VISION ENERGY INC, S-1/A, 2000-01-14

VISION ENERGY INC
S-1/A, 2000-01-14
CRUDE PETROLEUM & NATURAL GAS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2000

REGISTRATION NO. 333-90869

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

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

AMENDMENT NO. 1

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: [ ]
---------------------

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 JANUARY 14, 2000

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

[VISION ENERGY, INC. 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 $12.00
and $14.00 per share. The market price of the shares after the offering may be
higher or lower than the offering price.

We have applied to include the common stock on the Nasdaq National Market under
the symbol "VNRG."

INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 11.

<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.

SOUTHCOAST CAPITAL L.L.C.

The date of this prospectus is , 2000.
<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................................................ 11
Cautionary Statement About Forward-Looking Statements....... 18
Use of Proceeds............................................. 19
Dividend Policy............................................. 19
Dilution.................................................... 19
Capitalization.............................................. 20
Selected Financial Data..................................... 21
Pro Forma Financial Statements.............................. 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25
Business.................................................... 32
Management.................................................. 45
Arrangements with Seitel.................................... 50
Certain Transactions........................................ 52
Principal and Selling Stockholders.......................... 54
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 59
Underwriting................................................ 60
Legal Matters............................................... 62
Experts..................................................... 62
Where You Can Find More Information......................... 63
Glossary of Natural Gas and Oil Terms....................... 64
Index to Financial Statements............................... F-1
Annex A -- Letter 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 to investors 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 contains an overview of the 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 11, 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 64 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 December 31, 1999, we
participated in the drilling of 208 exploratory wells on prospects generated or
evaluated by our technical staff utilizing our proprietary 3D seismic database.
Of these exploratory wells, 124 have been completed as discoveries, which has
resulted in an overall success rate of 60% versus an industry average of
approximately 33%. During that period, we also participated in 92 development
wells with an overall success rate of 88% versus an industry average of
approximately 84%.

From our inception in 1993 through September 30, 1999, we participated in the
acquisition of over 2,100 square miles of 3D seismic data at a total net cost to
us of approximately $48.0 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 September 30, 1999, our proved reserves totaled 60.2 Bcf of natural gas
and 4,594 MBbls of oil and natural gas liquids, for a total of 87.8 Bcfe.
Approximately 42% of these reserves, on an Mcfe basis, were proved developed
reserves. The PV-10 of our net proved reserves as of September 30, 1999 was
$110.6 million. As of September 30, 1999, we owned interests in approximately
353,000 gross acres (109,000 net). The reserve-to-production ratio for our
reserves at September 30, 1999, using trailing 12 months' production from that
date, was 12 years. For the nine months ended September 30, 1999, our average
daily production was approximately 20.0 MMcfe per day. The reserve-to-production
ratio and average daily production exclude amounts related to property sales
that occurred in July 1999.

OUR STRATEGY

We intend to expand our reserve base, cash flow and net income and to generate
an attractive return on invested capital. We believe that the combination of our
strengths and the following elements in our business strategy will help us
achieve these objectives:

-- Focus on Exploration. As of December 31, 1999, we had an inventory of
over 125 exploratory prospects. In 2000, we expect to spend $31.9 million
in our exploration and development activities, including $19.2 million to
drill 40 wells with our industry partners.

-- Extensive Use of 3D Seismic Data. 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.

-- Maximize Return on Capital. 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.

4
<PAGE> 6

-- Maintain Financial Flexibility. As of the closing of this offering, we
expect to have $15.0 million in cash provided by the capital contribution
from Seitel, available borrowings of the full amount of our proposed
credit facility and less than $100,000 of outstanding indebtedness. We
believe this conservative capital structure should enable us to take
advantage of value creation opportunities as they arise.

SIGNIFICANT EXPLORATION DISCOVERIES

Our interests in our most significant exploration discoveries as of September
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. The
capital expenditures disclosed in the table are for evaluated properties only,
and the amounts for the North Gillis project are as of July 1999.

<TABLE>
<CAPTION>
CUMULATIVE
WELLS --------------------------------- REMAINING
DRILLED RESERVES PRODUCTION CAPEX CASH FLOW PV-10 FINDING COST
(GROSS/NET) (BCFE) (BCFE) ($MM) ($MM) ($MM) ($/MCFE)
----------- -------- ---------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
North Gillis......... 11/2 19.2 0.6 $5.1 $1.1 n/a $0.26
S. Texas Vicksburg... 11/4.5 17.5 0.9 5.9 2.3 $28.0 0.32
E. Midland........... 3/1 28.8 1.6 8.7 3.5 32.8 0.29
</TABLE>

RELATIONSHIP WITH SEITEL

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. 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.

RISK FACTORS

Investing in our common stock will subject you to risks and uncertainties
inherent in our business. For instance, 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. Also, we generally do not operate our properties and
cannot control the activities on those properties. In addition, because we have
incurred losses from operations since our formation, our future operating
results are difficult to forecast. For a more detailed description of these and
other risks, see "Risk Factors" beginning on page 11.

5
<PAGE> 7

THE OFFERING

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

Common stock to be outstanding after
the offering.......................... 14,350,000 shares(1)

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. We will use this capital
contribution to fund our exploration
and development program and for
working capital. 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. We
will use any net proceeds we receive
from the exercise of the
over-allotment option to expand our
exploration and development program
and for additional working capital.

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

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(1) 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, and approximately 450 shares of our common stock to
be issued after consummation of the offering under restricted stock grants
to our non-employee directors.

6
<PAGE> 8

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
NINE MONTHS ----------------------------
ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
--------------------------- ----------------- DECEMBER 31, SEPTEMBER 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 $14,428 $13,360 $18,994 $13,360
Expenses:
Production expenses............. 3,134 5,168 4,683 3,503 3,741 4,683 3,741
General and administrative
expenses...................... 1,803 2,408 3,105 2,177 2,385 3,140 2,377
Depreciation, depletion and
amortization.................. 7,333 12,852 12,110 9,870 6,889 12,110 6,889
Impairment of oil and gas
properties.................... -- 11,588 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total expenses............. 12,270 32,016 19,898 15,550 13,015 19,933 13,007
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations..... 5,203 (6,336) (904) (1,122) 345 (939) 353
Interest expense(1)............... (1,990) (3,162) (4,724) (3,391) (4,465) (35) (19)
Interest income................... 135 14 11 9 -- 11 --
Loss on extinguishment of
volumetric production
payment(2)...................... -- (4,228) -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes........................... 3,348 (13,712) (5,617) (4,504) (4,120) (963) 334
Provision (benefit) for income
taxes........................... 1,180 (4,909) (1,970) (1,580) (1,436) -- 123
------- ------- ------- ------- ------- ------- -------
Net income (loss)................. 2,168 (8,803) (3,647) (2,924) (2,684) (963) 211
Preferred stock dividends......... -- -- -- -- -- 75 56
------- ------- ------- ------- ------- ------- -------
Income (loss) attributable to
common stock.................... $ 2,168 $(8,803) $(3,647) $(2,924) $(2,684) $(1,038) $ 155
======= ======= ======= ======= ======= ======= =======
Net income (loss) per common
share:(3)
Basic........................... $ .15 $ (.61) $ (.25) $ (.20) $ (.19) $ (0.07) $ 0.01
======= ======= ======= ======= ======= ======= =======
Diluted......................... $ .15 $ (.61) $ (.25) $ (.20) $ (.19) $ (0.07) $ 0.01
======= ======= ======= ======= ======= ======= =======
Weighted average number of common
shares outstanding(3)........... 14,350 14,350 14,350 14,350 14,350 14,350 14,350
======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(4)......................... $12,536 $13,876 $11,206 $ 8,748 $ 7,234 $11,171 $ 7,242
Net cash provided by operating
activities...................... 29,784 16,600 17,500 16,107 6,635
Net cash used in investing
activities...................... (50,480) (54,708) (42,033) (32,274) (12,839)
Net cash provided by financing
activities...................... 20,696 38,108 24,533 16,167 6,204
Capital expenditures.............. 51,428 64,418 48,197 33,784 17,970
</TABLE>

7
<PAGE> 9

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED(5)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 238 $ 15,238
Total assets.............................................. 153,974 168,974
Long-term debt(1)......................................... 127,682 --
Stockholders' equity...................................... (9,068) 162,600
</TABLE>

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(1) Seitel has historically funded the majority of 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 several 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) Net income (loss) per common share and 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. Depreciation, depletion and amortization
includes, for purposes of the EBITDA calculation, 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 we have disclosed our EBITDA 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 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.

8
<PAGE> 10

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 and September 30, 1999 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 September 30, 1999 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 adjusted our reserve information as of September 30,
1999 to include the effects of hedges in place as of that date. Appendix A to
this prospectus contains a letter prepared by Forrest A. Garb & Associates, Inc.
summarizing the reserve report as of September 30, 1999. 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
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
-------- -------- -------- -------------
<S> <C> <C> <C> <C>
ESTIMATED PROVED NATURAL GAS AND OIL RESERVES:
Natural gas reserves (MMcf):
Proved developed...................................... 11,563 18,483 37,844 21,363
Proved undeveloped.................................... 12,198 28,511 36,215 38,885
-------- -------- -------- --------
Total............................................ 23,761 46,994 74,059 60,248
======== ======== ======== ========
Oil and natural gas liquids reserves (MBbls):
Proved developed...................................... 902 1,744 5,265 2,598
Proved undeveloped.................................... 1,392 894 2,073 1,996
-------- -------- -------- --------
Total............................................ 2,294 2,638 7,338 4,594
======== ======== ======== ========
Total proved natural gas and oil reserves
(MMcfe)........................................ 37,525 62,822 118,087 87,812
======== ======== ======== ========
PV-10 (IN THOUSANDS):
Proved developed........................................ $ 44,690 $ 41,802 $ 66,889 $ 50,994
Proved undeveloped...................................... 28,072 41,480 40,760 59,596
-------- -------- -------- --------
Total PV-10(1)................................... $ 72,762 $ 83,282 $107,649 $110,590
======== ======== ======== ========
STANDARDIZED MEASURE OF DISCOUNTED ESTIMATED FUTURE NET
CASH FLOWS AFTER INCOME TAXES (IN THOUSANDS)(1)....... $ 52,090 $ 64,597 $ 81,543 $ 82,866
======== ======== ======== ========
PRICES USED IN CALCULATING PROVED RESERVES AND PV-10:
Natural gas (per Mcf)................................... $ 3.55 $ 2.66 $ 2.32 $ 2.98
Oil and natural gas liquids (per Bbl)................... 22.22 16.23 10.47 19.23
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -----------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf)(2)................................... 4,902 6,926 6,216 4,543 4,226
Oil and natural gas liquids (MBbls)(2).................. 363 420 386 286 282
Total production (MMcfe)................................ 7,080 9,446 8,532 6,259 5,918
AVERAGE REALIZED SALES PRICES (INCLUDING EFFECTS OF
HEDGING):
Natural gas (per Mcf)(2)................................ $ 2.14 $ 2.63 $ 2.27 $ 2.35 $ 2.18
Oil and natural gas liquids (per Bbl)(2)................ 18.29 16.83 11.78 12.36 13.73
SELECTED DATA PER MCFE:
Production expenses..................................... $ 0.44 $ 0.55 $ 0.55 $ 0.56 $ 0.63
General and administrative expense...................... 0.25 0.25 0.36 0.35 0.40
Depreciation, depletion and amortization of oil and gas
properties............................................ 1.02 1.34 1.39 1.55 1.13
Three year average finding cost (drilling and
revisions)(3)......................................... 0.83
Three year average finding cost (all sources)(4)........ 0.97
</TABLE>

9
<PAGE> 11

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

(1) Excludes PV-10 related to sulfur reserves of $2.4 million as of December 31,
1996 and 1997, $4.3 million as of December 31, 1998 and $3.6 million as of
September 30, 1999.

(2) 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.

(3) Our finding costs (drilling and revisions) 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. Three-year average finding cost for
our exploration and development activities excluding property acquisitions,
as typically calculated by many of our competitors, was $1.13 per Mcfe for
the year ended December 31, 1998.

(4) Our finding costs (all sources) are equal to the sum of all costs incurred
relating to natural gas and oil exploration and development activities for
all evaluated properties, including property acquisitions, divided by the
sum of all additions and revisions to estimated proved reserves, including
reserve purchases. Three-year average finding cost for our exploration and
development activities including property acquisitions, as typically
calculated by many of our competitors, was $1.30 per Mcfe for the year ended
December 31, 1998.

10
<PAGE> 12

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

We generally do not operate 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.

11
<PAGE> 13

In addition, 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.

Since we generally do not operate our properties, we must rely on the operator
to minimize these risks. If any of these events occur, it could adversely affect
our ability to conduct operations and 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.

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.

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 $2.7
million in the first nine months of 1999. Our accumulated deficit as of
September 30, 1999 was $13.8 million. 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.

12
<PAGE> 14

OUR DRILLING ACTIVITIES MAY NOT BE SUCCESSFUL. THE 3D SEISMIC DATA AND OTHER
ADVANCED TECHNOLOGIES WE USE CANNOT ELIMINATE DRY HOLE RISK.

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 geological structures that may contain
natural gas and oil. 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 FOCUS ON 3D SEISMIC DATA AND OTHER ADVANCED TECHNOLOGIES IN OUR EXPLORATION
EFFORTS REQUIRES EXPERIENCED TECHNICAL PERSONNEL, WHOM WE MAY BE UNABLE TO
ATTRACT OR RETAIN.

We focus primarily on natural gas and oil exploration, and we rely heavily on 3D
seismic data and other advanced technologies in our exploration efforts. In
order to apply these advanced technologies successfully, we must attract and
retain experienced technical personnel. Therefore, 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. Many of our competitors are
larger than we are and have greater financial resources, and they may be able to
afford to pay their explorationists more or provide greater benefits than we
can. 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 LOW NATURAL GAS AND OIL PRICES AND MAY
BE REQUIRED TO DO SO AGAIN IN THE FUTURE. FUTURE WRITE-DOWNS WOULD RESULT IN A
CHARGE TO OUR EARNINGS AND POSSIBLE LOSSES.

Under SEC oil and gas accounting rules, we may have to write-down our assets if
natural gas and oil prices decline significantly or if we have significant
downward adjustments to our natural gas and oil reserves. 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 low natural gas and oil prices. If natural gas and oil prices fall
significantly or if we have significant downward reserve adjustments in the
future, it is possible that additional write-downs will occur again. These
write-downs would result in a charge to our earnings and possible losses, but
would not impact cash flows 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
13
<PAGE> 15

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 based on assumptions that may turn out to be
inaccurate, 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.

WE PLAN TO FUND MOST OF OUR FUTURE NATURAL GAS AND OIL EXPLORATION COSTS WITH
REVENUES FROM THE PRODUCTION FROM OUR NATURAL GAS AND OIL RESERVES. THE FAILURE
TO REPLACE THESE RESERVES WOULD ADVERSELY AFFECT OUR PRODUCTION AND CASH FLOWS,
AND THEREFORE OUR FUTURE EXPLORATION EFFORTS.

We have an active exploration schedule for 2000 that includes participating in
drilling 40 natural gas and oil wells. We intend to continue to pursue
significant exploration efforts in the future, and we plan to fund most of the
costs of these efforts with revenues generated by production of natural gas and
oil from our 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 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, which
would adversely affect our future exploration efforts.

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. Currently, we have budgeted to spend
approximately $35.3 million in 2000 for the acquisition of 3D seismic data,
exploration and development drilling, leasehold costs and other capital
expenditures. At September 30, 1999, we had working capital of $238,000.
Additionally, Seitel will contribute $15.0 million to us prior to the offering.
We also expect to enter into a $20.0 to $40.0 million revolving credit facility
before consummation of the offering. We intend to use these sources, along with
our operating cash flow, to fund our capital expenditures. However, additional
financing may be required in the future to fund our growth and our developmental
and exploratory drilling. We cannot

14
<PAGE> 16

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.

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 THAT WE MAY BE UNABLE TO AFFORD OR
THAT 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;
15
<PAGE> 17

-- 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.

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 these
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. For the nine months ended
September 30, 1999, we recognized net hedging losses of $268,000. As of January
1, 2000, we had open commodity price hedges totaling 1,975,000 MMBtu at an
average price of $2.52 per MMBtu, or approximately $2.77 per Mcf.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN ANTI-TAKEOVER PROVISIONS
THAT COULD PREVENT OR DISCOURAGE AN ACQUISITION OR CHANGE OF CONTROL OF VISION
ENERGY THAT STOCKHOLDERS MIGHT BELIEVE TO BE IN THEIR BEST INTERESTS.

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. 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. These
anti-takeover provisions may prevent or discourage transactions that
stockholders might believe to be in their best interests, including those in
which stockholders might receive a premium for their stock over its then market
price. Please read "Description of Capital Stock" for additional details
concerning the provisions of our certificate of incorporation and bylaws.

OUR SEPARATION FROM SEITEL MAY NOT HAVE THE INTENDED TAX CONSEQUENCES, WHICH
COULD INCREASE OUR FUTURE TAX LIABILITY.

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

16
<PAGE> 18

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.

AN ACTIVE PUBLIC MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP OR BE SUSTAINED
AFTER THE OFFERING, AND WE EXPECT THAT OUR STOCK PRICE WILL BE VOLATILE.

Because this offering is an initial public offering, there has been no prior
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 because:

- - our results of operations may fluctuate from period to period due to the
relatively small number of natural gas and oil wells in which we have
interests and the large impact on our results of operations that a single well
can have; and

- - we expect our stock price to fluctuate with changes in natural gas and oil
prices, which have historically been volatile.

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

After this offering, we will have outstanding 14,350,000 shares of common stock.
This includes the 12,915,000 that the selling stockholder is selling in this
offering, which may be resold in the public market immediately. The remaining
1,435,000 shares, or 10% of our total outstanding shares, will be retained by
the selling stockholder. An additional approximately 1,405,000 shares of common
stock, or 9% of our total outstanding shares on a fully diluted basis, will be
subject to options or warrants and could be sold into the market upon exercise.
The selling stockholder 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, the selling stockholder and the option and
warrant holders may be eligible to sell their shares of our common stock under
Rule 144. We will also grant registration rights to the selling stockholder that
will allow the selling stockholder to sell up to 717,500 shares approximately
one year after the date of this prospectus and all of its 1,435,000 shares two
years after the date of this prospectus. As restrictions on resale end, the
market price could drop significantly if the holders of these restricted shares
sell them or are perceived by the market as intending to sell them. Also, these
sales could make it more difficult for us to raise capital through the sale of
additional equity securities. For a more detailed description, see "Shares
Eligible for Future Sale" on page 59.

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<PAGE> 19

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; 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.

18
<PAGE> 20

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, 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. We will use this
capital contribution to fund our exploration and development program and for
working capital. 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, 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 to expand our exploration and development
program and for additional 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. We expect the terms of our revolving credit facility
to either prohibit or significantly limit our ability to pay dividends on our
common stock. 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 September 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 $162.6 million, or $11.33 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 $13.00 per share, which is the midpoint of the
estimated range of the initial public offering price, new investors will
experience immediate dilution of $1.67 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.

Upon consummation of the offering, we will grant options and warrants to
purchase 1,405,000 shares of our common stock to our officers, directors and
employees. The exercise price of these options and warrants will be equal to or
greater than the offering price set forth on the cover page of this prospectus,
so the exercise of these options will not have a dilutive effect to new
investors.

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<PAGE> 21

CAPITALIZATION

The following table shows:

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

-- the pro forma as adjusted capitalization of Vision Energy on September
30, 1999, assuming each of the following transactions had occurred on
September 30, 1999:

-- the conversion of Seitel's intercompany loans to DDD Energy into an
equity investment in DDD Energy;

-- 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

-- Seitel's additional cash capital contribution of $15.0 million to DDD
Energy prior to our acquisition of DDD Energy.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 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................... $ 127,682 $ --
--------- --------
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................................ 4,768 176,293
Accumulated deficit....................................... (13,837) (13,837)
--------- --------
Total stockholders' equity............................. (9,068) 162,600
--------- --------
Total capitalization.............................. $ 118,614 $163,600
========= ========
</TABLE>

20
<PAGE> 22

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 for the nine months ended September 30, 1999 and balance
sheet data as of December 31, 1997 and 1998 and September 30, 1999 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 for the nine months ended
September 30, 1998 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>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 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 $ 14,428 $ 13,360
Expenses:
Production expenses..................... 341 1,571 3,134 5,168 4,683 3,503 3,741
General and administrative expenses..... 315 698 1,803 2,408 3,105 2,177 2,385
Depreciation, depletion and
amortization.......................... 320 1,698 7,333 12,852 12,110 9,870 6,889
Impairment of oil and gas properties.... -- -- -- 11,588 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total expenses.................... 976 3,967 12,270 32,016 19,898 15,550 13,015
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations............. 229 839 5,203 (6,336) (904) (1,122) 345
Interest expense(1)....................... (718) (1,773) (1,990) (3,162) (4,724) (3,391) (4,465)
Interest income........................... -- 33 135 14 11 9 --
Loss on extinguishment of volumetric
production payment(2)................... -- -- -- (4,228) -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes......... (489) (901) 3,348 (13,712) (5,617) (4,504) (4,120)
Provision (benefit) for income taxes...... (182) (304) 1,180 (4,909) (1,970) (1,580) (1,436)
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... $ (307) $ (597) $ 2,168 $ (8,803) $ (3,647) $ (2,924) $ (2,684)
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(3)................................. $ 549 $ 2,537 $ 12,536 $ 13,876 $ 11,206 $ 8,748 $ 7,234
Net cash provided by operating
activities.............................. 2,742 3,617 29,784 16,600 17,500 16,107 6,635
Net cash used in investing activities..... (16,038) (24,659) (50,480) (54,708) (42,033) (32,274) (12,839)
Net cash provided by financing
activities.............................. 13,296 21,042 20,696 38,108 24,533 16,167 6,204
Capital expenditures...................... 16,978 23,075 51,428 64,418 48,197 33,784 17,970
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................... $ (465) $ 1,698 $ 2,660 $ (2,153) $ (5,701) $ (7,025) $ 238
Total assets.............................. 22,168 46,220 93,571 123,275 156,825 143,816 153,974
Long-term debt(1)......................... 17,968 38,906 59,592 97,673 122,259 113,849 127,682
Stockholder's equity...................... (273) (870) 1,298 (7,505) (7,208) (10,429) (9,068)
</TABLE>

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

21
<PAGE> 23
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) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization. Depreciation, depletion and amortization
includes, for purposes of the EBITDA calculation, 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 we have disclosed our EBITDA 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 requirements to
conserve funds for capital expenditures, debt service and other commitments.

22
<PAGE> 24

PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma income statements of DDD Energy, our predecessor, for
the year ended December 31, 1998 and the nine months ended September 30, 1999
and the unaudited pro forma condensed balance sheet of DDD Energy as of
September 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 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 NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 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 $13,360 $ -- $13,360
Expenses:
Production expenses.............. 4,683 -- 4,683 3,741 -- 3,741
General and administrative
expenses....................... 3,105 (664)(1) 3,140 2,385 (552)(1) 2,377
699(2) 544(2)
Depreciation, depletion and
amortization................... 12,110 -- 12,110 6,889 -- 6,889
------- ------ ------- ------- ------ -------
Total expenses................... 19,898 35 19,933 13,015 (8) 13,007
------- ------ ------- ------- ------ -------
Income (loss) from operations...... (904) (35) (939) 345 8 353
Interest expense................... (4,724) 4,689(3) (35) (4,465) 4,446(3) (19)
Interest income.................... 11 -- 11 -- -- --
------- ------ ------- ------- ------ -------
Income (loss) before income
taxes............................ (5,617) 4,654 (963) (4,120) 4,454 334
Provision (benefit) for income
taxes............................ (1,970) 1,970(4) -- (1,436) 1,559(4) 123
------- ------ ------- ------- ------ -------
Net income (loss).................. (3,647) 2,684 (963) (2,684) 2,895 211
Preferred stock dividends.......... -- 75(5) 75 -- 56(5) 56
------- ------ ------- ------- ------ -------
Income (loss) attributable to
common stock..................... $(3,647) $2,609 $(1,038) $(2,684) $2,839 $ 155
======= ====== ======= ======= ====== =======
Net income (loss) per common share:
Basic............................ $ (0.25) $ (0.07)(6) $ (0.19) $ 0.01(6)
Diluted.......................... $ (0.25) $ (0.07)(6) $ (0.19) $ 0.01(6)
Weighted average number of common
shares outstanding............... 14,350 14,350 14,350 14,350
</TABLE>

23
<PAGE> 25

PRO FORMA CONDENSED BALANCE SHEET

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

Total current assets....................................... $ 5,612 $ 15,000(7) $ 20,612
Net property and equipment................................. 148,362 -- 148,362
-------- --------- --------
Total assets........................................ $153,974 $ 15,000 $168,974
======== ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Total current liabilities.................................. $ 5,374 $ -- $ 5,374
Advances from Seitel....................................... 127,682 (127,682)(8) --
Deferred income taxes...................................... 29,986 (29,986)(9) --
-------- --------- --------
Total liabilities................................... 163,042 (157,668) 5,374
-------- --------- --------
Redeemable preferred stock................................. -- 1,000(10) 1,000
-------- --------- --------
Total stockholders' equity................................. (9,068) 15,000(7) 162,600
127,682(8)
29,986(9)
(1,000)(10)
-------- --------- --------
Total liabilities and stockholders' equity.......... $153,974 $ 15,000 $168,974
======== ========= ========
</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 nine months ended September 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.

24
<PAGE> 26

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 and possible losses, but would not have an impact on cash
flows from operating activities.

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 these 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.

25
<PAGE> 27

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>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf) (1).......................... 4,902 6,926 6,216 4,543 4,226
Oil and natural gas liquids (MBbls) (1)......... 363 420 386 286 282
Total production (MMcfe)........................ 7,080 9,446 8,532 6,259 5,918
Average daily production (MMcfe)................ 19.3 25.9 23.4 22.9 21.7
AVERAGE REALIZED SALES PRICES
(INCLUDING EFFECTS OF HEDGING):
Natural gas (per Mcf) (1)....................... $ 2.14 $ 2.63 $ 2.27 $ 2.35 $ 2.18
Oil and natural gas liquids (per Bbl) (1)....... 18.29 16.83 11.78 12.36 13.73
EXPENSES (PER MCFE):
Production expenses............................. $ 0.44 $ 0.55 $ 0.55 $ 0.56 $ 0.63
General and administrative expense.............. 0.25 0.25 0.36 0.35 0.40
Depreciation, depletion and amortization of oil
and gas properties........................... 1.02 1.34 1.39 1.55 1.13
</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.

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998

Our average daily combined natural gas and oil production decreased 5% to 21.7
MMcfe for the first nine months of 1999 from 22.9 MMcfe for the corresponding
period in 1998. Natural gas comprised 71% of our production for the first nine
months of 1999 and 73% for the corresponding period in 1998. For the first nine
months of 1999, our natural gas production decreased 7% to 4,226 MMcf compared
to 4,543 MMcf for the corresponding period in 1998. For the first nine months of
1999, our oil and natural gas liquids production decreased 1% to 282 MBbls
compared to 286 MBbls for the corresponding period in 1998. Natural gas prices
averaged $2.18 per Mcf for the first nine months of 1999 compared to $2.35 per
Mcf for the corresponding period in 1998. Oil and natural gas liquids prices
averaged $13.73 per Bbl for the first nine months of 1999 compared to $12.36 per
Bbl for the corresponding period in 1998.

Revenue was $13.4 million in the first nine months of 1999 compared to $14.4
million in the first nine months of 1998. The decrease in revenue was primarily
caused by both lower natural gas production and prices during the first nine
months of 1999. The decrease in natural gas production between periods was
primarily due to normal production declines experienced on several of our older
wells. Additionally, in July 1999, we sold our interest in 11 natural gas and
oil wells, five of which were producing, whose production partially offset these
declines during the first six months of 1999. We anticipate that wells that have
come on-line in the last half of 1999 will offset most of this production
decline.

Production costs amounted to $3.7 million, or $0.63 per Mcfe of production, in
the first nine months of 1999, compared to $3.5 million, or $0.56 per Mcfe of
production, in the first nine months of 1998. The increase in this rate is
primarily due to an increase in compression costs for our East Texas Smackover
properties.

26
<PAGE> 28

General and administrative expenses were $2.4 million for the first nine months
of 1999 compared to $2.2 million for the first nine months of 1998. This
increase was primarily a result of increased payroll costs due to addition of
personnel to fully staff for our ongoing planned operations. We believe that
increases to our general and administrative costs in the future resulting from
becoming a separate public company will primarily be offset by a reduction in
our general and administrative costs due to elimination of overhead costs
allocated to us by Seitel.

Depreciation, depletion and amortization, or DD&A, of natural gas and oil
properties was $6.7 million for the nine months ended September 30, 1999 and
$9.7 million for the nine months ended September 30, 1998. This amounted to DD&A
per Mcfe of production of $1.13 in the first nine months of 1999 and $1.55 in
the first nine months of 1998. The decrease in the DD&A rate was due to the
significant increase in our proved reserves as of September 30, 1999, as
determined by our independent reserve engineers, compared to our proved reserves
as of September 30, 1998, as determined by our internal reserve engineers. DD&A
of assets other than oil and gas properties was $0.2 million for the nine months
ended September 30, 1999 and 1998.

Interest expense, net of amounts capitalized to natural gas and oil properties,
was $4.5 million for the first nine months of 1999 compared to $3.4 million for
the first nine 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 $5.1 million
on this project. In accordance with the full cost method of accounting, we did
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 have been accounted for as a reduction of
capitalized costs. Production from these wells totaled 460 MMcfe for the nine
months ended September 30, 1999 and 133 MMcfe for the year ended December 31,
1998. We anticipate that the majority of loss in production from these wells
will be offset by production from new wells that came on-line in the second 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 several of
our shallow short-lived producing properties had not yet been offset by
production from new wells. Several wells with high initial flow rates
experienced production declines earlier and greater than was expected. We do not
anticipate experiencing this type of production decline on any of our existing
natural gas and oil properties. 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 these 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 technical and administrative
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,
27
<PAGE> 29

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. DD&A of assets other than oil
and gas properties was $0.2 million in 1998 and 1997.

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.

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. DD&A of
assets other than oil and gas properties was $0.2 million in 1997 and $0.1
million in 1996.

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 the
majority of DDD Energy's liquidity and capital resources in excess of the cash
provided by its operations.

28
<PAGE> 30

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 September 30, 1999, Seitel made net contributions to DDD
Energy of approximately $127.7 million in the form of intercompany loans. These
loans accrue interest at a rate equal to Seitel's cost of funds, which was 7.25%
as of September 30, 1999. Additionally, DDD Energy has incurred third party debt
in the past of which $45,000 remains outstanding at September 30, 1999. From
inception through September 30, 1999, DDD Energy incurred capital expenditures
totaling approximately $227.3 million. Of these expenditures, $48.0 million were
for the acquisition of 3D seismic data, $80.0 million were for exploratory and
developmental drilling, $97.6 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 September 30, 1999, we had working capital of
approximately $238,000. 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 in 2000, we may need 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.

Our level of capital expenditures varies from year to year due to many factors,
including our available capital resources, our drilling results, natural gas and
oil prices, industry conditions, decisions of operators of our properties and
other industry owners and the prices of oil field goods and services. During the
first nine months of 1999, we incurred capital expenditures of $18.0 million. Of
these expenditures, we incurred $6.2 million for the acquisition of 3D seismic
data, $5.0 million for exploratory and developmental drilling, $6.4 million for
leasehold costs and $400,000 for other capital expenditures. Our capital
expenditures for the first nine months of 1999 were significantly lower than in
previous periods primarily due to decreased drilling activity resulting from
depressed natural gas and oil prices that began in 1998 and continued for the
first part of 1999. We have budgeted to spend approximately $41.3 million in the
last three months of 1999 and in 2000 for the acquisition of 3D seismic data,
exploration and development drilling, leasehold costs and other capital
expenditures. Our projected capital expenditures for 2000 are greater than our
projected 1999 capital expenditures due primarily to recovering natural gas and
oil prices.

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. 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 $6.6 million for the nine months ended September 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 nine
month period ended September 30, 1999, we produced approximately 21.7 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. Our cash
flows relating to investing activities primarily consist of exploration and
development capital expenditures, which are currently budgeted to be $35.3
million, including capitalized general and administrative expenses, in 2000.
Historically, our cash flows from financing activities have primarily been
obtained through loans from Seitel. However, after the

29
<PAGE> 31

offering, any capital expenditures in excess of cash flow from operations and
Seitel's $15.0 million capital contribution will be funded by borrowings under
our proposed credit facility.

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. Based on current negotiations with several prospective lenders, we
expect this credit facility to bear interest at LIBOR plus a margin ranging from
approximately 1.25% to 2.25%. The amount of this margin will vary based on the
amount we have borrowed under the facility compared to the available borrowing
base. We expect the facility to mature three years from the closing of the
offering and to require mandatory prepayments if borrowings exceed the borrowing
base as determined periodically by the lender. We also expect the facility to
include standard loan covenants, including a minimum tangible net worth or
current ratio covenant and an interest coverage ratio. We expect to finalize a
revolving credit facility before consummation of the offering.

YEAR 2000 COMPLIANCE

Many computer systems and software products were originally coded to accept only
two-digit entries in the date code field. Now that we have entered 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 these "Year 2000" requirements. Systems that do not properly recognize this
information could generate erroneous data or cause a system to fail.

As of the date of this prospectus, neither we nor, to our knowledge, any of our
suppliers, customers or service providers have experienced any significant
disruption in operations as a result of Year 2000 issues. We do not anticipate
any of these problems in the future. We estimate our total costs to address Year
2000 issues has been less than $100,000.

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. These 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 nine months ended September 30, 1999, we
recognized net hedging losses of $268,000. The estimated fair value of our open
commodity price hedges as of September 30, 1999 was $(420,000). As of January 1,
2000, we had open commodity price hedges totaling 1,975,000 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.

30
<PAGE> 32

The following table shows the hedges we have in place as of January 1, 2000.

<TABLE>
<CAPTION>
VOLUME PER
MONTH HEDGE PRICE
MONTH (MMBTU) ($/MMBTU)
- ----- ---------- -----------
<S> <C> <C>
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............................... 1,975,000
=========
</TABLE>

31
<PAGE> 33

BUSINESS

As of September 30, 1999, our proved reserves totaled 60.2 Bcf of natural gas
and 4,594 MBbls of oil and natural gas liquids, for a total of 87.8 Bcfe.
Approximately 42% of these reserves, on an Mcfe basis, were proved developed
reserves. The PV-10 of our net proved reserves as of September 30, 1999 was
$110.6 million, using realized prices of $2.98 per Mcf for natural gas and
$19.23 per Bbl for oil and natural gas liquids. As of September 30, 1999, we
owned interests in approximately 353,000 gross acres (109,000 net). The
reserve-to-production ratio for our reserves at September 30, 1999, using
trailing 12 months' production from that date, was 12 years. For the nine months
ended September 30, 1999, our average daily production was approximately 20.0
MMcfe per day. The reserve-to-production ratio and average daily production
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 December
1999, we participated in 300 natural gas and oil wells, 68% of which were
completed as discoveries, and elected not to participate in 27 wells that
were proposed by partners, only seven of which were completed. Our
drilling success rate for exploratory wells is approximately 60% 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.

-- Substantial Seismic Database, Acreage and Prospect Inventory. Our
proprietary 3D seismic database covers over 1,700 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
December 31, 1999, our prospect inventory included over 125 exploratory
prospects that were being analyzed by our technical staff.

32
<PAGE> 34

-- 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.

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 December 31, 1999, we had an inventory of over 125
exploratory prospects. In 2000, we expect to spend $31.9 million in our
exploration and development activities, including $19.2 million to drill
40 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 $5.1 million in and had received $1.1 million of adjusted 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.

-- Maintain Financial Flexibility. As of the closing of this offering, we
will have $15.0 million in cash provided by the capital contribution from
Seitel. In addition, we expect to have available borrowings of the full
amount of our proposed credit facility, which we expect to be in the
range of $20.0 million to $40.0 million, and less than $100,000 of other
indebtedness. We believe this conservative capital structure should
enable us to take advantage of value creation opportunities as they
arise.

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
33
<PAGE> 35

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 September 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. The capital expenditures disclosed in the table are for
evaluated properties only and the amounts for the North Gillis project are as of
July 1999. Because we calculate our finding costs based only on our evaluated
properties, our finding costs may not be comparable to finding costs disclosed
by other oil and gas companies.

<TABLE>
<CAPTION>
CUMULATIVE
WELLS ------------------------------ REMAINING
DRILLED RESERVES PRODUCTION CAPEX CASH FLOW PV-10 FINDING COST
PROJECT (GROSS/NET) (BCFE) (BCFE) ($MM) ($MM) ($MM) ($/MCFE)
- ------- ----------- --------- ---------- ----- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
North Gillis......... 11/2 19.2 0.6 $5.1 $1.1 n/a $0.26
S. Texas Vicksburg... 11/4.5 17.5 0.9 5.9 2.3 $28.0 0.32
E. Midland........... 3/1 28.8 1.6 8.7 3.5 32.8 0.29
</TABLE>

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 December 31, 1999, we had an inventory of over 125 prospects.
We plan to drill approximately 40 of these wells in 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 September 30, 1999, and our budgeted drilling costs for wells in
2000.

<TABLE>
<CAPTION>
BUDGETED NO. OF BUDGETED NEW
PROVED 2000 WELLS (GROSS)
RESERVES DRILLING --------------------
PROJECT (BCFE) % GAS % PUD PV-10 COSTS EXPLOR. DEVELOP.
------- -------- ----- ----- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
S. Texas Vicksburg.............. 17.5 87% 78% $28.0 $8.2 6 3
E. Midland...................... 28.8 81 98 32.8 3.2 -- 2
Sacramento Basin................ 0.4 100 -- 1.0 1.9 18 --
E. Texas Smackover.............. 21.4 36 34 18.3 0.1 -- 1
Jennings........................ -- -- -- -- 3.2 2 --
Howard Creek.................... -- -- -- -- 0.8 3 --
Macedonia....................... -- -- -- -- 0.9 3 --
</TABLE>

34
<PAGE> 36

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 September 30, 1999, net proved reserves were 17.5 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. 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,
with six wells scheduled to be drilled in 2000.

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. 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. 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. 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 September 30, 1999, net proved reserves were 28.8 Bcfe. We expect to drill
two additional wells and spend $3.2 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 11 wells in 2000. Planned capital expenditures for 2000 are anticipated to
be $1.2 million.

Our project areas in Solano and Yolo Counties include 15% and 33% working
interests in the Bali and Tonga areas, respectively. We successfully drilled two
out of three gas wells in the Bali area. We anticipate drilling the initial test
well in the Tonga area in the second quarter of 2000 with the expectation of
drilling at least six more wells before the end of 2000. Planned capital
expenditures for 2000 are anticipated to be $700,000.

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
35
<PAGE> 37

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 at depths ranging from 10,000 to 13,000 feet. As of September 30, 1999,
net proved reserves were 21.4 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. 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 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. 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 processing of a
proprietary 57 square mile 3D survey to be completed in the first quarter of
2000. 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 generally do not act as operator for 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 generally 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 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 and
September 30, 1999 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 September 30, 1999 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.

36
<PAGE> 38

Appendix A to this prospectus contains a letter prepared by Forrest A. Garb &
Associates, Inc. summarizing the reserve report as of September 30, 1999.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- -------- -------------
<S> <C> <C> <C> <C>
ESTIMATED PROVED NATURAL GAS AND OIL RESERVES:
Natural gas reserves (MMcf):
Proved developed............................. 11,563 18,483 37,844 21,363
Proved undeveloped........................... 12,198 28,511 36,215 38,885
------- ------- -------- --------
Total................................... 23,761 46,994 74,059 60,248
======= ======= ======== ========
Oil and natural gas liquids reserves (MBbls):
Proved developed............................. 902 1,744 5,265 2,598
Proved undeveloped........................... 1,392 894 2,073 1,996
------- ------- -------- --------
Total................................... 2,294 2,638 7,338 4,594
======= ======= ======== ========
Total proved natural gas and oil reserves
(MMcfe)...................................... 37,525 62,822 118,087 87,812
======= ======= ======== ========
PV-10 (IN THOUSANDS):
Proved developed................................ $44,690 $41,802 $ 66,889 $ 50,994
Proved undeveloped.............................. 28,072 41,480 40,760 59,596
------- ------- -------- --------
Total PV-10(1).......................... $72,762 $83,282 $107,649 $110,590
======= ======= ======== ========
STANDARDIZED MEASURE OF DISCOUNTED ESTIMATED
FUTURE NET CASH FLOWS AFTER INCOME TAXES (IN
THOUSANDS)(1)................................ $52,090 $64,597 $ 81,543 $ 82,866
======= ======= ======== ========
PRICES USED IN CALCULATING PROVED RESERVES AND
PV-10:
Natural gas (per Mcf)........................... $ 3.55 $ 2.66 $ 2.32 $ 2.98
Oil and natural gas liquids (per Bbl)........... 22.22 16.23 10.47 19.23
</TABLE>

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

(1) Excludes PV-10 related to sulfur reserves of $2.4 million as of December 31,
1996 and 1997, $4.3 million as of December 31, 1998 and $3.6 million as of
September 30, 1999.

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 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.

37
<PAGE> 39

VOLUMES, PRICES AND PRODUCTION COSTS

The following table describes for each of the last three fiscal years and for
the nine month periods ended September 30, 1998 and 1999 our natural gas and
crude oil production, average production costs and average sales prices. The
information regarding crude oil includes condensate and natural gas liquids.
Almost all of our production comes from the U.S. Gulf Coast region.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET PRODUCTION:
Natural gas (MMcf)(1)........................... 4,902 6,926 6,216 4,543 4,226
Oil and natural gas liquids (MBbls)(1).......... 363 420 386 286 282
Total production (MMcfe)........................ 7,080 9,446 8,532 6,259 5,918
AVERAGE REALIZED SALES PRICES (INCLUDING EFFECTS
OF HEDGING):
Natural gas (per Mcf)(1)........................ $ 2.14 $ 2.63 $ 2.27 $ 2.35 $ 2.18
Oil and natural gas liquids (per Bbl)(1)........ 18.29 16.83 11.78 12.36 13.73
Total (per Mcfe)................................ 2.42 2.68 2.19 2.27 2.21
AVERAGE PRODUCTION COST PER MCFE................ $ 0.44 $ 0.55 $ 0.55 $ 0.56 $ 0.63
</TABLE>

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

PRODUCTIVE WELLS

The following table sets forth the number of productive natural gas and oil
wells in which we owned an interest as of September 30, 1999. Productive wells
include wells that are producing and wells that are not producing but are
capable of production. 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>

38
<PAGE> 40

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>
NINE MONTHS ENDED 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 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>

39
<PAGE> 41

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 generally do not operate 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 that 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.

40
<PAGE> 42

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.

41
<PAGE> 43

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 these changes could have an adverse effect on
our business. We believe that these 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.

42
<PAGE> 44

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. 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 other substances related to the oil and gas
industry into 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 these 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 -- We generally do not operate our
properties and cannot control the activities on the properties we do not
operate." 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 December 31, 1999, we and DDD Energy had 20 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.

43
<PAGE> 45

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.

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." 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, which could increase our future tax liability" for a description
of the risks associated with the intended tax structure of the offering.

44
<PAGE> 46

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table provides information regarding our executive officers and
directors as of December 31, 1999. Messrs. Cox, Zeidman and Sale were not
directors as of December 31, 1999, but will become members of our board of
directors immediately after the closing of the offering.

<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........................ 39 Interim Chief Financial Officer
Jerry S. Cox.............................. 49 Director
Fred S. Zeidman........................... 53 Director
Robert B. Sale, Jr........................ 67 Director
</TABLE>

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.

45
<PAGE> 47

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

46
<PAGE> 48

directors fee of $15,000, payable half in cash and half in grants of restricted
stock under our 2000 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 December 31, 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 2000 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.

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<PAGE> 49

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 2000 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.

2000 STOCK INCENTIVE PLAN

Prior to the closing of the offering, our board of directors and our
stockholders will adopt the Vision Energy 2000 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> 50

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 2000 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> 51

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 has funded DDD Energy's liquidity and capital
requirements with intercompany loans. As of September 30, 1999, DDD Energy owed
Seitel approximately $127.7 million for these loans. These loans accrue interest
at a rate equal to Seitel's cost of funds, which was 7.25% as of September 30,
1999. Under 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 $127.7 million at September 30, 1999;

-- at the closing of the offering, Seitel will transfer all of the stock of
DDD Energy to Vision Holdings LLC, and Vision Holdings LLC 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 their
over-allotment option in full. Vision Holdings LLC will sell all 10,000
shares of our preferred stock to other investors, which may include
officers and directors of Seitel;

-- 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;

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<PAGE> 52

-- 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 at our expense. After the
offering, Seitel will own 1,435,000 shares of our common stock, or 635,000
shares if the underwriters' over-allotment option is exercised in full. 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 as a 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 to Seitel 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 under the Stock Transfer and Separation Agreement immediately prior
to our acquisition of 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.

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<PAGE> 53

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:

-- 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

-- 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 $1.6 million in the
nine months ended September 30, 1999 for DDD Energy's proportionate share of
leasehold, drilling and workover costs and routine expenses relating to 52
natural gas and oil wells and 16 projects and prospects in which DDD Energy owns
interests and for which Cox & Perkins is operator. DDD Energy received
approximately $7.7 million in 1998 and approximately $3.0 million in the first
nine months of 1999 for its proportionate share of revenues from these wells.
All of the 1998 amount and all of the first nine months of 1999 amount were paid
directly to

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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.

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 $552,000 in the nine months ended September 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 these services from third parties may have been.

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
nine months ended September 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 for $15 a share, which
is 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, which may include
officers and directors of Seitel. Vision Holdings will transfer these shares of
preferred stock 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 under 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 under 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, which
may include officers and directors of Seitel, 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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<PAGE> 57

-- 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 the 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.

57
<PAGE> 59

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 that 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 the 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
the 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 of these laws.

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

We have not yet selected a transfer agent and registrar for our common stock,
but will do so prior to consummation of the offering.

58
<PAGE> 60

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 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 under 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.

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 at our expense. After the
offering, Seitel will own 1,435,000 shares of our common stock, or 635,000
shares if the underwriters' over-allotment option is exercised in full. 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 these shares
under the 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 restrictions. We and Seitel will each agree to
indemnify the other against, or to contribute to losses arising out of,
specified liabilities in connection with this 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 2000 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.

59
<PAGE> 61

UNDERWRITING

Vision Energy and the selling stockholder will enter into an underwriting
agreement with the underwriters named below. CIBC World Markets Corp., A.G.
Edwards & Sons, Inc. and Southcoast Capital L.L.C. 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. ..................................
Southcoast Capital L.L.C. ..................................
--------
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 to the public on or about ,
2000. 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
that price less a concession of $ per share. The underwriters may also
allow, and these 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 to cover over-allotments. The underwriters may
purchase up to 1,137,000 of these shares from Vision Energy and up to 800,000 of
these shares from the selling stockholder. 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.

The underwriting fee will be the total discount to be paid to the underwriters,
which equals the total public offering price that appears on the cover page of
this prospectus minus the total amount the underwriters

60
<PAGE> 62

will pay for the shares. 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 these 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.

61
<PAGE> 63

-- 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 these 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 these 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 reports 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
reports.

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.

62
<PAGE> 64

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.

63
<PAGE> 65

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 so that proceeds from the sale of the 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.

64
<PAGE> 66

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 so that proceeds from the sale of the 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 the 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.

65
<PAGE> 67

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Vision Energy, Inc.
Report of Independent Public Accountants.................. F-2
Balance Sheet as of December 31, 1999..................... F-3
Notes to Balance Sheet.................................... F-4
DDD Energy, Inc.
Report of Independent Public Accountants.................. F-5
Balance Sheets as of December 31, 1997 and 1998 and
September 30, 1999..................................... F-6
Statements of Operations for the years ended December 31,
1996, 1997 and 1998 and for the nine months ended
September 30, 1998 and 1999............................ F-7
Statements of Stockholder's Equity for the years ended
December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1999........................ F-8
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998 and for the nine months ended
September 30, 1998 and 1999............................ F-9
Notes to Financial Statements............................. F-10
Supplemental Oil and Gas Information (Unaudited).......... F-18
</TABLE>

F-1
<PAGE> 68

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Vision Energy, Inc.:

We have audited the accompanying balance sheet of Vision Energy, Inc. (a
Delaware Corporation) as of December 31, 1999. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Vision Energy, Inc. as of December
31, 1999 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas

January 12, 2000

F-2
<PAGE> 69

VISION ENERGY, INC.

BALANCE SHEET -- AS OF DECEMBER 31, 1999

ASSETS

<TABLE>
<S> <C>
Cash........................................................ $1,500
======

STOCKHOLDERS' EQUITY

Stockholders' Equity:
Preferred stock; authorized 20,000,000 shares, no shares
issued and outstanding, $.01 par value................. $ --
Common stock; authorized 80,000,000 shares, 100 shares
issued and outstanding, $.01 par value................. 1
Additional paid-in capital................................ 1,499
------
Total stockholders' equity........................ $1,500
======
</TABLE>

The accompanying notes are an integral part of this balance sheet.

F-3
<PAGE> 70

VISION ENERGY, INC.

NOTES TO BALANCE SHEET

NOTE A -- ORGANIZATION AND BASIS OF PRESENTATION

The accompanying balance sheet includes the accounts of Vision Energy, Inc. (the
Company). The Company was incorporated on November 8, 1999, and is owned 81% by
the Chief Executive Officer of the Company and 19% by Seitel, Inc. (Seitel). The
Company has conducted no business activity since inception.

NOTE B -- SUBSEQUENT EVENT (UNAUDITED)

TRANSFER OF STOCK OF DDD ENERGY, INC. FROM SEITEL, INC.

In connection with a proposed initial public offering of the Company's common
stock, the Company intends to enter into an agreement whereby Seitel will
transfer all of the capital stock of DDD Energy, Inc., a wholly-owned subsidiary
of Seitel, to the Company in exchange for 14,349,981 shares of its common stock
and 10,000 shares of its preferred stock. Additionally, the Company will
repurchase the 81 shares of Common Stock held by the Chief Executive Officer at
cost.

F-4
<PAGE> 71

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 September 30, 1999,
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 and for the
nine months ended September 30, 1999. 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 September 30, 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 and for the nine months ended September 30, 1999, in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas

January 12, 2000

F-5
<PAGE> 72

DDD ENERGY, INC.

BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Current Assets:
Cash and equivalents..................................... $ -- $ -- $ --
Receivables
Trade................................................. 7,683 5,759 4,975
Other................................................. 937 13 20
Advances to operators.................................... 925 1,182 484
Prepaid expenses and other............................... 103 160 133
-------- -------- --------
Total current assets............................. 9,648 7,114 5,612
-------- -------- --------
Property and Equipment, at cost:
Oil and gas properties, full-cost method of accounting
Proved properties..................................... 107,206 141,118 145,780
Unproved properties and properties under development,
not being amortized................................. 39,436 53,458 53,981
Other property and equipment............................. 1,118 1,358 1,710
-------- -------- --------
147,760 195,934 201,471
Less: Accumulated depreciation, depletion and
amortization.......................................... (34,133) (46,223) (53,109)
-------- -------- --------
Net property and equipment............................ 113,627 149,711 148,362
-------- -------- --------
TOTAL ASSETS.......................................... $123,275 $156,825 $153,974
======== ======== ========

LIABILITIES AND STOCKHOLDER'S EQUITY

Current Liabilities:
Current portion of long-term debt........................ $ 141 $ 88 $ 45
Accounts payable......................................... 10,337 11,778 4,604
Accrued liabilities...................................... 1,202 843 620
Employee compensation payable............................ 121 106 105
-------- -------- --------
Total current liabilities........................ 11,801 12,815 5,374
-------- -------- --------
Long-Term Debt............................................. 117 30 --
Advances from Seitel....................................... 97,556 122,229 127,682
Deferred Income Taxes...................................... 21,306 28,959 29,986
-------- -------- --------
TOTAL LIABILITIES................................ 130,780 164,033 163,042
-------- -------- --------
CONTINGENCIES AND COMMITMENTS (Note G)
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) (13,837)
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY............................ (7,505) (7,208) (9,068)
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............ $123,275 $156,825 $153,974
======== ======== ========
</TABLE>

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

F-6
<PAGE> 73

DDD ENERGY, INC.

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ---------------------
1996 1997 1998 1998 1999
------- -------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE................................... $17,473 $ 25,680 $18,994 $14,428 $13,360
EXPENSES
Production expenses..................... 3,134 5,168 4,683 3,503 3,741
General and administrative expenses..... 1,803 2,408 3,105 2,177 2,385
Depreciation, depletion and
amortization......................... 7,333 12,852 12,110 9,870 6,889
Impairment of oil and gas properties.... -- 11,588 -- -- --
------- -------- ------- ------- -------
12,270 32,016 19,898 15,550 13,015
------- -------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS............. 5,203 (6,336) (904) (1,122) 345
Interest expense.......................... (1,990) (3,162) (4,724) (3,391) (4,465)
Interest income........................... 135 14 11 9 --
Loss on extinguishment of volumetric
production payment...................... -- (4,228) -- -- --
------- -------- ------- ------- -------
Income (loss) before income taxes......... 3,348 (13,712) (5,617) (4,504) (4,120)
Provision (benefit) for income taxes...... 1,180 (4,909) (1,970) (1,580) (1,436)
------- -------- ------- ------- -------
NET INCOME (LOSS)......................... $ 2,168 $ (8,803) $(3,647) $(2,924) $(2,684)
======= ======== ======= ======= =======
Net income (loss) per common share:
Basic................................... $ .15 $ (.61) $ (.25) $ (.20) $ (.19)
======= ======== ======= ======= =======
Diluted................................. $ .15 $ (.61) $ (.25) $ (.20) $ (.19)
======= ======== ======= ======= =======
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-7
<PAGE> 74

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........... -- -- 824 -- 824
Net loss............................ -- -- -- (2,684) (2,684)
----- -- ------ -------- -------
Balance, September 30, 1999........... 1,000 $1 $4,768 $(13,837) $(9,068)
===== == ====== ======== =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 75

DDD ENERGY, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 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) $ (2,924) $ (2,684)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and
amortization....................... 7,333 12,852 12,110 9,870 6,889
Impairment of oil and gas
properties......................... -- 11,588 -- -- --
Deferred income tax provision......... 7,462 7,276 7,653 5,739 1,027
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 2,924 777
Decrease (increase) in prepaid
expenses and other................. 39 (59) (57) (29) 27
Proceeds from sale of volumetric
production payment................. 19,000 -- -- -- --
Increase (decrease) in accounts
payable and other liabilities...... 1,908 (1,529) 158 538 599
-------- -------- -------- -------- --------
Net cash provided by operating
activities............................ 29,784 16,600 17,500 16,107 6,635
-------- -------- -------- -------- --------
Cash flows from investing activities:
Additions to oil and gas properties........ (50,740) (54,945) (41,784) (32,094) (24,916)
Additions to other property and
equipment............................... (67) (469) (263) (194) (354)
Net proceeds from sale of oil and gas
properties.............................. -- -- -- -- 12,431
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) (32,274) (12,839)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Advances from Seitel, net.................. 20,800 38,024 24,673 16,293 5,453
Borrowings under term loans................ -- 247 -- -- --
Principal payments on term loans........... (104) (163) (140) (126) (73)
Capital contribution from Seitel........... -- -- -- -- 824
-------- -------- -------- -------- --------
Net cash provided by financing
activities............................ 20,696 38,108 24,533 16,167 6,204
-------- -------- -------- -------- --------
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) $ (3,391) $ (4,465)
Income taxes............................ 6,282 12,185 9,623 7,319 2,463
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-9
<PAGE> 76

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 71 percent of the Company's production for the nine
months ended September 30, 1999 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 for the nine months ended September 30, 1998, 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 for the nine months
ended September 30, 1998, 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-10
<PAGE> 77
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 nine months ended September 30,
1998 and 1999, exploration and development related overhead costs of $1,146,000,
$1,431,000, $1,795,000, $1,276,000 and $1,474,000, respectively, have been
capitalized to oil and gas properties. Costs associated with production and
general corporate activities are expensed in the period incurred. 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 nine months ended September 30, 1998 and 1999,
interest costs of $1,525,000, $2,105,000, $2,486,000, $1,790,000 and $2,343,000,
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. 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.

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. At March 31, 1999, the Company's capitalized
costs of oil and gas properties exceeded the limitation thereon based on
quarter-end oil and gas prices; however, an impairment was not recorded at that
time because price increases in April 1999 indicated that capitalized costs were
not impaired. Given the volatility of oil and gas prices, it is reasonably
possible that the Company's estimate of discounted future net cash flows from
proved oil and gas reserves could change in the near term. If oil and gas prices
decline significantly in the future, even if only for a short period of time, it
is possible that additional impairments of oil and gas properties could occur.

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

F-11
<PAGE> 78
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 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 with 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 K.

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.

F-12
<PAGE> 79
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE C -- INCOME TAXES

The provision (benefit) for income taxes for each of the three years in the
period ended December 31, 1998 and for the nine months ended September 30, 1999,
is comprised of the following amounts (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- -------- ------- -------------
<S> <C> <C> <C> <C>
Current................................... $(6,282) $(12,185) $(9,623) $(2,463)
Deferred.................................. 7,462 7,276 7,653 1,027
------- -------- ------- -------
Provision (benefit) for income taxes.... $ 1,180 $ (4,909) $(1,970) $(1,436)
======= ======== ======= =======
</TABLE>

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>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED DECEMBER 31, 1999
-------------------------- -------------
1996 1997 1998
------ ------- -------
<S> <C> <C> <C> <C>
Statutory income tax........................ $1,172 $(4,799) $(1,966) $(1,442)
Other, net.................................. 8 (110) (4) 6
------ ------- ------- -------
Provision (benefit) for income taxes...... $1,180 $(4,909) $(1,970) $(1,436)
====== ======= ======= =======
</TABLE>

Substantially all of the deferred income tax liability reflected in the
Company's balance sheets at December 31, 1997 and 1998 and September 30, 1999 is
attributable to temporary differences related to the Company's oil and gas
properties.

NOTE D -- LONG-TERM DEBT

In 1997, the Company obtained a three-year term loan totaling $247,000. The loan
bears interest at the rate of 7.9 percent. The proceeds were used for the
purchase of certain property and equipment which secures the debt. The loan will
be paid in full in 2000.

NOTE E -- 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 nine months
ended September 30, 1998 and 1999, the Company recorded interest expense of
$3,494,000, $5,241,000, $7,175,000, $5,168,000 and $6,789,000, 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, 7.02 percent, 7.03 percent and 7.25 percent for the
years ended December 31, 1996, 1997, and 1998 and for the nine months ended
September 30, 1998 and 1999, 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 K, the entire
intercompany balance owed to Seitel by the Company will be contributed to
capital.

F-13
<PAGE> 80
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE F -- 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 G -- 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 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 September 30, 1999, which would have a
material impact on its financial position or results of operations.

NOTE H -- 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, $623,000, and $(268,000) for the years ended December 31, 1996, 1997,
and 1998, and for the nine months ended September 30, 1998 and 1999,
respectively.

As of September 30, 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
and September 30, 1999 was $183,000 and $(420,000), respectively. As of December
31, 1998, the Company did not have any open commodity price hedges.

F-14
<PAGE> 81
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE I -- 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 nine months ended September 30, 1998 and 1999, the Company
recorded general and administrative costs allocated from Seitel of $457,000,
$690,000, $664,000, $507,000 and $552,000, respectively. Management believes
that, for the periods presented, incremental general and administrative costs on
a stand-alone basis would not have been materially different than the indirect
costs allocated from Seitel.

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 $236,000 for the years ended
December 31, 1997 and 1998 and for the nine months ended September 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
$12,209,000, $5,329,000, $5,876,000 and $4,653,000 for the years ended December
31, 1996, 1997 and 1998 and for the four months ended April 30, 1999,
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 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 K, 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 J -- 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 or for the nine months ended September 30, 1999.

Substantially all of the Company's accounts receivable at December 31, 1997 and
1998 and September 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,

F-15
<PAGE> 82
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 K -- SUBSEQUENT EVENTS (UNAUDITED)

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.

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.

F-16
<PAGE> 83
DDD ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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-17
<PAGE> 84

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 and September 30, 1999,
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
Revisions of previous estimates........................... (5,394) (1,366)
Purchases of reserves in place............................ 1,079 29
Sales of reserves in place................................ (11,336) (1,307)
Extensions and discoveries................................ 6,066 182
Production................................................ (4,226) (282)
------- -------
Proved reserves at September 30, 1999....................... 60,248 4,594
======= =======
</TABLE>

F-18
<PAGE> 85
DDD ENERGY, INC.

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

<TABLE>
<CAPTION>
GAS OIL
(MMCF) (MBBL)
------- -------
<S> <C> <C>
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
======= =======
September 30, 1999........................................ 21,363 2,598
======= =======
</TABLE>

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 F of Notes to
Financial Statements).

The proved reserves disclosed above exclude proved sulfur reserves of 197,000
long tons, 174,000 long tons, 420,000 long tons and 286,000 long tons at
December 31, 1996, 1997 and 1998 and September 30, 1999, respectively.

CAPITALIZED COSTS OF OIL AND GAS PROPERTIES: As of December 31, 1997 and 1998
and September 30, 1999, the Company's capitalized costs of oil and gas
properties were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Proved properties.................................. $107,206 $141,118 $ 145,780
Unproved properties................................ 39,436 53,458 53,981
-------- -------- ---------
Total capitalized costs....................... 146,642 194,576 199,761
Less: Accumulated depreciation, depletion and
amortization..................................... (33,727) (45,599) (52,270)
-------- -------- ---------
Net capitalized costs......................... $112,915 $148,977 $ 147,491
======== ======== =========
</TABLE>

Of the total costs excluded from the amortization base as of September 30, 1999,
$12,716,000 was incurred during 1999, $22,883,000 was incurred during 1998,
$6,972,000 was incurred during 1997, $7,183,000 was incurred during 1996,
$2,167,000 was incurred during 1995 and $2,060,000 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.

F-19
<PAGE> 86
DDD ENERGY, INC.

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

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 and for the nine months ended September 30, 1999 (in
thousands):

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Acquisition of properties:
Evaluated................................ $23,090 $13,813 $ 4,701 $ --
Unevaluated.............................. 7,000 10,857 15,207 6,408
Exploration costs.......................... 17,358 26,961 22,708 10,847
Development costs.......................... 3,913 12,318 5,318 363
------- ------- ------- -------
Total costs incurred.................. $51,361 $63,949 $47,934 $17,618
======= ======= ======= =======
</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 period-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.

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 period-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.

F-20
<PAGE> 87
DDD ENERGY, INC.

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

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,
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
-------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash inflows........................... $127,905 $162,762 $248,608 $267,584
Production costs....................... (21,913) (21,417) (43,065) (55,898)
Development costs...................... (10,101) (21,659) (17,131) (33,440)
Income taxes........................... (26,524) (27,453) (47,541) (44,472)
-------- -------- -------- --------
Future net cash flows.................. 69,367 92,233 140,871 133,774
10 percent annual discount............. (17,277) (27,636) (59,328) (50,908)
-------- -------- -------- --------
Standardized measure of discounted
future net cash flows(1)(2).......... $ 52,090 $ 64,597 $ 81,543 $ 82,866
======== ======== ======== ========
</TABLE>

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

(1) Estimated future net cash flows before income tax expense, discounted at 10
percent per annum, totaled approximately $72.8 million, $83.3 million,
$107.6 million and $110.6 million as of December 31, 1996, 1997, and 1998
and September 30, 1999, respectively.

(2) The above table excludes future net cash flows before income taxes of
$3,495,000, $3,187,000, $9,167,000 and $6,894,000 and discounted future net
cash flows before income taxes of $2,427,000, $2,350,000, $4,310,000 and
$3,643,000 as of December 31, 1996, 1997 and 1998 and September 30, 1999,
respectively, related to proved sulfur reserves.

F-21
<PAGE> 88
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 and for the nine months ended September 30, 1999 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
-------- -------- -------- -------------------
<S> <C> <C> <C> <C>
Standardized measure, beginning of
period.............................. $ 16,058 $ 52,090 $ 64,597 $ 81,543
Extensions and discoveries, net of
related costs..................... 26,690 45,193 34,102 12,221
Sales of oil and gas produced, net
of production costs............... (9,057) (16,035) (13,990) (9,332)
Net changes in prices and production
costs............................. 24,561 (28,384) (25,385) 44,222
Change in future development
costs............................. (355) (2,650) 3,626 (11,338)
Development costs incurred during
the period that reduced future
development costs................. 2,042 7,802 4,330 225
Revision of previous quantity
estimates......................... 3,077 (8,927) 31,358 (19,006)
Repurchase of volumetric production
payment........................... -- 8,319 -- --
Purchases of reserves in place...... 18,309 -- 4,609 975
Sales of reserves in place.......... -- -- -- (23,402)
Sale of volumetric production
payment........................... (17,763) -- -- --
Accretion of discount............... 2,532 7,276 8,328 10,765
Net change in income taxes.......... (11,406) 1,988 (7,422) (1,618)
Change in production rates and
other............................. (2,598) (2,075) (22,610) (2,389)
-------- -------- -------- --------
Standardized measure, end of
period............................ $ 52,090 $ 64,597 $ 81,543 $ 82,866
======== ======== ======== ========
</TABLE>

F-22
<PAGE> 89

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

November 10, 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 (NGLs) reserves attributed to
certain interests owned by DDD Energy, Inc. (DDD) as of October 1, 1999. These
interests are in petroleum producing properties that are located in Texas,
Louisiana, Michigan, Mississippi, and California. Garb applied Securities and
Exchange Commission (SEC) guideline to estimate the reserves for each property.

As per our assignment, Garb included only proven reserves. This estimate does
not include probable or possible reserves. Garb used SEC criteria to verify that
the reserves are proved. The reserves described in this report are 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
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................... 1,142 17,634 42,126 59,586 42,303
Non-Producing............... 453 3,729 0 16,829 9,301
Undeveloped................. 1,523 38,885 19,860 102,483 59,596
----- ------ ------ ------- -------
Total................ 3,118 60,248 61,986 178,898 111,200
</TABLE>

Garb estimated reserves using decline curve analysis, material balance,
volumetric analysis, analogy, or a combination of these methods. 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 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. 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 obtained product costs and prices from DDD. Garb used a 3-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 believes the costs are reasonable. Garb used September 1999 product prices
obtained from DDD as follows: Oil = $19.98/bbl, Gas = $2.99/Mcf, and NGL =
$0.42/gal. Garb applied these prices to all properties. Garb did not escalate
costs or prices as per SEC guidelines.

A-1
<PAGE> 90

FORREST A. GARB & ASSOCIATES, INC.

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

Attachment I 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 II. 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 evaluation. Should you have any
questions, please do not hesitate to call.

Yours truly,

/s/ FORREST A. GARB & ASSOCIATES, INC.

Forrest A. Garb & Associates, Inc.

A-2
<PAGE> 91

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
in accordance with SEC Regulation S-X are set forth in this report.

(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> 92

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

[LOGO]

VISION ENERGY, INC.

12,915,000 SHARES

COMMON STOCK

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

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

, 2000

CIBC WORLD MARKETS
A.G. EDWARDS & SONS, INC.
SOUTHCOAST CAPITAL L.L.C.

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

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> 93

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.......................................... 95,000
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> 94

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 Seitel, Inc. at a purchase price of $15 per
share, or an aggregate of $285.

Mr. Calvert and Seitel were the only offerees in these transactions, and no
public solicitation was made. Both Mr. Calvert and Seitel had access to all
information regarding the issuer by virtue of their relationships to the issuer,
and the share certificates issued to each of them contain a restrictive legend
prohibiting transfer of the shares in violation of federal securities laws.
These shares were issued to Mr. Calvert and Seitel as the initial capitalizing
transaction for the issuer in connection with its corporate organization.

II-2
<PAGE> 95

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

<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 -- Form of opinion of Gardere Wynne Sewell & Riggs, L.L.P.
8.1 -- Form of tax opinion of Arthur Andersen LLP
10.1* -- Form of Stock 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 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 2000 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)
27.1 -- Financial Data Schedule
99.1+ -- Consent of Jerry S. Cox to act as director
99.2+ -- Consent of Fred S. Zeidman to act as director
99.3+ -- Consent of Robert B. Sale, Jr. to act as director
</TABLE>

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

+ Previously filed.

* 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

II-3
<PAGE> 96

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.

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> 97

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 January 14, 2000.

VISION ENERGY, INC.

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

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 January 14, 2000
- ----------------------------------------------------- Directors and Chief
Horace A. Calvert Executive Officer (Principal
Executive Officer)

* President and Director January 14, 2000
- -----------------------------------------------------
Marshall L. Munsell

* Executive Vice President and January 14, 2000
- ----------------------------------------------------- Director
Thomas A. Mazza

* Interim Chief Financial January 14, 2000
- ----------------------------------------------------- Officer (Principal
Marcia H. Kendrick Accounting and Financial
Officer)

* By: /s/ HORACE A. CALVERT January 14, 2000
----------------------------------------------
Horace A. Calvert as Attorney-in-fact
</TABLE>

II-5
<PAGE> 98

EXHIBIT INDEX

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

+ Previously filed.

* To be filed by amendment.

<PAGE> 1
EXHIBIT 1.1

12,915,000 Shares

VISION ENERGY, INC.

Common Stock

UNDERWRITING AGREEMENT

___________ ____, 2000

CIBC World Markets Corp.
A.G. Edwards & Sons, Inc.
Southcoast Capital L.L.C.
c/o CIBC World Markets Corp.
One World Financial Center
New York, New York 10281

On behalf of the Several
Underwriters named on
Schedule I attached hereto.

Ladies and Gentlemen:

Vision Holdings LLC, a Delaware limited liability company (the
"Selling Stockholder") and wholly owned subsidiary of Seitel, Inc., a Delaware
corporation (the "Parent"), proposes, subject to the terms and conditions
contained herein, to sell to you and the other underwriters named on Schedule I
to this Agreement (the "Underwriters"), for whom you are acting as
Representatives (the "Representatives"), an aggregate of 12,915,000 shares (the
"Firm Shares") of the Common Stock, par value $0.01 per share (the "Common
Stock"), of Vision Energy, Inc., a Delaware corporation (the "Company"). The
respective amounts of the Firm Shares to be purchased by each of the several
Underwriters are set forth opposite their names on Schedule I hereto. In
addition, the Company and the Selling Stockholder propose to grant to the
Underwriters an option to purchase up to an additional 1,937,000 shares (the
"Option Shares") of Common Stock (of which up to 1,137,000 shares will be sold
by the Company and up to 800,000 shares will be sold by the Selling Stockholder)
for the purpose of covering over-allotments in connection with the sale of the
Firm Shares. The Firm Shares and the Option Shares are together called the
"Shares."

<PAGE> 2

1. Sale and Purchase of the Shares. On the basis of the
representations, warranties and agreements contained in, and subject to the
terms and conditions of, this Agreement:

(a) The Selling Stockholder agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Selling Stockholder, at a price of $_____
per share (the "Initial Price"), the number of Firm Shares set forth
opposite the name of such Underwriter under the column "Number of Firm
Shares to Be Purchased" on Schedule I to this Agreement, subject to
adjustment in accordance with Section 10 hereof.

(b) The Company and the Selling Stockholder grant to the
several Underwriters an option to purchase, severally and not jointly,
all or any part of the Option Shares at the Initial Price. The
respective number of Option Shares to be purchased from the Company and
from the Selling Stockholder pursuant to the exercise of such option
shall be equal to the total number of Option Shares to be purchased by
the Underwriters multiplied by a fraction (adjusted by the
Representatives to eliminate fractional shares) (x) the numerator of
which is 1,137 (with respect to the Company) or 800 (with respect to
the Selling Stockholder), as the case may be, and (y) the denominator
of which is 1,937. The number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the
Representatives to eliminate fractional shares) of the total number of
Option Shares to be purchased by the Underwriters as such Underwriter
is purchasing of the Firm Shares. Such option may be exercised only to
cover over-allotments in the sales of the Firm Shares by the
Underwriters and may be exercised in whole or in part at any time on or
before 12:00 noon, New York City time, on the business day before the
Firm Shares Closing Date (as defined below), and from time to time
thereafter within 30 days after the date of this Agreement, in each
case upon written, facsimile or telegraphic notice, or verbal or
telephonic notice confirmed by written, facsimile or telegraphic
notice, by the Representatives to the Company no later than 12:00 noon,
New York City time, on the business day before the Firm Shares Closing
Date or at least two business days before the Option Shares Closing
Date (as defined below), as the case may be, setting forth the
aggregate number of Option Shares to be purchased, the respective
number of Option Shares to be purchased from the Company and from the
Selling Stockholder, and the time and date (if other than the Firm
Shares Closing Date) of such purchase.

2. Delivery and Payment. Delivery by the Selling Stockholder
of the Firm Shares to the Representatives for the respective accounts of the
Underwriters, and payment of the purchase price in immediately available funds
by wire transfer to the order of the Selling Stockholder for the Firm Shares,
against delivery of the respective certificates therefor to the Representatives,
shall take place at the offices of Baker Botts L.L.P., 910 Louisiana Street,
3000 One Shell Plaza, Houston, Texas 77002, at 9:00 a.m., New York City time, on
the third business day following the date of this Agreement, or at such time on
such other date, not later than 10 business days after the date of this
Agreement, as shall be agreed upon by the Company and the Representatives (such
time and date of delivery and payment are called the "Firm Shares Closing
Date").

<PAGE> 3

In the event the option with respect to the Option Shares is
exercised in whole or in part on one or more occasions, delivery by the Company
and the Selling Stockholder of the Option Shares to the Representatives for the
respective accounts of the Underwriters and payment of the purchase price
thereof in immediately available funds by wire transfer to the Company and the
Selling Stockholder, as applicable, shall take place at the offices of Baker
Botts L.L.P. specified above at the time and on the date (which may be the same
date as, but in no event shall be earlier than, the Firm Shares Closing Date)
specified in the notice referred to in Section 1(b) (such time and date of
delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called, individually,
a "Closing Date" and, together, the "Closing Dates."

Certificates evidencing the Shares shall be registered in such
names and shall be in such denominations as the Representatives shall request at
least two full business days before the Firm Shares Closing Date or, in the case
of Option Shares, on the day of notice of exercise of the option as described in
Section l(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).

3. Registration Statement and Prospectus; Public Offering. The
Company has prepared and filed in conformity with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the published
rules and regulations thereunder (the "Rules") adopted by the Securities and
Exchange Commission (the "Commission"), a Registration Statement (as hereinafter
defined) on Form S-1 (No. 333-90869), including a preliminary prospectus
relating to the Shares, and such amendments thereof as may have been required to
the date of this Agreement. Copies of such Registration Statement (including all
amendments thereof) and of the related Preliminary Prospectus (as hereinafter
defined) have heretofore been delivered by the Company to you. The term
"Preliminary Prospectus" means any preliminary prospectus (as described in Rule
430 of the Rules) included at any time as a part of the Registration Statement
or filed with the Commission by the Company with the consent of the
Representatives pursuant to Rule 424(a) of the Rules. The term "Registration
Statement" as used in this Agreement means the initial registration statement
(including all exhibits, financial schedules and information deemed to be a part
of the Registration Statement through incorporation by reference or otherwise),
as amended at the time and on the date it becomes effective (the "Effective
Date"), including the information (if any) deemed to be part thereof at the time
of effectiveness pursuant to Rule 430A of the Rules. If the Company has filed or
will file an abbreviated registration statement to register additional Shares
pursuant to Rule 462(b) under the Rules (the "462(b) Registration Statement"),
then any reference herein to the Registration Statement shall also be deemed to
include such 462(b) Registration Statement. The term "Prospectus" as used in
this Agreement means the prospectus in the form included in the Registration
Statement at the time of effectiveness or, if Rule 430A of the Rules is relied
on, the term Prospectus shall also include the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules.

<PAGE> 4

The Company and the Selling Stockholder understand that the
Underwriters propose to make a public offering of the Shares, as set forth in
and pursuant to the Prospectus, as soon after the Effective Date and the date of
this Agreement as the Representatives deem advisable. The Company and the
Selling Stockholder hereby confirm that the Underwriters and dealers have been
authorized to distribute or cause to be distributed each Preliminary Prospectus
and are authorized to distribute the Prospectus (as from time to time amended or
supplemented if the Company furnishes amendments or supplements thereto to the
Underwriters).

4. Representations and Warranties. The Company, the Parent and
the Selling Stockholder hereby, jointly and severally, represent and warrant to
each Underwriter as follows:

(a) On the Effective Date, the Registration Statement
complied, and on the date of the Prospectus, the date any
post-effective amendment to the Registration Statement becomes
effective, the date any supplement or amendment to the Prospectus is
filed with the Commission and each Closing Date, the Registration
Statement and the Prospectus (and any amendment thereof or supplement
thereto) will comply, in all material respects, with the applicable
provisions of the Securities Act and the Rules and the Securities
Exchange Act of 1934, as amended, and the published rules and
regulations adopted by the Commission thereunder (collectively, the
"Exchange Act"). The Registration Statement did not, as of the
Effective Date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and on the
Effective Date and the other dates referred to above, neither the
Registration Statement nor the Prospectus, nor any amendment thereof or
supplement thereto, will contain any untrue statement of a material
fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading. When any related preliminary prospectus was first filed
with the Commission (whether filed as part of the Registration
Statement or any amendment thereto or pursuant to Rule 424(a) of the
Rules) and when any amendment thereof or supplement thereto was first
filed with the Commission, such preliminary prospectus as amended or
supplemented complied in all material respects with the applicable
provisions of the Securities Act and the Rules and did not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading. Notwithstanding the foregoing, none
of the representations and warranties in this paragraph 4(a) shall
apply to statements in, or omissions from, the Registration Statement
or the Prospectus made in reliance upon, and in conformity with,
information herein or otherwise furnished in writing by the
Representatives on behalf of the several Underwriters for use in the
Registration Statement or the Prospectus. The Company acknowledges that
the only information furnished in writing by the Representatives on
behalf of the several Underwriters for use in the Registration
Statement or the Prospectus is (i) the second, third and fourth
sentences in the fourth paragraph under the caption "Underwriting" in
the Prospectus and (ii) the 10th and 12th paragraphs under such
caption.

<PAGE> 5

(b) The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing
the use of the Prospectus has been issued and no proceedings for that
purpose have been instituted or are pending or, to the Company's or the
Parent's knowledge, threatened under the Securities Act. Any required
filing of the Prospectus and any supplement thereto pursuant to Rule
424(b) of the Rules has been or will be made in the manner and within
the time period required by such Rule 424(b). If the Company has
elected to rely on Rule 462(b) of the Rules and the 462(b) Registration
Statement has not been declared effective, (i) the Company has filed a
462(b) Registration Statement in compliance with and that is effective
upon filing pursuant to Rule 462(b) and has received confirmation of
its receipt and (ii) the Company has given irrevocable instructions for
transmission of the applicable filing fee in connection with the filing
of the 462(b) Registration Statement, in compliance with Rule 111 of
the Rules, or the Commission has received payment of such filing fee.

(c) The financial statements of the Company and DDD Energy
(including all notes and schedules thereto) included in the
Registration Statement and Prospectus present fairly the financial
position, the results of operations, the statements of cash flows and
the statements of stockholders' equity and the other information
purported to be shown therein of the Company and DDD Energy at the
respective dates and for the respective periods to which they apply;
and such financial statements and related schedules and notes have been
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of the results for such
periods have been made. The summary and selected financial data
included in the Prospectus present fairly the information shown therein
as at the respective dates and for the respective periods specified,
and the summary and selected financial data have been presented on a
basis consistent with the financial statements so set forth in the
Prospectus and other financial information. The pro forma financial
statements set forth in the Registration Statement and the Prospectus
(the "pro forma financial statements") have been prepared in accordance
with the applicable accounting requirements of Rule 11-02 of Regulation
S-X; the pro forma adjustments reflected in the pro forma financial
statements have been properly applied to the historical amounts in the
compilation of such statements; and the assumptions used in the
preparation of the pro forma financial statements are, in the opinion
of the Company, reasonable.

(d) Arthur Andersen LLP, whose report is filed with the
Commission as a part of the Registration Statement, is and, during the
periods covered by such report, was independent public accountants as
required by the Securities Act and the Rules.

(e) The information on the basis of which the reserve
estimates and related information included in the Registration
Statement and the Prospectus was prepared by the Company, Forrest A.
Garb & Associates, Inc., independent natural gas and oil engineers,

<PAGE> 6

Miller & Lentz, Ltd., independent natural gas and oil engineers, or any
other person, is true and correct in all material respects.

(f) Each of the Company, the Parent and the Selling
Stockholder is a corporation or limited liability company, as the case
may be, duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. The Company
has no subsidiaries and does not control, directly or indirectly, any
corporation, limited liability company, partnership, joint venture,
association or other business organization. Immediately prior to the
closing on the Firm Shares Closing Date, DDD Energy, Inc. ("DDD
Energy") will be a wholly owned subsidiary of the Company and will be
duly incorporated, validly existing and in good standing under the laws
of the State of Delaware. Each of the Company and DDD Energy is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business
conducted by it or the location of the assets or properties owned,
leased or licensed by it requires such qualification, except for such
jurisdictions where the failure to so qualify, individually or in the
aggregate, would not have a material adverse effect on the assets or
properties, business, results of operations or financial condition of
the Company and DDD Energy, taken as a whole (a "Material Adverse
Effect"). Neither the Company nor DDD Energy owns, leases or licenses
any asset or property or conducts any business outside the United
States of America. Each of the Company and DDD Energy has all requisite
corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and
from all governmental or regulatory bodies or any other person or
entity (collectively, the "Permits"), to own, lease and license its
assets and properties and conduct its business, all of which are valid
and in full force and effect, as described in the Registration
Statement and the Prospectus, except where the lack of such Permits,
individually or in the aggregate, would not have a Material Adverse
Effect. Each of the Company and DDD Energy has fulfilled and performed
all of its obligations with respect to such Permits, and no event has
occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other impairment of
the rights of the Company or DDD Energy thereunder, except where such
failure to fulfill or perform or such revocation, termination or
impairment would not have a Material Adverse Effect. Except as may be
required under the Securities Act and state securities or Blue Sky
laws, no other Permits are required to enter into, deliver and perform
this Agreement and to issue and sell the Shares.

(g) Each of the Company and DDD Energy owns or possesses
adequate and enforceable rights to use all trademarks, trademark
applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how and other similar rights and
proprietary knowledge (collectively, "Intangibles") described in the
Prospectus as being owned by it necessary for the conduct of its
business. Neither the Company nor DDD Energy has received any notice
of, nor is aware of, any infringement of or conflict with asserted
rights of others with respect to any Intangibles.

<PAGE> 7

(h) Except as described in the Prospectus, each of the Company
and DDD Energy has (i) good and indefeasible title to all its interests
in its natural gas and oil properties, and title investigations have
been carried out by or on behalf of the Company or DDD Energy in
accordance with good practice in the natural gas and oil industry in
the areas in which the Company or DDD Energy operates, and (ii) good
and indefeasible title to all other real property and marketable title
to all other material properties and assets described in the Prospectus
as owned by the Company or DDD Energy and valid, subsisting and
enforceable leases for all properties and assets, real or personal,
described in the Prospectus as leased by the Company or DDD Energy, in
each case free and clear of any imperfections of title, security
interests, mortgages, pledges liens encumbrances or charges of any
kind, other than those described in the Prospectus and those that would
not, individually or in the aggregate, have a Material Adverse Effect.

(i) There is no litigation or governmental or other proceeding
to which the Company, DDD Energy, the Parent or the Selling Stockholder
is subject or which is pending or, to their knowledge, threatened,
against the Company, DDD Energy, the Parent or the Selling Stockholder,
which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect, affect the consummation of this
Agreement or which is required to be disclosed in the Registration
Statement and the Prospectus that is not so disclosed.

(j) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, except as
described therein, (a) there has not been any material adverse change
with regard to the assets or properties, business, results of
operations or financial condition of the Company or DDD Energy; (b)
neither the Company nor DDD Energy has sustained any loss or
interference with its assets, businesses or properties (whether owned
or leased) from fire, explosion, earthquake, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree,
which would have a Material Adverse Effect; and (c) since the date of
the latest balance sheet included in the Registration Statement and the
Prospectus, except as reflected therein, neither the Company nor DDD
Energy has (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, except such
liabilities or obligations incurred in the ordinary course of business,
(ii) entered into any transaction not in the ordinary course of
business or (iii) declared or paid any dividend or made any
distribution on any shares of its stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire
any shares of its stock, other than the 81 shares of Common Stock to be
repurchased from Horace A. Calvert on the Firm Shares Closing Date.

(k) There is no document, contract or other agreement of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required by the Securities Act or
Rules. Each description of a contract, document or other agreement in
the Registration

<PAGE> 8

Statement and the Prospectus accurately reflects in all respects the
material terms of the underlying document, contract or agreement. Each
agreement described in the Registration Statement and the Prospectus or
listed in the Exhibits to the Registration Statement is, or will be as
of the Firm Shares Closing Date, in full force and effect and is, or
will be as of the Firm Shares Closing Date, valid and enforceable by
and against the Company, DDD Energy, the Parent and the Selling
Stockholder, as the case may be, in accordance with its terms. Neither
the Company, DDD Energy, the Parent, the Selling Stockholder nor, to
their knowledge, any other party is in default in the observance or
performance of any term or obligation to be performed by it under any
such agreement, and no event has occurred which with notice or lapse of
time or both would constitute such a default, in any such case which
default or event, individually or in the aggregate, would have a
Material Adverse Effect. No default exists, and no event has occurred
which with notice or lapse of time or both would constitute a default,
in the due performance and observance of any term, covenant or
condition by the Company or DDD Energy of any other agreement or
instrument to which the Company or DDD Energy is a party or by which
either of them or their respective assets, properties or business may
be bound or affected which default or event, individually or in the
aggregate, would have a Material Adverse Effect.

(l) Neither the Company nor DDD Energy is in violation of any
term or provision of its charter or by-laws or of any franchise,
license, Permit, judgment, decree, order, statute, rule or regulation,
where the consequences of such violation, individually or in the
aggregate, would have a Material Adverse Effect.

(m) Neither the execution, delivery and performance of this
Agreement by the Company, the Parent or the Selling Stockholder nor the
consummation of any of the transactions contemplated hereby (including,
without limitation, the issuance and sale by the Company and the
Selling Stockholder of the Shares) will give rise to a right to
terminate or accelerate the due date of any payment due under, or
conflict with, violate or result in the breach of any term or provision
of, or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, or require any consent
or waiver under, or result in the execution or imposition of any lien,
charge, claim, security interest or encumbrance upon any properties or
assets of the Company, DDD Energy or the Selling Stockholder pursuant
to the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company, DDD Energy, the Parent or
the Selling Stockholder is a party or by which any of them or any of
their respective properties or businesses is bound, or any franchise,
license, Permit, judgment, decree, order, statute, rule or regulation
applicable to the Company, DDD Energy, the Parent or the Selling
Stockholder or violate any provision of the charter, by-laws or other
governing instruments of the Company, DDD Energy or the Selling
Stockholder, except for such consents or waivers which have already
been obtained and are in full force and effect.

(n) The Company has authorized and outstanding capital stock
as set forth in the Registration Statement and the Prospectus under the
caption "Capitalization." The

<PAGE> 9

certificates evidencing the Shares are in due and proper legal form and
have been duly authorized for issuance by the Company. All of the
issued and outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable, and none of
them was issued in violation of any preemptive or other similar right.
The Shares, when sold by the Selling Stockholder and when issued and
sold by the Company pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and none of
them will be issued in violation of any preemptive or other similar
right. Except as disclosed in the Registration Statement and the
Prospectus, there are no preemptive or other rights to subscribe for or
to purchase or acquire or any restriction upon the voting or transfer
of any securities of the Company pursuant to its Certificate of
Incorporation or by-laws or any agreement or instrument to or by which
the Company is a party or bound. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding
option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, exercisable for or
exchangeable for stock of the Company. The Common Stock and the Shares
conform in all material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus.

(o) The Selling Stockholder will have on each Closing Date
valid and marketable title to the Shares to be sold by the Selling
Stockholder free and clear of any lien, claim, security interest or
other encumbrance, including, without limitation, any restriction on
transfer, except as otherwise described in the Registration Statement
and Prospectus. The Selling Stockholder will have on each Closing Date
full legal right, power and authorization, and any approval required by
law, to sell, assign, transfer and deliver the Shares to be sold by the
Selling Stockholder in the manner provided by this Agreement. Upon
delivery of and payment for the Shares to be sold by the Selling
Stockholder pursuant to this Agreement, the several Underwriters will
receive valid and marketable title to such Shares free and clear of any
lien, claim, security interest or other encumbrance.

(p) Except with respect to the Shares to be sold by the
Selling Stockholder, no holder of any security of the Company has the
right to have any security owned by such holder included in the
Registration Statement or to demand registration of any security owned
by such holder during the period ending 180 days after the date of this
Agreement. Each stockholder, director (including nominees) and
executive officer of the Company has delivered to the Representatives
his enforceable written lock-up agreement in the form attached to this
Agreement ("Lock-Up Agreement").

(q) All necessary corporate action has been duly and validly
taken by the Company, the Parent and the Selling Stockholder to
authorize the execution, delivery and performance of this Agreement and
the issuance and sale of the Shares by the Company and the Selling
Stockholder. This Agreement has been duly and validly authorized,
executed and delivered by the Company, the Parent and the Selling
Stockholder and constitutes the legal, valid and binding obligation of
the Company, the Parent and the Selling Stockholder

<PAGE> 10

enforceable against the Company, the Parent and the Selling Stockholder
in accordance with its terms, except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles. The
Lock-Up Agreement to which the Selling Stockholder is a party has been
duly and validly authorized, executed and delivered by the Selling
Stockholder and constitutes the legal, valid and binding obligation of
the Selling Stockholder, enforceable against the Selling Stockholder in
accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.

(r) Neither the Company nor DDD Energy is involved in any
labor dispute nor, to the knowledge of the Company or the Parent, is
any such dispute threatened, which dispute would have a Material
Adverse Effect. Neither the Company nor the Parent is aware of any
existing or imminent labor disturbance by the employees of any of the
principal suppliers or contractors of the Company or DDD Energy which
would have a Material Adverse Effect. The Company is not aware of any
threatened or pending litigation between the Company and any of its
executive officers which, if adversely determined, could have a
Material Adverse Effect and has no reason to believe that such officers
will not remain in the employment of the Company.

(s) No transaction has occurred between or among the Company
and any of its officers or directors or five percent stockholders or
any affiliate or affiliates of any such officer or director or five
percent stockholder that is required to be described in and is not
described in the Registration Statement and the Prospectus.

(t) Neither the Company, the Parent nor the Selling
Stockholder has taken, nor will it take, directly or indirectly, any
action designed to or which might reasonably be expected to cause or
result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any
of the Shares.

(u) Each of the Company and DDD Energy has filed all Federal,
state and local tax returns which are required to be filed through the
date hereof, or has received extensions thereof, and has paid all taxes
shown on such returns and all assessments received by it to the extent
that the same are material and have become due. There are no tax audits
or investigations pending that if adversely determined would have a
Material Adverse Effect, nor are there any material proposed additional
tax assessments against the Company or DDD Energy.

(v) The Shares have been duly authorized for quotation on the
National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market System, subject to official notice of
issuance. A registration statement has been filed on Form 8-A

<PAGE> 11

pursuant to Section 12 of the Exchange Act, which registration
statement complies in all material respects with the Exchange Act.

(w) Each of the Company and DDD Energy has complied with all
of the requirements and filed the required forms, if any, as specified
in Florida Statutes Section 517.075.

(x) The books, records and accounts of each of the Company and
DDD Energy accurately and fairly reflect, in reasonable detail, the
transactions in, and dispositions of, the assets of, and the results of
operations of, the Company or DDD Energy, as the case may be. Each of
the Company and DDD Energy maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to
any differences.

(y) Each of the Company and DDD Energy is insured by insurers
of recognized financial responsibility against such losses and risks
and in such amounts as it believes are customary in the businesses in
which it is engaged or proposes to engage after giving effect to the
transactions described in the Prospectus; all policies of insurance and
fidelity or surety bonds insuring the Company, DDD Energy or their
respective businesses, assets, employees, officers and directors are in
full force and effect; each of the Company and DDD Energy is in
compliance with the terms of such policies and instruments in all
material respects; and neither the Company nor the Parent has reason to
believe that the Company or DDD Energy will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect. Neither the Company nor DDD Energy has been denied any
insurance coverage which it has sought or for which it has applied.

(z) Each approval, consent, order, authorization, designation,
declaration or filing of, by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company, the Parent or the Selling Stockholder of this
Agreement and the consummation of the transactions herein contemplated
required to be obtained or performed by the Company, the Parent or the
Selling Stockholder (except such additional steps as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") or
may be necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws) has been obtained
or made and is in full force and effect.

<PAGE> 12

(aa) There are no affiliations with the NASD among the
Company's officers or directors or any five percent or greater
stockholder of the Company, or any affiliate thereof, except as set
forth in the Registration Statement or otherwise disclosed in writing
to the Representatives.

(bb) (i) Each of the Company and DDD Energy is in compliance
with all rules, laws and regulations relating to the use, treatment,
storage and disposal of toxic substances and protection of health or
the environment ("Environmental Law") which are applicable to its
business, except for any noncompliance that, individually or in the
aggregate, would not have a Material Adverse Effect; (ii) neither the
Company nor DDD Energy has received any notice from any governmental
authority or third party of an asserted claim under Environmental Laws;
(iii) each of the Company and DDD Energy has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and is in compliance with
all terms and conditions of any such permit, license or approval,
except for any failure to obtain such licenses, permits or other
approvals or any noncompliance with the terms thereof that,
individually or in the aggregate, would not have a Material Adverse
Effect; (iv) to the Company's knowledge, no facts currently exist that
will require the Company to make future material capital expenditures
to comply with Environmental Laws; and (v) no property which is or has
been owned, leased or occupied by the Company or DDD Energy has been
designated as a Superfund site pursuant to the Comprehensive
Environmental Response, Compensation of Liability Act of 1980, as
amended ("CERCLA"), or otherwise designated as a contaminated site
under applicable state or local law. Neither the Company nor DDD Energy
has been named as a "potentially responsible party" under CERCLA.

(cc) To the best knowledge of the Company and DDD Energy, the
operators of their mineral properties periodically review, in the
ordinary course of their business, the effect of Environmental Laws on
their respective businesses, operations and properties, in the course
of which such operators identify and evaluate associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws, or any permit, license or approval, any
related constraints on operating activities and any potential
liabilities to third parties). Neither the Company nor DDD Energy has
received any notification from such operators with respect to or is
otherwise aware of any such associated costs and liabilities that
would, individually or in the aggregate, have a Material Adverse
Effect.

(dd) The Company is not and, after giving effect to the
offering and sale of the Shares and the application of proceeds thereof
as described in the Prospectus, will not be an "investment company" or
an entity controlled by an "investment company" within the meaning of
the Investment Company Act of 1940, as amended (the "Investment Company
Act").

<PAGE> 13

(ee) The Company, DDD Energy or any other person associated
with or acting on behalf of the Company or DDD Energy, including,
without limitation, any director, officer, agent or employee of the
Company or DDD Energy, has not, directly or indirectly, while acting on
behalf of the Company or DDD Energy (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity; (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds; (iii)
violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any other unlawful payment.

(ff) Each of the Company and DDD Energy has reviewed its
operations to evaluate the extent to which its business or operations
have been affected by the Year 2000 Problem (that is, any significant
risk that computer hardware or software applications do not, in the
case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time
periods occurring prior to January 1, 2000); as a result of such
review, each of the Company and the Parent has no reason to believe,
and does not believe, that the Year 2000 Problem has had or will have a
Material Adverse Effect, or has resulted or will result in any material
loss or interference with the business or operations of the Company or
DDD Energy.

5. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters under this Agreement are several and not joint.
The respective obligations of the Underwriters to purchase the Shares are
subject to each of the following terms and conditions:

(a) Notification that the Registration Statement has become
effective shall have been received by the Representatives, and the
Prospectus shall have been timely filed with the Commission in
accordance with Section 6(a) of this Agreement.

(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission, and any requests for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to the satisfaction of the Commission and the
Representatives.

(c) The representations and warranties of the Company, the
Parent and the Selling Stockholder contained in this Agreement and in
the certificates delivered pursuant to Sections 5(d) and 5(e) shall be
true and correct when made and on and as of each Closing Date as if
made on such date. The Company, the Parent and the Selling Stockholder
shall have performed all covenants and agreements and satisfied all the
conditions contained in this Agreement required to be performed or
satisfied by them at or before such Closing Date.

<PAGE> 14

(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the chief executive or chief operating officer and the
chief financial or chief accounting officer of the Company to the
effect that (i) the signers of such certificate have carefully examined
the Registration Statement, the Prospectus and this Agreement, (ii) the
representations and warranties of the Company in this Agreement are
true and correct on and as of such Closing Date with the same effect as
if made on such Closing Date, (iii) the Company has performed all
covenants and agreements and satisfied all conditions contained in this
Agreement required to be performed or satisfied by it at or prior to
such Closing Date, and (iv) no stop order preventing or suspending the
effectiveness of the Registration Statement has been issued and, to the
best of their knowledge, no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act.

(e) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of each of the Selling Stockholder and the Parent, to the
effect that (i) the Selling Stockholder or the Parent, as the case may
be, has carefully examined the Registration Statement, the Prospectus
and this Agreement, (ii) the representations and warranties of the
Selling Stockholder or the Parent, as the case may be, in this
Agreement are true and correct on and as of such Closing Date with the
same effect as if made on such Closing Date and (iii) the Selling
Stockholder or the Parent, as the case may be, has performed all
covenants and agreements and satisfied all conditions contained in this
Agreement required to be performed or satisfied by it at or prior to
such Closing Date.

(f) The Representatives shall have received, at the time this
Agreement is executed and on each Closing Date, a signed letter from
Arthur Andersen LLP addressed to the Representatives and dated the date
of this Agreement and each such Closing Date, respectively, in form and
substance reasonably satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the
Securities Act and the Rules, that the response to Item 10 of the
Registration Statement is correct insofar as it relates to them and
stating in effect that:

(i) in their opinion the audited financial statements
and financial statement schedules included in the Registration
Statement and the Prospectus and reported on by them comply as
to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules;

(ii) on the basis of a reading of the amounts
included in the Registration Statement and the Prospectus
under the headings "Summary Historical and Pro Forma Financial
Information" and "Selected Financial Data," carrying out
certain procedures (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter, a reading of the minutes of
the meetings of

<PAGE> 15

the stockholders and directors of the Company and DDD Energy,
and inquiries of certain officials of the Company and DDD
Energy who have responsibility for financial and accounting
matters of the Company and DDD Energy as to transactions and
events subsequent to the date of the latest audited financial
statements, except as disclosed in the Registration Statement
and the Prospectus, nothing came to their attention which
caused them to believe that:

(A) the amounts in "Summary Historical and
Pro Forma Financial Information" and "Selected
Financial Data" included in the Registration
Statement and the Prospectus do not agree with the
corresponding amounts in the audited and unaudited
financial statements from which such amounts were
derived;

(B) with respect to the Company, there were,
at a specified date not more than three business days
prior to the date of the letter, any increases in the
liabilities of the Company or any decreases in the
stockholders' equity in the Company, as compared with
the amounts shown on the Company's balance sheet as
of November 8, 1999 included in the Registration
Statement;

(C) with respect to DDD Energy, there were,
at a specified date not more than three business days
prior to the date of the letter, any increases in the
current liabilities and long-term liabilities of DDD
Energy or any decreases in working capital or the
stockholders' equity in DDD Energy, as compared with
the amounts shown on DDD Energy's balance sheet as of
the nine months ended September 30, 1999 included in
the Registration Statement or, during the period from
September 30, 1999 to a specified date not more than
three business days prior to the date of the letter,
there were any decreases, as compared to the
corresponding period in the previous year, in revenue
or net income of DDD Energy;

(iii) they have performed certain other procedures as
may be permitted under generally acceptable auditing standards
as a result of which they determined that certain information
of an accounting, financial or statistical nature (which is
limited to accounting, financial or statistical information
derived from the general accounting records of the Company and
DDD Energy) set forth in the Registration Statement and the
Prospectus and reasonably specified by the Representatives
agrees with the accounting records of the Company and DDD
Energy; and

(iv) based upon the procedures set forth in clauses
(ii) and (iii) above and a reading of the amounts included in
the Registration Statement under the headings "Summary
Historical and Pro Forma Financial Information" and "Selected
Financial Data" included in the Registration Statement and
Prospectus and a reading of the financial statements from
which certain of such data were derived, nothing has come

<PAGE> 16

to their attention that gives them reason to believe that the
"Summary Historical and Pro Forma Financial Information" and
"Selected Financial Data" included in the Registration
Statement and Prospectus do not comply as to the form in all
material respects with the applicable accounting requirements
of the Securities Act and the Rules or that the information
set forth therein is not fairly stated in relation to the
financial statements included in the Registration Statement or
Prospectus from which certain of such data were derived are
not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with
that of the audited financial statements included in the
Registration Statement and Prospectus.

References to the Registration Statement and the Prospectus in
this paragraph (f) are to such documents as amended and supplemented at
the date of the letter.

(g) The Representatives shall have received on each Closing
Date from Gardere Wynne Sewell & Riggs, L.L.P., counsel for the
Company, the Parent and the Selling Stockholder, an opinion, addressed
to the Representatives and dated such Closing Date, and stating in
effect that:

(i) Each of the Company, DDD Energy and the Parent is
duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. The Selling
Stockholder is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization.
To the best of such counsel's knowledge, the Company has no
subsidiaries other than DDD Energy and does not control,
directly or indirectly, any corporation, limited liability
company, partnership, joint venture, association or other
business organization other than DDD Energy. Each of the
Company and DDD Energy is duly qualified to do business and is
in good standing as a foreign corporation in the State of
Texas and, to such counsel's knowledge, in each other
jurisdiction in which the nature of the business conducted by
it or the location of the assets or properties owned, leased
or licensed by it requires such qualification, except for such
jurisdictions where the failure to so qualify, individually or
in the aggregate, would not have a Material Adverse Effect.

(ii) Each of the Company and DDD Energy has all
requisite corporate power and authority to own, lease and
license its assets and properties and conduct its business as
described in the Registration Statement and the Prospectus
and, with respect to the Company, to enter into, deliver and
perform this Agreement and to issue and sell the Shares to be
sold by it.

(iii) The Company has authorized and outstanding
capital stock as set forth in the Registration Statement and
the Prospectus under the caption "Capitalization." The
certificates evidencing the Shares are in due and proper legal
form and have been duly authorized for issuance by the
Company. All of the issued and outstanding shares of Common
Stock have been duly authorized and validly issued and are
fully

<PAGE> 17

paid and nonassessable, and, to the best knowledge of such
counsel, none of them were issued in violation of any
preemptive or similar contractual right of any stockholder of
the Company by reason of any agreement to which the Company is
a party. The Shares, when sold by the Selling Stockholder and
when issued and sold by the Company and paid for by the
Underwriters pursuant to this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable, and,
to the best knowledge of such counsel, none of them will have
been issued in violation of any preemptive or similar
contractual right of any stockholder of the Company by reason
of any agreement to which the Company is a party. To the best
of such counsel's knowledge, except as disclosed in the
Registration Statement and the Prospectus, there are no
preemptive or other rights to subscribe for or to purchase or
acquire or any restriction upon the voting or transfer of any
securities of the Company pursuant to the Company's
Certificate of Incorporation or by-laws or any agreement or
other instrument to which the Company is a party or by which
it is bound. To the best of such counsel's knowledge, except
as disclosed in the Registration Statement and the Prospectus,
there is no outstanding option, warrant or other right calling
for the issuance of, and no commitment, plan or arrangement to
issue, any share of stock of the Company or any security
convertible into, exercisable for, or exchangeable for stock
of the Company.

(iv) The execution and delivery of this Agreement
have been duly authorized by all necessary corporate action on
the part of the Company, the Parent and the Selling
Stockholder. This Agreement has been duly and validly
authorized, executed and delivered by the Company, the Parent
and the Selling Stockholder.

(v) The execution, delivery and performance by the
Company, the Parent and the Selling Stockholder of this
Agreement and the sale by the Selling Stockholder, and the
issuance and sale by the Company, of the Shares will not (i)
violate the Company's, the Parent's, DDD Energy's or the
Selling Stockholder's charter or bylaws, (ii) conflict with,
constitute a breach of any of the terms or provisions of, or a
default under, or require consent or waiver under, any
indenture, loan agreement, mortgage, lease or other agreement
or instrument of which such counsel has knowledge and to which
the Company, the Parent, DDD Energy or the Selling Stockholder
is a party or by which they or their respective property is
bound, or (iii) violate or conflict with any applicable law or
any rule or regulation, or to such counsel's knowledge, any
judgment, order or decree, in each case of any court or any
governmental body or agency having jurisdiction over the
Company, the Parent, DDD Energy or the Selling Stockholder or
their respective property.

(vi) All of the Selling Stockholder's rights in the
Shares to be sold by the Selling Stockholder pursuant to this
Agreement have been transferred to the Underwriters who have
severally purchased such Shares pursuant to this Agreement,
free and clear of any lien, claim, security interest or other
encumbrance.

<PAGE> 18

(vii) No consent, approval, authorization or order of
any court or governmental agency or regulatory body is
required for the execution, delivery or performance of this
Agreement by the Company, the Parent or the Selling
Stockholder or the consummation of the transactions
contemplated hereby, except such as have been obtained under
the Securities Act and such as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the several Underwriters.

(viii) To the best of such counsel's knowledge, there
is no litigation or governmental or other proceeding to which
the Company, DDD Energy, the Parent or the Selling Stockholder
is subject, or which is pending or threatened against, the
Company, DDD Energy, the Parent or the Selling Stockholder,
which affect the consummation of this Agreement or is required
to be disclosed in the Registration Statement and the
Prospectus that is not so disclosed.

(ix) The statements in the Prospectus under the
captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital
Resources--[Credit Facility]," "Business--Regulation,"
"Management--Employment Agreements," "Management--1999 Stock
Incentive Plan," "Arrangements with Seitel," "Certain
Transactions," "Description of Capital Stock" and "Shares
Eligible for Future Sale," insofar as such statements
constitute a summary of documents referred to therein or
matters of law, are fair summaries of such documents and
matters. To the best of such counsel's knowledge, accurate
copies of all contracts and other documents required to be
filed as exhibits to, or described in, the Registration
Statement have been so filed with the Commission or are fairly
described in the Registration Statement, as the case may be.

(x) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or
supplement thereto (except for the financial statements and
schedules and other financial, statistical and reserve data
included therein, as to which such counsel expresses no
opinion) appeared on its face to comply as to form in all
material respects with the requirements of the Securities Act
and the Rules.

(xi) The Registration Statement is effective under
the Securities Act, and, to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for
that purpose have been instituted or are threatened or pending
under the Securities Act. Any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b)
of the Rules has been made in the manner and within the time
period required by such Rule 424(b).

<PAGE> 19

(xii) The capital stock of the Company conforms in
all material respects to the description thereof contained in
the Prospectus under the caption "Description of Capital
Stock."

To the extent deemed advisable by such counsel, they may rely
as to matters of fact on certificates of responsible officers of the
Company, the Parent and the Selling Stockholder and public officials
and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the
laws of the States of New York and Texas, the General Corporation Law
of the State of Delaware and the Federal laws of the United States;
provided that such counsel shall state that in their opinion the
Underwriters and they are justified in relying on such other opinions.
Copies of such certificates and other opinions shall be furnished to
the Representatives and counsel for the Underwriters.

In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of
the Company, representatives of the Representatives and representatives
of the independent certified public accountants of the Company, at
which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such
counsel is not passing upon and does not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in
the Registration Statement and the Prospectus (except as specified in
the foregoing opinion), on the basis of the foregoing, no facts have
come to the attention of such counsel which lead such counsel to
believe that the Registration Statement at the time it became effective
(except with respect to the financial statements and notes and
schedules thereto and other financial, statistical and reserve data, as
to which such counsel need express no belief) contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus as amended or
supplemented (except with respect to the financial statements, notes
and schedules thereto and other financial, statistical and reserve
data, as to which such counsel need make no statement) on the date
thereof and on the Closing Date contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.

(h) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
reasonably satisfactory in form and substance to the Representatives
and their counsel, and the Underwriters shall have received from Baker
Botts L.L.P. a favorable opinion, addressed to the Representatives and
dated such Closing Date, with respect to the Shares, the Registration
Statement and the Prospectus, and such other related matters, as the
Representatives may reasonably request, and the Company shall have
furnished to Baker Botts L.L.P. such documents as they may request for
the purpose of enabling them to pass upon such matters.

<PAGE> 20

(i) The Company shall have received on or prior to the Firm
Shares Closing Date from Arthur Andersen LLP an opinion, in form and
substance reasonably satisfactory to the Representatives, stating in
effect that pursuant to the Internal Revenue Code of 1986, as amended,
and the regulations and rules published thereunder, the Company should
have a tax basis in its assets equal to the purchase price paid by the
Company therefor pursuant to the Stock Transfer and Separation
Agreement to be executed and delivered by the Company, the Parent and
the Selling Stockholder as of the Firm Shares Closing Date.

(j) The Representatives shall have received from Forrest A.
Garb & Associates, Inc., independent natural gas and oil engineers, a
letter or letters dated the date of this Agreement and of each Closing
Date, respectively, in form and substance satisfactory to the
Representatives, each stating, as of the date of such letter (or, with
respect to matters involving changes or developments since the
respective dates as of which information regarding the natural gas and
oil reserves and future net cash flows is given in the Prospectus, as
of the date not more than three days prior to the date of such letter),
the conclusions and findings of such firm with respect to the natural
gas and oil reserves of the Company and such other matters as the
Representatives reasonably may request.

(k) If the Shares have been qualified for sale in Florida, the
Representatives shall have received on each Closing Date certificates,
addressed to the Representatives, and dated such Closing Date, of an
executive officer of the Company, to the effect that the signer of such
certificate has reviewed and understands the provisions of Section
517.075 of the Florida Statutes, and represents that the Company has
complied, and at all times will comply, with all provisions of Section
517.075 and further, that as of such Closing Date, neither the Company
nor any of its affiliates does business with the government of Cuba or
with any person or affiliate located in Cuba.

(l) The Representatives shall have received copies of the
Lock-up Agreements executed by each entity or person described in
Section 4(p).

(m) The transactions contemplated to occur before the closing
on the Firm Shares Closing Date pursuant to the Stock Transfer and
Separation Agreement among the Parent, the Selling Stockholder and the
Company (the "Separation Agreement") as described in the Prospectus
under the caption "Arrangements with Seitel" shall have occurred, and
the Sublease, Registration Rights Agreement, Tax Indemnity Agreement,
Employee Benefits Allocation Agreement and Administrative Services
Agreement (each as defined in the Separation Agreement) entered into
pursuant to the Separation Agreement shall be in substantially the
forms included as Exhibits to the Registration Statement and as
described in the Prospectus.

(n) The Company, the Parent and the Selling Stockholder shall
have furnished or caused to be furnished to the Representatives such
further certificates or documents as the Representatives shall have
reasonably requested.

<PAGE> 21

6. Covenants of the Company. (a) The Company covenants
and agrees as follows:

(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto, to become effective as
promptly as possible. The Company shall prepare the Prospectus in a
form approved by the Representatives and file such Prospectus pursuant
to Rule 424(b) under the Securities Act not later than the Commission's
close of business on the second business day following the execution
and delivery of this Agreement, or, if applicable, such earlier time as
may be required by Rule 430A(a)(3) under the Securities Act.

(ii) The Company shall promptly advise the Representatives in
writing (i) when any amendment to the Registration Statement shall have
become effective, (ii) of any request by the Commission for any
amendment of the Registration Statement or the Prospectus or for any
additional information, (iii) of the prevention or suspension of the
use of any preliminary prospectus or the Prospectus or of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any
proceeding for that purpose and (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose. The Company shall not
file any amendment of the Registration Statement or supplement to the
Prospectus unless the Company has furnished the Representatives a copy
thereof for its review prior to filing and shall not file any such
proposed amendment or supplement to which the Representatives
reasonably object. The Company shall use its best efforts to prevent
the issuance of any such stop order and, if issued, to obtain as soon
as possible the withdrawal thereof.

(iii) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Securities Act or the Rules, the Company
promptly shall prepare and file with the Commission, subject to the
second sentence of paragraph (ii) of this Section 6(a), an amendment or
supplement which shall correct such statement or omission or an
amendment which shall effect such compliance.

(iv) The Company shall make generally available to its
security holders and to the Representatives as soon as practicable, but
not later than 45 days after the end of the 12-month period beginning
at the end of the fiscal quarter of the Company during which the
Effective Date occurs (or 90 days if such 12-month period coincides
with the Company's fiscal year), an earning statement (which need not
be audited) of the Company, covering such

<PAGE> 22

12-month period, which shall satisfy the provisions of Section 11(a) of
the Securities Act or Rule 158 of the Rules.

(v) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments
thereof) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and all amendments thereof and, so
long as delivery of a prospectus by an Underwriter or dealer may be
required by the Securities Act or the Rules, as many copies of any
preliminary prospectus and the Prospectus and any amendments thereof
and supplements thereto as the Representatives may reasonably request.

(vi) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and sale
in connection with the offering under the laws of such jurisdictions as
the Representatives may designate and shall maintain such
qualifications in effect so long as required for the distribution of
the Shares; provided, however, that the Company shall not be required
in connection therewith, as a condition thereof, to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction or subject itself to taxation as doing
business in any jurisdiction.

(vii) Without the prior written consent of CIBC World Markets
Corp., for a period of 180 days after the date of this Agreement, the
Company and each of its individual directors (including nominees) and
executive officers shall not issue, sell or register with the
Commission (other than on Form S-8 or on any successor form), or
otherwise dispose of, directly or indirectly, any equity securities of
the Company (or any securities convertible into, exercisable for or
exchangeable for equity securities of the Company), except for the
issuance of the Shares pursuant to the Registration Statement, the
issuance by the Company of warrants to purchase shares granted to
executives of the Company (the "Warrants"), and shares upon exercise
thereof, as described in the Registration Statement and the Prospectus
and the issuance of shares pursuant to the Company's 1999 Stock
Incentive Plan (the "Plan") as described in the Registration Statement
and the Prospectus. In the event that during this period, (i) any
shares are issued pursuant to the Warrants or the Plan that are
exercisable during such 180-day period or (ii) any registration is
effected on Form S-8 or on any successor form relating to shares that
are exercisable during such 180-day period, the Company shall obtain
the written agreement of such grantee or purchaser or holder of such
registered securities that, for a period of 180 days after the date of
this Agreement, such person will not, without the prior written consent
of CIBC World Markets Corp., offer for sale, sell, distribute, grant
any option for the sale of, or otherwise dispose of, directly or
indirectly, or exercise any registration rights with respect to, any
shares of Common Stock (or any securities convertible into, exercisable
for or exchangeable for any shares of Common Stock) owned by such
person.

<PAGE> 23

(viii) On or before completion of this offering, the Company
shall make all filings required under applicable securities laws and by
the Nasdaq National Market (including any required registration under
the Exchange Act).

(ix) The Company shall file timely and accurate reports in
accordance with the provisions of Florida Statutes Section 517.075, or
any successor provision, and any regulation promulgated thereunder, if
at any time after the Effective Date, the Company or any of its
affiliates commences engaging in business with the government of Cuba
or any person or affiliate located in Cuba.

(x) The Company will apply the net proceeds from the offering
of the Shares in the manner set forth under "Use of Proceeds" in the
Prospectus.

(b) The Company agrees to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company, the Parent and the Selling Stockholder under this Agreement, including
those relating to: (i) the preparation, printing, filing and distribution of the
Registration Statement, including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the Registration
Statement and the Prospectus, and the printing, filing and distribution of this
Agreement; (ii) the preparation and delivery of certificates for the Shares to
the Underwriters; (iii) the registration or qualification of the Shares for
offer and sale under the securities or Blue Sky laws of the various
jurisdictions referred to in Section 6(a)(vi), including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
registration and qualification and the preparation, printing, distribution and
shipment of preliminary and supplementary Blue Sky memoranda; (iv) the
furnishing (including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of each preliminary prospectus, the Prospectus and
all amendments or supplements to the Prospectus, and of the several documents
required by this Section to be so furnished, as may be reasonably requested for
use in connection with the offering and sale of the Shares by the Underwriters
or by dealers to whom Shares may be sold; (v) the filing fees of the NASD in
connection with its review of the terms of the public offering and reasonable
fees and disbursements of counsel for the Underwriters in connection with such
review; (vi) inclusion of the Shares for quotation on the Nasdaq National
Market; and (vii) all transfer taxes, if any, with respect to the sale and
delivery of the Shares by the Company to the Underwriters. Subject to the
provisions of Section 9, the Underwriters agree to pay, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Underwriters under this Agreement not payable by the Company
pursuant to the preceding sentence, including, without limitation, the fees and
disbursements of counsel for the Underwriters.

7. Indemnification. (a) The Company, the Parent and the
Selling Stockholder agree, jointly and severally, to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Securities Act or Section

<PAGE> 24

20 of the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation, legal and
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted), to which they, or any
of them, may become subject under the Securities Act, the Exchange Act or other
Federal or state law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in (A)
any preliminary prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto, (B) in any Blue Sky application or
other information or other documents executed by the Company filed in any state
or other jurisdiction to qualify any or all of the Shares under the securities
laws thereof (any such application, document or information being hereinafter
referred to as a "Blue Sky Application") or (C) in any materials or information
provided to investors by, or with the approval of, the Company or the Parent in
connection with the marketing of the offering of the Shares ("Marketing
Materials"), including any roadshow or investor presentations made to investors
by the Company or the Parent (whether in person or electronically), or in any
such case arise out of or are based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) in whole or in part upon any breach
of the representations and warranties set forth in Section 4 hereof, or (iii) in
whole or in part upon any failure of the Company, the Parent or the Selling
Stockholder to perform any of their respective obligations hereunder or under
law; provided, however, that such indemnity shall not inure to the benefit of
any Underwriter (or any person controlling such Underwriter) on account of any
losses, claims, damages or liabilities arising from the sale of the Shares to
any person by such Underwriter if such untrue statement or omission or alleged
untrue statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or supplement
thereto, or in any Blue Sky Application or Marketing Materials, in reliance upon
and in conformity with information furnished in writing by the Representatives
on behalf of any Underwriter specifically for use therein. The Company, the
Parent and the Selling Stockholder acknowledge that the only information
furnished in writing by the Representatives on behalf of the several
Underwriters for use in the Registration Statement or the Prospectus or in any
Blue Sky Application or Marketing Materials is (i) the second, third and fourth
sentences in the fourth paragraph under the caption "Underwriting" in the
Prospectus and (ii) the 10th and 12th paragraphs under such caption. This
indemnity agreement will be in addition to any liability which the Company, the
Parent and the Selling Stockholder may otherwise have.

(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Parent, the Selling Stockholder and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company who signs the Registration Statement,
to the same extent as the foregoing indemnity from the Company, the Parent and
the Selling Stockholder to each Underwriter, but only insofar as such losses,
claims, damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which was made in
any preliminary prospectus, the Registration Statement or the Prospectus, or any
amendment thereof or supplement thereto, or in any Blue Sky Application or

<PAGE> 25

Marketing Materials, in reliance upon and in conformity with information
furnished in writing by the Representatives on behalf of any Underwriter for use
therein; provided, however, that the obligation of each Underwriter to indemnify
the Company (including any controlling person, director or officer thereof), the
Parent or the Selling Stockholder shall be limited to the net proceeds received
from such Underwriter.

(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such action,
suit or proceeding, enclosing a copy of all papers served. No indemnification
provided for in Section 7(a) or 7(b) shall be available to any party who shall
fail to give notice as provided in this Section 7(c) if the party to whom notice
was not given was unaware of the proceeding to which such notice would have
related to the extent such indemnifying party is prejudiced by the failure to
give such notice, but the omission so to notify such indemnifying party of any
such action, suit or proceeding shall not relieve it from any liability that it
may have to any indemnified party for contribution or otherwise than under this
Section. In case any such action, suit or proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense thereof
and the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses, except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in connection with
the defense thereof. The indemnified party shall have the right to employ its
counsel in any such action, but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless (i) the employment of counsel by
such indemnified party has been authorized in writing by the indemnifying
parties, (ii) the indemnified party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or in addition to those available to the indemnifying party (in which case the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of the indemnified party) or (iii) the indemnifying parties
shall not have employed counsel to assume the defense of such action within a
reasonable time after notice of the commencement thereof, in each of which cases
the fees and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent, which
consent shall not be unreasonably withheld or delayed.

8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(a) or 7(b) is due in accordance with its terms but for any reason is
held to be unavailable to or insufficient to hold harmless an indemnified party
under Section 7(a) or 7(b), then each indemnifying party shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other

<PAGE> 26

expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution received by any person entitled hereunder to
contribution from any person who may be liable for contribution) to which the
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Parent and the Selling
Stockholder on the one hand and the Underwriters on the other from the offering
of the Shares or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 7 hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, the Parent and the Selling Stockholder on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, the Parent, the Selling Stockholder and the
Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts but before deducting
expenses) received by the Company or the Selling Stockholder, as set forth in
the table on the cover page of the Prospectus, bear to (y) the underwriting
discounts received by the Underwriters, as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company, the Parent and the
Selling Stockholder or the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact related to information supplied by the Company, the Parent and the Selling
Stockholder or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Parent, the Selling Stockholder and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) in no case shall any
Underwriter (except as may be provided in the Agreement Among Underwriters) be
liable or responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by such Underwriter hereunder; and (ii) the
Company, the Parent and the Selling Stockholder shall be liable and responsible
for any amount in excess of such underwriting discount; provided, however, that
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person, if any, who controls an Underwriter within the meaning
of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall
have the same rights to contribution as such Underwriter, and each person, if
any, who controls the Company within the meaning of the Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to clauses (i) and (ii) in the immediately preceding sentence of this
Section 8. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties under this Section, notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties

<PAGE> 27

from whom contribution may be sought shall not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this Section. No party shall be liable for
contribution with respect to any action, suit, proceeding or claim settled
without its written consent. The Underwriter's obligations to contribute
pursuant to this Section 8 are several in proportion to their respective
underwriting commitments and not joint.

9. Termination. This Agreement may be terminated with respect
to the Shares to be purchased on a Closing Date by the Representatives by
notifying the Company and the Selling Stockholder at any time:

(a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if on or prior to such date, any domestic
or international event or act or occurrence has materially disrupted,
or in the opinion of the Representatives will in the future materially
disrupt, the securities markets; (ii) if there has occurred any new
outbreak or material escalation of hostilities or other calamity or
crisis the effect of which on the financial markets of the United
States is such as to make it, in the judgment of the Representatives,
inadvisable to proceed with the offering; (iii) if there shall be such
a material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial
markets in the United States is such as to make it, in the judgment of
the Representatives, inadvisable or impracticable to market the Shares;
(iv) if trading in the Shares has been suspended by the Commission or
trading generally on the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. or the Nasdaq National Market has been suspended
or limited, or minimum or maximum ranges for prices for securities
shall have been fixed, or maximum ranges for prices for securities have
been required, by said exchanges or by order of the Commission, the
NASD or any other governmental or regulatory authority; (v) if a
banking moratorium has been declared by any state or Federal authority;
or (vi) if, in the judgment of the Representatives, there has occurred
a Material Adverse Effect, or

(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.

If this Agreement is terminated pursuant to any of its
provisions, neither the Company, the Parent nor the Selling Stockholder shall be
under any liability to any Underwriter, and no Underwriter shall be under any
liability to the Company, the Parent or the Selling Stockholder, except that (y)
if this Agreement is terminated by the Representatives or the Underwriters
because of any failure, refusal or inability on the part of the Company, the
Parent or the Selling Stockholder to comply with the terms or to fulfill any of
the conditions of this Agreement, the Company will reimburse the Underwriters
for all out-of-pocket expenses (including the reasonable fees and disbursements
of their counsel) incurred by them in connection with the proposed purchase and
sale of the Shares or in contemplation of performing their obligations hereunder
and (z) no Underwriter who shall have failed or refused to purchase the Shares
agreed to be purchased by it under this Agreement, without some reason
sufficient hereunder to justify cancellation or termination of its

<PAGE> 28

obligations under this Agreement, shall be relieved of liability to the Company,
the Selling Stockholder or to the other Underwriters for damages occasioned by
its failure or refusal.

10. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representatives may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date:

(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided that in no event shall
the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 11
by more than one-ninth of such number of Shares without the written
consent of such Underwriter, or

(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to one additional business day
within which it may, but is not obligated to, find one or more
substitute underwriters reasonably satisfactory to the Representatives
to purchase such Shares upon the terms set forth in this Agreement.

In any such case, either the Representatives or the Company
shall have the right to postpone the applicable Closing Date for a period of not
more than five business days in order that necessary changes and arrangements
(including any necessary amendments or supplements to the Registration Statement
or Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company or the Selling
Stockholder and without liability on the part of the Company, except in both
cases as provided in Sections 6(b), 7, 8 and 9. The provisions of this Section
shall not in any way affect the liability of any defaulting Underwriter to the
Company or the nondefaulting Underwriters arising out of such default. A
substitute underwriter hereunder shall become an Underwriter for all purposes of
this Agreement.

<PAGE> 29

11. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers, of
the Parent, of the Selling Stockholder and of the Underwriters set forth in or
made pursuant to this Agreement shall remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or the
Company, the Parent or the Selling Stockholder or any of the officers, directors
or controlling persons referred to in Sections 7 and 8 hereof, and shall survive
delivery of and payment for the Shares. The provisions of Sections 6(b), 7, 8
and 9 shall survive the termination or cancellation of this Agreement.

This Agreement has been and is made for the benefit of the
Underwriters, the Company, the Parent and the Selling Stockholder and their
respective successors and assigns, and, to the extent expressed herein, for the
benefit of persons controlling any of the Underwriters, or the Company, and
directors and officers of the Company, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" shall not include any
purchaser of Shares from any Underwriter merely because of such purchase.

All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph if subsequently confirmed
in writing, (a) if to the Representatives, c/o CIBC World Markets Corp., One
World Financial Center, New York, New York 10281, Attention: __________, with a
copy to Baker Botts L.L.P., 910 Louisiana Street, 3000 One Shell Plaza, Houston,
Texas 77002, Attention: R. Joel Swanson, and (b) if to the Company, to its agent
for service as such agent's address appears on the cover page of the
Registration Statement with a copy to Gardere Wynne Sewell & Riggs, L.L.P., 1000
Louisiana Street, Suite 3400, Houston, Texas 77002, Attention: W. Mark Young,
and (c) if to the Parent or the Selling Stockholder to Seitel, Inc., 50 Briar
Hollow Lane, 7th Floor, West Building, Houston, Texas 77027, Attention: Debra D.
Valice, with a copy to Gardere Wynne Sewell & Riggs, L.L.P., 1000 Louisiana
Street, Suite 3400, Houston, Texas 77002, Attention: W. Mark Young.

This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.

This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

<PAGE> 30

Please confirm that the foregoing correctly sets forth the
agreement among us.

Very truly yours,

VISION ENERGY, INC.

By:
-------------------------------
Name:
Title:

SEITEL, INC.

By:
-------------------------------
Name:
Title:

VISION HOLDINGS LLC

By:
-------------------------------
Name:
Title:

Confirmed:

CIBC WORLD MARKETS CORP.
A.G. EDWARDS & SONS, INC.
SOUTHCOAST CAPITAL L.L.C.

Acting severally on behalf of itself and as representative of the several
Underwriters named in Schedule I annexed hereto.

By: CIBC WORLD MARKETS CORP.

By:
------------------------
Name:
Title:

<PAGE> 31
SCHEDULE I

Number of Firm
Shares to
Name Be Purchased
- ---- ------------

CIBC World Markets Corp.........................................

A.G. Edwards & Sons, Inc........................................

Southcoast Capital L.L.C........................................

-------------
Total.................................................. 12,915,000
=============

I-1

<PAGE> 1
EXHIBIT 5.1

, 2000

Board of Directors
Vision Energy, Inc.
50 Briar Hollow Lane, 7th Floor, West Building
Houston, Texas 77027

Gentlemen:

We have acted as counsel to Vision Energy, Inc., a Delaware corporation
(the "Company"), in connection with the proposed offer and sale by the Company
to the Underwriters pursuant to the prospectus forming a part of that certain
Registration Statement on Form S-1, File No. 333-90869, originally filed under
the Securities Act of 1933, as amended (the "Securities Act") with the
Securities and Exchange Commission (the "SEC") on November 12, 1999 (such
Registration Statement, as amended at the effective date thereof being referred
to herein as the "Registration Statement") of an aggregate of 12,915,000 shares
(the "Primary Shares") of common stock, par value $0.01 per share (the "Common
Stock"), of the Company and up to 1,937,000 shares (the "Option Shares") of
Common Stock which may be sold pursuant to an over-allotment option provided in
the Underwriting Agreement. The Company will issue 14,349,981 shares of Common
Stock to Vision Holdings, LLC, a Delaware limited liability company (the
"Selling Stockholder"), pursuant to the Separation Agreement, and the Selling
Stockholder will then sell the Primary Shares and up to a maximum of 800,000 of
the Option Shares to the underwriters pursuant to the Underwriting Agreement.
The Company will issue and sell up to 1,137,000 of the Option Shares to the
underwriters pursuant to the Underwriting Agreement. Capitalized terms used but
not defined herein have the meanings ascribed to them in that certain
Underwriting Agreement by and among the Company and the Underwriters, a form of
which has been filed as an exhibit to the Registration Statement.

We are rendering this opinion as of the time the Registration Statement
becomes effective in accordance with Section 8(a) of the Securities Act.

As the basis for the opinions expressed below, we have examined the
Registration Statement and the prospectus contained therein, the Certificate of
Incorporation and Bylaws of the Company, the records of corporate proceedings of
the Company that have occurred prior to the date hereof with respect to the
offering, the form of Underwriting Agreement, the form of Separation Agreement
and such statutes, regulations, corporate records and documents, certificates of
corporate and public officials and other instruments as we have deemed necessary
or advisable for the purposes of this opinion. In such examination, we have
assumed (i) that the signatures on all documents that we have

<PAGE> 2

Board of Directors of Vision Energy, Inc.
, 2000
Page Two

examined are genuine, (ii) the authenticity of all documents submitted to us as
originals, and (iii) the conformity with the original documents of all documents
submitted to us as copies.

In connection with this opinion, we have assumed that (i) the
Registration Statement, and any amendments thereto (including post-effective
amendments), will have become effective and (ii) the shares of Common Stock
covered by this opinion will be issued and sold in compliance with applicable
federal and state securities laws and in the manner described in the
Registration Statement and the applicable prospectus.

Based upon the foregoing, subject to the qualifications hereinafter set
forth, and having regard for such legal considerations as we have deemed
relevant, we are of the opinion that (i) the Primary Shares and the Option
Shares proposed to be sold by the Selling Stockholder to the Underwriters have
been validly authorized for issuance and delivery thereof in accordance with the
provisions of the Separation Agreement (in the form reviewed by us) and as set
forth in the Registration Statement and, when issued and delivered to the
Selling Stockholder in accordance with the Separation Agreement and sold by the
Selling Stockholder to the Underwriters in accordance with the Underwriting
Agreement, will be validly issued, fully paid and nonassessable, and (ii) the
Option Shares proposed to be issued and sold by the Company to the Underwriters
have been validly authorized for issuance and delivery thereof in accordance
with the provisions of the Underwriting Agreement (in the form reviewed by us)
and as set forth in the Registration Statement and, when so issued and
delivered, will be validly issued, fully paid and nonassessable.

The opinions expressed herein are limited exclusively to the federal
laws of the United States of America, the laws of the State of Texas and the
General Corporation Law of the State of Delaware, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction.

This opinion is rendered solely for the benefit of the Company and is
not to be used, circulated, copied, quoted or referred to without our prior
written consent. We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the statements made with respect to us
under the caption "Legal Matters" in the Prospectus included as part of the
Registration Statement, but we do not thereby admit that we are within the class
of persons whose consent is required under the provisions of the Securities Act
or the rules and regulations of the SEC issued thereunder.

Very truly yours,

<PAGE> 1
EXHIBIT 8.1

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

Ms. Debra Valice
Chief Financial Officer and Executive Vice President
Seitel, Inc.

Horace Calvert
President and Chief Executive Officer
Vision Energy, Inc.
50 Briar Hollow Lane
7th Floor, West Building
Houston, Texas 77027

Dear Ms. Valice and Mr. Calvert:

You have requested that we provide our opinion regarding the availability of
Vision Energy, Inc. ("Vision") and Seitel, Inc. ("Seitel") to effect a valid
joint election under Section 338(1) following the proposed acquisition (the
"Acquisition") of the stock of DDD Energy, Inc. ("DDD"), to be effected via an
initial public offering ("IPO") of Vision stock by Seitel through its wholly
owned subsidiary Vision Holdings LLC ("LLC"). For a further description of the
transactions necessary to effect the acquisition, see Appendix A, Facts,
Assumptions and Representations as Provided by Management.

Based upon our analysis of the relevant tax authorities and the limitations
set-out herein, it is our opinion that Vision's acquisition of DDD should
constitute a "qualified stock purchase" within the meaning of Section 338(d)(3).
Further, assuming the subsequent filing with the Internal Revenue Service
("IRS") of a valid and timely Section 338(h)(10) election(2) by Seitel and
Vision to treat the Acquisition of the DDD stock by Vision as an asset purchase,
we are of the opinion that DDD, as a subsidiary of Vision after the IPO, should
be entitled to depreciate, amortize or otherwise recover the tax basis of the
assets deemed to be purchased as a result of the Section 338(h)(10) election, in
accordance with the customary income tax accounting principles attributable to
each particular asset in amounts determined pursuant to Code section 338 and the
Regulations thereunder.

In rendering our opinions, we have relied upon the facts, information,
assumptions and representations as contained in Appendix A, the Vision Energy,
Inc. Form S-1 as filed with the Securities and Exchange Commission on
___________, and the related stock transfer agreements (collectively, the
"Relevant Documents") all of which are assumed to be accurate as of the date of
this letter and as of the closing date of the IPO. We have not audited or
otherwise verified any of these facts and assumptions. Additionally, since the
facts represented herein involve a series of prospective transactions, in
rendering our opinions we have expressly relied upon your representations that
the prospective events set-out herein will, in fact, occur exactly as described,
including the relative timing between the steps as well as the ordering of the
steps. Specifically in reaching these opinions, we have presumed that there will
be an initial public offering of the stock of Vision, by Seitel and LLC,
pursuant to a firm commitment underwriting, and that the other stock sales and
transfers described in the Relevant Documents will occur in

- -------------------------------
(1) Unless otherwise stated, all references to section and regulation citations
refer to the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, respectively.

(2) The election must be made on a properly completed Form 8023. Both Seitel
and Vision Energy must sign the election form, and it must be filed with
the IRS District Office in Austin, TX by the 15th day of the 9th month
beginning after the acquisition date, or for example, October 15, 2000 if
the IPO were to close in January 2000.

<PAGE> 2
Ms. Debra Valice and Mr. Horace Calvert
Page 2

accordance with existing binding commitments to make such transfers. Any
misstatement, omission, amendment or change in any of the facts or
representations set forth in the Relevant Documents after the date hereof, would
necessarily have to be evaluated in order to determine whether our opinions set
forth herein would change. We have no obligation to update this opinion for any
changes in the facts, representations, or prevailing technical authorities that
occur after the date of this letter.

These opinions are based upon our analysis of the Code, Treasury Regulations,
existing administrative and judicial interpretations thereof (collectively, the
"U.S. Federal Income Tax Authorities") as of the date of this letter. We provide
no assurance that the U.S. Federal Income Tax authorities upon which this
opinion is based will not be amended, revoked, or modified (with or without
retroactive effect) in a manner that would affect or change our conclusions.

These opinions are not binding on the IRS or the courts. There can be no
assurance that the IRS or the courts will not take positions contrary to the
position expressed herein. The opinion expressed herein reflects our assessment
of the probable outcome of litigation and other adversarial proceedings based
solely on an analysis of the existing U.S. Federal Income Tax authorities
relating to the issues which are the subject of this opinion.

We have not considered any non-income tax, state, local or foreign tax
consequences, or other areas such as securities law, and, therefore, do not
express any opinion regarding such matters. Additionally, our opinions expressed
herein are specifically limited to the U.S. Federal Income Tax consequences of
the acquisition of DDD stock by Vision involving Code section 338 and matters
related to the consequences of the section 338(h)(10) election.

This opinion is solely for the benefit of Vision, its stockholders, and Seitel,
and is not intended to be relied upon by any other parties. Although you hereby
have our express consent to inform other parties to the IPO of our opinion by
including copies of this letter as an exhibit in the registration statement on
Form S-1 of Vision (the "Registration Statement") with respect to the IPO and by
making reference to us and our opinion in the Prospectus forming a part of the
Registration Statement, we assume no responsibility for any tax or other
consequences to any other parties. Instead, each of these parties is urged to
consult and rely upon the advice of their respective advisors. Except to the
extent expressly permitted hereby, and without the prior written consent of this
firm, this letter may not be quoted in whole or in part or otherwise referred to
in any documents or delivered to any other person or entity.

<PAGE> 3
APPENDIX A
FACTS, ASSUMPTIONS AND REPRESENTATIONS AS PROVIDED BY MANAGEMENT

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

The following facts, assumptions, and representations, together with all of the
agreements and documents referred to in our opinion dated _______________
("Opinion"), form the basis for the opinions issued on ____________ by Arthur
Andersen LLP ("Andersen") with respect to Vision Energy, Inc.'s ("Vision")
proposed acquisition (the "Acquisition") of 100% of the stock of DDD Energy,
Inc. ("DDD"), a wholly owned subsidiary of Seitel, Inc. ("Seitel"). Generally,
the Acquisition will take the form of a transfer of 100% of the stock of DDD in
exchange for all the stock of Vision followed by an initial public offering (the
"Offering") of Vision's stock by Seitel through its wholly owned subsidiary
Vision Holdings LLC, as discussed below. Capitalized terms not otherwise defined
herein have the meaning ascribed to them in the Opinion and Vision's Form S-1
dated ____________, and as subsequently amended.

FACTS

Seitel is the widely held and publicly traded parent of a consolidated group
that includes DDD. DDD was formed by Seitel in March 1993 and has been operating
as an exploration and production subsidiary since the date of its incorporation.
DDD's first producing properties commenced production in early 1994. Seitel
wishes to terminate its involvement with DDD and divest itself of DDD's business
operations. Seitel's disposition of its interest in DDD will be structured as
follows.

On ____________, Seitel will form Vision Holdings LLC ("LLC"), a single member
Delaware Limited Liability Company, by transferring $1,000 to LLC in exchange
for all of the issued and outstanding member interests in LLC.

On November 8, 1999, Seitel and Horace Calvert, president of DDD, formed Vision,
a Delaware corporation. Mr. Calvert transferred $1,215 to Vision in return for
81 shares of Vision common stock. The shares received by Mr. Calvert are subject
to a redemption agreement dated November 9, 1999, which grants Vision the right
to redeem the shares at an amount equal to their cost upon providing him notice
of its intention to do so. It is envisioned that this call option will be
exercised upon closing the IPO between Seitel, LLC, and the underwriters. Seitel
transferred $285 to Vision in return for 19 shares of Vision common stock.

On _________, prior to the transfers taking place on ________, LLC will enter
into a binding commitment to sell 12,915,000 shares of Vision common stock to
the public through CIBC World Markets, A.G. Edwards & Sons, Inc., and Southcoast
Capitol, LLC (collectively "the Underwriters") for cash. Additionally, LLC will
also enter into a binding commitment to sell 10,000 shares of Vision's Class A
Redeemable Preferred Stock to unrelated third party investors ("Third Party
Investors") who are not otherwise taking part in the Offering.

The Vision common stock will have characteristics consistent with stock traded
in public markets. The Vision Class A Redeemable Preferred stock will consist of
10,000 authorized shares with a liquidation preference of $100. The holder will
be entitled to cumulative dividends of 7 1/2% of the liquidation preference per
share per year to be paid in cash, and the dividend rate will increase 2% each
year if dividends are not paid as they accrue. The preferred shares will have no
voting rights. The preferred shares will be redeemable at the option of Vision,
or the holder, at any time after five years following the offering. The
redemption price will be equal to the greater of: 1) 105% of the sum of the
liquidation preference per share plus all accrued and unpaid dividends, or 2)
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 Vision 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 the

<PAGE> 4
Vision common stock received in the Offering. The redemption formula will be
adjusted for stock splits and other similar transactions, and there will be an
acceleration provision allowing for redemption upon the occurrence of certain
liquidity events.

On ________, Seitel, LLC, Vision, and the Underwriters will execute a firm
commitment underwriting agreement for the purpose of conducting the Offering. In
conjunction therewith, Vision will redeem Mr. Calvert's shares pursuant to the
redemption agreement and Seitel will transfer 100% of the issued and outstanding
stock of DDD to LLC as a contribution to capital. Vision will issue 14,349,981
shares of Vision common stock and 10,000 shares of class A Redeemable Preferred
stock to LLC in exchange for 100% of the DDD stock.

Upon closing of the Offering, LLC will transfer 12,915,000 shares of Vision
common stock to the Underwriters and will transfer the 10,000 Class A Redeemable
Preferred shares to the Third Party Investors, pursuant to the binding
commitments.

Within 30 days of the closing of the Offering, should the Underwriters elect to
exercise their over-allotment option, the 1,937,000 shares available to the
Underwriters will consist of a combination of newly issued Vision shares and
Vision shares received by LLC. Vision will issue up to 1,137,000 new common
shares and LLC will sell up to 800,000 Vision common shares from the shares
received in the DDD stock transfer described above. The over-allotment shares
will come proportionately from each party. The total number of Vision common
shares outstanding immediately after the Offering in the event the underwriters'
over allotment option is exercised in full will not exceed 15,487,000.

On or before the 15th day of the 9th month beginning after the month in which
the Offering closes, Seitel/LLC and Vision will file a duly completed Form 8023
with the Internal Revenue Service, electing to treat the sale of DDD stock to
Vision as an asset sale pursuant to section 338(h)(10) of the Internal Revenue
Code of 1986, as amended (the Code). This election will be jointly executed by
Seitel/LLC and Vision.

DECLARATIONS

1. The undersigned is familiar with the business and affairs of Seitel,
DDD, LLC and Vision, has examined and is familiar with the tax
representations set forth below, and has made such investigations of
factual matters as are reasonably necessary for the purposes of
making the declarations and representations herein. The undersigned
is familiar with Vision's Registration Statement filed on Form S-1,
the stock transfer agreements, the underwriting agreement, and all
other documents relating to the Offering (collectively, the "Offering
Documents").

2. No event has come to the attention of the undersigned that causes the
undersigned to believe that any of the information relating to the
Offering (including, but not limited to, all representations,
warranties, covenants, and undertakings) set forth in the Offering
Documents, insofar as such information relates to Seitel, DDD, LLC
and Vision, or to the plans and intentions of such entities, contains
any untrue statement of fact or omits to state a fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.

3. The Offering Documents represent the full and complete agreement
between Seitel, DDD, LLC, Vision, Mr. Calvert, the underwriters, and
the Third Party Investors regarding the Offering, and there are no
other written or oral agreements regarding the Offering.

<PAGE> 5
4. The undersigned understands that the following representations form
the basis of the opinions of Andersen and that any change or
inaccuracy in the facts described in such representations could
adversely alter such opinions.

REPRESENTATIONS

To the best of the knowledge and belief of the undersigned, the following
representations are true, correct, and complete as of the date hereof and will
be true, correct, and complete at the closing, and no additional information is
or will be required to make the following representations not misleading as of
such dates:

1. DDD is a wholly owned subsidiary of Seitel and has remained a wholly owned
subsidiary of Seitel since its formation in March 1993.

2. DDD did not acquire or hold any assets whose value represented goodwill
from its formation in March 1993 to August 10, 1993.

3. There are no outstanding options on DDD stock at the time of the Offering.

4. Seitel will form Vision Holdings LLC, a single member Delaware Limited
Liability Company ("LLC"), on _______. LLC will serve as a non-restricted
entity for Seitel to hold its remainder interest in DDD after the Offering
is closed. Seitel will transfer 100% of its DDD stock to LLC prior to the
closing of the Offering.

5. Horace Calvert and Seitel incorporated Vision on November 8, 1999 to serve
as the registrant in the Offering. Pursuant to Vision's Articles of
Incorporation, Horace Calvert received 81 shares of Vision common stock in
exchange for his $1,215 capital contribution, and Seitel received 19 shares
of Vision common stock in exchange for its $285 capital contribution. The
shares issued to Horace Calvert are subject to a Buy/Sell Agreement, which
was entered into on November 9, 1999 and provides that in the case of an
Offering, the shares will be "called" at cost.

6. Vision was formed prior to the closing solely to permit registration of its
common stock with the Securities and Exchange Commission, to enable it to
acquire all of the outstanding stock of DDD at closing, and to engage in
other transactions as described herein. Except for activities incident to
these actions, prior to closing, Vision will have no activities and will
carry on no business. Seitel will transfer its 19 shares of Vision to LLC.

7. There is no plan or intention for Vision or DDD to cease to remain in
existence as separate corporations following the closing.

8. Vision has not acquired and, prior to the filing of the election under Code
section 338(h)(10), and during the required consistency period, will not
acquire any assets of DDD.

9. Prior to the transfer of its DDD stock to Vision, LLC will enter into two
separate binding commitments. The first binding commitment will obligate
LLC to sell to the Public the 12,915,000 Vision common shares that it
receives in exchange for its DDD stock, through the Underwriters, for
$_______ in cash. The second binding commitment will obligate LLC to sell
the 10,000 shares of Vision Class A Redeemable Preferred stock it receives
in the same exchange to the Third Party Investors for $1,000,000 cash.
Pursuant to the Buy/Sell Agreement, Mr. Calvert's shares will be called at
cost. Pursuant to the Offering Documents, LLC will exchange 100% of its DDD
stock for 14,349,981 shares of additional Vision common stock and 10,000
shares of Vision Class A Redeemable Preferred stock.

<PAGE> 6
10. Pursuant to Code section 338(h)(10), Seitel/LLC and Vision will jointly and
timely file Form 8023, electing to treat the sale of DDD stock to Vision as
an asset sale for federal income tax purposes on or before the 15th day of
the 9th month following the close of the Offering.

11. [Third Party Investors] have no plan or intention of participating in the
Offering and have no plan or intention of acquiring any shares of Vision
common stock following the close of the Offering.

12. Neither Seitel, Vision, LLC, nor any of their subsidiaries have any plan or
intention of acquiring or reacquiring any Vision shares issued in the
Offering.

13. The terms of the agreements, including the underwriting agreement, will be
determined in good faith negotiations between the parties, and the fair
market value of the Vision shares received by LLC in exchange for the DDD
shares will be approximately equal to the fair market value of the DDD
shares.

14. Seitel and Vision have each paid or will pay their own expenses.

15. Vision has no plan or intention to dispose of the DDD shares.

We understand that (i) your opinions will be based on the representations set
forth herein and on the statements contained in the Offering Documents
(including all schedules and exhibits thereto), and (ii) your opinions will be
subject to certain limitations and qualifications including that they may not be
relied upon if any such representations and statements are not accurate in all
respects. It is further understood that your opinions will not address any tax
consequences of the Offering or any action taken in connection therewith except
as expressly set forth in such opinions.

Very truly yours,

Seitel, Inc. Vision Energy, Inc.
A Delaware corporation A Delaware corporation

- ------------------------------- -------------------------------
By: By:
---------------------------- ----------------------------
Title: Title:
------------------------- -------------------------

Horace Calvert [Third Party Investors]

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

<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 reports dated January 12, 2000, included herein
and to all references to our Firm included in this registration statement.

/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP

Houston, Texas
January 14, 2000

<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
972.788.1110 Fax 972.991.3160
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 October 1, 1999, in the
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.

January 14, 2000

<PAGE> 1
EXHIBIT 23.3

CONSENT OF INDEPENDENT PETROLEUM ENGINEERS

We hereby consent to all references to Miller and Lents, Ltd. and/or the reports
prepared by Miller and 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 and Lents, Ltd.

By /s/ JAMES A. COLE
James A. Cole
Senior Vice President

January 14, 2000

<ARTICLE> 5

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