will be less than $100,000. To date, costs incurred to address
Year 2000 compliance have been internal in nature and have been charged to
income as incurred. Such costs have been funded from cash provided by operating
activities. However, uncertainty exists concerning the potential costs and
effects associated with any Year 2000 compliance, and we intend to continue to
make efforts to ensure that third parties with whom we have relationships are
Year 2000 compliant. We are not aware of any information technology projects
that have been delayed due to the Year 2000 compliance program.

Risk of Non-Compliance and Contingency Plan

The goal of the Year 2000 project has been to ensure that all of the critical
systems and processes, which are under our direct control, remain functional.
However, because certain systems and processes may be interrelated with systems
outside of our control, there can be no assurance that all implementations will
be successful.

Our most likely "worst case" scenarios are impairment of:

-- our ability to deliver our production to, or receive payment from, third
parties gathering and/or purchasing our production from affected
facilities;

-- our ability to receive and process 3D seismic data, which would hinder
our ability to generate and drill exploratory prospects; and

-- our ability to execute financial transactions with our banks or other
third parties whose systems fail or malfunction.

As part of the Year 2000 project, we will develop contingency plans to respond
to any potential failures as they may be identified. We cannot assure you that
unexpected Year 2000 compliance problems for us or our vendors, customers and
service providers would not materially and adversely affect our business,
financial condition or operating results. We will continue throughout 1999 to
consider the likelihood of a material business interruption due to the Year 2000
issue.

31
<PAGE> 33

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -- COMMODITY PRICE
RISK

We produce and sell natural gas, crude oil, condensate and natural gas liquids.
We currently sell most of our natural gas and oil production under price
sensitive or market price contracts. As a result, our financial results can be
significantly affected as natural gas and oil prices fluctuate. We use
derivative financial instruments, principally natural gas swaps, to reduce the
price risks associated with fluctuations in natural gas prices. However, these
contracts also limit the benefits we would realize if prices increase.

We designate these derivative financial instruments as hedges and account for
them on the accrual basis, recognizing gains and losses in natural gas and oil
production revenues when the associated production occurs. Such contracts
usually are placed with major derivative dealers that we believe are minimal
credit risks. We defer and recognize in income the net gains and losses on
natural gas swaps designated as hedges of anticipated transactions, including
accrued gains or losses upon maturity or termination of the contract, when we
produce the associated hedged gas.

During 1998, we recognized net hedging gains of $653,000. As of December 31,
1998, we did not have any open commodity price hedges. During 1999, we have
entered into natural gas swaps in order to hedge a portion of anticipated
natural gas production. For the six months ended June 30, 1999, we recognized
net hedging losses of $102,000. As of November 1, 1999, we had open commodity
price hedges totaling 2,595,000 MMBtu at an average price of $2.52 per MMBtu, or
approximately $2.77 per Mcf. We continually review and may alter our hedged
positions. Our strategy is to seek arrangements with guaranteed minimum prices
and flexibility to participate in improving commodity prices. In general, we do
not intend to hedge more than 50% of our natural gas production under long-term
hedging arrangements.

The following table shows the hedges we have in place as of November 1, 1999.

<TABLE>
<CAPTION>
VOLUME PER
MONTH HEDGE PRICE
MONTH (MMBTU) ($/MMBTU)
- ----- ---------- -----------
<S> <C> <C>
December 1999............................................... 310,000 $2.51
January 2000................................................ 310,000 2.51
February 2000............................................... 290,000 2.51
March 2000.................................................. 310,000 2.51
April 2000.................................................. 300,000 2.51
May 2000.................................................... 310,000 2.51
June 2000................................................... 300,000 2.51
July 2000................................................... 310,000 2.51
August 2000................................................. 155,000 2.57
---------
Total volume hedged............................... 2,595,000
=========
</TABLE>

32
<PAGE> 34

BUSINESS

OUR STRENGTHS

We believe that our historical success and future prospects are directly related
to the following combination of strengths:

33
<PAGE> 35

financial performance, and we will further incentivize these key
employees with grants of employee stock options.

OUR STRATEGY

-- Focus on Exploration. We maintain an exploration program driven by our
technical analysis of 3D seismic and other geophysical and geological
data. As of September 30, 1999, we had an inventory of over 125
exploratory prospects. From June 30, 1999 to the end of 2000, we expect
to invest $42.1 million in exploratory and development activities. During
this period, we intend to drill 48 wells with our industry partners. We
allocate our exploration spending between a small number of higher risk,
higher potential prospects that may result in significant increases in
proved reserves and a greater number of lower risk, moderate potential
prospects. We work closely with the operators of our properties by
providing detailed 3D seismic and other geotechnical analysis of the
prospects to more accurately determine the economic feasibility of, and
optimal exploratory and development programs for, our prospects.

EXPLORATION TECHNOLOGY

We rely extensively on the evaluation and interpretation of 3D seismic data for
our natural gas and oil exploration and development activities.
Three-dimensional seismic data provides a graphic geophysical depiction of the
earth's subsurface from two horizontal dimensions and one vertical dimension.
Traditional two-dimensional, or 2D, seismic data provides this geophysical
depiction from one horizontal and one vertical dimension, and therefore does not
provide as much geophysical information as 3D seismic data. However, 2D seismic
data is still used extensively in the oil and gas exploration industry for
broad-scale exploration evaluation and to determine the location for and to help
design 3D surveys.

We generally decide whether to purchase a working interest in a potential
project on the basis of our evaluation of existing 2D seismic data and other
geological and geophysical data. When we evaluate projects, we focus on the
types of potential natural gas and oil traps that we have identified through our
exploration experiences as being most effectively exploited using 3D seismic
data. After we become a working interest owner in a project, we actively
participate in the design of a 3D seismic survey over the

34
<PAGE> 36

project area and supervise the acquisition of proprietary seismic data. We then
analyze and interpret the 3D seismic data in conjunction with other geophysical
and geological data, such as well logs and production data from wells drilled on
prospects showing similar 3D seismic characteristics, using sophisticated
computer workstations and software. This interpretation of the combination of 3D
seismic with all other geological and geophysical data is essential to
adequately evaluate prospects to minimize dry hole risks.

We use computer software and modeling techniques to project the likely geologic
setting of a potential drilling location and potential locations of undiscovered
natural gas and oil reserves. This process relies on a comparison of actual data
for the potential drilling location and historical data for the density and
velocity characteristics of different types of rock formations, hydrocarbons and
other subsurface minerals, resulting in a projected three-dimensional image of
the subsurface. This modeling is performed through the use of advanced
interactive computer workstations and various combinations of available computer
software developed solely for this application. Our explorationists can access a
diverse software tool kit including modeling, mapping, well path description,
time slice analysis, pre- and post-stack seismic processing and seismic
attribute analyses.

SIGNIFICANT EXPLORATION DISCOVERIES

Since our inception, we have concentrated on the exploration for natural gas and
oil onshore in the U.S. Gulf Coast region. Our interests in our most significant
exploration discoveries as of June 30, 1999 are summarized in the table below.
Please also read "-- Reserves" for a more detailed discussion of our natural gas
and oil reserves. This table includes amounts related to our interests in the 11
wells in the North Gillis project that we sold in July 1999 for $13.2 million.

<TABLE>
<CAPTION>
CUMULATIVE
WELLS -------------------------------- REMAINING
DRILLED RESERVES CAPEX CASH FLOW PV-10 FINDING COST
PROJECT (GROSS/NET) (BCFE)(1) ($MM)(2) ($MM) ($MM) ($/MCFE)
- ------- ----------- --------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
North Gillis............... 11/2 19.3 $3.6 $1.0 n/a $0.19
S. Texas Vicksburg......... 9/4 17.9 3.8 0.4 $18.5 0.21
E. Midland................. 3/1 31.2 8.7 3.4 29.7 0.28
</TABLE>

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

(1) Cumulative reserves equals proved reserves as of June 30, 1999 plus
historical production.

(2) Capital expenditures are for evaluated properties only.

DESCRIPTION OF OUR PRINCIPAL NATURAL GAS AND OIL PROPERTIES AND PROJECTS

Our principal natural gas and oil properties are located in the onshore U.S.
Gulf Coast area, east Texas and the north central area of the state of
California. As of September 30, 1999, we had an inventory of over 125 prospects.
We plan to drill approximately 48 of these wells between June 30, 1999 and the
end of 2000, most of which are located in the projects listed in the table
below.

The following table describes our principal natural gas and oil properties and
projects as of June 30, 1999, and our budgeted capital expenditures and wells
for the year 2000.

<TABLE>
<CAPTION>
NO. OF BUDGETED NEW
PROVED BUDGETED WELLS (GROSS)
RESERVES 2000 --------------------
PROJECT (BCFE) % GAS % PUD PV-10 CAPEX EXPLOR. DEVELOP.
------- -------- ----- ----- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
S. Texas Vicksburg.............. 15.3 88% 63% $18.5 $8.2 5 --
E. Midland...................... 28.9 79 98 29.7 2.7 -- 2
Sacramento Basin................ 0.4 100 -- 0.4 1.7 15 --
E. Texas Smackover.............. 32.5 33 18 26.4 0.1 -- 1
Jennings........................ -- 80 -- -- 3.2 2 --
Howard Creek.................... -- 20 -- -- 0.8 3 --
Macedonia....................... -- 80 -- -- 0.9 3 --
</TABLE>

35
<PAGE> 37

South Texas Vicksburg. This project is located in Nueces, Hidalgo and Kleburg
Counties. We have three active project areas within this region:
Tartan-Riverside, N.E. Jeffress and Ricardo. The evaluation of each area is
based on 3D seismic data that is used to delineate the complex structural traps
associated with a thick sand/shale sequence that makes up the Vicksburg
formation. As of June 30, 1999, net proved reserves were 15.3 Bcfe.

We own a 25% working interest in the Tartan-Riverside project. In 1998, we
coordinated the acquisition of a 104 square mile 3D survey in this area.
Targeted reservoir size in this area is 2.0 Bcf to over 5.0 Bcf. We had a 100%
success rate drilling six wells on four different prospects. These wells have
encountered multiple productive horizons in the Vicksburg formation at depths
ranging from 8,700 to 11,400 feet. In addition, as of September 30, 1999, we had
identified 14 development locations on these prospects and were evaluating six
exploratory prospects for drilling within the next two years. Capital
expenditures for 2000 are anticipated to be $4.4 million in this area.

The N.E. Jeffress project is located adjacent to prolific Vicksburg formation
production established by other major operators. We own a 100% working interest
in this field. We acquired third-party 3D group data to evaluate this complex
structural area. Targeted reservoir size in these areas is 3.0 Bcf to over 5.0
Bcf per well. We anticipate drilling two wells in 2000 with capital expenditures
in the amount of $3.1 million.

We own a 25% working interest in the Ricardo project. We coordinated the
acquisition of a 34 square mile 3D survey that is currently being evaluated for
initial drilling locations. The Vicksburg Sand section is the primary target
interval in Ricardo. The traps are expected to be highly complex, faulted
structures with stratigraphic complexity as well. Pre-drill prospect reserve
estimates indicate traps ranging in size from 10.0 to 25.0 Bcfe. We plan the
initial exploratory test well to be drilled by the middle of 2000 with capital
expenditures of $700,000 for that year.

East Midland. We own an approximate 33% working interest in this project located
in Acadia Parish, Louisiana. Targeted reservoir size in this project is 3.0 Bcf
to over 8.0 Bcf. In 1996, we coordinated the acquisition of a 24 square mile 3D
survey. We and our partner group utilized 3D seismic technology to identify and
subsequently exploit deeper hydrocarbon reserves within the field and within
adjacent areas. In 1997, we drilled two wells to exploit the Nonion Struma sand,
which is a gas and condensate reservoir producing below 14,000 feet in a highly
faulted complex structural setting. These wells produced at average daily rates
of 10 MMcf of natural gas and 150 Bbl of condensate and natural gas liquids per
well. Detailed mapping indicates the presence of over 1,200 acres of productive
area associated with this horizon covering five separate fault blocks. We expect
additional reserves to be exploited in the Nonion Struma exploratory area as
well as shallower prospective fault closures. As of June 30,1999, net proved
reserves were 28.9 Bcfe. We expect to drill two additional wells and spend $2.7
million on capital expenditures in 2000.

Sacramento Basin. We have a significant exploration position in two separate
areas within the Sacramento Basin gas play, which is located in the Stockton and
Davis area of north central California. The two areas are the Conestrama area of
San Joaquin County and the Bali and Tonga area of Solano and Yolo Counties. We
believe the key to exploration in both areas is the effective use of 3D seismic
data to identify amplitude anomalies that appear to be associated with gas traps
in this complex structural and stratigraphic basin. We believe the combination
of low drilling costs and high probability-of-success drilling plays in this
premium gas marketing area makes the Sacramento Basin a significant area for us.

In the Conestrama area, we coordinated the acquisition and processing of over
225 square miles of 3D seismic data. We own a 33% working interest and expect to
drill two initial wells before the end of 1999 and nine wells in 2000. We expect
to encounter prospects ranging from 1.0 Bcf to over 5.0 Bcf per well in multiple
Cretaceous and Tertiary horizons that range in depth from 6,000 to 11,000 feet.
Planned capital expenditures for 2000 are anticipated to be $1.1 million.

Our project areas in Solano and Yolo Counties include 15% and 33% working
interests in the Bali and Tonga areas, respectively. Targeted reservoir size in
these areas is 1.0 Bcf to over 1.8 Bcf per well. We

36
<PAGE> 38

successfully drilled two out of three gas wells in the Bali area. We anticipate
drilling the initial test well in the Tonga area before the end of 1999 with the
expectation of drilling at least six more wells before the end of 2000. Planned
capital expenditures for 2000 are anticipated to be $600,000.

East Texas Smackover. This project encompasses several counties in the northeast
triangle area between Dallas, Houston and Tyler. We own working interests,
ranging from 10% to 83%, in six separate fields within the salt-cored Smackover
with 15 wells producing as of September 30, 1999. We purchased these interests
in 1994 and 1995 from Edge Petroleum and Unocal. The Jurassic Smackover in this
area is productive from salt-cored anticlines that create structural traps in
the overlying Smackover carbonate section. These traps are located at depths
ranging from 10,000 to 13,000 feet with targeted reservoir size ranging from 2.0
Bcf to over 5.0 Bcf. As of June 30, 1999, net proved reserves were 32.5 Bcfe.
There are three proved undeveloped locations that we anticipate drilling over
the next three years. Capital expenditures are anticipated to be $100,000 in
2000.

Jennings. This project is located in Jefferson Davis Parish, Louisiana. In 1995,
we coordinated the acquisition of an approximate 18 square mile 3D survey. After
extensive review of the data, we identified several large Bol Mex and Nonion
Struma sand prospects. Targeted reservoir size in this project is 7.0 Bcf to
over 10.0 Bcf. We plan to drill the initial well along with one additional well
in 2000. Our budgeted capital expenditures for this area are $3.2 million in
2000.

Howard Creek. This project is located in Beauregard and Allen Parishes in
southwest Louisiana. Our primary target for this project is associated with
3D-based evaluation and exploitation of shallow Yegua channel sand reservoirs,
which range in depth from 6,000 to 9,000 feet. These traps, estimated to range
from 3.0 Bcfe to over 6.0 Bcfe, are expected to exhibit a hydrocarbon amplitude
anomaly leading to a high probability of drilling success. Historical production
from analog fields in the immediate vicinity indicates that the target sands
have excellent hydrocarbon recovery characteristics. We are currently
coordinating the acquisition of a more than 100 square mile 3D survey that
should be completed during mid-year 2000. We expect to drill three initial wells
in the later half of 2000. Planned capital expenditures are $800,000 in 2000.

Macedonia. This project is located in Wilkinson County, which is in the
southwest corner of Mississippi. The primary target is a combination
structural-stratigraphic trap in the Tuscaloosa sand interval, which ranges in
depth from 11,000 to 12,000 feet. Historically, wells along the trend have
produced in excess of 6.0 Bcf from reservoirs that are similar to those that we
expect to test in the area. In addition to our primary target, there are
secondary plays in the Wilcox and Frio sand sections. The Wilcox and Frio depths
range from 6,000 to 7,000 feet and 3,500 to 4,000 feet, respectively. We have a
40% working interest and are currently coordinating the acquisition and
processing of a 57 square mile survey to be completed before the end of 1999. We
plan to drill the initial Tuscaloosa test well by the middle of 2000. Capital
expenditures for 2000 are anticipated to be $900,000.

OPERATIONS

We do not act as operator for any of our natural gas and oil projects. As a
non-operator, we can focus on our demonstrated strengths of prospect evaluation
and exploration and development program planning without the distraction of
day-to-day operational issues. Also, because we do not act as operator, we do
not have the overhead that acting as operator requires, such as a full oil and
gas production accounting staff, oil and gas marketing personnel, production
engineering staff and production operational personnel. We seek to invest in
working interests with operators who we believe are efficient and responsive to
our needs. More than 30 oil and gas companies act as operators on the properties
in which we own working interests.

RESERVES

The following table shows information related to our estimated proved reserves.
Estimated reserve volumes and values were determined under the method prescribed
by the SEC that requires the application of period-end prices for each period,
held constant throughout the projected reserve life. You should not

37
<PAGE> 39

assume that the present value of estimated future net cash flows referred to in
this prospectus is the current market value of our estimated natural gas and oil
reserves.

Estimates of proved reserves as of December 31, 1996, 1997 and 1998 are based on
reserve reports prepared by our independent petroleum engineering consultants.
Forrest A. Garb & Associates, Inc. prepared the report for our reserves as of
December 31, 1998 and for a portion of our reserves as of December 31, 1997, and
Miller & Lents, Ltd. prepared the report for our reserves as of December 31,
1996 and for a portion of our reserves as of December 31, 1997. We have based
our estimated proved reserves as of June 30, 1999 on our internal estimates of
changes to our proved reserves resulting from production and drilling activity
since December 31, 1998. Appendix A to this prospectus contains a letter
prepared by Forrest A. Garb & Associates, Inc. summarizing the reserve report as
of December 31, 1998.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------- JUNE 30,
1996 1997 1998 1999(1)
------- ------- -------- --------
<S> <C> <C> <C> <C>
ESTIMATED PROVED NATURAL GAS AND OIL RESERVES:
Natural gas reserves (MMcf):
Proved developed................................ 11,563 18,483 37,844 32,550
Proved undeveloped.............................. 12,198 28,511 36,215 32,030
------- ------- -------- --------
Total...................................... 23,761 46,994 74,059 64,580
======= ======= ======== ========
Oil and natural gas liquids reserves (MBbls):
Proved developed................................ 902 1,744 5,265 4,086
Proved undeveloped.............................. 1,392 894 2,073 1,962
------- ------- -------- --------
Total...................................... 2,294 2,638 7,338 6,048
======= ======= ======== ========
Total proved natural gas and oil reserves
(MMcfe)......................................... 37,525 62,822 118,087 100,868
======= ======= ======== ========
PV-10 (IN THOUSANDS):
Proved developed................................... $44,690 $41,802 $ 66,889 $ 62,334
Proved undeveloped................................. 28,072 41,480 40,760 45,054
------- ------- -------- --------
Total PV-10(2)............................. $72,762 $83,282 $107,649 $107,388
======= ======= ======== ========
STANDARDIZED MEASURE OF DISCOUNTED ESTIMATED FUTURE
NET CASH FLOWS AFTER INCOME TAXES (IN
THOUSANDS)(2)................................... $52,090 $64,597 $ 81,543
======= ======= ========
PRICES USED IN CALCULATING PROVED RESERVES AND
PV-10:
Natural gas (per Mcf).............................. $ 3.55 $ 2.66 $ 2.32 $ 2.55
Oil and natural gas liquids (per Bbl).............. 22.22 16.23 10.47 16.83
</TABLE>

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

(1) Reserve information has been adjusted to exclude amounts related to our sale
of interests in 11 wells in the North Gillis project in July 1999.

(2) Excludes PV-10 related to sulfur reserves of $2.4 million as of December 31,
1996 and 1997 and $4.3 million as of December 31, 1998.

Producing natural gas and oil reservoirs generally are characterized by
declining production rates that vary depending upon reservoir characteristics
and other factors. Therefore, without reserve additions in excess of production
through successful exploration and development activities, our reserves and
production will decline. Although we estimate our reserves and the estimated
costs of developing them according to industry standards, the estimated costs
may be inaccurate, development may not occur as scheduled and actual results
will likely differ from estimates.

The process of estimating natural gas and oil reserves is complex. It requires
many assumptions, including assumptions relating to natural gas and oil prices,
drilling and operating expenses, capital expenditures, taxes and availability of
funds. Actual future production, natural gas and oil prices, operating expenses
and quantities of natural gas and oil reserves most likely will vary from our
estimates and these variances may be material. Please read the supplemental oil
and gas information following the notes to our financial

38
<PAGE> 40

statements and "Risk Factors -- Reserve estimates depend on many assumptions
that may turn out to be inaccurate. Any material inaccuracies in these reserve
estimates or underlying assumptions will materially affect the quantities and
present value of our reserves" for a discussion of the risks inherent in natural
gas and oil estimates and for additional information concerning our proved
reserves.

Our estimates of proved reserves in the table above do not differ from those we
have filed with other federal agencies.

VOLUMES, PRICES AND PRODUCTION COSTS

The following table describes for each of the last three fiscal years and for
the six month periods ended June 30, 1998 and 1999 our natural gas and crude oil
(including condensate and natural gas liquids) production, average production
costs and average sales prices. Almost all such production comes from the U.S.
Gulf Coast region.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf)(1)........................... 4,902 6,926 6,216 2,921 3,076
Oil and natural gas liquids (MBbls)(1).......... 363 420 386 198 181
Total production (MMcfe)........................ 7,080 9,446 8,532 4,109 4,162
AVERAGE REALIZED SALES PRICES (INCLUDING EFFECTS
OF HEDGING):
Natural gas (per Mcf)(1)........................ $ 2.14 $ 2.63 $ 2.27 $ 2.43 $ 2.00
Oil and natural gas liquids (per Bbl)(1)........ 18.29 16.83 11.78 12.87 12.44
Total (per Mcfe)................................ 2.42 2.68 2.19 2.35 2.02
AVERAGE PRODUCTION COST PER MCFE................ $ 0.44 $ 0.55 $ 0.55 $ 0.58 $ 0.56
</TABLE>

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

PRODUCTIVE WELLS

The following table sets forth the number of productive natural gas and oil
wells (including producing wells and wells capable of production) in which we
owned an interest as of September 30, 1999. Gross natural gas and oil wells
include 10 with multiple completions. All of the wells are operated by our
natural gas and oil company partners.

<TABLE>
<CAPTION>
GROSS WELLS NET WELLS
----------- ---------
<S> <C> <C>
Oil..................................................... 54 12.74
Gas..................................................... 122 33.78
--- -----
Total......................................... 176 46.52
=== =====
</TABLE>

39
<PAGE> 41

DRILLING ACTIVITY

The following table sets forth the number of net wells that we have participated
in that were drilled in the first nine months of this fiscal year and in the
last three fiscal years.

<TABLE>
<CAPTION>
EXPLORATORY DEVELOPMENT
------------------------- -------------------------
PRODUCTIVE DRY TOTAL PRODUCTIVE DRY TOTAL
---------- ---- ----- ---------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
THROUGH SEPTEMBER 30, 1999
Texas........................................ 1.73 0.28 2.01 0.39 -- 0.39
Louisiana.................................... 0.19 0.33 0.52 -- -- --
California................................... 0.15 -- 0.15 -- -- --
----- ---- ----- ---- ---- ----
Total.............................. 2.07 0.61 2.68 0.39 -- 0.39
===== ==== ===== ==== ==== ====
1998
Texas........................................ 0.57 1.68 2.25 1.10 -- 1.10
Mississippi.................................. 1.00 1.00 2.00 -- -- --
Louisiana.................................... 1.50 1.75 3.25 0.66 0.33 0.99
California................................... 0.15 0.15 0.30 -- -- --
Arkansas..................................... -- 0.13 0.13 -- -- --
Michigan..................................... -- 0.25 0.25 -- -- --
----- ---- ----- ---- ---- ----
Total.............................. 3.22 4.96 8.18 1.76 0.33 2.09
===== ==== ===== ==== ==== ====
1997
Texas........................................ 5.29 4.05 9.34 1.88 0.52 2.40
Mississippi.................................. 2.64 2.00 4.64 1.24 -- 1.24
Louisiana.................................... 2.35 1.05 3.40 1.05 -- 1.05
----- ---- ----- ---- ---- ----
Total.............................. 10.28 7.10 17.38 4.17 0.52 4.69
===== ==== ===== ==== ==== ====
1996
Texas........................................ 2.85 0.90 3.75 2.91 -- 2.91
Mississippi.................................. 0.69 2.48 3.17 -- 0.15 0.15
Louisiana.................................... 0.25 0.26 0.51 -- -- --
----- ---- ----- ---- ---- ----
Total.............................. 3.79 3.64 7.43 2.91 0.15 3.06
===== ==== ===== ==== ==== ====
</TABLE>

As of September 30, 1999, we were participating in the drilling of one gross and
0.25 net wells.

ACREAGE

The following table sets forth certain information regarding our developed and
undeveloped lease acreage as of September 30, 1999. The table does not include
additional acreage that we have options to acquire.

<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
--------------- ------------------
GROSS NET GROSS NET
------ ------ -------- -------
<S> <C> <C> <C> <C>
Texas..................................................... 23,186 10,405 86,730 23,597
Mississippi............................................... 4,100 1,321 28,376 11,350
Louisiana................................................. 6,864 1,446 67,300 20,411
California................................................ 240 36 130,650 39,353
Alabama................................................... 160 5 1,516 270
Michigan.................................................. 260 130 3,300 1,100
------ ------ ------- ------
Total........................................... 34,810 13,343 317,872 96,081
====== ====== ======= ======
</TABLE>

40
<PAGE> 42

TITLE TO PROPERTIES

Our properties are subject to customary royalty interests, liens incident to
operating agreements, liens for current taxes and other burdens, including other
mineral encumbrances and restrictions. We do not believe that any of these
burdens materially interferes with the use of or affects the value of our
properties in the operation of our business.

We believe that we have satisfactory title to or rights in all of our producing
properties. As is customary in the natural gas and oil industry, minimal
investigation of title is made at the time of acquisition of undeveloped
properties. We investigate title and obtain title opinions from local counsel,
if any, only before commencement of drilling operations.

MARKETING

We do not operate any of our producing properties. Our natural gas and oil
production is sold by our operators under price sensitive or market price
contracts. Our revenues, profitability and future growth depend substantially on
prevailing prices for natural gas and oil. The price received by us for our
natural gas and oil production fluctuates widely. For example, natural gas and
oil prices declined significantly in 1998 and, for an extended period of time,
remained substantially below prices obtained in previous years.

Decreases in the prices of natural gas and oil could adversely affect the
carrying value of our proved reserves and our revenues, profitability and cash
flow. Although we currently are not experiencing any significant involuntary
curtailment of our natural gas or oil production, market, economic and
regulatory factors may in the future materially affect our ability to sell our
natural gas or oil production.

COMPETITION

We compete with major integrated oil and gas companies and independent oil and
gas companies in all areas of operation. In particular, we compete for property
acquisitions and for the equipment and labor required to operate and develop
these properties. Most of our competitors have substantially greater financial
and other resources. In addition, larger competitors may be able to absorb the
burden of any changes in federal, state and local laws and regulations more
easily than we can, which would adversely affect our competitive position. These
competitors may be able to pay more for exploratory prospects and may be able to
define, evaluate, bid for and purchase a greater number of properties and
prospects than we can. Our ability to explore for oil and natural gas prospects
and to acquire additional properties in the future will depend upon our ability
to conduct operations, to evaluate and select suitable properties and to
consummate transactions in this highly competitive environment. In addition,
most of our competitors have operated for a much longer time than we have and
have demonstrated the ability to operate through industry cycles.

SEASONALITY AND TIMING FACTORS

Our results of operations can fluctuate from quarter to quarter. The
fluctuations are caused by a number of factors. Bringing a small number of
high-production wells on line in a given quarter can materially impact the
results of such quarter since many of the wells in which we participate
experience high initial flow rates for the first 60 to 90 days of production and
then taper off to a lower, more steady rate for the remainder of their lives. If
several of these wells are brought on line in a quarter, the results for that
quarter will appear unusually strong, and then later, when production decreases
to its long-term, steady rate, our results may not be able to sustain the trend
of increased performance indicated by the strong results of the previous
quarter. Our operations also can be impacted by weather, mechanical and
equipment problems or shortages and other factors, which may delay the hookup of
successfully completed wells and delay the resultant production revenue. Also,
due to the high percentage of natural gas reserves in our portfolio and the
seasonal variations in natural gas prices, the results from our operations also
are subject to significant fluctuations due to variations in natural gas prices.
In addition, some producing wells may be required to go off line periodically
for pipeline and other maintenance. We do not believe that these fluctuations in
quarterly results are indicative of our long-term prospects and financial
performance.
41
<PAGE> 43

REGULATION

Our operations are subject to extensive and continually changing regulation, as
legislation affecting the oil and natural gas industry is under constant review
for amendment and expansion. Many departments and agencies, both federal and
state, are authorized by statute to issue and have issued rules and regulations
binding on the oil and natural gas industry and its individual participants. The
failure to comply with these rules and regulations can result in substantial
penalties. The regulatory burden on the oil and natural gas industry increases
our cost of doing business and, consequently, affects our profitability.
However, we do not believe that we are affected in a significantly different
manner by these regulations than are our competitors in the oil and natural gas
industry.

Transportation And Sale of Natural Gas

The Federal Energy Regulatory Commission ("FERC") regulates interstate natural
gas pipeline transportation rates as well as the terms and conditions of
service. FERC's regulations affect the marketing of the natural gas we produce,
as well as the revenues we receive for sales of that natural gas. In 1985, the
FERC adopted policies that make natural gas transportation accessible to natural
gas buyers and sellers on an open-access, nondiscriminatory basis. The FERC
issued Order No. 636 on April 8, 1992, which, among other things, prohibits
interstate pipelines from making sales of gas tied to the provision of other
services and requires pipelines to "unbundle" the services they provide. This
has enabled buyers to obtain natural gas supplies from any source and secure
independent delivery service from the pipelines. All of the interstate pipelines
subject to the FERC's jurisdiction are now operating under Order No. 636 open
access tariffs. On July 29, 1998, the FERC issued a Notice of Proposed
Rulemaking regarding the regulation of short-term natural gas transportation
services. The FERC proposes to revise its regulations to require all available
short-term capacity, including capacity released by shippers holding firm
entitlements, to be allocated through an auction process. The FERC also proposes
to require pipelines to offer additional services under open access principles,
such as "park and loan" services. In a related initiative, the FERC issued a
Notice of Inquiry on July 29, 1998 seeking input from natural gas industry
players and affected entities regarding virtually every aspect of the regulation
of interstate natural gas transportation services. Among other things, FERC is
seeking input on whether to retain cost-based rate regulation for long term
transportation services, potential changes in the manner in which rates are
designed and the use of index driven or incentive rates for pipelines. The July
29, 1998 Notice of Inquiry may lead to a subsequent Notice of Proposed
Rulemaking to further revise the FERC's regulations.

Additional proposals and proceedings that might affect the natural gas industry
are considered from time to time by Congress, the FERC, state regulatory bodies
and the courts. We cannot predict when or if any of these proposals might become
effective or their effect, if any, on our operations. The natural gas industry
historically has been closely regulated; thus there is no assurance that the
less stringent regulatory approach recently pursued by the FERC and Congress
will continue.

Regulation of Production

The production of natural gas and oil is subject to regulation under a wide
range of state and federal statutes, rules, orders and regulations. State and
federal statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. Most states in which we own
and operate properties have regulations governing conservation matters,
including provisions for the unitization or pooling of natural gas and oil
properties, the establishment of maximum rates of production from natural gas
and oil wells and the regulation of the spacing, plugging and abandonment of
wells. Many states also restrict production to the market demand for natural gas
and oil and several states have indicated interest in revising applicable
regulations. The effect of these regulations is to limit the amount of natural
gas and oil we can produce from our wells and to limit the number of wells or
the locations at which we can drill. Moreover, each state generally imposes a
production or severance tax with respect to production and sale of natural gas,
crude oil and gas liquids within its jurisdiction.

42
<PAGE> 44

Environmental Regulations

General. Various federal, state and local laws and regulations governing the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, affect our operations and costs. In particular,
our exploration, development and production operations, our activities in
connection with storage and transportation of crude oil and other liquid
hydrocarbons and our use of facilities for treating, processing or otherwise
handling hydrocarbons and related wastes are subject to stringent environmental
regulation. As with the industry generally, compliance with existing regulations
increases our overall cost of business. The areas affected include:

-- unit production expenses primarily related to the control and limitation
of air emissions and the disposal of produced water;

-- capital costs to drill exploration and development wells resulting from
expenses primarily related to the management and disposal of drilling
fluids and other oil and gas exploration wastes; and

-- capital costs to construct, maintain and upgrade equipment and
facilities.

These laws and regulations have been changed frequently in the past, and in
general, these changes have imposed more stringent requirements that increase
operating costs or require capital expenditures in order to remain in
compliance. We believe that our business operations are in substantial
compliance with current laws and regulations and that continued compliance with
existing requirements will not materially impact our financial position or
results of operations. It is also possible that unanticipated factual
developments could cause us to make environmental expenditures that are
significantly different from those we currently expect. While we are not aware
of any proposed or pending changes to the existing laws or regulations that
would have a material adverse effect on our business, existing laws and
regulations could be changed and any such changes could have an adverse effect
on our business. We believe that such regulations would be enacted over time and
would affect the industry as a whole.

Superfund. The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), also known as "Superfund," imposes liability, without regard to
fault or the legality of the original act, on some classes of persons that
contributed to the release of a "hazardous substance" into the environment.
These persons include the "owner" or "operator" of the site and companies that
disposed or arranged for the disposal of the hazardous substances found at the
site. CERCLA also authorizes the Environmental Protection Agency and, in some
instances, third parties to act in response to threats to the public health or
the environment and to seek to recover from the responsible classes of persons
the costs they incur. In the course of our ordinary operations, we may generate
waste that may fall within CERCLA's definition of a "hazardous substance." We
may be jointly and severally liable under CERCLA or comparable state statutes
for all or part of the costs required to clean up sites at which these wastes
have been disposed.

We currently own or lease, and have in the past owned or leased, numerous
properties that for many years have been used for the exploration and production
of oil and gas. Although we have used operating and disposal practices that were
standard in the industry at the time, hydrocarbons or other wastes may have been
disposed of or released on or under the properties owned or leased by us or on
or under other locations where these wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose
actions with respect to the treatment and disposal or release of hydrocarbons or
other wastes were not under our control. These properties and wastes disposed on
these properties may be subject to CERCLA and analogous state laws. Under these
laws, we could be required:

-- to remove or remediate previously disposed wastes, including wastes
disposed of or released by prior owners or operators;

-- to clean-up contaminated property, including contaminated groundwater; or

-- to perform remedial plugging operations to prevent future contamination.

43
<PAGE> 45

Oil Pollution Act of 1990. The Oil Pollution Act of 1990 (the "OPA") and
regulations thereunder impose liability on "responsible parties" for damages
resulting from crude oil spills into or upon navigable waters, adjoining
shorelines or in the exclusive economic zone of the United States. Liability
under the OPA is strict, joint and several, and potentially unlimited. A
"responsible party" includes the owner or operator of an onshore facility. A
failure to comply with the OPA's requirements or inadequate cooperation during a
spill response action may subject a responsible party to civil or criminal
enforcement actions. We are not aware of any action or event that would subject
us to liability under the OPA and we believe that compliance with the OPA's
operating requirements will not have a material adverse effect on us.

Clean Water Act. The Federal Water Pollution Control Act of 1972, as amended
(the "Clean Water Act"), imposes restrictions and controls on the discharge of
produced waters and other oil and gas wastes into navigable waters. These
controls have become more stringent over the years, and it is possible that
additional restrictions will be imposed in the future. Permits must be obtained
to discharge pollutants into state and federal waters. Certain state regulations
and the general permits issued under the Federal National Pollutant Discharge
Elimination System program prohibit the discharge of produced waters and sand,
drilling fluids, drill cuttings and certain other substances related to the oil
and gas industry into certain coastal and offshore waters. The Clean Water Act
provides for civil, criminal and administrative penalties for unauthorized
discharges for oil and other hazardous substances and imposes liability on
parties responsible for those discharges for the costs of cleaning up any
environmental damage caused by the release and for natural resource damages
resulting from the release. Comparable state statutes impose liabilities and
authorize penalties in the case of an unauthorized discharge of petroleum or its
derivatives, or other hazardous substances, into state waters. We believe that
our operations comply in all material respects with the requirements of the
Clean Water Act and state statutes enacted to control water pollution.

Resources Conservation Recovery Act. The Resource Conservation Recovery Act
("RCRA") is the principal federal statute governing the treatment, storage and
disposal of hazardous wastes. RCRA imposes stringent operating requirements (and
liability for failure to meet such requirements) on a person who is either a
"generator" or "transporter" of hazardous waste or an "owner" or "operator" of a
hazardous waste treatment, storage or disposal facility. At present, RCRA
includes a statutory exemption that allows most crude oil and natural gas
exploration and production waste to be classified as nonhazardous waste. A
similar exemption is contained in many of the state counterparts to RCRA. As a
result, we are not required to comply with a substantial portion of RCRA's
requirements because our operations generate minimal quantities of hazardous
wastes. At various times in the past, proposals have been made to amend RCRA to
rescind the exemption that excludes crude oil and natural gas exploration and
production wastes from regulation or hazardous waste. Repeal or modification of
the exemption by administrative, legislative or judicial process, or
modification of similar exemptions in applicable state statutes, would increase
the volume of hazardous waste we are required to manage and dispose of and would
cause us to incur increased operating expenses.

OPERATING HAZARDS AND INSURANCE

The natural gas and oil business involves a variety of operating risks, such as
those described under "Risk Factors -- The natural gas and oil business involves
many operating risks that can cause substantial losses." In accordance with
industry practice, we maintain insurance against some, but not all, potential
risks and losses. We do not carry business interruption insurance. For some
risks, we may not obtain insurance if we believe the cost of available insurance
is excessive relative to the risks presented. In addition, pollution and
environmental risks generally are not fully insurable. If a significant accident
or other event occurs and is not fully covered by insurance, it could adversely
affect us.

EMPLOYEES

At November 9, 1999, we and DDD Energy had 19 full-time employees. None of our
employees are covered by collective bargaining agreements. We believe that we
have a favorable relationship with our employees. We will have employment
contracts with three of our senior corporate executives.
44
<PAGE> 46

LEGAL PROCEEDINGS

We are involved from time to time in ordinary, routine claims and lawsuits
incidental to our business. In the opinion of management, uninsured losses, if
any, resulting from the ultimate resolution of these matters should not be
material to our financial position or results of operations.

RELATIONSHIP WITH SEITEL; STRUCTURE OF OFFERING

We believe DDD Energy's separation from Seitel is a vital step in the evolution
of our business. Once separated, we will be able to better plan and execute our
exploration and development activities than DDD Energy would have been able to
as a subsidiary of Seitel because, as a separate public business, we will not
compete with Seitel's other business units for available capital. In addition,
we intend to generate our own natural gas and oil exploration projects, which
DDD Energy has not previously done because Seitel did not want to compete
directly with its seismic data customers.

We and Seitel are structuring the offering so that we can elect to treat this
transaction as an asset sale for tax purposes. We describe this structure in
"Arrangements with Seitel." This tax election will result in a tax liability
paid by Seitel based on the gain on the asset sale. This gain will be equal to
the excess of the value of the consideration received by Seitel for these assets
over DDD Energy's tax basis in these assets. We, in turn, should have a tax
basis in these assets equal to the value of the consideration we have given for
these assets. This should allow us to take greater tax deductions in the future
for depreciation and depletion of these assets than if the transaction were
treated as a sale of stock. We expect to receive a tax opinion from Arthur
Andersen LLP to the effect that under the Internal Revenue Code of 1986 and the
regulations and rulings published under that code, we should have a tax basis in
our assets equal to the purchase price we pay for them. You should also read
"Risk Factors -- Our separation from Seitel may not have the intended tax
consequences" for a description of the risks associated with the intended tax
structure of the offering.

45
<PAGE> 47

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table provides information regarding our executive officers and
directors as of November 9, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Horace A. Calvert......................... 46 Chairman of the Board, Chief Executive
Officer and Director
Marshall L. Munsell....................... 42 President and Director
Thomas A. Mazza........................... 43 Executive Vice President and Director
Marcia H. Kendrick........................ 38 Interim Chief Financial Officer
Jerry S. Cox(1)........................... 49 Director
Fred S. Zeidman(1)........................ 53 Director
Robert B. Sale, Jr.(1).................... 67 Director
</TABLE>

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

(1) These individuals will become members of our board of directors immediately
after the closing of the offering.

Horace A. Calvert has been Seitel's Chief Operating Officer since July 1992 and
Executive Vice President since January 1987. In March 1993, Mr. Calvert was
appointed President of DDD Energy. From January 1985 until his appointment as
Vice President in May 1986, he was Seitel's Chief Geophysicist. From January
1975 through January 1985, Mr. Calvert held various geophysical positions within
Amoco Production Company, including senior project geophysicist for the Texas
Gulf Coast Onshore region. On consummation of the offering, Mr. Calvert will
resign as an officer of Seitel, but will remain a director and employee of
Seitel. Mr. Calvert has been our Chairman of the Board and Chief Executive
Officer and a member of our board of directors since our formation in November
1999.

Marshall L. Munsell has served as a Senior Vice President of DDD Energy since
September 1999. From May 1999 to September 1999, Mr. Munsell served as DDD
Energy's Vice President of Land, and from September 1997 to May 1999, he held
the position of DDD Energy's Land Manager. From October 1988 until September
1997, he served in various staff and management roles with Presidio Oil Company.
From June 1980 to October 1998, he held staff positions with Sun Oil Company.
Mr. Munsell has been our President and a member of our board of directors since
our formation in November 1999.

Thomas A. Mazza has served as a Senior Vice President of DDD Energy since
September 1999. From May 1999 to September 1999, Mr. Mazza served as DDD
Energy's Vice President of Geophysics and from July 1996 to May 1999 he held the
position of DDD Energy's Geophysical Manager. From June 1994 to July 1996, Mr.
Mazza served in various management roles with Presidio Oil Company. From 1989 to
1994, he held staff positions as a geophysicist at Marathon Oil Company. From
1982 to 1989, Mr. Mazza held various staff positions as a geophysicist at
Tenneco Oil Company. Mr. Mazza has been our Executive Vice President and a
member of our board of directors since our formation in November 1999.

Marcia H. Kendrick has been Chief Accounting Officer and Assistant Treasurer of
Seitel since August 1993. From 1982 to August 1993, Ms. Kendrick was in the
audit division of Arthur Andersen LLP's Houston office. Ms. Kendrick is a
certified public accountant. Ms. Kendrick will serve as our interim Chief
Financial Officer until we identify and hire a permanent Chief Financial
Officer. Ms. Kendrick remains an employee of Seitel. Ms. Kendrick has been our
Interim Chief Financial Officer since our formation in November 1999.

Jerry S. Cox is President and Chairman of Cox & Perkins Exploration, Inc.,
positions he has held since founding Cox & Perkins in 1976. Mr. Cox serves as a
Regent of Pepperdine University and is a director of the Hydril Company. He is a
Director and Past President of the 12th Man Foundation of Texas A&M University,
and is a Director of the Development Council, Lowry Mays School of Business at
Texas A&M.
46
<PAGE> 48

Fred S. Zeidman is a member of Seitel's board of directors. Mr. Zeidman has
served as President, Chief Executive Officer, and a director of Intersystems,
Inc., an American Stock Exchange listed company engaged in providing services to
the thermoplastic resins industry, since July 1993. He also served as President
of Interpak Terminals, Inc., a wholly owned subsidiary of Helm Resources, Inc.,
a publicly-traded company with equity interests in diverse businesses, engaged
in the packaging and distribution of thermoplastic resins, from July 1993 until
its sale in July 1997. Mr. Zeidman served as Chairman of Unibar Energy Services
Corporation, one of the largest independent drilling fluids companies in the
United States, from 1985 to 1991. From April 1992 to July 1993, Mr. Zeidman
served as President of Service Enterprises, Inc., which is primarily engaged in
plumbing, heating, air conditioning and electrical installation and repair. From
1983 to 1993, Mr. Zeidman served as President of Enterprise Capital Corporation,
a federally licensed small business investment company specializing in venture
capital financing. Mr. Zeidman also serves as a director of Heritage Bank.

Robert B. Sale, Jr. is a director of Compass Bank, Houston, Texas and served as
Vice Chairman of Compass from September 1992 until August 1997. From August 1987
until September 1992 he held the position of Chairman and Chief Executive
Officer of Compass. From November 1984 until June 1987 he was president of
Interfirst Bank, N.A., Houston and was Chief Executive Officer of San Felipe
National Bank, Houston from August 1972 until November 1984. Mr. Sale is
currently a director of Catalyst Financial Corporation, Yuma Companies, Inc.,
The Institute for Rehabilitation and Research, Goodwill Industries and the
Houston Museum of Natural Science. He served as President of the President's
Council, Houston Baptist University from 1990 until 1993 and Chairman of the
Houston Museum of Natural Science during 1997.

BOARD OF DIRECTORS

The terms of the board of directors are divided into three classes: Class I,
whose term will expire at the first annual meeting of stockholders after
consummation of the offering; Class II, whose term will expire at the second
annual meeting of stockholders after consummation of the offering; and Class
III, whose term will expire at the third annual meeting of stockholders after
consummation of the offering. Mr. Mazza is currently a Class I director, Mr.
Munsell is currently a Class II director and Mr. Calvert is currently a Class
III director. Upon their election to the board of directors immediately after
the closing of the offering, Mr. Zeidman will become a Class I director, Mr. Cox
will become a Class II director and Mr. Sale will become a Class III director.
At each annual meeting of stockholders, the successors to directors whose term
expires will be elected to serve a term of three years. This classification of
directors may have the effect of delaying or preventing changes in control of
us. Our board of directors will consist of six members after the offering. Our
bylaws provide that the authorized number of directors may be changed by
resolution of the board of directors.

Executive officers are elected by the board of directors annually. There are no
family relationships among any of our directors or officers.

BOARD COMMITTEES

Immediately after the closing of the offering, we will establish an Audit
Committee and a Compensation Committee. The Audit Committee, which will consist
of Messrs. Cox, Sale and Zeidman, will review our internal accounting procedures
and consult with and review the services provided by our independent auditors.
The Compensation Committee, which will consist of Messrs. Cox, Sale and Zeidman,
will review and recommend to the Board of Directors the compensation and
benefits of our executive officers, establish and review general policies
relating to our compensation and benefits and administer our stock plans.

DIRECTOR COMPENSATION

Directors who are our employees do not receive cash compensation for their
services as directors or members of committees of the board of directors. Our
non-employee directors will receive an annual

47
<PAGE> 49

directors fee of $15,000, payable half in cash and half in grants of restricted
stock under our 1999 Stock Incentive Plan, and a meeting fee of $1,000 for each
meeting of the board or a committee of which they are a member that they attend.
Our directors will also be reimbursed for reasonable expenses incurred in
attending these meetings. Restricted stock grants having a market value on the
date of grant equal to one quarter of the annual directors fee to be paid in
stock will be granted at the beginning of each calendar quarter, and will vest
at the end of that calendar quarter.

Each member of our board of directors who is not our employee will receive an
automatic grant of options to purchase up to 5,000 shares of our common stock at
an exercise price equal to the closing sales price of our common stock on the
date of grant upon consummation of the offering or, if first elected after the
offering, at the time first elected to our board. These options will vest at the
next annual stockholders' meeting following the grant if the director is still
serving on our board immediately before that meeting. In addition, while a
member of our board of directors, each director shall receive an additional
grant on the date of each annual meeting of stockholders held after a director's
initial election to the board of directors of options to purchase 5,000 shares
of our common stock at an exercise price equal to the closing sales price of our
common stock on the date of grant. These options will fully vest at the annual
meeting of stockholders held the year following the date of grant if the
director is still serving on our board immediately before that meeting.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of our executive officers has served as a member of a compensation
committee or board of directors of any other entity which has an executive
officer serving as a member of the board of directors.

EXECUTIVE COMPENSATION

Annual Compensation

The following table sets forth information regarding the compensation of our
Chief Executive Officer and each of our two other most highly compensated
executive officers. The annual compensation amounts in the table exclude
perquisites and other personal benefits because they did not exceed the lesser
of $50,000 or 10% of the total annual salary and bonus reported for each
executive officer. Mr. Calvert has been compensated by Seitel during these
periods, rather than by DDD Energy, and the compensation amounts listed in the
table for Mr. Calvert include only the compensation amounts paid to him by
Seitel that relate to his services as Chief Executive Officer of DDD Energy.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
--------------------------- ---- -------- --------
<S> <C> <C> <C>
Horace A. Calvert, President............................. 1998 $444,878 $190,014
Marshall L. Munsell, Vice President...................... 1998 70,000 35,000
Thomas A. Mazza, Vice President.......................... 1998 80,000 92,083
</TABLE>

Option Grants

As of November 9, 1999, we had not granted any options to our named executive
officers. However, upon the closing of the offering, we will grant to the
following individuals options under our 1999 Stock Incentive Plan having an
exercise price equal to the offering price of our common stock in the offering:

<TABLE>
<CAPTION>
NUMBER OF
NAME OPTIONS
---- ---------
<S> <C>
Horace A. Calvert........................................ 390,000
Marshall L. Munsell...................................... 200,000
Thomas A. Mazza.......................................... 200,000
</TABLE>

Sixty percent of these options will vest after the first anniversary of their
grant, an additional twenty percent will vest on the second anniversary of their
grant, and the final twenty percent will vest on the third anniversary of their
grant.

48
<PAGE> 50

EMPLOYMENT AGREEMENTS

Mr. Calvert will enter into an employment agreement with us effective upon the
closing of the offering. The agreement will provide that Mr. Calvert will
receive a minimum annual base salary equal to $350,000. Under the agreement, Mr.
Calvert also will be allowed to participate in all benefit plans offered by us
to similarly situated employees and will receive a bonus each year equal to the
greater of $150,000 or 4.25% of our income before taxes. The employment
agreement will provide that compensation payable under the employment agreement
in excess of $750,000 per year will be paid 40% in cash and 60% in the form of
restricted stock grants under our 1999 Stock Incentive Plan.

The employment agreement has an initial term ending on December 31, 2002, with
an automatic renewal feature. If neither party gives notice of non-renewal of
the agreement 90 or more days prior to the expiration of the then current term
of the agreement, it will automatically be extended for one additional one year
period. Either the board of directors or Mr. Calvert can terminate the
employment agreement at any time. If we terminate the employment agreement prior
to the expiration of the then current term without cause or if Mr. Calvert
terminates his employment prior to the expiration of the then current term for
good reason, then we will continue to pay his then current base salary and
continue, at our cost, his coverages under our group health plans, for the
greater of the balance of the then current term or one year.

We will also be required under the terms of Mr. Calvert's employment agreement
to grant warrants to Mr. Calvert to purchase 200,000 shares of our common stock.
Warrants to purchase 100,000 shares will have an exercise price equal to 1.5
times the offering price on the cover of this prospectus, and will expire on the
earlier of termination of Mr. Calvert's employment or five years after the
closing of the offering. The warrants to purchase the other 100,000 shares will
have an exercise price equal to two times the offering price on the cover of
this prospectus, and will expire on the earlier of termination of Mr. Calvert's
employment or ten years after the closing of the offering.

Messrs. Munsell and Mazza will enter into employment agreements with us
effective upon the closing of the offering. The agreements will provide that
each of them will receive a minimum annual base salary equal to $250,000. In
addition, each of Messrs. Munsell and Mazza will be allowed to participate in
all benefit plans offered by us to similarly situated employees and will receive
a bonus each year equal to 2% of our income before taxes.

We will also be required under the terms of Mr. Munsell's and Mr. Mazza's
employment agreements to grant warrants to each of Mr. Munsell and Mr. Mazza to
purchase 100,000 shares of our common stock. Warrants to purchase 50,000 shares
each will have an exercise price equal to 1.5 times the offering price on the
cover of this prospectus, and will expire on the earlier of termination of
employment or five years after the closing of the offering. The warrants to
purchase the other 50,000 shares each will have an exercise price equal to two
times the offering price on the cover of this prospectus, and will expire on the
earlier of termination of employment or ten years after the closing of the
offering.

The other terms of the employment agreements of Messrs. Munsell and Mazza are
substantially similar to the terms of Mr. Calvert's employment agreement.

1999 STOCK INCENTIVE PLAN

Prior to the closing of the offering, our board of directors and our sole
stockholder will adopt the Vision Energy 1999 Stock Incentive Plan. The purpose
of the plan is to provide directors, officers and employees of Vision Energy
additional incentive and reward opportunities designed to enhance our profitable
growth. The plan provides for the granting of incentive stock options intended
to qualify under Section 422 of the Internal Revenue Code, options that do not
constitute incentive stock options and restricted stock awards. In general, the
compensation committee of our board of directors administers the plan and is
authorized to select the recipients of awards and the terms and conditions of
awards. However, the board of directors is expected to administer the plan with
respect to awards to directors.

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<PAGE> 51

The number of shares of our common stock that may be issued under the plan may
not exceed 1,600,000 shares, subject to adjustment to reflect stock dividends,
stock splits, recapitalizations and similar changes in our capital structure.
Shares of our common stock that are attributable to awards which have expired,
terminated or been canceled or forfeited are available for issuance or use in
connection with future awards. The maximum number of shares of our common stock
that may be subject to awards granted under the plan to any one individual
during any calendar year may not exceed 450,000 shares, subject to adjustment to
reflect stock dividends, stock splits, recapitalizations and similar changes in
our capital structure.

The compensation committee determines the price at which a share of our common
stock may be purchased upon exercise of an option granted under the plan.
However, the purchase price will not be less than the fair market value of a
share of our common stock on the date the option is granted.

Shares of our common stock that are the subject of a restricted stock award
under the plan will be subject to restrictions on disposition by the holder of
the award and an obligation of the holder to forfeit and surrender the shares
under some circumstances. These obligations to forfeit or surrender the shares,
or forfeiture restrictions, will be determined by the compensation committee in
its sole discretion, and the compensation committee may provide that these
forfeiture restrictions will lapse upon:

-- the attainment of one or more performance targets established by the
compensation committee;

-- the award holder's continued employment with us or continued service as a
consultant or director for a specified period of time;

-- the occurrence of any event or the satisfaction of any other condition
specified by the compensation committee in its sole discretion; or

-- a combination of any of the foregoing.

If we are involved in a merger or consolidation in which our stockholders
beneficially own less than 50% of the voting stock of the surviving entity or
any person, entity or group acquires beneficial ownership of more than 50% of
the voting stock of Vision Energy, then all options will become immediately
exercisable and forfeiture restrictions on restricted stock awards will lapse.

No awards under the plan may be granted after ten years from the date the plan
was adopted by our board of directors. The plan will remain in effect until all
awards granted under it have been satisfied or expired. Our board of directors
in its discretion may terminate the plan at any time with respect to any shares
of our common stock for which awards have not been granted. The plan may be
amended, other than to increase the maximum aggregate number of shares that may
be issued under the plan or to change the class of individuals eligible to
receive awards under the plan, by the board of directors without the consent of
our stockholders. No change in any award previously granted under the plan may
be made which would impair the rights of the holder of the award without the
approval of the holder.

On completion of the offering, options under the 1999 stock incentive plan to
purchase 1,005,000 shares of common stock will be granted to our directors,
officers and employees, with an exercise price equal to the initial public
offering price. Sixty percent of these options will vest after the first
anniversary of their grant, an additional twenty percent will vest on the second
anniversary of their grant, and the final twenty percent will vest on the third
anniversary of their grant. We will also grant approximately 450 shares of
restricted stock to our non-employee directors upon their election to the board
of directors immediately after the closing of the offering.

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<PAGE> 52

ARRANGEMENTS WITH SEITEL

Seitel founded DDD Energy in 1993. Since that time, Seitel has operated DDD
Energy as a wholly owned subsidiary. At the closing of the offering, we will
acquire the business that has been operated by DDD Energy.

As the sole stockholder of DDD Energy, Seitel was responsible for providing DDD
Energy with financial, management, administrative and other resources.
Furthermore, Seitel exercised substantial control over DDD Energy's operations.
Accordingly, the business we will own and operate after the offering has no
history of operating as an independent entity.

Prior to the offering, Seitel provided DDD Energy with significant management
functions and services, including treasury, accounting, tax, legal, human
resources and other support services. DDD Energy was charged and/or allocated
expenses of approximately $457,000 in 1996, $690,000 in 1997, $664,000 in 1998
and $286,000 in the six months ended June 30, 1999. The costs of these services
were directly charged and/or allocated using methods that our management
believes were reasonable. These charges and allocations could be different from
the costs DDD Energy would have incurred for these services if DDD Energy had
not been a subsidiary of Seitel. Neither DDD Energy nor Seitel conducted any
study or obtained any estimates from third parties to determine what the cost of
obtaining such services from third parties may have been.

Prior to the offering, Seitel has funded DDD Energy's liquidity and capital
requirements with intercompany loans. As of June 30, 1999, DDD Energy owed
Seitel approximately $134.7 million for these loans. These loans accrue interest
at a rate equal to Seitel's cost of funds, which is currently 7.25%. Pursuant to
the Stock Transfer and Separation Agreement described below, Seitel will convert
the entire balance of these loans to an equity investment in DDD Energy
immediately before the closing of the offering.

We and Seitel will enter into a number of agreements for the purpose of defining
our continuing relationship. These agreements were negotiated in the context of
a parent-subsidiary relationship and therefore are not the result of
arm's-length negotiations between independent parties. Seitel has structured and
documented these agreements without independent representation of DDD Energy or
us. We intend to follow the procedures provided by the Delaware General
Corporation Law, which include a vote to affirm any future agreements with
Seitel by a majority of our directors who are not employees, officers or
directors of Seitel. We cannot assure you that any arrangements or transactions
we enter into with Seitel in the future will be the same as those that we could
negotiate with independent parties.

The following is a summary of our agreements with Seitel relating to the
offering.

STOCK TRANSFER AND SEPARATION AGREEMENT

The Stock Transfer and Separation Agreement will provide as follows:

-- immediately prior to the closing of the offering, Seitel will convert its
intercompany loans to DDD Energy, net of any tax benefit to Seitel, into
an equity investment in DDD Energy, and will make an additional capital
contribution of $15.0 million in cash to DDD Energy. These intercompany
loans totaled approximately $134.7 million at June 30, 1999;

-- at the closing of the offering, Vision Holdings LLC, Seitel's subsidiary
that owns all of the stock of DDD Energy, will transfer all of the
outstanding stock of DDD Energy to us, so that DDD Energy will become our
subsidiary;

-- in exchange for this transfer to us of all of the shares of DDD Energy,
we will issue 14,349,981 shares of our common stock and 10,000 shares of
our preferred stock to Vision Holdings LLC;

-- Vision Holdings LLC will sell 12,915,000 shares of our common stock in
the offering as a selling stockholder, and up to an additional 800,000
shares of our common stock if the underwriters exercise

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<PAGE> 53

their over-allotment option in full. Vision Holdings LLC will sell all
10,000 shares of our preferred stock to other investors;

-- we and Seitel will enter into a Sublease, a Registration Rights
Agreement, a Tax Indemnity Agreement, an Employee Benefits Allocation
Agreement and an Administrative Services Agreement;

-- Seitel and its subsidiaries and we and our subsidiaries will indemnify
each other for liabilities relating to the operations of our businesses
prior to and after the date of completion of the offering, including
liabilities under the Securities Act relating to the offering;

-- we and Seitel will elect to treat these transactions and the offering as
an asset sale for tax purposes;

-- immediately following the closing of the offering, our board of directors
will increase the size of the entire board of directors from three to
six, and will elect Messrs. Zeidman, Cox and Sale as directors to fill
the vacancies created by this increase in size;

-- Seitel will pay all of the costs and expenses incurred in connection with
the offering, unless we sell shares of our common stock upon exercise of
the underwriters' over-allotment option. If we sell shares of our common
stock upon exercise of the over-allotment option, we will pay the
underwriters' discount attributable to the shares we sell and a
proportionate share of the other offering expenses based on the number of
shares we sell compared to the number of shares Vision Holdings sells;
and

-- Seitel will allow us to have access to historical financial and
operational information relating to DDD Energy maintained by Seitel.

SUBLEASE

The Sublease between us and Seitel will provide for us to lease our principal
corporate offices, comprising approximately 8,700 square feet, from Seitel for a
term expiring August 2002 at an annual rent of approximately $96,000. The
Sublease will also provide for us to utilize specific shared office equipment,
such as phone systems and central computer systems, for an additional charge.

REGISTRATION RIGHTS AGREEMENT

Under the Registration Rights Agreement, we will agree to register the offer and
sale by Seitel on a delayed and continuous basis from time to time of the shares
of common stock owned by Seitel after the offering (1,435,000 shares, or 635,000
if the underwriters' over-allotment option is exercised in full) at our expense.
We will agree to file a shelf registration statement within 370 days after
consummation of the offering and to use our best efforts to secure the
effectiveness of the shelf registration statement as soon as possible. Seitel
will agree in the Registration Rights Agreement not to sell more than 50% of its
shares of our common stock under the registration statement prior to the date
two years after the completion of the offering. In addition, we will grant
Seitel the right to participate as a selling stockholder in future underwritten
public offerings of our common stock, subject to restrictions. We and Seitel
will each agree to indemnify the other against, or to contribute to losses
arising out of, liabilities in connection with any registration, including
liabilities under the Securities Act.

TAX INDEMNITY AGREEMENT

Prior to the offering, DDD Energy has been a member of the Seitel affiliated
group, which has filed its tax returns on a consolidated basis with such group.
After the offering, DDD Energy will no longer be a member of the Seitel
affiliated group. We and Seitel will enter into a Tax Indemnity Agreement to
define our and their rights and obligations relating to federal, state and other
taxes for periods before and after the offering. Under the Tax Indemnity
Agreement, Seitel will calculate the estimated tax benefit from DDD Energy's
operations up to the date of consummation of the offering and will reduce the
amount of the intercompany loans Seitel has made to DDD Energy by the amount of
this benefit to the extent not already applied to reduce the amount of this
loan. Seitel will then contribute the amount of the intercompany loan to DDD
Energy as an equity contribution immediately prior to our acquisition of

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DDD Energy. We will be responsible for federal income taxes from DDD Energy's
operations on and after the date of consummation of the offering. Any subsequent
refunds, additional taxes or penalties or other adjustments relating to DDD
Energy's federal income taxes for periods prior to the date of consummation of
the offering shall be for the benefit of or be borne by Seitel. Similar
provisions apply under the Tax Indemnity Agreement to other taxes, such as state
and local income taxes. We will not be required to pay any portion of Seitel's
income taxes arising from its sale of our stock in the offering.

EMPLOYEE BENEFITS ALLOCATION AGREEMENT

We and Seitel intend to enter into an Employee Benefits Allocation Agreement
under which we will agree to establish our own 401(k) plan, into which Seitel
will transfer those assets that are currently held in Seitel's 401(k) plan for
the benefit of our employees. In addition, the Employee Benefits Allocation
Agreement will require us to establish our own health and disability insurance
and related plans to provide insurance coverage to our employees after the
consummation of the offering. We will assume all obligations of Seitel with
respect to vacation and severance for our employees, and we and Seitel will
agree to indemnify each other with respect to our obligations under the Employee
Benefits Allocation Agreement.

ADMINISTRATIVE SERVICES AGREEMENT

We and Seitel intend to enter into an Administrative Services Agreement under
which Seitel will provide us with administrative services, consisting primarily
of receptionist and office administration services, at up to the same levels as
provided prior to the offering. Seitel will agree to provide these services for
a term equal to the term of the Sublease. We will pay Seitel for these services
at Seitel's actual cost of providing these services.

CERTAIN TRANSACTIONS

Some of Seitel's employees and directors and immediate family members of these
employees and directors contributed cash to partnerships in 1994 through 1997.
These partnerships invested in working interests in natural gas and oil
properties along with DDD Energy. These partnerships' working interests ranged
from 2.5% to 5% of the total investment made by the partnerships and us.
Effective October 1, 1998, we purchased the partnerships' working interests for
shares of Seitel common stock, cash in lieu of fractional shares and assumption
of specific partnership liabilities. The purchase price for the interests of
each partnership was equal to the greater of (i) the present value of future
production of proved reserves based on the independent reserve report dated
January 1, 1998, adjusted by us to the effective date of the purchase to take
into account production and other reserve changes, plus 100% of costs
attributable to unevaluated prospects, or (ii) the partners' original capital
contributions to the partnership. This purchase price determination was approved
by an independent committee of Seitel's board of directors. We did not obtain a
third-party appraisal of these properties. The purchase prices for the assets of
the 1994 partnership was approximately $1.2 million, for the assets of the 1995
partnership was approximately $2.9 million, for the assets of the 1996
partnership was approximately $800,000, and for the assets of the 1997
partnership was approximately $600,000. When Seitel received its independent
reserve report dated January 1, 1999, we paid additional cash consideration to
the 1995 partnership of approximately $700,000, to the 1996 partnership of
approximately $100,000 and to the 1997 partnership of $610, based on the
estimated present values of future production from the properties as reflected
in this reserve report and as adjusted to October 1, 1998. Horace A. Calvert
received 45,169 shares of Seitel common stock and $98,559 in these transactions
as a result of his partnership interests in these partnerships.

In the ordinary course of business, DDD Energy paid to Cox & Perkins Exploration
Co. approximately $2.5 million in 1998 and approximately $600,000 in the six
months ended June 30, 1999 for DDD Energy's proportionate share of drilling and
workover costs and routine expenses relating to 56 natural gas and oil wells in
which DDD Energy owns interests and for which Cox & Perkins is operator. DDD
Energy received approximately $7.7 million in 1998 and approximately $2.0
million in the first six months of 1999

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for its proportionate share of revenues from these wells. All of the 1998 amount
and all of the first six months of 1999 amount were paid directly to DDD Energy
by Cox & Perkins or related entities. Jerry S. Cox, a member of our board of
directors, is president, chief executive officer and the owner of 67% of the
outstanding stock of Cox & Perkins.

DDD Energy has periodically used the seismic data processing services of a
wholly owned subsidiary of Seitel. This Seitel subsidiary provided these
services to DDD Energy at its cost. DDD Energy incurred charges for these
services of approximately $300,000 in 1998 and approximately $200,000 in the six
months ended June 30, 1999. After the offering, we intend to purchase our own
seismic processing equipment and do not intend to utilize the seismic data
processing services of Seitel's subsidiary.

DDD Energy has periodically used the seismic data acquisition services of Eagle
Geophysical, Inc., a company in which Seitel owned an approximately 17% interest
prior to April 1999, at which time Seitel declared a dividend of its investment
in Eagle Geophysical to its stockholders. Eagle Geophysical provided these
seismic data acquisition services to DDD Energy at agreed upon contractual
amounts and terms similar to contracts with third party contractors. DDD Energy
incurred charges for these services of $5.9 million in 1998.

Mr. Calvert currently has an employment agreement with Seitel. Mr. Calvert and
Seitel currently intend to amend or terminate this employment agreement
effective as of the closing of the offering, but have not yet determined the
terms of any amendment or termination.

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PRINCIPAL AND SELLING STOCKHOLDERS

Prior to the offering, we had 100 shares of our common stock outstanding. Mr.
Horace Calvert owned 81 of these shares, and Seitel, through its wholly owned
subsidiary Vision Holdings, owned the remaining 19 shares. As a result of the
transactions that will occur at the closing of the offering, Vision Holdings
will transfer all of the outstanding stock of DDD Energy to us, we will
repurchase the 81 shares of common stock from Mr. Calvert at the price he paid
us for these shares and we will issue 14,349,981 shares of our common stock and
10,000 shares of our preferred stock to Vision Holdings. Vision Holdings will
then sell 12,915,000 shares of our common stock as a selling stockholder in the
offering. Vision Holdings will also transfer all of the 10,000 shares of our
preferred stock to other investors in separate, negotiated transactions that
will be exempt from registration under the securities laws.

The following table presents information regarding the beneficial ownership of
our outstanding common stock immediately after the offering for:

-- each person or group that we know will own more than 5% of our common
stock after the offering;

-- each of our directors;

-- our chief executive officer and each of our two other most highly
compensated executive officers; and

-- all our executive officers and directors as a group.

Beneficial ownership is determined in accordance with rules of the SEC and
includes shares over which the indicated beneficial owner exercises voting
and/or investment power. Shares of common stock subject to options or warrants
currently exercisable or exercisable within 60 days are deemed to be outstanding
for computing the percentage ownership of the person holding the options or
warrants, but are not deemed to be outstanding for computing the percentage
ownership of any other person. Except as otherwise indicated, we believe the
beneficial owners of the common stock listed below, based on information
furnished by them, will have, after the offering, sole voting and investment
power with respect to the number of shares listed opposite their names.

The percentages of ownership listed below are based on 14,350,450 shares of our
common stock outstanding after the offering, which includes the shares of our
common stock to be issued after consummation of the offering pursuant to
restricted stock grants to our directors.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AFTER THE OFFERING
DIRECTORS, OFFICERS AND --------------------------
5% STOCKHOLDERS NUMBER PERCENT
----------------------- ----------- ---------
<S> <C> <C>
Vision Holdings LLC(1)...................................... 1,435,000 10.0%
50 Briar Hollow Lane, 7th Floor West Building
Houston, Texas 77027
Horace A. Calvert(2)........................................ 200,000 1.4
Marshall L. Munsell(3)...................................... 100,000 *
Thomas A. Mazza(3).......................................... 100,000 *
Jerry S. Cox(4)............................................. 150 *
Fred S. Zeidman(4).......................................... 150 *
Robert B. Sale, Jr.(4)...................................... 150 *
All directors and executive officers as a group (6
persons)(2)(3)(4)......................................... 400,450 2.7
</TABLE>

- ---------------------------
* Less than 1%

(1) Vision Holdings LLC is a wholly owned subsidiary of Seitel, Inc.

(2) Includes 200,000 shares of our common stock issuable upon exercise of
warrants that will be granted to Mr. Calvert under his employment agreement
with us.

(3) Includes 100,000 shares of our common stock issuable upon exercise of
warrants that will be granted to each of Mr. Munsell and Mr. Mazza under his
employment agreement with us.

(4) Includes approximately 150 shares of our common stock to be issued after
consummation of the offering pursuant to restricted stock grants to Messrs.
Cox, Zeidman and Sale.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 80,000,000 shares of common stock, par
value $0.01 per share, and 20,000,000 shares of preferred stock, par value $0.01
per share. On completion of the offering, we will have outstanding 14,350,000
shares of common stock and 10,000 shares of preferred stock.

COMMON STOCK

Subject to any special voting rights of any series of preferred stock that we
may issue in the future, each share of common stock has one vote on all matters
voted on by our stockholders, including the election of our directors. No share
of common stock affords any cumulative voting or preemptive rights or is
convertible, redeemable, assessable or entitled to the benefits of any sinking
or repurchase fund. Holders of common stock will be entitled to dividends in the
amounts and at the times declared by our board of directors in its discretion
out of funds legally available for the payment of dividends.

Holders of common stock will share equally in our assets on liquidation after
payment or provision for all liabilities and any preferential liquidation rights
of any preferred stock then outstanding. All outstanding shares of common stock
are fully paid and non-assessable.

PREFERRED STOCK

As part of the transactions in which we will acquire all of the stock of DDD
Energy, we will designate a class of our preferred stock and will issue all of
the authorized shares of this class to Vision Holdings. Vision Holdings will
then transfer all of these shares of preferred stock to other investors in
separate, negotiated transactions that will be exempt from registration under
the securities laws. This class of preferred stock will be designated as the
Class A Redeemable Preferred Stock. We will authorize 10,000 shares of Class A
Redeemable Preferred Stock. Each share will have a liquidation preference of
$100, and will entitle the holder to cumulative dividends of 7 1/2% of the
liquidation preference per share per year. The dividend rate will increase 2%
per year if dividends are not paid as they accrue. The holders of these shares
will not have voting rights, except to the extent required by Delaware corporate
law. These shares will be redeemable, at our option or the option of the holder,
at any time five years after the offering, at a price equal to the greater of:

-- 105% of the sum of the liquidation preference per share plus all accrued
and unpaid dividends; or

-- the sum of the liquidation preference per share plus all accrued and
unpaid dividends, multiplied by a fraction:

-- the numerator of which is the average closing price per share of our
common stock on the exchange on which it is then traded for the twenty
trading days prior to the redemption, and

-- the denominator of which is the price per share of our common stock in
the offering.

At the direction of our board, we may issue additional shares of preferred stock
from time to time. Our board of directors may, without any action by holders of
the common stock:

-- adopt resolutions to issue preferred stock in one or more classes or
series;

-- fix or change the number of shares constituting any class or series of
preferred stock; and

-- establish or change the rights of the holders of any class or series of
preferred stock.

The rights that any class or series of preferred stock may evidence may include:

-- general or special voting rights;

-- preferential liquidation or preemptive rights;

-- preferential cumulative or noncumulative dividend rights;

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-- redemption or put rights; and

-- conversion or exchange rights.

We may issue shares of, or rights to purchase, preferred stock the terms of
which might:

-- adversely affect voting or other rights evidenced by, or amounts
otherwise payable with respect to, the common stock;

-- discourage an unsolicited proposal to acquire us; or

-- facilitate a particular business combination involving us.

Any of these actions could discourage a transaction that some or a majority of
our stockholders might believe to be in their best interests or in which our
stockholders might receive a premium for their stock over its then market price.

ANTI-TAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS

The provisions of Delaware law and our certificate of incorporation and bylaws
we summarize below may have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider in
his or her best interest, including those attempts that might result in a
premium over the market price for the common stock.

Business Combinations under Delaware Law

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporation Law. Section 203 prevents an interested stockholder,
generally a person who owns 15% or more of our outstanding voting stock, from
engaging in business combinations with us for three years following the time
that the person becomes an interested stockholder. These restrictions do not
apply if:

-- before the person becomes an interested stockholder, our board of
directors approves the transaction in which the person becomes an
interested stockholder or the business combination;

-- upon completion of the transaction that results in the person becoming an
interested stockholder, the interested stockholder owns at least 85% of
our outstanding voting stock at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding
those shares owned by persons who are directors and also officers and
employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or

-- following the transaction in which the person became an interested
stockholder, the business combination is approved by our board of
directors and authorized at an annual or special meeting of our
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of our outstanding voting stock not owned by the
interested stockholder.

In addition, the law does not apply to interested stockholders, such as Seitel,
who are interested stockholders before common stock of the company is listed on
the Nasdaq National Market.

The law defines the term "business combination" to encompass a wide variety of
transactions with or caused by an interested stockholder, including mergers,
asset sales and other transactions in which the interested stockholder receives
or could receive a benefit on other than a pro rata basis with other
stockholders. This law could have an anti-takeover effect with respect to
transactions not approved in advance by our board of directors, including
discouraging takeover attempts that might result in a premium over the market
price for the shares of our common stock.

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Written Consent of Stockholders

Our bylaws provide that any action by our stockholders must be taken at an
annual or special meeting of stockholders. Special meetings of the stockholders
may be called only by our chief executive officer or the board of directors.
Stockholders may not act by written consent.

Advance Notice Procedure for Stockholder Proposals

Our bylaws establish an advance notice procedure for the nomination of
candidates for election as directors as well as for stockholder proposals to be
considered at annual meetings of stockholders. In general, notice of intent to
nominate a director must be delivered to or mailed and received at our principal
executive offices as follows:

-- With respect to an election to be held at a special meeting of
stockholders for the election of directors or at our first annual meeting
of stockholders, not later than the close of business of the 10th day
following the day on which such notice of the date of the meeting was
mailed or public disclosure of the date of the meeting was made,
whichever first occurs, and must contain specified information concerning
the person to be nominated.

-- With respect to an election to be held at subsequent annual meetings of
stockholders, not less than 90 days nor more than 120 days prior to the
anniversary date of the proxy statement for the immediately preceding
annual meeting of stockholders, and must contain specified information
concerning the person to be nominated.

Notice of stockholders' intent to raise business at an annual meeting must be
delivered to or mailed and received at our principal executive offices not less
than 120 days prior to the anniversary date of the proxy statement for the
preceding annual meeting of stockholders or, with respect to our first annual
meeting of stockholders, December 30 of the year prior to the year in which the
meeting will be held. These procedures may operate to limit the ability of
stockholders to bring business before a stockholders meeting, including with
respect to the nomination of directors or considering any transaction that could
result in a change of control.

Staggered Board of Directors

Our board of directors is divided into three classes that are elected for
staggered three-year terms. The classification of the board of directors has the
effect of requiring at least two annual stockholders meetings, instead of one,
to effect a change in control of the board of directors.

In addition, the bylaws provide that directors may be removed only with cause
and then only by the affirmative vote of 80% of our voting stock entitled to
vote. This provision, in conjunction with the provision of the bylaws
authorizing only the board of directors to fill vacant directorships, will
prevent stockholders from removing incumbent directors without cause and filling
the resulting vacancies with their own nominees.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Limitation of Liability. Delaware law authorizes corporations to limit or
eliminate the personal liability of their directors to them and their
stockholders for monetary damages for breach of the directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
Delaware law, directors are accountable to corporations and their stockholders
for monetary damages for conduct constituting gross negligence in the exercise
of their duty of care. Delaware law enables corporations to limit available
relief to equitable remedies such as injunction or rescission.

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Our certificate of incorporation limits the liability of our directors to us or
our stockholders to the fullest extent permitted by Delaware law. Specifically,
our directors will not be personally liable for monetary damages for breach of a
director's fiduciary duty in such capacity, except for liability

-- for any breach of the director's duty of loyalty to us or our
stockholders;

-- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

-- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

-- for any transaction from which the director derived an improper personal
benefit.

The inclusion of this provision in our certificate of incorporation may reduce
the likelihood of derivative litigation against our directors and may discourage
or deter our stockholders or management from bringing a lawsuit against our
directors for breach of their duty of care, even though the action, if
successful, might otherwise have benefitted us and our stockholders.

Indemnification. Delaware law also authorizes corporations to indemnify their
officers, directors, employees and agents for liabilities, other than
liabilities to the corporation, arising because such individual was an officer,
director, employee or agent of the corporation so long as the individual acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of the corporation and not unlawful.

Our certificate of incorporation provides that our officers, directors,
employees and agents will be indemnified by us for liabilities arising because
such individual was an officer or director of Vision Energy to the extent
currently permitted by Delaware law.

These provisions in our certificate of incorporation do not alter the liability
of our officers and directors under federal securities laws and do not affect
the right to sue under federal securities laws for violations thereof.

We have entered into indemnification agreements with each of our directors and
officers. These agreements require us to, among other things, indemnify the
director or officer against expenses and costs incurred by the individual in
connection with any action, suit or proceeding arising out of the individual's
status or service as a director or officer of Vision Energy, other than
liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest. The agreement also requires us to advance
expenses incurred by the individual in connection with any proceeding against
the individual with respect to which he or she may be entitled to
indemnification by us. Following completion of the offering, we also will
maintain directors' and officers' liability insurance.

At present, we are not aware of any pending litigation or proceeding involving
any director, officer, employee or agent of Vision Energy where indemnification
will be required or permitted. Furthermore, we are not aware of any threatened
litigation or proceeding that might result in a claim for indemnification.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar of our common stock is .

59
<PAGE> 61

SHARES ELIGIBLE FOR FUTURE SALE

On completion of the offering, we will have 14,350,000 shares of common stock
outstanding, or 15,487,000 shares if the underwriters' over-allotment option is
exercised in full. Of these outstanding shares of common stock, the shares sold
in the offering, including those shares sold under the underwriters' over-
allotment option, will be freely tradeable without restriction, unless they are
purchased by our "affiliates," as that term is defined in Rule 144 under the
Securities Act, which sales would be subject to certain restrictions under Rule
144.

Seitel will own all of the remaining outstanding shares of common stock. All of
these shares of common stock will be "restricted securities," as that term is
defined in Rule 144, and may be sold only if registered or pursuant to an
exemption from registration such as that provided by Rule 144. Seitel has agreed
not to sell or otherwise dispose of any of its shares for a period of 180 days
after the date of this prospectus. CIBC World Markets Corp., however, may in its
sole discretion, at any time and in most cases without notice, release all or
any portion of the shares subject to lock-up agreements.

In general, under Rule 144 as currently in effect, a person who has beneficially
owned shares of our common stock for at least one year would be entitled to
sell, within any three month period, a number of shares that does not exceed the
greater of:

-- 1% of the number of shares of common stock then outstanding, which will
equal approximately 143,500 shares immediately after the effective date
of the offering; or

-- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to this sale.

Sales under Rule 144 are also subject to other requirements regarding the manner
of sale, notice filing and the availability of current public information about
us.

Pursuant to the Registration Rights Agreement, we will agree to register the
offer and sale by Seitel on a delayed and continuous basis from time to time of
the shares of common stock owned by Seitel after the offering (1,435,0000
shares, or 635,000 if the underwriters' over-allotment option is exercised in
full) at our expense. We will agree to file a shelf registration statement
within 370 days after consummation of the offering and to use our best efforts
to secure the effectiveness of such shelf registration statement as soon as
possible thereafter. Seitel will agree in the Registration Rights Agreement not
to sell more than 50% of such shares pursuant to such registration statement
prior to the date two years after the consummation of the offering. In addition,
we will grant Seitel the right to participate as a selling stockholder in future
underwritten public offerings of our common stock, subject to certain
restrictions. We and Seitel will each agree to indemnify the other against, or
to contribute to losses arising out of, certain liabilities in connection with
any such registration, including liabilities under the Securities Act.

We have reserved 1,600,000 shares of common stock for issuance to our directors
and employees under the 1999 Stock Incentive Plan and 400,000 shares of common
stock for issuance to three of our executive officers under warrants that we
will grant to them under their employment agreements. We intend to file a
registration statement on Form S-8 covering the issuance of shares of common
stock under the plan and upon exercise of the warrants. Accordingly, shares
issued under the plan or upon exercise of the warrants will be freely tradeable,
subject to the restrictions on resale on affiliates by Rule 144. Immediately
after the closing of the offering, we anticipate that options to purchase a
total of 1,005,000 shares will be granted under the plan. None of these options
will vest until the first anniversary of the date of their grant. We anticipate
that options to purchase 603,000 shares of our common stock will vest on the
first anniversary of the closing of the offering. All of the warrants to
purchase 400,000 shares of our common stock will be exercisable upon grant.

Prior to the offering, there has been no public market for our common stock. The
market price of our common stock could drop because of sales of a large number
of shares in the open market following the offering or the perception that those
sales may occur. These factors also could make it more difficult for us to raise
capital through future offerings of common stock.

60
<PAGE> 62

UNDERWRITING

Vision Energy and the selling stockholder will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets Corp. and A.G.
Edwards & Sons, Inc. are acting as representatives of the underwriters.

The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
from the selling stockholder the number of shares of common stock set forth
opposite its name below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp. ...................................
A.G. Edwards & Sons, Inc. ..................................
--------
Total.............................................
========
</TABLE>

The underwriters have agreed to purchase all of the shares offered by this
prospectus (other than those covered by the over-allotment option described
below) if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated, depending on the circumstances.

The shares should be ready for delivery on or about , 2000 against
payment in immediately available funds. The representatives have advised us and
the selling stockholder that the underwriters propose to offer the shares
directly to the public at the public offering price that appears on the cover
page of this prospectus. In addition, the representatives may offer some of the
shares to other securities dealers at such price less a concession of $ per
share. The underwriters may also allow, and such dealers may reallow, a
concession not in excess of $ per share to other dealers. After the shares
are released for sale to the public, the representatives may change the offering
price and other selling terms at various times.

Vision Energy and the selling stockholder have granted the underwriters an
over-allotment option. This option, which is exercisable for up to 30 days after
the date of this prospectus, permits the underwriters to purchase a maximum of
1,937,000 additional shares (1,137,000 from Vision Energy and 800,000 from the
selling stockholder) to cover over-allotments. If the underwriters exercise all
or part of this option, they will purchase shares covered by the option at the
initial public offering price that appears on the cover page of this prospectus,
less the underwriting discount. If this option is exercised in full, the total
price to public will be $ million, the total proceeds to us will be $
million and the total proceeds to the selling stockholder will be $ million. The
underwriters have severally agreed that, to the extent the over-allotment option
is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the foregoing
table.

61
<PAGE> 63

The following table provides information regarding the amount of the discount to
be paid to the underwriters by the selling stockholder:

<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE TOTAL WITH FULL EXERCISE
PER SHARE OF OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
--------- ------------------------ ------------------------
<S> <C> <C> <C>
Selling stockholder...................... $ $
Vision Energy............................
------------------------ ------------------------
Total..................................... $ $
</TABLE>

If the underwriters do not exercise their overallotment option, the selling
stockholder will pay all of the expenses of the offering which, excluding the
underwriting discount, it estimates will be approximately $ . If the
underwriters exercise their overallotment option, the selling stockholder and
Vision Energy will each pay their pro rata share of the offering expenses based
on the number of shares of common stock sold by each of them.

Vision Energy and the selling stockholder have agreed to indemnify the
underwriters against specified liabilities, including liabilities under the
Securities Act of 1933.

Vision Energy, its officers and directors and Seitel have agreed to a 180-day
"lock up" with respect to all shares of common stock and other Vision Energy
securities that they beneficially own, including securities that are convertible
into shares of common stock and securities that are exchangeable or exercisable
for shares of common stock. This means that, for a period of 180 days following
the date of this prospectus, Vision Energy and such other persons may not offer,
sell, pledge or otherwise dispose of these Vision Energy securities without the
prior written consent of CIBC World Markets Corp.

The representatives have informed us that they do not expect discretionary sales
by the underwriters to exceed five percent of the shares offered by this
prospectus.

There is no established trading market for shares of our common stock. The
offering price for the shares has been determined by Vision Energy, the selling
stockholder and the representatives, based on the following factors:

-- prevailing market and general economic conditions,

-- our financial information,

-- our history and prospects,

-- Vision Energy and the industry in which we compete,

-- an assessment of our management, its past and present operations, the
prospects for and timing of, our future revenues and

-- the present stage of our development and the above factors in relation to
the market values and various valuation measures of other companies
engaged in activities similar to ours.

Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of the shares is completed. However, the
underwriters may engage in the following activities in accordance with the
rules:

-- Stabilizing transactions -- The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price of
the shares, so long as stabilizing bids do not exceed a specified
maximum.

-- Over-allotments and syndicate covering transactions -- The underwriters
may create a short position in the shares by selling more shares than are
set forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.

62
<PAGE> 64

-- Penalty bids -- If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of the offering.

Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.

Neither Vision Energy nor the underwriters make any representation or prediction
as to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.

LEGAL MATTERS

The validity of the issuance of the shares of common stock offered by this
prospectus will be passed on for us by Gardere Wynne Sewell & Riggs, L.L.P.,
Houston, Texas. Certain legal matters will be passed on for the underwriters by
Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The audited financial statements included in this prospectus to the extent and
for the periods indicated in their report have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of such firm as experts in accounting and auditing in giving said
report.

The opinion regarding the tax basis of Vision Energy's assets subsequent to the
offering referred to in this prospectus has been rendered by Arthur Andersen
LLP, independent public accountants, and has been referred to herein in reliance
upon the authority of such firm as experts in giving said opinion.

The estimated reserve evaluations and related calculations of Forrest A. Garb &
Associates, Inc., independent petroleum engineering consultants, included in
this prospectus have been included in reliance on the authority of said firm as
experts in petroleum engineering.

The estimated reserve evaluations and related calculations of Miller & Lents,
Ltd., independent petroleum engineering consultants, included in this prospectus
have been included in reliance on the authority of said firm as experts in
petroleum engineering.

63
<PAGE> 65

WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement we have filed with the SEC
relating to our common stock. As permitted by SEC rules, this prospectus does
not contain all of the information we have included in the registration
statement and the accompanying exhibits and schedules we filed with the SEC. You
may refer to the registration statement, exhibits and schedules for more
information about us and our common stock. You can read and copy the
registration statement, exhibits and schedules at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain
information about the operation of the SEC's Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The address of that site is
http://www.sec.gov.

Following the offering, we will be required to file current reports, quarterly
reports, annual reports, proxy statements and other information with the SEC.
You may read and copy those reports, proxy statements and other information at
the SEC's Public Reference Room or through its Internet site. We intend to
furnish our stockholders with annual reports that will include a description of
our operations and audited consolidated financial statements certified by an
independent public accounting firm.

64
<PAGE> 66

GLOSSARY OF NATURAL GAS AND OIL TERMS

The following is a description of the meanings of some of the natural gas and
oil industry terms used in this prospectus. The meanings of the terms "proved
reserves," "proved developed reserves," "proved developed producing reserves,"
"proved developed non-producing reserves" and "proved undeveloped reserves" are
provided in Appendix A to this prospectus.

Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in this
prospectus in reference to crude oil or other liquid hydrocarbons.

Bcf. Billion cubic feet.

Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Btu or British Thermal Unit. The quantity of heat required to raise the
temperature of one pound of water by one degree Fahrenheit.

Completion. The installation of permanent equipment for the production of
natural gas or oil, or in the case of a dry hole, the reporting of abandonment
to the appropriate agency.

Condensate. Liquid hydrocarbons associated with the production of a primarily
natural gas reserve.

Developed acreage. The number of acres that are allocated or assignable to
productive wells or wells capable of production.

Development well. A well drilled into a proved natural gas or oil reservoir to
the depth of a stratigraphic horizon known to be productive.

Dry hole. A well found to be incapable of producing hydrocarbons in sufficient
quantities such that proceeds from the sale of such production exceed production
expenses and taxes.

Evaluated properties are natural gas and oil properties that either:

-- have been determined to contain or not to contain commercially producible
natural gas or oil deposits through drilling natural gas and oil wells;
or

-- have been evaluated using seismic and other geophysical and geological
data and as to which a final determination not to drill has been made
based on that evaluation.

Exploratory well. A well drilled to find and produce natural gas or oil reserves
not classified as proved, to find a new reservoir in a field previously found to
be productive of natural gas or oil in another reservoir or to extend a known
reservoir.

Field. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.

Finding and development cost or finding cost. An amount per Mcfe equal to the
sum of all costs incurred relating to natural gas and oil exploration and
development activities for all evaluated properties, excluding property
acquisitions, divided by the sum of all additions and revisions to estimated
proved reserves, excluding reserve purchases. We believe that the proportion of
our costs attributable to unevaluated properties is significantly higher than
many of our competitors' due to the greater investments we believe we make in
seismic data and other costs prior to drilling. Because of this, we calculate
our finding costs based only on the costs attributable to our evaluated
properties, not based on the costs of both our evaluated and unevaluated
properties. Our finding costs may not be comparable to finding costs disclosed
by other natural gas and oil companies.

Gross acres or gross wells. The total acres or wells, as the case may be, in
which a working interest is owned.

MBbls. One thousand barrels of crude oil or other liquid hydrocarbons.

65
<PAGE> 67

Mcf. One thousand cubic feet of natural gas.

Mcfe. One thousand cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

MMBbls. One million barrels of crude oil or other liquid hydrocarbons.

MMBtu. One million British Thermal Units.

MMcf. One million cubic feet of natural gas.

MMcfe. One million cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.

Net acres or net wells. The sum of the fractional working interest owned in
gross acres or wells, as the case may be.

Productive well. A well that is found to be capable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.

Prospect. A specific geographic area which, based on supporting geological,
geophysical or other data and also preliminary economic analysis using
reasonably anticipated prices and costs, is deemed to have potential for the
discovery of commercial hydrocarbons.

PV-10. The present value of estimated future net cash flows to be generated from
the production of proved reserves, net of estimated production and ad valorem
taxes, future capital costs and operating expenses, using prices and costs in
effect as of the date indicated, without giving effect to federal income taxes.
The future net cash flows have been discounted at an annual rate of 10% to
determine their "present value." The present value is shown to indicate the
effect of time on the value of the revenue stream and should not be construed as
being the fair market value of the properties.

Reservoir. A porous and permeable underground formation containing a natural
accumulation of producible natural gas and/or oil that is confined by
impermeable rock or water barriers and is individual and separate from other
reservoirs.

Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of natural gas and oil regardless of whether such acreage contains proved
reserves.

Unevaluated properties are natural gas and oil properties that have not yet been
evaluated to contain or not contain natural gas or oil in commercially
producible quantities by drilling natural gas and oil wells and for which we
have not made a final determination not to drill based on an evaluation of
seismic and other data.

Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and receive a
share of production.

66
<PAGE> 68

DDD ENERGY, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30,
1999 (unaudited).......................................... F-3
Statements of Operations for the years ended December 31,
1996, 1997 and 1998 and for the six months ended June 30,
1998 and 1999............................................. F-4
Statements of Stockholder's Equity for the years ended
December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1999....................................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998 and for the six months ended June 30,
1998 and 1999............................................. F-6
Notes to Financial Statements............................... F-7
Supplemental Oil and Gas Information (Unaudited)............ F-14
</TABLE>

F-1
<PAGE> 69

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To DDD Energy, Inc.:

We have audited the accompanying balance sheets of DDD Energy, Inc. (a
Delaware corporation) as of December 31, 1997 and 1998, and the related
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1998. 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 statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DDD Energy, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
November 9, 1999

F-2
<PAGE> 70

DDD ENERGY, INC.

BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1997 1998 1999
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and equivalents...................................... $ -- $ -- $ --
Receivables
Trade.................................................. 7,683 5,759 4,295
Other.................................................. 937 13 19
Advances to operators..................................... 925 1,182 933
Prepaid expenses and other................................ 103 160 201
-------- -------- --------
Total current assets.............................. 9,648 7,114 5,448
-------- -------- --------
Property and Equipment, at cost:
Oil and gas properties, full-cost method of accounting
Proved properties...................................... 107,206 141,118 151,264
Unproved properties and properties under development,
not being amortized.................................. 39,436 53,458 57,123
Other property and equipment.............................. 1,118 1,358 1,670
-------- -------- --------
147,760 195,934 210,057
Less: Accumulated depreciation, depletion and
amortization........................................... (34,133) (46,223) (50,498)
-------- -------- --------
Net property and equipment............................. 113,627 149,711 159,559
-------- -------- --------
TOTAL ASSETS........................................... $123,275 $156,825 $165,007
======== ======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
Current portion of long-term debt......................... $ 141 $ 88 $ 67
Accounts payable.......................................... 10,337 11,778 4,553
Accrued liabilities....................................... 1,202 843 1,559
Employee compensation payable............................. 121 106 97
-------- -------- --------
Total current liabilities......................... 11,801 12,815 6,276
-------- -------- --------
Long-Term Debt.............................................. 117 30 --
Advances from Seitel........................................ 97,556 122,229 134,716
Deferred Income Taxes....................................... 21,306 28,959 32,042
-------- -------- --------
TOTAL LIABILITIES................................. 130,780 164,033 173,034
-------- -------- --------
CONTINGENCIES AND COMMITMENTS (Note F)
STOCKHOLDER'S EQUITY
Common Stock, par value $1.00 per share; authorized 10,000
shares; issued and outstanding 1,000 shares............ 1 1 1
Additional paid-in capital................................ -- 3,944 4,768
Accumulated deficit....................................... (7,506) (11,153) (12,796)
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY............................. (7,505) (7,208) (8,027)
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............. $123,275 $156,825 $165,007
======== ======== ========
</TABLE>

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

F-3
<PAGE> 71

DDD ENERGY, INC.

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1996 1997 1998 1998 1999
------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE..................................... $17,473 $ 25,680 $18,994 $ 9,810 $ 8,547
EXPENSES
Production expenses....................... 3,134 5,168 4,683 2,367 2,348
General and administrative expenses....... 1,803 2,408 3,105 1,379 1,534
Depreciation, depletion and
amortization........................... 7,333 12,852 12,110 6,490 4,275
Impairment of oil and gas properties...... -- 11,588 -- -- --
------- -------- ------- ------- -------
12,270 32,016 19,898 10,236 8,157
------- -------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS............... 5,203 (6,336) (904) (426) 390
Interest expense............................ (1,990) (3,162) (4,724) (2,341) (2,912)
Interest income............................. 135 14 11 4 --
Loss on extinguishment of volumetric
production payment........................ -- (4,228) -- -- --
------- -------- ------- ------- -------
Income (loss) before income taxes........... 3,348 (13,712) (5,617) (2,763) (2,522)
Provision (benefit) for income taxes........ 1,180 (4,909) (1,970) (969) (879)
------- -------- ------- ------- -------
NET INCOME (LOSS)........................... $ 2,168 $ (8,803) $(3,647) $(1,794) $(1,643)
======= ======== ======= ======= =======
Net income (loss) per common share:
Basic..................................... $ .15 $ (.61) $ (.25) $ (.13) $ (.11)
======= ======== ======= ======= =======
Diluted................................... $ .15 $ (.61) $ (.25) $ (.13) $ (.11)
======= ======== ======= ======= =======
Weighted average number of common shares
outstanding............................... 14,350 14,350 14,350 14,350 14,350
======= ======== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 72

DDD ENERGY, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
---------------- PAID-IN (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995............ 1,000 $1 $ -- $ (871) $ (870)
Net income.......................... -- -- -- 2,168 2,168
----- -- ------ -------- -------
Balance, December 31, 1996............ 1,000 1 -- 1,297 1,298
Net loss............................ -- -- -- (8,803) (8,803)
----- -- ------ -------- -------
Balance, December 31, 1997............ 1,000 1 -- (7,506) (7,505)
Contributions from Seitel........... -- -- 3,944 -- 3,944
Net loss............................ -- -- -- (3,647) (3,647)
----- -- ------ -------- -------
Balance, December 31, 1998............ 1,000 1 3,944 (11,153) (7,208)
Contributions from Seitel
(unaudited)...................... -- -- 824 -- 824
Net loss (unaudited)................ -- -- -- (1,643) (1,643)
----- -- ------ -------- -------
Balance, June 30, 1999 (unaudited).... 1,000 $1 $4,768 $(12,796) $(8,027)
===== == ====== ======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 73

DDD ENERGY, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................... $ 2,168 $ (8,803) $ (3,647) $ (1,794) $ (1,643)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and
amortization....................... 7,333 12,852 12,110 6,490 4,275
Impairment of oil and gas
properties......................... -- 11,588 -- -- --
Deferred income tax provision......... 7,462 7,276 7,653 3,826 3,083
Loss on extinguishment of volumetric
production payment................. -- 4,228 -- -- --
Gain on sale of property and
equipment.......................... -- -- (11) (11) --
Amortization of deferred revenue...... (4,958) (4,079) -- -- --
Decrease (increase) in receivables.... (3,168) (4,874) 1,294 582 1,458
Decrease (increase) in prepaid
expenses and other................. 39 (59) (57) (222) (41)
Proceeds from sale of volumetric
production payment................. 19,000 -- -- -- --
Increase (decrease) in accounts
payable and other liabilities...... 1,908 (1,529) 158 7 294
-------- -------- -------- -------- --------
Net cash provided by operating
activities............................ 29,784 16,600 17,500 8,878 7,426
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to oil and gas properties........ (50,740) (54,945) (41,784) (24,844) (20,374)
Additions to other property and
equipment............................... (67) (469) (263) (57) (312)
Proceeds from sale of other property and
equipment............................... -- -- 14 14 --
Collections on loans....................... 327 706 -- -- --
-------- -------- -------- -------- --------
Net cash used in investing activities... (50,480) (54,708) (42,033) (24,887) (20,686)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Advances from Seitel, net.................. 20,800 38,024 24,673 16,115 12,487
Borrowings under term loans................ -- 247 -- -- --
Principal payments on term loans........... (104) (163) (140) (106) (51)
Capital contribution from Seitel........... -- -- -- -- 824
-------- -------- -------- -------- --------
Net cash provided by financing
activities............................ 20,696 38,108 24,533 16,009 13,260
-------- -------- -------- -------- --------
Net increase (decrease) in cash and
equivalents................................ -- -- -- -- --
Cash and equivalents at beginning of
period..................................... -- -- -- -- --
-------- -------- -------- -------- --------
Cash and equivalents at end of period........ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
Supplemental disclosure of cash flow
information:
Cash (paid) received during the period for:
Interest, net of amounts capitalized.... $ (1,990) $ (3,162) $ (4,724) $ (2,341) $ (2,912)
Income taxes............................ 6,282 12,185 9,623 4,795 3,962
Supplemental disclosure of non-cash investing
and financing activities:
Acquisition of oil and gas properties in
exchange for 355,733 shares of Seitel
common stock............................ $ -- $ -- $ 5,499 $ -- $ --
Liabilities assumed in acquisition of oil
and gas properties...................... -- -- 1,555 -- --
Capital contribution of 355,733 shares of
Seitel common stock..................... -- -- 3,944 -- --
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 74

DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE A -- BASIS OF PRESENTATION

The accompanying financial statements represent the financial position, results
of operations, and cash flows of DDD Energy, Inc. (the Company), a wholly-owned
subsidiary of Seitel, Inc. (Seitel).

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS: The Company, formed in 1993, is an independent energy
company that explores for, develops and produces natural gas, crude oil and
natural gas liquids. The Company's oil and gas activities are on properties
primarily located in the onshore Gulf Coast areas of Texas, Louisiana, Alabama
and Mississippi, as well as California and Arkansas.

The Company's future financial condition, results of operations and cash flows
will depend upon prices received for its oil and gas production and the costs of
finding, developing and producing reserves. A substantial portion of the
Company's production is sold under market-sensitive contracts. Prices for oil
and gas are subject to fluctuations in response to changes in supply, market
uncertainty and a variety of other factors beyond the Company's control. These
factors include worldwide political instability (especially in the Middle East),
the foreign supply of oil and gas, the price of foreign imports, the level of
consumer demand, and the price and availability of alternative fuels. With
natural gas accounting for 73 percent of the Company's 1998 production on an
energy equivalent basis, the Company is affected more by fluctuations in natural
gas prices than oil prices.

In the course of its operations, the Company is subject to certain risk factors,
including but not limited to the following: competition, industry conditions,
volatility of oil and gas prices, operating risks, dependence on key personnel
and compliance with governmental regulations.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of certain estimates
by management in determining the Company's assets, liabilities, revenues and
expenses. Actual results could differ from those estimates. Depreciation,
depletion and amortization of oil and gas properties and impairments of oil and
gas properties are determined using estimates of proved oil and gas reserves and
the present value of estimated cash flows therefrom. There are numerous
uncertainties in estimating the quantity of proved reserves and in projecting
the future rates of production and timing of development expenditures. Refer to
"Supplemental Oil and Gas Information" for additional information regarding the
process of estimating proved oil and gas reserve quantities and related values.

UNAUDITED INTERIM FINANCIAL INFORMATION: The unaudited interim financial
statements as of June 30, 1999, and for the six months ended June 30, 1998 and
1999, included herein, have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission (SEC). Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments necessary to fairly present the
financial position, results of operations and cash flows with respect to the
interim financial statements, have been included. The results of operations for
the interim periods are not necessarily indicative of the results for an entire
fiscal year.

Amounts included in these notes to financial statements as of and for the six
months ended June 30, 1998 and 1999, are unaudited.

CASH AND EQUIVALENTS: The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.

F-7
<PAGE> 75
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

OIL AND GAS PROPERTIES: The Company accounts for its oil and gas exploration and
production activities using the full-cost method of accounting. Under this
method, all costs associated with acquisition, exploration and development of
oil and gas reserves are capitalized, including salaries, benefits and other
internal costs directly attributable to these activities. For the years ended
December 31, 1996, 1997 and 1998 and for the six months ended June 30, 1998 and
1999, exploration and development related overhead costs of $1,146,000,
$1,431,000, $1,795,000, $821,000 and $973,000, respectively, have been
capitalized to oil and gas properties. Interest costs related to unproved
properties and properties under development also are capitalized to oil and gas
properties. For the years ended December 31, 1996, 1997 and 1998 and for the six
months ended June 30, 1998 and 1999, interest costs of $1,525,000, $2,105,000,
$2,486,000, $1,184,000 and $1,582,000, respectively, have been capitalized to
oil and gas properties. No gains or losses are recognized upon the sale of oil
and gas properties unless a significant portion of the Company's proved oil and
gas reserves are sold (generally greater than 25 percent). Instead, proceeds
from the sale of oil and gas properties are accounted for as a reduction of
capitalized costs.

Depreciation, depletion and amortization (DD&A) expense is calculated quarterly
using the units-of-production method based upon production and estimates of
proved reserves. Estimated future development costs and site restoration,
dismantlement and abandonment costs, net of salvage values, are included in the
amortization base. Capitalized costs associated with the acquisition and
evaluation of unproved properties and properties under development are not
included in the amortization base until the properties associated with these
costs are evaluated.

Capitalized costs of oil and gas properties, net of accumulated DD&A and
deferred income taxes, are limited to the present value, discounted at 10
percent, of future net cash flows from estimated proved oil and gas reserves
(based on current economic and operating conditions) plus the lower of cost or
fair value of unproved properties, adjusted for the effects of related income
taxes. If capitalized costs exceed this limit, the excess is charged to
impairment of oil and gas properties. Based on the Company's December 31, 1997
estimated proved reserves valued at March 18, 1998 market prices, the Company
recorded a non-cash impairment of oil and gas properties of $11,588,000
($7,532,000 net of taxes) in 1997.

Substantially all of the Company's exploration and development activities are
conducted jointly with others and, accordingly, the Company's oil and gas
property balance reflects only its proportionate interest in such activities.

OTHER PROPERTY AND EQUIPMENT: Depreciation of other property and equipment is
provided on a straight-line basis over the estimated useful lives of the assets,
which range from three to five years.

INCOME TAXES: The Company follows the liability method of accounting for income
taxes under which deferred tax assets and liabilities are recognized for the
future tax consequences of (i) temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements
and (ii) operating loss and tax credit carryforwards for tax purposes. Deferred
tax assets are reduced by a valuation allowance when, based upon management's
estimates, it is more likely than not that a portion of the deferred tax assets
will not be realized in a future period.

The Company is included in the consolidated federal income tax return filed by
Seitel. Under an informal arrangement, Seitel allocates income tax
expense/benefit to its subsidiaries included in its consolidated tax return
based on each subsidiaries' relative contribution to the total consolidated tax
liability. The subsidiaries pay to Seitel the amount of their respective current
federal income tax liability or, to the extent the consolidated group is able to
utilize their separate company tax losses or credits, receive reimbursement from
Seitel without regard to any alternative minimum tax liabilities incurred by
Seitel.

USE OF DERIVATIVES: The Company has a price risk management program that
utilizes derivative financial instruments, principally natural gas swaps, to
reduce the price risk associated with fluctuations in natural
F-8
<PAGE> 76
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

gas prices. Such contracts usually are placed with major derivative dealers that
the Company believes are minimal credit risks. The Company accounts for its
derivative financial instruments using the hedge (or deferral) method of
accounting. Under this method, realized gains and losses from the Company's
price risk management activities are recognized in oil and gas production
revenues when the associated production occurs and the resulting cash flows are
reported as cash flows from operating activities. Gains and losses on derivative
financial instruments that are closed before the hedged production occurs are
deferred until the production month originally hedged.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133, as amended, is required to be
adopted on January 1, 2001, although earlier adoption is permitted. The
statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting treatment. The Company has not yet quantified the impact of adopting
SFAS No. 133. However, management does not believe that the adoption of SFAS No.
133 will have a material impact on the Company's financial position or results
of operations.

NET INCOME (LOSS) PER COMMON SHARE: In accordance SFAS No. 128, "Earnings Per
Share," basic net income (loss) per common share is computed based on the
weighted average number of shares of common stock outstanding during the period.
Diluted net income per common share is computed based on the weighted average
number of shares of common stock outstanding plus the assumed issuance of common
stock for all potentially dilutive securities. Diluted net loss per common share
does not reflect dilution from potential common shares, because to do so would
be antidilutive. There were no potentially dilutive securities outstanding for
any period presented.

Net income (loss) per common share in the accompanying statements of operations
has been adjusted to give retroactive effect to the proposed offering described
in Note J.

STOCK-BASED COMPENSATION: The Company accounts for employee stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Nonemployee stock-based compensation is
accounted for using the fair value method in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation." For all periods presented, the
Company has not issued stock-based compensation to employees (or nonemployees),
although the Company anticipates issuing options to purchase its common stock in
future periods.

NOTE C -- INCOME TAXES

The provision (benefit) for income taxes for each of the three years in the
period ended December 31, 1998, is comprised of the following amounts (in
thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------- -------- -------
<S> <C> <C> <C>
Current................................................ $(6,282) $(12,185) $(9,623)
Deferred............................................... 7,462 7,276 7,653
------- -------- -------
Provision (benefit) for income taxes................. $ 1,180 $ (4,909) $(1,970)
======= ======== =======
</TABLE>

F-9
<PAGE> 77
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The differences between income taxes computed at the federal statutory rate and
the Company's effective income tax amounts are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Statutory income tax..................................... $1,172 $(4,799) $(1,966)
Other, net............................................... 8 (110) (4)
------ ------- -------
Provision (benefit) for income taxes................... $1,180 $(4,909) $(1,970)
====== ======= =======
</TABLE>

Substantially all of the deferred income tax liability reflected in the
Company's balance sheets at December 31, 1997 and 1998 is attributable to
temporary differences related to the Company's oil and gas properties.

NOTE D -- ADVANCES FROM SEITEL

Seitel has funded the Company's capital expenditures and operating costs since
inception and is reimbursed for such advances as the Company has available cash.
During the years ended December 31, 1996, 1997, and 1998 and the six months
ended June 30, 1998 and 1999, the Company recorded interest expense of
$3,494,000, $5,241,000, $7,175,000, $3,515,000 and $4,489,000, respectively,
related to advances from Seitel. Interest was allocated to the Company at a rate
equivalent to the weighted-average cost of Seitel's corporate debt, which was
7.24 percent, 7.16 percent, and 7.02 percent for 1996, 1997, and 1998,
respectively. The amount of interest expense reported in the accompanying income
statement has been reduced by capitalized interest as described in Note B.

In connection with the proposed offering described in Note J, the entire
intercompany balance owed to Seitel by the Company will be contributed to
capital.

NOTE E -- VOLUMETRIC PRODUCTION PAYMENT

In June 1996, the Company sold a volumetric production payment for $19 million
to certain unaffiliated limited partnerships. Under the terms of the production
payment agreements, the Company conveyed a mineral property interest of
approximately 7.6 billion cubic feet of natural gas and approximately 363,000
barrels of other hydrocarbons to the purchasers. The Company retained
responsibility for its working interest share of the cost of operations. The
Company accounted for the proceeds received in the transaction as deferred
revenue which was amortized into revenue as natural gas and other hydrocarbons
were produced and delivered.

The Company entered into an agreement to extinguish the remaining portion of its
volumetric production payment which was effective July 1, 1997. The cost to
acquire the production payment liability exceeded its book value. As a result of
this transaction, the Company recorded a pre-tax loss of $4,228,000 in the
accompanying statement of operations for the year ended December 31, 1997.

NOTE F -- CONTINGENCIES AND COMMITMENTS

LITIGATION: The Company is involved from time to time in or threatened with
litigation and is subject to governmental and regulatory controls arising in the
ordinary course of business. It is the opinion of the Company's management that
all claims and litigation involving the Company are not likely to have a
material adverse effect on its financial position or results of operations.

ENVIRONMENTAL: The Company, as an owner of oil and gas properties, is subject to
various federal, state and local laws and regulations relating to discharge of
materials into, and protection of, the environment. These laws and regulations
may, among other things, impose liability on the lessee under an oil and gas
lease for the cost of pollution clean-up resulting from operations and subject
the lessee to liability for

F-10
<PAGE> 78
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

pollution damages. The Company maintains insurance coverage, which it believes
is customary in the industry, although it is not fully insured against all
environmental risks. The Company is not aware of any environmental claims
existing as of December 31, 1998, which would have a material impact on its
financial position or results of operations.

NOTE G -- FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISK

The Company has a price risk management program that utilizes derivative
financial instruments, principally natural gas swaps, to reduce the price risk
associated with fluctuations in natural gas prices. Such contracts usually are
placed with major derivative dealers that the Company believes are minimal
credit risks. The derivative financial instruments call for the Company to
receive or make payments based upon the differential between a fixed and a
variable commodity price as specified in the contract. As a result of these
activities, the Company recognized net hedging gains (losses) of $0, $474,000,
$653,000, $533,000, and $(102,000) for the years ended December 31, 1996, 1997,
and 1998, and for the six months ended June 30, 1998 and 1999, respectively.

As of October 31, 1999, the Company had open natural gas swaps through July 2000
covering 10,000 MMBtu per day at an average fixed price of $2.51 per MMBtu and
for August 2000 covering 5,000 MMBtu per day at an average fixed price of $2.57
per MMBtu.

The estimated fair value of open commodity price hedges as of December 31, 1997
was $183,000. As of December 31, 1998, the Company did not have any open
commodity price hedges.

NOTE H -- RELATED PARTY TRANSACTIONS

The Company reimburses Seitel for direct and indirect costs of certain Seitel
employees who provide services to the Company and for other costs, primarily
general and administrative expenses, related to the Company's operations. Seitel
allocates indirect costs to the Company using a formula based upon the ratio of
the Company's levels of revenue, number of personnel or other factors, as
applicable, to the total consolidated Seitel levels for such items. Management
of the Company believes that the use of such formula results in a reasonable
allocation of indirect costs. During the years ended December 31, 1996, 1997 and
1998 and for the six months ended June 30, 1998 and 1999, the Company recorded
general and administrative costs allocated from Seitel of $457,000, $690,000,
$664,000, $323,000 and $286,000, respectively.

The Company periodically uses the seismic data processing services of a
wholly-owned subsidiary of Seitel. Such services are provided to the Company
based on the costs incurred by Seitel's subsidiary. The Company incurred charges
for these services of $326,000, $265,000 and $182,000 for the years ended
December 31, 1997 and 1998 and for the six months ended June 30, 1999,
respectively. Subsequent to the proposed offering, the Company plans to purchase
its own seismic processing equipment such that these services will no longer be
provided by Seitel's subsidiary.

The Company periodically uses the seismic data acquisition services of Eagle
Geophysical, Inc. (Eagle), a wholly-owned subsidiary of Seitel from 1993 to
August 1997, and an equity investee of Seitel from August 1997 until April 1999.
From 1993 until August 1997, such services were provided to the Company based on
the costs that Eagle incurred. Subsequent to August 1997, such services were
provided based on agreed upon contractual amounts and terms similar to contracts
with third party contractors. The Company incurred charges for these services of
$5,329,000 and $5,876,000 for the years ended December 31, 1997 and 1998,
respectively.

Certain employees and directors of Seitel contributed cash to partnerships in
1994 through 1997 which invested in the exploration and development of oil and
gas properties on a working interest basis along with the Company. Each
partnership's working interest amounted to 5% of the total investment made by
such
F-11
<PAGE> 79
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

partnership and the Company for the partnerships formed in 1994 and 1995, 3% for
the partnership formed in 1996 and 2.5% for the partnership formed in 1997. In
October 1998, the Company purchased the oil and gas interests owned by each of
the partnerships in exchange for 355,733 shares of Seitel's common stock,
payment of $824,000 in cash and assumption of each partnership's liabilities
totaling $1,555,000.

In connection with the proposed offering described in Note J, the Company and
Seitel intend to enter into a number of agreements for the purpose of defining
their continuing relationship. It is currently anticipated that after the
offering Seitel will account for its investment using the cost method of
accounting. Conflicts of interest may arise in the future between Seitel and the
Company in connection with these agreements and other areas of their ongoing
relationship.

NOTE I -- MAJOR CUSTOMERS

The Company is an oil and gas exploration and production company that generally
sells its oil and gas to numerous customers on a month-to-month basis through
the operators of its oil and gas properties. To the Company's knowledge, no
customers accounted for 10% or more of revenues during the years 1996, 1997 or
1998.

Substantially all of the Company's accounts receivable at December 31, 1997 and
1998 and June 30, 1999, result from oil and gas sales and joint interest
billings to other companies in the oil and gas industry. This concentration of
customers and joint interest owners may impact the Company's overall credit
risk, either positively or negatively, in that these entities may be similarly
affected by industry-wide changes in economic or other conditions. Such
receivables are generally not collateralized. Historically, credit losses
incurred by the Company on receivables have not been material.

NOTE J -- SUBSEQUENT EVENTS (UNAUDITED)

SALE OF OIL AND GAS PROPERTIES: In July 1999, the Company sold its 18.75%
working interest in 11 oil and gas wells, one salt water disposal well and
approximately 16,000 acres of leasehold and options to lease for approximately
$12.4 million, net of costs.

SECURITIES OFFERING: Prior to completion of a proposed initial public offering,
the entire intercompany balance owed to Seitel by the Company will be
contributed to capital and Seitel will make an additional capital contribution
of $15 million in cash to the Company. These contributions will increase the
Company's additional paid-in capital. Seitel will then transfer all of the
outstanding stock of the Company to a newly created Delaware company named
Vision Energy, Inc. (Vision Energy) in exchange for 14,350,000 shares of Vision
Energy's $.01 par value common stock and 10,000 shares of Vision Energy's
preferred stock. Vision Energy will not conduct any business or have any
operations or assets and liabilities prior to such transfer. Vision Energy plans
to file a registration statement with the SEC for an underwritten initial public
offering of its common shares (the Offering), under which Seitel will offer
shares of common stock of Vision Energy as a selling stockholder.

MASTER SEPARATION AGREEMENT: In connection with the Offering, Vision Energy and
Seitel intend to enter into a Master Separation Agreement for purposes of
defining their continuing relationship. The Master Separation Agreement will
provide for Vision Energy and Seitel to enter into a Sublease, a Registration
Rights Agreement, a Tax Indemnity Agreement, an Administrative Services
Agreement and an Employee Benefits Allocation Agreement. Under the Master
Separation Agreement, Seitel and its subsidiaries and Vision Energy will
indemnify each other with respect to liabilities arising in connection with the
operations of their respective businesses prior to and after the date of
consummation of the Offering including liabilities under the Securities Act with
respect to the Offering. The Master Separation Agreement will also provide for
continued access by Vision Energy to historical financial and operational
information relating to the Company maintained by Seitel.

F-12
<PAGE> 80
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Sublease -- The Sublease between Vision Energy and Seitel will provide for
Vision Energy to lease its principal corporate offices, comprising approximately
8,700 square feet, from Seitel until August 31, 2002 at an annual rent of
approximately $96,000. The sublease will also provide for Vision Energy to
utilize certain shared office equipment, such as phone systems and central
computer systems, for an additional charge.

Registration Rights Agreement -- Pursuant to the Registration Rights Agreement,
Vision Energy will agree to register the offer and sale by Seitel on a delayed
and continuous basis from time to time of the shares of Vision Energy common
stock owned by Seitel after the Offering at the expense of Vision Energy.

Tax Indemnity Agreement -- Prior to the Offering, the Company has been a member
of the Seitel affiliated group and has filed its tax returns on a consolidated
basis with such group. After the Offering, the Company will no longer be a
member of the Seitel affiliated group. Vision Energy and Seitel will enter into
a Tax Indemnity Agreement to define their respective rights and obligations
relating to federal, state and other taxes for periods before and after the
Offering. Pursuant to the Tax Indemnity Agreement, Seitel will calculate the
estimated tax benefit from the Company's operations as of the consummation of
the offering and will reduce the amount of the intercompany loan by the benefit
to the extent not already reflected. Vision Energy and the Company will be
responsible for federal income taxes from its operations on and after the date
of consummation of the Offering. Any subsequent refunds, additional taxes or
penalties or other adjustments relating to the Company's federal income taxes
for periods prior to the date of consummation of the Offering shall be for the
benefit of or be borne by Seitel. Similar provisions apply under the Tax
Indemnity Agreement to other taxes, such as state and local income taxes.

Administrative Services Agreement -- Seitel and Vision Energy intend to enter
into an Administrative Services Agreement pursuant to which Seitel will provide
Vision Energy with administrative services, primarily receptionist and office
administrative services, at up to the same levels as provided prior to the
Offering. Seitel will provide these services for the term of the sublease.
Vision Energy will pay Seitel for these services at Seitel's actual cost of
providing these services.

Employee Benefits Allocation Agreement -- Vision Energy intends to enter into an
employee benefits allocation agreement with Seitel to govern certain matters
relating to the employees of Seitel who will become employees of Vision Energy.

EMPLOYMENT AGREEMENT: Vision Energy intends to enter into employment agreements
with certain of its executive officers in connection with the Offering. In
connection with these employment agreements, Vision Energy intends to grant
warrants to purchase a total of 400,000 shares of Vision Energy common stock at
an exercise price above the initial public offering price.

STOCK OPTION PLANS: Vision Energy intends to adopt a stock option plan prior to
the Offering, and 1,600,000 shares of common stock have been reserved for
issuance pursuant to such plan. Under the stock option plan, Vision Energy may
grant both incentive stock options intended to qualify under Section 422 of the
Internal Revenue Code and options that are not qualified as incentive stock
options to officers, employees and directors. Options will be granted at or
above the market price of Vision Energy common stock on the date of grant.
Vision Energy intends to grant to directors, officers and employees, effective
as of the date of consummation of the Offering, options to purchase a total of
1,005,000 shares of Vision Energy common stock at an exercise price equal to the
initial public offering price.

F-13
<PAGE> 81

DDD ENERGY, INC.

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED)

The following information concerning the Company's oil and gas operations is
presented in accordance with SFAS No. 69, "Disclosures about Oil and Gas
Producing Activities."

OIL AND GAS RESERVES: Proved oil and gas reserves represent estimated quantities
of natural gas, crude oil, condensate and natural gas liquids that geological
and engineering data demonstrate, with reasonable certainty, to be recoverable
in future years from known reservoirs under economic and operating conditions
existing at the time the estimates were made. Proved developed reserves are
proved reserves expected to be recovered through wells and equipment in place
and under operating methods being utilized at the time the estimates were made.

The following table sets forth estimates of proved reserves and proved developed
reserves of natural gas and crude oil (including condensate and natural gas
liquids) attributable to the Company's interests in oil and gas properties. The
reserve estimates presented herein were prepared by the independent petroleum
engineering firms of Miller and Lents, Ltd. at December 31, 1996, Miller and
Lents, Ltd. and Forrest A. Garb & Associates, Inc. at December 31, 1997 and
Forrest A. Garb & Associates, Inc. at December 31, 1998, in accordance with
guidelines established by the SEC. It should be noted that these reserve
quantities are estimates and may be subject to substantial upward or downward
revisions. The estimates are based on the most current and reliable information
available; however, additional information obtained through future production
and experience and additional development of existing reservoirs may
significantly alter previous estimates of proved reserves.

<TABLE>
<CAPTION>
GAS OIL
(MMCF) (MBBL)
------ ------
<S> <C> <C>
Proved reserves at December 31, 1995........................ 14,011 1,512
Revisions of previous estimates........................... 1,966 249
Purchases of reserves in place............................ 7,896 68
Extensions and discoveries................................ 10,322 1,107
Sale of volumetric production payment..................... (7,626) (363)
Production................................................ (2,808) (279)
------ -----
Proved reserves at December 31, 1996........................ 23,761 2,294
Revisions of previous estimates........................... (3,863) (500)
Repurchase of volumetric production payment............... 3,736 98
Extensions and discoveries................................ 28,491 1,110
Production................................................ (5,131) (364)
------ -----
Proved reserves at December 31, 1997........................ 46,994 2,638
Revisions of previous estimates........................... 12,698 2,374
Purchases of reserves in place............................ 2,898 284
Extensions and discoveries................................ 17,685 2,428
Production................................................ (6,216) (386)
------ -----
Proved reserves at December 31, 1998........................ 74,059 7,338
====== =====
Proved developed reserves --
December 31, 1995......................................... 10,219 1,178
====== =====
December 31, 1996......................................... 11,563 902
====== =====
December 31, 1997......................................... 18,483 1,744
====== =====
December 31, 1998......................................... 37,844 5,265
====== =====
</TABLE>

F-14
<PAGE> 82
DDD ENERGY, INC.

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED)

In addition to the proved reserves disclosed above, the Company owned proved
sulfur reserves of 197,000 long tons, 174,000 long tons and 420,000 long tons at
December 31, 1996, 1997 and 1998, respectively. In addition to the production
quantities indicated above, in 1996 and 1997 the Company delivered 84 and 56
thousand barrels (MBbls) of oil, respectively, and 2,094 and 1,795 million cubic
feet (MMcf) of natural gas, respectively, under the terms of a volumetric
production payment agreement (See Note E of Notes to Financial Statements).

CAPITALIZED COSTS OF OIL AND GAS PROPERTIES: As of December 31, 1997 and 1998,
the Company's capitalized costs of oil and gas properties were as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Proved properties........................................... $107,206 $141,118
Unproved properties......................................... 39,436 53,458
-------- --------
Total capitalized costs................................ 146,642 194,576
Less: Accumulated depreciation, depletion and
amortization.............................................. (33,727) (45,599)
-------- --------
Net capitalized costs.................................. $112,915 $148,977
======== ========
</TABLE>

Of the total costs excluded from the amortization base as of December 31, 1998,
$25,329,000 was incurred during 1998, $12,916,000 was incurred during 1997,
$8,793,000 was incurred during 1996, $3,748,000 was incurred during 1995 and
$2,672,000 was incurred during 1994. The Company cannot accurately predict when
these costs will be included in the amortization base, but it is expected that
these costs will be evaluated in the next three to five years.

COSTS INCURRED IN OIL AND GAS ACTIVITIES: The following table sets forth the
Company's costs incurred for oil and gas activities for the years ended December
31, 1996, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Acquisition of properties:
Evaluated............................................. $23,090 $13,813 $ 4,701
Unevaluated........................................... 7,000 10,857 15,207
Exploration costs....................................... 17,358 26,961 22,708
Development costs....................................... 3,913 12,318 5,318
------- ------- -------
Total costs incurred............................... $51,361 $63,949 $47,934
======= ======= =======
</TABLE>

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES: The following table sets forth the standardized measure of
discounted future net cash flows attributable to the Company's proved oil and
gas reserves as prescribed by SFAS No. 69. Future cash inflows were computed by
applying year-end prices of oil and gas to the estimated future production of
proved oil and gas reserves. Future oil and gas prices actually received may
differ from the estimates in the standardized measure.

Future production and development costs represent the estimated future
expenditures (based on current costs) to be incurred in developing and producing
the proved reserves, assuming continuation of existing economic conditions.
Future income tax expenses were computed by applying statutory income tax rates
to the difference between pre-tax net cash flows relating to the Company's
proved oil and gas reserves and the tax basis of proved oil and gas properties,
adjusted for tax credits and allowances. The resulting annual net cash flows
were then discounted to present value amounts by applying a 10 percent annual
discount factor.

F-15
<PAGE> 83
DDD ENERGY, INC.

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED)

Although the information presented is based on the Company's best estimates of
the required data, the methods and assumptions used in preparing the data are
those prescribed by the FASB. Although not market sensitive, they were specified
in order to achieve uniformity in assumptions and to provide for the use of
reasonably objective data. It is important to note that this standardized
measure information is not fair market value of the Company's oil and gas
properties and it does not reflect changes in oil and gas prices experienced
since the respective year-end. It is primarily a tool designed by the FASB to
increase comparability of oil and gas reserves and changes therein through the
use of a standardized method. Accordingly, the Company cautions that this data
should not be used for other than its intended purpose.

Management does not rely upon the following information in making investment and
operating decisions. The Company, along with its partners, bases such decisions
upon a wide range of factors, including estimates of probable as well as proved
reserves, and varying price and cost assumptions considered more representative
of a range of possible economic conditions that may occur in the future.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash inflows........................................ $127,905 $162,762 $248,608
Production costs.................................... (21,913) (21,417) (43,065)
Development costs................................... (10,101) (21,659) (17,131)
Income taxes........................................ (26,524) (27,453) (47,541)
-------- -------- --------
Future net cash flows............................... 69,367 92,233 140,871
10 percent annual discount.......................... (17,277) (27,636) (59,328)
-------- -------- --------
Standardized measure of discounted future net cash
flows(1)(2)....................................... $ 52,090 $ 64,597 $ 81,543
======== ======== ========
</TABLE>

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

(1) The above table excludes future net cash flows before income taxes of
$3,495,000, $3,187,000 and $9,167,000, and discounted future net cash flows
before income taxes of $2,427,000, $2,350,000 and $4,310,000, as of December
31, 1996, 1997 and 1998, respectively, related to proved sulfur reserves.

(2) Estimated future net cash flows before income tax expense, discounted at 10
percent per annum, totaled approximately $72.8 million, $83.3 million, and
$107.6 million as of December 31, 1996, 1997, and 1998, respectively.

F-16
<PAGE> 84
DDD ENERGY, INC.

SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED) -- (CONTINUED)

The following are the principal sources of changes in the standardized measure
of discounted future net cash flows for the years ended December 31, 1996, 1997
and 1998 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Standardized measure, beginning of year.............. $ 16,058 $ 52,090 $ 64,597
Extensions and discoveries, net of related costs..... 26,690 45,193 34,102
Sales of oil and gas produced, net of production
costs.............................................. (9,057) (16,035) (13,990)
Net changes in prices and production costs........... 24,561 (28,384) (25,385)
Change in future development costs................... (355) (2,650) 3,626
Development costs incurred during the period that
reduced future development costs................... 2,042 7,802 4,330
Revision of previous quantity estimates.............. 3,077 (8,927) 31,358
Repurchase of volumetric production payment.......... -- 8,319 --
Purchases of reserves in place....................... 18,309 -- 4,609
Sale of volumetric production payment................ (17,763) -- --
Accretion of discount................................ 2,532 7,276 8,328
Net change in income taxes........................... (11,406) 1,988 (7,422)
Change in production rates and other................. (2,598) (2,075) (22,610)
-------- -------- --------
Standardized measure, end of year.................... $ 52,090 $ 64,597 $ 81,543
======== ======== ========
</TABLE>

F-17
<PAGE> 85

FORREST A. GARB & ASSOCIATES, INC.
INTERNATIONAL PETROLEUM CONSULTANTS

5310 HARVEST HILL ROAD, SUITE 160 - LB 152
DALLAS, TEXAS 75230 - 5805
972-788-1110
Fax 972-991-3160

February 1, 1999

DDD Energy, Inc.
50 Briar Hollow Lane, Suite 700
Houston, Texas 77027

Dear Sirs:

In response to your request, Forrest A. Garb & Associates, Inc. (Garb) has
estimated the oil, gas, and natural gas liquids (NGL) reserves attributed to
certain interests owned by DDD Energy, Inc., (DDD) as of January 1, 1999. DDD is
a wholly owned subsidiary of Seitel, Inc. The interests are in petroleum
producing properties that are located in Texas, Louisiana, Michigan,
Mississippi, and California. Garb applied Security and Exchange Commission (SEC)
guidelines to estimate the reserves and future cash flows for each property.

Only proven reserves are included in this report. No probable or possible
reserves are included in the estimate. Garb verified the properties as proved
using SEC criteria and operating information through the publish date of this
report. The reserves described in this report are further divided into three
categories: proved developed producing (PDP), proved developed non-producing
(PDNP), and proved undeveloped (PUD). PDNP reserves may be behind-pipe or
waiting connection to sales market. The following table shows the results of
Garb's analysis:

<TABLE>
<CAPTION>
ESTIMATED ESTIMATED
NET RESERVES FUTURE NET REVENUE
---------------------------- -------------------------
OIL AND DISCOUNTED
CONDENSATE GAS NGL UNDISCOUNTED @10%
CATEGORY (MBO) (MMCF) (MGAL) ($000S) ($000S)
- -------- ---------- ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Producing................... 1,859 27,051 68,311 73,857 45,673
Non-Producing............... 1,659 10,793 5,060 35,473 21,216
Undeveloped................. 1,546 36,215 22,148 79,083 40,760
----- ------ ------ ------- -------
Total................ 5,064 74,059 95,519 188,413 107,649
</TABLE>

Garb estimated reserves using decline curve analysis, material balance,
volumetric analysis, analogy, or a combination of these. For decline curve
analysis, Garb obtained historical production for DDD wells and analogous offset
wells from public data sources. For material balance, Garb received pressure and
production data from DDD. For volumetric analysis, DDD and Garb produced
geologic maps for undeveloped and non-producing properties. Garb reviewed
petrophysical logs on all behind-pipe reserves and on offset wells to drilling
locations.

Garb reviewed historical performance data, geologic interpretations, and seismic
interpretations to estimate reserves. Garb used information provided by DDD and,
where possible, verified the data using public reporting agencies. Garb audited
DDD's geologic maps, petrophysical interpretations, and seismic interpretation.
Where estimates differed, Garb's values were used. Garb estimated reservoir
properties based on its own petrophysical evaluation.

Garb used December 1998 product prices obtained from DDD as the initial prices.
These prices are Oil = $11/Bbl, Gas = $2.08/MMBtu, and NGL is priced as a
fraction of oil prices based on historical ratios seen throughout 1998. No
transportation charges, if any, are included in the evaluation. Garb accounted
for gas quality as a Btu adjustment and oil differentials as a reduction in the
initial oil price.

A-1
<PAGE> 86
FORREST A. GARB & ASSOCIATES, INC.

Garb used a 12-month average operating cost for established properties based on
billings to DDD from the various operators. On properties with no historical
costs, DDD provided an estimate for developing and operating the properties.
Based on its experience, Garb considers the costs to be reasonable.

Garb did not escalate costs or prices as per SEC guidelines. SEC value is the
present value of future net revenue discounting by ten percent per annum.

The titles to the properties have not been independently examined by Garb. DDD
provided ownership interests in the properties. Garb accepted the extent and
character of ownership (working interests, royalty interests, and reversionary
interests) as represented by DDD. Our staff conducted no independent tests,
property inspections, or audits of operating expenses in conjunction with this
study.

Attachment 1 contains summaries of reserves and cash flow forecasts by category.
General comments applicable to the methods and procedures used to evaluate DDD's
interests are in Attachment 2. Any distribution of this report or any part
thereof must include the general comments and this cover letter in its entirety.

Garb is an independent firm of geologists and petroleum engineers. Neither the
firm nor its employees own an interest in the properties studied, nor have we
been employed on a contingent basis.

This report was prepared under the supervision of Forrest A. Garb, Registered
Professional Engineer No. 16160, State of Texas.

We appreciate the opportunity to submit this SEC evaluation. Should you have any
questions, please do not hesitate to call.

Yours truly,

Forrest A. Garb & Associates, Inc.

A-2
<PAGE> 87
FORREST A. GARB & ASSOCIATES, INC.

GENERAL COMMENTS

(1) The reserve estimates presented in this report have been calculated using
deterministic procedures. The reserves shown in this report are those
estimated to be recoverable under the guidelines of the Securities and
Exchange Commission (SEC). The definition for proved oil and gas reserves
are in accordance with SEC Regulation S-X.

(2) The estimated future net revenue shown in the cash flow projections is
that revenue which should be realized from the sale of the estimated net
reserves. Surface and well equipment salvage values have not been
considered in the revenue projections. Future net revenue as stated in
this report is before the deduction of federal income tax.

(3) The discounted future net revenue is not represented to be the fair market
value of these reserves. The estimated reserves included in the cash flow
projections have not been adjusted for risk.

(4) The reserves included in this study are estimates only and should not be
construed as exact quantities. Future conditions may affect recovery of
estimated reserves and revenue. All categories of reserves may be subject
to revision as more performance data become available.

(5) Extent and character of ownership, oil and gas prices, production data,
direct operating costs, required capital expenditures, and other data
furnished have been accepted as represented. No independent well tests,
property inspections or audits of operating expenses were conducted by our
staff in conjunction with this study.

(6) If investments or business decisions are to be made in reliance on these
estimates by anyone other than our client, such person, with the approval
of our client, is invited to visit our offices at his expense to evaluate
the assumptions made and the completeness and extent of the data available
on which our estimates are based.

(7) Gas contract differences including take or pay claims are not considered
in this report.

(8) Gas sales imbalances have not been taken into account in the reserve
estimates.

(9) Unless otherwise stated in the text, existing or potential liabilities
stemming from environmental conditions caused by current or past operating
practices have not been considered in this report. No costs are included
in the projections of future net revenue nor in our economic analyses to
restore, repair, or to improve the environmental conditions of the
properties studied to meet existing or future local, state, or federal
regulations.

(10) Any distribution of this report or any part thereof must include these
general comments and the cover letter in their entirety.

(11) This report was prepared under the supervision of Forrest A. Garb,
Registered Professional Engineer No. 16160, State of Texas.

A-3
<PAGE> 88

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

[LOGO]

VISION ENERGY, INC.

12,915,000 SHARES

COMMON STOCK

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

PROSPECTUS
---------------------------

, 2000

CIBC WORLD MARKETS
A.G. EDWARDS & SONS, INC.

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

<PAGE> 89

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses to be paid by the Registrant
in connection with the issuance and distribution of the securities being
registered. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $57,805
NASD filing fee............................................. 21,293
Nasdaq listing fee.......................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Engineering fees and expenses............................... *
Blue Sky fees and expenses.................................. *
Printing, EDGAR formatting and mailing expenses............. *
Transfer Agent fees......................................... *
Miscellaneous............................................... *
-------
Total............................................. *
=======
</TABLE>

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

* To be provided by amendment.

Seitel has agreed to pay all of these costs unless the underwriters exercise
their over-allotment option, in which event Seitel and the Registrant will pay
these costs pro rata based on the number of shares of common stock sold by each.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party 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 the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party 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 the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the

II-1
<PAGE> 90

circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.

Vision Energy's certificate of incorporation limits the liability of its
directors to Vision Energy or its stockholders to the fullest extent permitted
by Delaware law. Specifically, our directors will not be personally liable for
monetary damages for breach of a director's fiduciary duty in such capacity,
except for liability

-- for any breach of the director's duty of loyalty to Vision Energy or its
stockholders,

-- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,

-- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or

-- for any transaction from which the director derived an improper personal
benefit.

Vision Energy's certificate of incorporation provides that its officers,
directors, employees and agents will be indemnified by Vision Energy for
liabilities arising because such individual was an officer or director of Vision
Energy to the extent permitted by Section 145 of the DGCL.

Vision Energy will enter into indemnification agreements with each of its
directors and officers. These agreements require Vision Energy to, among other
things, indemnify the director or officer against expenses and costs incurred by
the individual in connection with any action, suit or proceeding arising out of
the individual's status or service as a director or officer of Vision Energy,
other than liabilities arising from willful misconduct or conduct that is
knowingly fraudulent or deliberately dishonest. The agreement also requires
Vision Energy to advance expenses incurred by the individual in connection with
any proceeding against the individual with respect to which he or she may be
entitled to indemnification by it. Following completion of the offering, Vision
Energy also will maintain directors' and officers' liability insurance.

The Underwriting Agreement that Vision Energy will enter into with respect to
the offer and sale of the common stock covered by this registration statement
will contain certain provisions for the indemnification of directors and
officers of Vision Energy and the underwriters, as applicable, against civil
liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since Vision Energy's inception, it has issued and sold the following securities
in private transactions exempt from the registration provisions of the
Securities Act pursuant to Section 4(2) thereof as transactions not involving a
public offering:

-- On November 9, 1999, Vision Energy issued and sold an aggregate of 81
shares of common stock to Horace A. Calvert at a purchase price of $15
per share, or an aggregate of $1,215; and

-- On November 9, 1999, Vision Energy issued and sold an aggregate of 19
shares of common stock to Vision Holdings LLC at a purchase price of $15
per share, or an aggregate of $285.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

II-2
<PAGE> 91

<TABLE>
<S> <C>
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P.
8.1* -- Tax Opinion of Arthur Andersen LLP
10.1* -- Form of Asset Transfer and Separation Agreement among Seitel, Inc., Vision Holdings LLC
and Vision Energy, Inc.
10.2* -- Form of Sublease among Seitel, Inc., Seitel Gas & Energy, Inc., Seitel Management, Inc.
and Vision Energy, Inc.
10.3* -- Form of Registration Rights Agreement among Seitel, Inc., Vision Holdings LLC and
Vision Energy, Inc.
10.4* -- Form of Tax Indemnity Agreement between Seitel, Inc. and Vision Energy, Inc.
10.5* -- Form of Employee Benefits Allocation Agreement between Seitel, Inc. and Vision Energy,
Inc.
10.6* -- Form of Administrative and Services Agreement between Seitel, Inc. and Vision Energy,
Inc.
10.7* -- Form of Employment Agreement between Vision Energy, Inc. and Horace A. Calvert
10.8* -- Form of Employment Agreement between Vision Energy, Inc. and Marshall L. Munsell
10.9* -- Form of Employment Agreement between Vision Energy, Inc. and Thomas A. Mazza
10.10* -- Form of Vision Energy 1999 Stock Incentive Plan
10.11* -- Form of Indemnification Agreement between Vision Energy, Inc. and each director of
Vision Energy, Inc.
10.12* -- Form of Warrant issued by Vision Energy, Inc. to the executive officers of Vision
Energy, Inc.
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Forrest A. Garb & Associates, Inc.
23.3 -- Consent of Miller & Lents, Ltd.
23.4* -- Consent of Gardere Wynne Sewell & Riggs, L.L.P. (contained in Exhibit 5.1)
24.1 -- Power of Attorney (included on signature page to this Registration Statement)
27.1 -- Financial Data Schedule
99.1 -- Consent of Jerry S. Cox to act as director
99.2 -- Consent of Fred S. Ziedman to act as director
99.3 -- Consent of Robert B. Sale, Jr. to act as director
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.

II-3
<PAGE> 92

The undersigned registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.

The undersigned registrant undertakes that:

(i) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.

(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 93

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on November 12, 1999.

VISION ENERGY, INC.

By: /s/ HORACE A. CALVERT
----------------------------------
Horace A. Calvert
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Horace A. Calvert and Marshall S. Munsell, and each of
them, each of whom may act without joinder of the other, his or her true and
lawful attorneys and agents, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any or all pre- and post-effective amendments to this
registration statement (including any registration statement of the type
contemplated by Rule 462(b) promulgated under the Securities Act of 1933), and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully as to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or the substitute or substitutes
of any or all of them, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ HORACE A. CALVERT Chairman of the Board of November 12, 1999
- ----------------------------------------------------- Directors and Chief
Horace A. Calvert Executive Officer
(Principal Executive
Officer)

/s/ MARSHALL L. MUNSELL President and Director November 12, 1999
- -----------------------------------------------------
Marshall L. Munsell

/s/ THOMAS A. MAZZA Executive Vice President and November 12, 1999
- ----------------------------------------------------- Director
Thomas A. Mazza

/s/ MARCIA H. KENDRICK Interim Chief Financial November 12, 1999
- ----------------------------------------------------- Officer (Principal
Marcia H. Kendrick Accounting and Financial
Officer)
</TABLE>

II-5
<PAGE> 94

EXHIBIT INDEX

<TABLE>
<C> <S>
1.1* -- Form of Underwriting Agreement
3.1 -- Certificate of Incorporation of Vision Energy, Inc.
3.2 -- Bylaws of Vision Energy, Inc.
3.3* -- Form of Certificate of Designation of Rights and
Preferences of Redeemable Preferred Stock of Vision
Energy, Inc.
4.1* -- Specimen Common Stock certificate
4.2* -- Specimen Redeemable Preferred Stock certificate
5.1* -- Opinion of Gardere Wynne Sewell & Riggs, L.L.P.
8.1* -- Tax Opinion of Arthur Andersen LLP
10.1* -- Form of Asset Transfer and Separation Agreement among
Seitel, Inc., Vision Holdings LLC and Vision Energy, Inc.
10.2* -- Form of Sublease among Seitel, Inc., Seitel Gas & Energy,
Inc., Seitel Management, Inc. and Vision Energy, Inc.
10.3* -- Form of Registration Rights Agreement among Seitel, Inc.,
Vision Holdings LLC and Vision Energy, Inc.
10.4* -- Form of Tax Indemnity Agreement between Seitel, Inc. and
Vision Energy, Inc.
10.5* -- Form of Employee Benefits Allocation Agreement between
Seitel, Inc. and Vision Energy, Inc.
10.6* -- Form of Administrative and Services Agreement between
Seitel, Inc. and Vision Energy, Inc.
10.7* -- Form of Employment Agreement between Vision Energy, Inc.
and Horace A. Calvert
10.8* -- Form of Employment Agreement between Vision Energy, Inc.
and Marshall L. Munsell
10.9* -- Form of Employment Agreement between Vision Energy, Inc.
and Thomas A. Mazza
10.10* -- Form of Vision Energy 1999 Stock Incentive Plan
10.11* -- Form of Indemnification Agreement between Vision Energy,
Inc. and each director of Vision Energy, Inc.
10.12* -- Form of Warrant issued by Vision Energy, Inc. to the
executive officers of Vision Energy, Inc.
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Forrest A. Garb & Associates, Inc.
23.3 -- Consent of Miller & Lents, Ltd.
23.4* -- Consent of Gardere Wynne Sewell & Riggs, L.L.P.
(contained in Exhibit 5.1)
24.1 -- Power of Attorney (included on signature page to this
Registration Statement)
27.1 -- Financial Data Schedule
99.1 -- Consent of Jerry S. Cox to act as director
99.2 -- Consent of Fred S. Ziedman to act as director
99.3 -- Consent of Robert B. Sale, Jr. to act as director
</TABLE>

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

* To be filed by amendment.

<PAGE> 1
EXHIBIT 3.1

CERTIFICATE OF INCORPORATION

VISION ENERGY, INC.

I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware ("DGCL"),
do execute this Certificate of Incorporation and do hereby certify as follows:

ARTICLE I
NAME

The name of the corporation (the "Corporation") is Vision Energy, Inc.

ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT

The registered office of the Corporation in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.

ARTICLE III
CORPORATE PURPOSES

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the DGCL.

ARTICLE IV
CAPITAL STOCK

The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 100,000,000 shares, divided into
80,000,000 of common stock having a par value of $0.01 per share and 20,000,000
of preferred stock having a par value of $0.01 per share.

The Board of Directors is authorized, subject to limitations prescribed
by DGCL and the provisions of this Article IV, to provide for the issuance of
the shares of preferred stock in one or

<PAGE> 2

more series, and by filing a certificate pursuant to DGCL, to establish from
time to time the number of shares to be included in each such series, and to fix
the designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof, and to
increase or decrease the number of shares of any such series (but not below the
number of shares of such series then outstanding). The number of authorized
shares of preferred stock may also be increased or decreased (but not below the
number of shares of such series then outstanding) by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote, unless a
vote of any other holders is required pursuant to a certificate or certificates
establishing a series of preferred stock.

Except as otherwise expressly provided in a certificate designating any
series of preferred stock pursuant to the foregoing provisions of this Article
IV, any new series of preferred stock may be designated, fixed and determined as
provided herein by the Board of Directors without approval of the holders of
common stock or the holders of preferred stock, or any series thereof, and any
such new series may have powers, preferences and rights, including, without
limitation, voting rights, dividend rights, liquidation rights, redemption
rights and conversion rights, senior to, junior to or pari passu with the rights
of the common stock, the preferred stock, or any future class or series of
preferred stock or common stock.

ARTICLE V
DIRECTORS

The number of directors of the Corporation shall be determined in the
manner provided by the By-Laws and may be increased or decreased from time to
time in the manner provided therein. Election of directors need not be by
written ballots unless the By-Laws of the Corporation shall so require.

ARTICLE VI
CORPORATE EXISTENCE

The Corporation shall have perpetual existence.

ARTICLE VII
BY-LAWS AMENDMENTS

In furtherance and not in limitation of the powers conferred by DGCL,
the Board of Directors is expressly authorized to adopt, alter, amend or repeal
the By-Laws of the Corporation or to adopt new By-Laws.

2
<PAGE> 3

ARTICLE VIII
PREEMPTIVE RIGHTS

Preemptive rights shall not exist with respect to shares of stock or
securities convertible into shares of stock of the Corporation.

ARTICLE IX
CUMULATIVE VOTING

The right to cumulate votes in the election of directors shall not
exist with respect to shares of the Corporation.

ARTICLE X
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS

A. Any person who was or is a party or is threatened to be made a party
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 the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent
(including trustee) of another corporation, partnership, joint venture, trust or
other enterprise, shall be indemnified by the Corporation (funds paid or
required to be paid to any person as a result of the provisions of this Article
shall be returned to the Corporation or reduced, as the case may be, to the
extent that such person receives funds pursuant to an indemnification from any
such other corporation or organization) against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Any such person who could be indemnified pursuant to the preceding
sentence except for the fact that the subject action or suit is or was by or in
the right of the Corporation shall be indemnified by the Corporation against
expenses (including attorneys' fees) actually or reasonably incurred by him in
connection with the defense or settlement of such action or suit, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery of the State of Delaware or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

3
<PAGE> 4

B. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph A of this Article X, or in
defense of any claim, issue or matter therein, he shall be indemnified by the
Corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith without the necessity of any action
being taken by the Corporation other than the determination, in good faith, that
such defense has been successful. In all other cases wherein such
indemnification is provided by this Article, unless ordered by a court,
indemnification shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, or agent is proper in the circumstances because he has met the
applicable standard of conduct specified in this Article. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the holders of a majority of the shares of capital stock of
the Corporation entitled to vote thereon.

C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. Entry of a judgment by consent as part of
a settlement shall not be deemed a final adjudication of liability for
negligence or misconduct in the performance of duty, nor of any other issue or
matter.

D. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by the director, officer, employee
or agent involved to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation.

E. The indemnification hereby provided shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any By-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.

F. By action of the Board of Directors, notwithstanding any interest of
the directors in the action, the Corporation may purchase and maintain
insurance, in such amounts as the Board of Directors deems appropriate, on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent (including trustee) of another corporation,
partnership, joint venture, trust or other

4
<PAGE> 5

enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation shall have the power to indemnify him against such liability under
the provisions of this Article.

ARTICLE XI
LIMITED DIRECTOR LIABILITY

To the fullest extent that DGCL, as it exists on the date hereof or may
hereafter be amended, permits the limitation or elimination of the liability of
directors, a director of the Corporation shall not be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director. Any amendment, modification or repeal of this Article IX
shall not eliminate, reduce or otherwise adversely affect any limitation of
personal liability of a director of the Corporation with respect to any acts or
omissions of the director occurring prior to such amendment, modification or
repeal.

ARTICLE XII
INITIAL DIRECTORS

The names and mailing addresses of the initial directors are:

<TABLE>
<CAPTION>
Name Mailing Address
- ---- ---------------
<S> <C>
Horace A. Calvert 50 Briar Hollow Lane
7th Floor, West Building
Houston, TX 77027

Marshall L. Munsell 50 Briar Hollow Lane
7th Floor, West Building
Houston, TX 77027

Thomas A. Mazza 50 Briar Hollow Lane
7th Floor, West Building
Houston, TX 77027
</TABLE>

ARTICLE XIII
AMENDMENTS TO CERTIFICATE OF INCORPORATION

The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation, and other provisions authorized by DGCL at the time in force may
be added or inserted, in the manner now or hereafter prescribed

5
<PAGE> 6

by DGCL; and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this Article
XIII.

ARTICLE XIV
INCORPORATOR

The powers of the incorporator will terminate upon the filing of this
Certificate. The name and mailing address of the incorporator is as follows:

<TABLE>
<CAPTION>
Name Mailing Address
- ---- ---------------
<S> <C>
James C. Webster Gardere Wynne Sewell & Riggs, L.L.P.
1000 Louisiana, Suite 3400
Houston, Texas 77002
</TABLE>

The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is his act and deed on this 8th day of November,
1999.

/s/ JAMES C. WEBSTER
----------------------------------------
JAMES C. WEBSTER

<PAGE> 1
EXHIBIT 3.2

BY-LAWS

VISION ENERGY, INC.

(A DELAWARE CORPORATION)

EFFECTIVE: NOVEMBER 9, 1999

<PAGE> 2

<TABLE>
<S> <C>
ARTICLE I
OFFICES

Section 1. Registered Office......................................................................1
Section 2. Other Offices..........................................................................1

ARTICLE II
MEETINGS OF STOCKHOLDERS

Section 1. Time and Place of Meetings.............................................................1
Section 2. Annual Meetings........................................................................1
Section 3. Notice of Annual Meetings..............................................................1
Section 4. Special Meetings.......................................................................1
Section 5. Notice of Special Meetings.............................................................1
Section 6. Quorum.................................................................................1
Section 7. Order of Business......................................................................2
Section 8. New Business...........................................................................2
Section 9. Voting.................................................................................3
Section 10. List of Stockholders...................................................................3
Section 11. Inspectors of Votes....................................................................3
Section 12. Actions Without a Meeting..............................................................4

ARTICLE III
BOARD OF DIRECTORS

Section 1. Powers.................................................................................4
Section 2. Number, Tenure, and Qualification......................................................4
Section 3. Classification.........................................................................4
Section 4. Nominations............................................................................5
Section 5. Removal................................................................................6
Section 6. Resignations...........................................................................6
Section 7. Vacancies..............................................................................6
Section 8. Chairman of the Board..................................................................6
Section 9. Time and Place of Meetings.............................................................7
Section 10. Annual Meetings........................................................................7
Section 11. Regular Meetings--Notice...............................................................7
Section 12. Special Meetings--Notice...............................................................7
Section 13. Quorum and Manner of Acting............................................................7
Section 14. Remuneration...........................................................................7
Section 15. Executive Committee; How Constituted and Powers........................................8
Section 16. Organization...........................................................................8
Section 17. Meetings...............................................................................8
Section 18. Other Committees.......................................................................8
Section 19. Minutes of Committees..................................................................9
Section 20. Alternate Members of Committees........................................................9
Section 21. Actions Without a Meeting..............................................................9
Section 22. Presence at Meetings by Means of Communications Equipment..............................9
</TABLE>

<PAGE> 3

<TABLE>
<S> <C>
ARTICLE IV
NOTICES

Section 1. Type of Notice.........................................................................9
Section 2. Waiver of Notice.......................................................................9
Section 3. Authorized Notices....................................................................10

ARTICLE V
OFFICERS

Section 1. Description...........................................................................10
Section 2. Election..............................................................................10
Section 3. Salaries..............................................................................10
Section 4. Term..................................................................................10
Section 5. Chief Executive Officer...............................................................10
Section 6. President.............................................................................11
Section 7. Chief Operating Officer...............................................................11
Section 8. Vice Presidents.......................................................................11
Section 9. Chief Financial Officer...............................................................11
Section 10. Secretary and Assistant Secretaries...................................................11
Section 11. Treasurer and Assistant Treasurers....................................................12
Section 12. Controller and Assistant Controllers..................................................12

ARTICLE VI
CERTIFICATES REPRESENTING STOCK

Section 1. Right to Certificate..................................................................13
Section 2. Facsimile Signatures..................................................................13
Section 3. New Certificates......................................................................13
Section 4. Transfers.............................................................................13
Section 5. Record Date...........................................................................13
Section 6. Registered Stockholders...............................................................14

ARTICLE VII
GENERAL PROVISIONS

Section 1. Dividends.............................................................................14
Section 2. Reserves..............................................................................14
Section 3. Checks................................................................................14
Section 4. Fiscal Year...........................................................................14
Section 5. Corporate Seal........................................................................14
Section 6. Certificate of Incorporation..........................................................14

ARTICLE VIII
AMENDMENTS

Section 1. Amendments to By-Laws.................................................................14
</TABLE>

<PAGE> 4

ARTICLE I

OFFICES

Section 1. Registered Office. The registered office of Vision Energy,
Inc. (the "Corporation") required by the General Corporation Law of the State of
Delaware to be maintained in the State of Delaware, shall be the registered
office named in the Certificate of Incorporation of the Corporation, or such
other office as may be designated from time to time by the Board of Directors in
the manner provided by law.

Section 2. Other Offices. The Corporation may also have offices at such
other place or places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine or the business of the
Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. Time and Place of Meetings. All meetings of the stockholders
shall be held at such time and place, either within or without the State of
Delaware, as the Board of Directors shall designate and as shall be stated in
the notice of the meeting.

Section 2. Annual Meetings. Annual meetings of the stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors of the Corporation and stated in the notice of the
meeting. At the annual meeting, the stockholders shall elect a Board of
Directors and transact such other business as may properly be brought before the
meeting.

Section 3. Notice of Annual Meetings. Written notice of the annual
meeting, stating the place, date and hour of the meeting, shall be given to each
stockholder of record entitled to vote at such meeting not less than 10 nor more
than 60 days before the date of the meeting.

Section 4. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by the Chief Executive
Officer, or by order of the Board of Directors, and shall be called by the
Chairman of the Board, the Chief Executive Officer, or the Secretary at the
request in writing of a majority of the Board of Directors. Such request shall
state the purpose or purposes of the proposed special meeting. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.

Section 5. Notice of Special Meetings. Written notice of a special
meeting, stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given to each stockholder of
record entitled to vote at such meeting not less than 10 nor more than 60 days
before the date of the meeting.

Section 6. Quorum. The holders of stock having a majority of the voting
power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the

1
<PAGE> 5

transaction of business at all meetings of the stockholders. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time without notice
(other than announcement at the meeting at which the adjournment is taken of the
time and place of the adjourned meeting) until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified. If the adjournment is for more than 30 days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.

Section 7. Order of Business. The order of business at annual meetings
of stockholders and, so far as practicable, at other meetings of stockholders
shall be determined by the Chief Executive Officer.

Section 8. New Business.

(a) At an annual meeting of stockholders, only such new business
shall be conducted, and only such proposals shall be acted upon, as shall have
been properly brought before the annual meeting. For any new business proposed
by the Board of Directors to be properly brought before the annual meeting, such
new business shall be approved by the Board of Directors and shall be stated in
writing and filed with the Secretary of the Corporation at least five days
before the date of the annual meeting, and all business so approved, stated and
filed shall be considered at the annual meeting. Any stockholder may make any
other proposal at the annual meeting, but unless properly brought before the
annual meeting such proposal shall not be acted upon at the annual meeting. For
a proposal to be properly brought before an annual meeting by a stockholder, the
stockholder must have given proper and timely notice thereof in writing to the
Secretary of the Corporation as specified herein. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than the date that corresponds to 120 days
prior to the date the Corporation's proxy statement was released to stockholders
in connection with the previous year's annual meeting of stockholders, or, with
respect to a proposal at the first annual meeting after the Corporation's
incorporation, not later than the 30th day of each December of the year prior to
the year in which such first annual meeting is to be held. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a description of the proposal
desired to be brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and address, as they appear
on the Corporation's books, of the stockholder proposing such business and any
other stockholders known by such stockholder to be supporting such proposal,
(iii) the class and number of shares of the stock that are held of record,
beneficially owned, and represented by proxy on the date of such stockholder
notice and on the record date of the meeting (if such date shall have been made
publicly available) by the stockholder and by any other stockholders known by
such stockholder to be supporting such proposal on such dates, (iv) any
financial interest of the stockholder in such proposal, and (v) all other
information that would be required to be filed with the Securities and Exchange
Commission if, with respect to any such item of business, such stockholder or
stockholders were a participant in a solicitation subject to Section 14 of the
Securities Exchange Act of 1934, as amended.

(b) The Board of Directors may reject any stockholder proposal not
made strictly in accordance with the terms of this Section 8. Alternatively, if
the Board of Directors fails to consider the validity of any stockholder
proposal, the presiding officer of the annual meeting shall, if the facts
warrant, determine and declare at the annual meeting that the stockholder
proposal was not made in strict accordance with the terms of this Section 8 and,
if he should so determine, he shall so declare at the annual meeting and

2
<PAGE> 6

any such business or proposal not properly brought before the annual meeting
shall not be acted upon at the annual meeting. This provision shall not prevent
the consideration and approval or disapproval at the annual meeting of reports
of officers, directors, and committees of the Board of Directors, but, in
connection with such reports, no new business shall be acted upon at such annual
meeting unless stated, filed, and received as herein provided.

Section 9. Voting. Except as otherwise provided in the Certificate of
Incorporation, each stockholder shall, on each matter submitted to a vote at
each meeting of the stockholders, be entitled to one vote in person or by proxy
for each share of stock of the Corporation held by him and registered in his
name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 5 of Article VI of these By-Laws as the record date for
the determination of stockholders who shall be entitled to notice of and to vote
at such meeting. Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held directly or indirectly
by the Corporation, shall not be entitled to vote. Any vote by stock of the
Corporation may be given at any meeting of stockholders by the stockholder
entitled thereto, in person or by his proxy appointed by an instrument in
writing subscribed by such stockholder or by his attorney thereunto duly
authorized and delivered to the Secretary of the Corporation or to the secretary
of the meeting; provided, however, that no proxy shall be voted or acted upon
after three years from its date, unless said proxy shall provide for a longer
period. Each proxy shall be revocable unless expressly provided therein to be
irrevocable and unless otherwise made irrevocable by law. At all meetings of the
stockholders, all matters, except where other provision is made by law, the
Certificate of Incorporation, or these By-Laws, shall be decided by the vote of
a majority of the votes cast by the stockholders present in person or by proxy
and entitled to vote thereat, a quorum being present. Unless demanded by a
stockholder of the Corporation present in person or by proxy at any meeting of
the stockholders and entitled to vote thereat, or so directed by the presiding
officer of the meeting, the vote thereat on any question other than the election
or removal of directors need not be by written ballot. Upon a demand of any such
stockholder for a vote by written ballot on any question or at the direction of
such presiding officer that a vote by written ballot be taken on any question,
such vote shall be taken by written ballot. On a vote by written ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number of shares voted.

Section 10. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of its stock ledger,
either directly or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board of Directors, to prepare and
make, at least ten days before every meeting of the stockholders, a complete
list of the stockholders entitled to vote thereat, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days before said meeting,
either at a place within the city where said meeting is to be held, which place
shall be specified in the notice of said meeting, or, if not so specified, at
the place where said meeting is to be held. The list shall also be produced and
kept at the time and place of said meeting during the whole time thereof, and
may be inspected by any stockholder of record who shall be present thereat. The
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine the stock ledger, such list or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders.

Section 11. Inspectors of Votes. The presiding officer of the meeting
may appoint two inspectors of votes to act at each meeting of the stockholders,
unless the Board of Directors shall have theretofore made such appointments.
Each inspector of votes shall first subscribe an oath or affirmation faithfully
to execute

3
<PAGE> 7

the duties of an inspector of votes at the meeting with strict impartiality and
according to the best of his ability. Such inspectors of votes, if any, shall
take charge of the ballots, if any, at the meeting, and after the balloting on
any question, shall count the ballots cast and shall make a report in writing to
the secretary of the meeting of the results of the balloting. An inspector of
votes need not be a stockholder of the Corporation, and any officer of the
Corporation may be an inspector of votes on any question other than a vote for
or against his election to any position with the Corporation or on any other
question in which he may be directly interested.

Section 12. Actions Without a Meeting. All actions of the stockholders
of the Corporation must be taken at an annual or special meeting of stockholders
duly called by or under the authority of the Chief Executive Officer or the
Board of Directors of the Corporation and may not be taken by a consent or
consents in writing; provided, however, that, unless otherwise limited by the
Delaware General Corporation Law or the Certificate of Incorporation, if at any
time the Corporation has ten or less stockholders, any action required to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of the
taking of any corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors, which shall have and may exercise all powers
of the Corporation and take all lawful acts as are not by statute, the
Certificate of Incorporation, or these By-Laws directed or required to be
exercised or taken by the stockholders.

Section 2. Number, Tenure, and Qualification. The number of directors
shall be fixed from time to time exclusively pursuant to a resolution adopted by
the affirmative vote of two-thirds or more of the whole Board of Directors;
provided that upon the removal or resignation of any director or directors such
that the number of remaining directors is less than five, a majority of the
directors then remaining in office, though less than a quorum, or a sole
remaining director may decrease the number of directors constituting the whole
Board of Directors. The number of directors which shall constitute the whole
Board of Directors shall not be less than one. Directors need not be
stockholders. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 7 of this Article III, and each
director elected shall hold office until his successor is duly elected and
qualified, or until his death or retirement or until he resigns or is removed in
the manner hereinafter provided. Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy and entitled
to vote on the election of directors at any annual or special meeting of
stockholders. Such election shall be by written ballot. This Section 2 may only
be amended by the affirmative vote of two-thirds or more of the whole Board of
Directors or otherwise in accordance with the Certificate of Incorporation.

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Section 3. Classification. The directors, other than those who may be
elected by the holders of any class or series of stock having a preference over
Common Stock as to dividends or upon liquidation, shall be divided, with respect
to the time during which they shall hold office, into three classes, Class I,
Class II and Class III. The number of directors in each class shall be as nearly
equal in number as possible. Each initial director in Class I shall be elected
to a term expiring at the first annual stockholders meeting following his
election, each initial director in Class II shall be elected to a term expiring
at the second annual stockholders meeting following his election, and each
director in Class III shall be elected to an initial term expiring at the third
annual stockholders meeting following his election. After the initial terms of
the initial directors of a class of directors, each director of such class shall
be elected for a term expiring on the third annual stockholders meeting
following the annual stockholders meeting at which such director is elected and
until their successors are duly elected and qualified. Any director elected to
fill a vacancy or newly created directorship shall serve until the next election
of the class for which such director has been elected. In the event of a
resignation or other decrease in the number of directors, the Board of Directors
may reassign the remaining directors to classes so that all classes of directors
shall be as nearly equal in number as possible.

Section 4. Nominations.

(a) If a person is to be elected to the Board of Directors because
of a vacancy existing on the Board, nomination shall be made only by the Board
of Directors or by a nominating committee of the Board of Directors (the Board
of Directors as a whole or such committee of the Board being referred to herein
as the "nominating committee") pursuant to the affirmative vote of the majority
of the entire membership of the nominating committee. The nominating committee
shall also make nominations for the directors to be elected by the stockholders
of the Corporation at an annual meeting of the stockholders as provided in this
section.

(b) Only persons nominated in accordance with the procedures set
forth in this Section 4 shall be eligible for election as directors at an annual
meeting. The nominating committee shall select the nominees for election as
directors. Except in the case of a nominee substituted as a result of the death,
incapacity, disqualification, or other inability to serve as a nominee, the
nominating committee shall deliver written nominations to the Secretary at least
30 days prior to the date of the annual meeting. Nominees substituted as a
result of the death, incapacity, disqualification, or other inability to serve
as a nominee shall be delivered to the Secretary as promptly as practicable.
Provided the nominating committee selects the nominees, no nominees for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by stockholders are made in
accordance with the provisions of this Section 4. Ballots bearing the names of
all the persons nominated for election as directors at an annual meeting in
accordance with the procedures set forth in this Section 4 by the nominating
committee and by stockholders shall be provided for use at the annual meeting.
However, except in the case of a nominee substituted as a result of the death,
incapacity, disqualification, or other inability to serve as a nominee, if the
nominating committee shall fail or refuse to nominate a slate of directors at
least 30 days prior to the date of the annual meeting, nominations for directors
may be made at the annual meeting by any stockholder entitled to vote and shall
be voted upon. No person shall be elected as a director of the Corporation
unless nominated in accordance with the terms set forth in this Section 4.

(c) Nominations of individuals for election to the Board of
Directors of the Corporation at a special or annual meeting of stockholders may
be made by any stockholder of the Corporation entitled to vote for the election
of directors at that meeting who complies with the procedures set forth in this
Section 4. To be timely with respect to elections to be held at a special
meeting of stockholders or at the first

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annual meeting of stockholders after incorporation of the Corporation, a
stockholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the earlier of (i) the day on which such
notice of the date of the special meeting or first annual meeting was mailed or
(ii) the day on which public disclosure of the date of such meeting was made. To
be timely with respect to elections to be held at annual meetings of
stockholders after the first annual meeting, a stockholder's notice shall be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than 90 days prior nor more than 120 days prior to the date
the Corporation's proxy statement was released to stockholders in connection
with the previous year's annual meeting of stockholders. Such stockholder's
notice shall set forth (x) as to each person whom the stockholder proposes to
nominate for election or re-election as a director (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the classes and number of shares of capital stock
of the Corporation that are owned of record and beneficially owned by such
person on the date of such stockholder notice and (D) any other information
relating to such person that is required to be disclosed in solicitations of
proxies with respect to nominees for election as directors pursuant to Section
14 under the Securities Exchange Act of 1934, as amended; and (y) as to the
stockholder giving the notice (A) the name and address, as they appear on the
Corporation's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such nominees, and (B) the classes and number
of shares of capital stock of the Corporation that are owned of record and
beneficially owned by such stockholder on the date of such stockholder notice
and by any other stockholders known by such stockholder to be supporting such
nominees on the date of such stockholder notice.

(d) The Board of Directors may reject any nomination by a
stockholder not made in strict accordance with the terms of this Section 4.
Alternatively, if the Board of Directors fails to consider the validity of any
nominations by a stockholder, the presiding officer of the annual meeting shall,
if the facts warrant, determine and declare at the annual meeting that a
nomination was not made in strict accordance with the terms of this Section 4,
and, if he should so determine, he shall so declare at the annual meeting and
the defective nomination shall be disregarded.

Section 5. Removal. Any director may be removed, with cause, at any
time, by the affirmative vote by written ballot of 80% of the voting interest of
the stockholders of record of the Corporation entitled to vote, given at an
annual meeting or at a special meeting of the stockholders called for that
purpose. The vacancy in the Board of Directors caused by any such removal shall
be filled by the Board of Directors as provided in Section 7 of this Article
III.

Section 6. Resignations. Any director may resign at any time by giving
written notice of his resignation to the Corporation, effective at the time
specified therein or, if not specified, immediately upon its receipt by the
Corporation. Unless otherwise specified in the notice, acceptance of a
resignation shall not be necessary to make it effective.

Section 7. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
only by a majority of the directors then in office though less than a quorum or
by a sole remaining director. Directors so chosen shall hold office until their
successors are elected and qualified, unless sooner displaced by death,
resignation, or removal. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.

Section 8. Chairman of the Board. The Board of Directors may elect a
Chairman of the Board, who shall be a director but need not otherwise be an
officer of the Corporation. Except as otherwise

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provided in these By-Laws, the Chairman of the Board, if any, shall preside,
when present, at all meetings of stockholders and at all meetings of the Board
of Directors and shall see that all orders and resolutions of the stockholders
and the Board of Directors are carried into effect. The Chairman of the Board
shall advise and counsel the President and other officers of the Corporation and
shall exercise such other powers and perform such other duties as designated in
these By-Laws and as from time to time may be assigned to him by the Board of
Directors.

MEETINGS OF THE BOARD OF DIRECTORS

Section 9. Time and Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, at such time and places
as it determines.

Section 10. Annual Meetings. Except as otherwise determined by the
Board of Directors, the first meeting of each newly elected Board shall be held
immediately following the annual meeting of stockholders at which the Board, or
any class thereof, is elected and at the same place as such meeting, and no
notice of such meeting to the newly elected directors shall be necessary in
order legally to constitute the meeting, provided a quorum shall be present. If
such meeting is not held immediately following the annual meeting of
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.

Section 11. Regular Meetings--Notice. Regular meetings of the Board of
Directors may be held without notice.

Section 12. Special Meetings--Notice. Special meetings of the Board of
Directors may be called by the Chairman of the Board, Chief Executive Officer,
or two directors on 24 hours' notice to each director, either personally or by
telephone or by mail, telegraph, telex, cable, wireless, or other form of
recorded communication; special meetings shall be called by the Secretary in
like manner and on like notice on the written request of the Chairman of the
Board, Chief Executive Officer, or two directors. Notice of any such meeting
need not be given to any director, however, if waived by him in writing or by
telegraph, telex, cable, wireless, or other form of recorded communication, or
if he shall be present at the meeting.

Section 13. Quorum and Manner of Acting. At all meetings of the Board
of Directors, 50% of the directors at the time in office (but not less than
one-third of the total number of directors constituting the whole Board of
Directors pursuant to Section 2 of this Article III) shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as may be otherwise specifically provided by statute,
by the Certificate of Incorporation, or these By-Laws. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.

Section 14. Remuneration. As expressly provided by resolution adopted
by the Board of Directors, the directors may, as such, receive remuneration for
their services; and the Board of Directors may at any time and from time to time
by resolution provide that a specified sum shall be paid to any director of the
Corporation, either as his annual remuneration as such director or member of any
committee of the Board of Directors or as remuneration for his attendance at
each meeting of the Board of Directors or any such

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committee. The Board of Directors may also likewise provide that the Corporation
shall reimburse each director for any expenses paid by him on account of his
attendance at any meeting. Nothing in this Section 14 shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving remuneration therefor.

COMMITTEES OF DIRECTORS

Section 15. Executive Committee; How Constituted and Powers. The Board
of Directors may in its discretion, by resolution passed by a majority of the
whole Board of Directors, designate an Executive Committee consisting of one or
more of the directors of the Corporation. Subject to the provisions of Section
141 of the General Corporation Law of the State of Delaware, the Certificate of
Incorporation, and these By-Laws, the Executive Committee shall have and may
exercise, when the Board of Directors is not in session, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it; but the
Executive Committee shall not have the power or authority to (a) authorize the
issuance of capital stock or grant and authorize options or other rights with
respect to such issuance, (b) declare a dividend, or (c) fill vacancies in the
Board of Directors, the Executive Committee, or any other committee of directors
or to elect or approve officers of the Corporation. The Board of Directors shall
have the power at any time, by resolution passed by a majority of the whole
Board of Directors, to change the membership of the Executive Committee, to fill
all vacancies in it, or to dissolve it, either with or without cause.

Section 16. Organization. The Chairman of the Executive Committee, to
be selected by the Board of Directors, shall act as chairman at all meetings of
the Executive Committee and the Secretary shall act as Secretary thereof. In
case of the absence from any meeting of the Executive Committee of the Chairman
of the Executive Committee or the Secretary, the Executive Committee may appoint
a chairman or secretary, as the case may be, of the meeting.

Section 17. Meetings. Regular meetings of the Executive Committee, of
which no notice shall be necessary, may be held on such days and at such places,
within or without the State of Delaware, as shall be fixed by resolution adopted
by a majority of the Executive Committee and communicated in writing to all its
members. Special meetings of the Executive Committee shall be held whenever
called by the Chairman of the Executive Committee or a majority of the members
of the Executive Committee then in office. Notice of each special meeting of the
Executive Committee shall be given by mail, telegraph, telex, cable, wireless,
or other form of recorded communication or be delivered personally or by
telephone to each member of the Executive Committee not later than the day
before the day on which such meeting is to be held. Notice of any such meeting
need not be given to any member of the Executive Committee, however, if waived
by him in writing or by telegraph, telex, cable, wireless, or other form of
recorded communication, or if he shall be present at such meeting; and any
meeting of the Executive Committee shall be a legal meeting without any notice
thereof having been given, if all the members of the Executive Committee shall
be present thereat. Subject to the provisions of this Article III, the Executive
Committee, by resolution adopted by a majority of the whole Executive Committee,
shall fix its own rules of procedure.

Section 18. Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more other committees,
each committee to consist of one or more of the directors of the Corporation.
Any committee, to the extent provided in the resolution of the Board of

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Directors and not prohibited by law, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers that may require it. At any meeting of a committee, a
majority of the members of the committee shall constitute a quorum for the
transaction of business, and the act of a majority of the members present at any
meeting at which a quorum is present shall be the act of the committee.

Section 19. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.

Section 20. Alternate Members of Committees. The Board of Directors may
designate one or more directors as alternate members of the Executive Committee
or any other committee, who may replace any absent or disqualified member at any
meeting of the committee, or if none be so appointed, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.

GENERAL

Section 21. Actions Without a Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee.

Section 22. Presence at Meetings by Means of Communications Equipment.
Members of the Board of Directors, or of any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear one another.
Participation in a meeting conducted pursuant to this Section 22 shall
constitute presence in person at the meeting.

ARTICLE IV

NOTICES

Section 1. Type of Notice. Whenever, under the provisions of any
applicable statute, the Certificate of Incorporation, or these By-Laws, notice
is required to be given to any director or stockholder, the requirement shall
not be construed to mean personal notice, but such notice may be given in
writing, in person, or by mail, addressed to such director or stockholder at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when it shall
be deposited in the United States mail. Notice to directors may also be given in
any manner permitted by Article III hereof and shall be deemed to be given at
the time when first transmitted by the method of communication so permitted.

Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of any applicable statute, the Certificate of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall

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be deemed equivalent thereto, and transmission of a waiver of notice by a
director or stockholder by mail, telegraph, telex, cable, wireless, or other
form of recorded communication may constitute such a waiver.

Section 3. Authorized Notices. Unless otherwise specified herein, the
Secretary or such other person or persons as the Chief Executive Officer
designates shall be authorized to give notices for the Corporation.

ARTICLE V

OFFICERS

Section 1. Description. The elected officers of the Corporation shall
be a President, one or more Vice Presidents, with or without such descriptive
titles as the Board of Directors shall deem appropriate, a Secretary, a
Treasurer, and a Controller, and, as provided in Article III, a Chairman of the
Board. The Board of Directors by resolution shall also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers, and such
other officers and agents as from time to time may appear to be necessary or
advisable in the conduct of the affairs of the Corporation. Any two or more
offices may be held by the same person.

Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect and appoint the officers to fill
the positions designated in Section 1 of this Article V.

Section 3. Salaries. The Board of Directors shall fix all salaries of
all elected officers of the Corporation.

Section 4. Term. An officer of the Corporation shall hold office until
he resigns or his successor is chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the whole Board of Directors.
The Board of Directors shall fill any vacancy occurring in any office of the
Corporation by death, resignation, removal, or otherwise. Election or
appointment of an officer or agent shall not of itself create contract rights.

Section 5. Chief Executive Officer. The President shall be the Chief
Executive Officer of the Corporation unless the Board of Directors elects or
appoints the Chairman of the Board, if any, or other officers as Chief Executive
Officer. Subject to the provisions of these By-Laws and the control of the Board
of Directors, the Chief Executive Officer shall have general supervision of the
affairs of the Corporation and shall have general and active executive charge,
management, and control of all the business, operations, and properties of the
Corporation with all such powers as may be reasonably incident to such
responsibilities. In the absence of the Chairman of the Board, if any, he shall
preside, when present, at all meetings of stockholders and, in the absence of
any other person designated thereto by these By-Laws, at all meetings, of the
Board of Directors. He shall see that all orders and resolutions of the
stockholders and the Board of Directors are carried into effect. He shall have
all the powers and authority usually appertaining to the chief executive officer
of a corporation (except as otherwise provided in these By-Laws), as may be
designated in accordance with these By-Laws, and as from time to time may be
assigned to him by the Board of Directors.

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Section 6. President. Unless the Board of Directors otherwise
determines, the President shall have the authority to agree upon and execute all
bonds, evidences of indebtedness, deeds, leases, contracts, and other
obligations in the name of the Corporation and affix the corporate seal thereto;
to sign stock certificates; and to exercise such other powers and duties as may
be designated in accordance with these By-Laws and as from time to time may be
assigned to him by the Board of Directors. The President shall be the Chief
Operating Officer of the Corporation unless a Chief Operating Officer is
otherwise elected.

Section 7. Chief Operating Officer. The Chief Operating Officer shall
have, subject to review and approval of the Chief Executive Officer, if
different from the President, and the President, if different from the Chief
Operating Officer, the responsibility for the operation of the Corporation and
shall exercise such other powers and duties as may be designated in accordance
with these By-Laws and as from time to time may be assigned to him by the Board
of Directors.

Section 8. Vice Presidents. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated by the Board, or in the absence of any designation, in the order of
their election) shall perform the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors, the Chief Executive Officer, or the
President may from time to time prescribe.

Section 9. Chief Financial Officer. Subject to the direction of the
Board of Directors and the President, the Chief Financial Officer shall perform
all duties and have all powers that are commonly incident to that position. He
shall have active control of and responsibility for all matters pertaining to
the financial affairs of the Corporation and its subsidiaries. He shall have the
authority to execute and deliver bonds, deeds, contracts, and stock certificates
of and for the Corporation, and to affix the corporate seal thereto by
handwritten or facsimile signature and all other powers customarily appertaining
to his office, except to the extent otherwise limited or enlarged by the Board
of Directors. He shall report to the Chief Executive Officer and to the
Executive Committee and the Board of Directors of the Corporation at their
request on all financial matters of the Corporation.

Section 10. Secretary and Assistant Secretaries.

(a) The Secretary or an Assistant Secretary shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record all proceedings of the meetings of the stockholders of the Corporation
and of the Board of Directors in a book to be kept for that purpose, and shall
perform like duties for the standing committees when required. The Secretary
shall be under the supervision of the Chief Executive Officer and the President
and shall perform such other duties as may be prescribed by the Chief Executive
Officer or the President. The Secretary shall have charge of the seal of the
Corporation and have authority to affix the seal to any instrument requiring it.
When so affixed, the seal shall be attested by the signature of the Secretary or
Treasurer or an Assistant Secretary or Assistant Treasurer, which may be a
facsimile. The Secretary shall keep and account for all books, documents, papers
and records of the Corporation except those for which some other officer or
agent is properly accountable. The Secretary shall have authority to sign stock
certificates and shall generally perform all the duties usually appertaining to
the office of the Secretary of a corporation.

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(b) Assistant Secretaries shall assist the Secretary, and in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the Board of Directors, Chief Executive Officer, or President
may from time to time prescribe.

Section 11. Treasurer and Assistant Treasurers.

(a) The Treasurer shall perform all the duties customary to that
office, and shall have the responsibility for and custody over all funds and
securities of the Corporation. He shall make such disbursements of the funds of
the Corporation as are authorized and shall render from time to time an account
of all such transactions. He shall have the authority to endorse for deposit or
collection, or otherwise, all commercial paper payable to the Corporation, and
to give proper receipts or discharges for all payments to the Corporation. He
shall be responsible for all terms of credit granted by the Corporation and for
the collection of all its accounts. He shall have the authority to execute and
deliver bonds, deeds, contracts, and stock certificates of and for the
Corporation, and to affix the corporate seal thereto by handwritten or facsimile
signature and all other powers customarily appertaining to his office, except to
the extent otherwise limited or enlarged. The Treasurer shall be under the
supervision of the Chief Financial Officer and he shall perform such other
duties as may be prescribed to him by the Chief Financial Officer.

(b) Assistant Treasurers shall assist the Treasurer and, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer.

Section 12. Controller and Assistant Controllers.

(a) The Controller shall be the Chief Accounting Officer of the
Corporation. He shall be responsible for all matters pertaining to the accounts
of the Corporation, its subsidiaries and divisions, with the supervision of the
books of account, their installation, arrangement, and classification. The
Controller shall maintain adequate records of all assets, liabilities, and
transactions; see that an adequate system of internal audit thereof is regularly
maintained; coordinate the efforts of the Corporation's independent public
accountants in its external audit program; receive, review, and consolidate all
operating and financial statements of the Corporation and its various
departments and subsidiaries; and prepare financial statements, reports, and
analyses. The Controller shall have supervision of the accounting practices of
the Corporation and of each subsidiary and division of the Corporation and shall
prescribe the duties and powers of the accounting personnel of the subsidiaries
and divisions. The Controller shall cause to be maintained an adequate system of
financial control through a program of budgets, financial planning, and
interpretive reports. The Controller shall initiate and enforce accounting
measures and procedures whereby the business of the Corporation and its
subsidiaries and divisions shall be conducted with the maximum efficiency and
economy. The Controller shall have all other powers customarily appertaining to
the office of controller, except to the extent otherwise limited or enlarged.
The Controller shall be under the supervision of the Chief Financial Officer.

(b) The Assistant Controllers shall assist the Controller, and if
the Controller is unavailable, perform the duties and exercise the powers of the
Controller.

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ARTICLE VI

CERTIFICATES REPRESENTING STOCK

Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a Vice
President and by the Secretary, an Assistant Secretary, the Treasurer, or an
Assistant Treasurer of the Corporation, certifying the number of shares owned by
him in the Corporation. If the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class, the powers,
designations, preferences, and relative, participating, option, or other special
rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences or rights shall be set forth in
full or summarized on the face or back of the certificate that the Corporation
shall issue to represent such class or series of stock; provided, that, except
as otherwise provided in Section 202 of the General Corporation Law of the State
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate that the Corporation shall issue to
represent such class or series of stock a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences, and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences or rights.

Section 2. Facsimile Signatures. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.

Section 3. New Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation and alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen, or destroyed or the issuance of such new certificate.

Section 4. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, it shall be the duty of the Corporation, subject to any proper
restrictions on transfer, to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.

Section 5. Record Date. The Board of Directors may fix, in advance, a
record date for stockholders' meetings or for any other lawful purpose, which
shall be no fewer than 10 nor more than 60 days before the date of the meeting
or other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

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Section 6. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not provided by the laws of
the State of Delaware.

ARTICLE VII

GENERAL PROVISIONS

Section 1. Dividends. Dividends upon the capital stock of the
Corporation, if any, may be declared by the Board of Directors (but not any
committee thereof) at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock or other
securities.

Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
thinks proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.

Section 3. Checks. All checks or demands for money and promissory notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time prescribe.

Section 4. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.

Section 5. Corporate Seal. The Board of Directors may provide for a
corporate seal, which shall have the name of the Corporation inscribed thereon
and shall otherwise be in such form as may be approved from time to time by the
Board of Directors. The corporate seal, if any, may be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or otherwise.

Section 6. Certificate of Incorporation. To the extent of any
inconsistency between these By-Laws and the Certificate of Incorporation of the
Corporation, the terms and provisions of the Certificate of Incorporation shall
control for all purposes.

ARTICLE VIII

AMENDMENTS

Section 1. Amendments to By-Laws. These By-Laws may be altered,
amended, or repealed or new By-Laws adopted only in accordance with the
Certificate of Incorporation of the Corporation and any other requirements
specified in these By-Laws.

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use in this
registration statement of our report dated November 9, 1999 included herein and
to all references to our Firm included in this registration statement.

ARTHUR ANDERSEN LLP

Houston, Texas
November 12, 1999

<PAGE> 1
EXHIBIT 23.2

FORREST A. GARB & ASSOCIATES, INC.

INTERNATIONAL PETROLEUM CONSULTANTS
5310 HARVEST HILL ROAD, SUITE 160 - LB 152
DALLAS, TEXAS 75230-5805
(972) 788-111- Telefax 991-3160
E-Mail: [email protected]

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

We hereby consent to the inclusion of our letter to DDD Energy, Inc. regarding
our estimates of proved reserves, future production, and income attributable to
certain leasehold interests of DDD Energy, Inc. as of January 1, 1999, in this
Registration Statement on Form S-1 (the "Registration Statement") of Vision
Energy, Inc. and to all references to Forrest A. Garb & Associates, Inc. and/or
the reports prepared by Forest A. Garb & Associates, Inc. regarding our
estimates of proved reserves, future production, and income attributable to
certain leasehold interests of DDD Energy, Inc. in this Registration Statement
and to the reference to our firm as experts in this Registration Statement.

/s/ FORREST A. GARB & ASSOCIATES, INC.
--------------------------------------
Forrest A. Garb & Associates, Inc.

November 11, 1999

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

We hereby consent to all references to Miller & Lents, Ltd. and/or the reports
prepared by Miller & Lents, Ltd. regarding our estimates of proved reserves,
future production and income attributable to certain leasehold interests of DDD
Energy, Inc. in this Registration Statement on Form S-1 (the "Registration
Statement") of Vision Energy, Inc. and to the reference to our firm as experts
in this Registration Statement.

Miller and Lents, Ltd. has no interest in Seitel, Inc., or DDD Energy, Inc., or
in any affiliated companies or subsidiaries and is not to receive any such
interest as payment for such reports and has no director, officer, or employee
otherwise connected with Seitel, Inc., or DDD Energy, Inc. We are not employed
by Seitel, Inc., on a contingent basis.

Miller & Lents, Ltd.

By /s/ JAMES A. COLE
James A. Cole
Senior Vice President

November 11, 1999

<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 5,772 4,314
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,114 5,448
<PP&E> 195,934 210,057
<DEPRECIATION> 46,223 50,498
<TOTAL-ASSETS> 156,825 165,007
<CURRENT-LIABILITIES> 12,815 6,276
<BONDS> 122,259 134,716
0 0
0 0
<COMMON> 1 1
<OTHER-SE> (7,209) (8,028)
<TOTAL-LIABILITY-AND-EQUITY> 156,825 165,007
<SALES> 18,994 8,547
<TOTAL-REVENUES> 18,994 8,547
<CGS> 4,683 2,348
<TOTAL-COSTS> 4,683 2,348
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,724 2,912
<INCOME-PRETAX> (5,617) (2,522)
<INCOME-TAX> (1,970) (879)
<INCOME-CONTINUING> (3,647) (1,643)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,647) (1,643)
<EPS-BASIC> (.25) (.11)
<EPS-DILUTED> (.25) (.11)

</TABLE>

<PAGE> 1
EXHIBIT 99.1

November 10, 1999

Vision Energy, Inc.
50 Briar Hollow Lane,
7th Floor West Building
Houston, Texas 77027

Attention: Horace A. Calvert, Chairman of the Board
and Chief Executive Officer

Dear Sirs:

I hereby consent to act as a director of Vision Energy, Inc., a
Delaware corporation, to be elected after consummation of the Company's Initial
Public Offering of its common stock. In addition, I consent to being named in
the Registration Statement relating to that Initial Public Offering as a
director nominee who will be elected after consummation of the offering.

Sincerely,

/s/ JERRY S. COX

Jerry S. Cox

<PAGE> 1

EXHIBIT 99.2

November 10, 1999

Vision Energy, Inc.
50 Briar Hollow Lane,
7th Floor West Building
Houston, Texas 77027

Attention: Horace A. Calvert, Chairman of the Board
and Chief Executive Officer

Dear Sirs:

Sincerely,

/s/ FRED S. ZIEDMAN

Fred S. Ziedman

<PAGE> 1

EXHIBIT 99.3

November 10, 1999

Vision Energy, Inc.
50 Briar Hollow Lane,
7th Floor West Building
Houston, Texas 77027

Attention: Horace A. Calvert, Chairman of the Board
and Chief Executive Officer

Dear Sirs:

Sincerely,

/s/ ROBERT B. SALE, JR.

Robert B. Sale, Jr.