The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Form 10-Q. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as applying to all related forward-looking statements wherever they appear in this Form 10-Q. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause our actual results to differ materially from anticipated results include those discussed in

Forward Looking Statements

This report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this report regarding the Company's strategies and plans for growth are forward-looking statements. These forward-looking statements are often characterized by the terms "may," "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," and other words and terms of similar meanings and do not reflect historical facts. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from such expectations are disclosed in the Company's Securities and Exchange Commission ("SEC") filings, and include, but are not limited to, the dependence upon energy industry spending for seismic services, the unpredictable nature of forecasting weather, the potential for contract delay or cancellation, the potential for fluctuations in oil and gas prices, the availability of capital resources, and the current depressed economy which could adversely affect our revenues and cash flow if our customers, and/or potential customers, become unable to pay, or must delay payment of, amounts owing to the Company because such customers are not successful in generating revenues or are precluded from securing necessary financing. The forward-looking statements contained herein reflect the current views of the Company's management, and the Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those contemplated by such forward-looking statements except as required by law.

Executive Overview

TGC Industries, Inc. is a Texas corporation, and with its wholly-owned subsidiary, Eagle Canada, Inc., a Delaware corporation, (collectively "TGC" or the "Company"), is primarily engaged in the geophysical service business of conducting three-dimensional ("3-D") surveys for clients in the oil and gas business. TGC's principal business office is located at 101 E. Park Blvd., Suite 955, Plano, Texas 75074 (Telephone: 972-881-1099). TGC's internet address is www.tgcseismic.com. TGC makes available free of charge on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K as soon as reasonably practicable after filing with, or furnishing such information to, the SEC.

The Company is a leading provider of seismic data acquisition services throughout the continental United States and Canada. We supply seismic data to companies engaged in the exploration and development of oil and natural gas on land and in land-to-water transition areas. Our customers rely on seismic data to identify areas where subsurface conditions are favorable for the accumulation of existing hydrocarbons, to optimize the development and production of hydrocarbon reservoirs, to better delineate existing oil and natural gas fields, and to augment reservoir management techniques. We operated eight seismic crews in the lower 48 states during the first quarter of 2012. We operated seven crews in Canada during the first quarter. However, the Canadian market is seasonal, and as a result of the thawing season, we will have limited Canadian activity for the next two quarters starting with the second quarter of 2012.

We acquire geophysical data using the latest in 3-D survey techniques. We introduce acoustic energy into the ground by using vibration equipment or dynamite detonation, depending on the surface terrain and subsurface requirements. The reflected energy, or echoes, is received through geophones, converted into a digital signal at a multi-channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements dictate the number of channels necessary to perform our services. With our state-of-the-art seismic equipment, including computer technology and multiple channels, we acquire, on a cost effective basis, immense volumes of seismic data that when processed and interpreted produce more precise images of the earth's subsurface. Our customers then use our seismic data to generate 3-D geologic models that help reduce finding costs and improve recovery rates from existing wells.

We provide our seismic data acquisition services primarily to major and independent onshore oil and natural gas exploration and development companies for use in the onshore drilling and production of oil and natural gas in the continental United States and Canada. The main factors influencing demand for seismic data acquisition services in our industry are the level of drilling activity by oil and natural gas companies and the sizes of such companies' exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and natural gas prices and depletion rates.

The services we provide to our customers vary according to the size and needs of each customer. Our services are marketed by supervisory and executive personnel who contact customers to determine their needs and respond to customer inquiries regarding the availability of crews. Contacts are based principally upon professional relationships developed over a number of years. There are a number of consultants in the oil and natural gas industry who process and interpret seismic data for oil and natural gas companies. These consultants can have an influence in determining which company their customers use to acquire seismic data.

The acquisition of seismic data for the oil and natural gas industry is a highly competitive business. Contracts for such services generally are awarded on the basis of price quotations, crew experience, and the availability of crews to perform in a timely manner, although factors other than price, such as crew safety performance history, and technological and operational expertise, are often determinative. Our competitors include companies with financial resources that are significantly greater than our own as well as companies of comparable and smaller size. Our primary competitors are Dawson Geophysical Company, Geo Kinetics, Inc., and CGG-Veritas. These competitors are publicly-traded companies with long operating histories which field numerous crews and work in a number of different regions and terrain. In addition to the previously named companies, we also compete for projects from time to time with smaller seismic companies which operate in local markets with only one or two crews and often specialize in specific regions or type of operations. We believe that our long-term industry expertise, the customer relationships developed over our history, and our financial stability gives us an advantage over most of our competitors in the industry.

Results of Operations

The Company's business is subject to seasonal variations; thus the results of operations for the three months ended March 31, 2012, are not necessarily indicative of a full year's results.

Three Months Ended March 31, 2012, Compared to Three Months Ended March 31, 2011
(Unaudited)

Revenues. Our revenues were $67,045,408 for the three months ended March 31, 2012, compared to $50,247,313 for the same period of 2011, an increase of 33.4%. This increase was primarily due to continued improvement in the North American land seismic acquisition market, increased efficiencies of new wireless recording technology, seasonal strength in Canada, and our operation of eight crews in the U.S. and seven crews in Canada during the first quarter of 2012 compared with seven crews in the U.S. and six crews in Canada during the first quarter of 2011.

Cost of services. Our cost of services was $38,548,049 for the three months ended March 31, 2012, compared to $34,269,694 for the same period of 2011, an increase of 12.5%. This increase was primarily attributable to strong revenue growth during the quarter, partially offset by our fielding of two additional crews. As a percentage of revenues, cost of services was 57.5% for the three months ended March 31, 2012, compared to 68.2% for the same period of 2011. The decrease in cost of services as a percentage of revenues was attributable to increased efficiencies of new wireless recording technology, strong revenue growth in the North American land seismic acquisition market, and seasonal strength in Canada.

Selling, general, and administrative expenses. SG&A expenses were $2,300,002 for the three months ended March 31, 2012, compared to $2,500,558 for the same period of 2011, a decrease of 8.0%. This decrease was primarily due to costs in 2011 related to the entry into and subsequent termination of a merger agreement, as described in Note H, partially offset by recent staff additions. SG&A expense as a percentage of revenues was 3.4% for the three months ended March 31, 2012, compared with 5.0% for the same period of 2011.

Depreciation and amortization expense. Depreciation and amortization expense was $5,722,599 for the three months ended March 31, 2012, compared to $4,462,879 for the same period of 2011, an increase of 28.2%. This increase was primarily attributable to additions of seismic recording equipment, vibration vehicles, and other equipment and vehicles. Depreciation and amortization expense as a percentage of revenues was 8.5% for the three months ended March 31, 2011 compared to 8.9% for the same period of 2011.

Income from operations. Income from operations was $20,474,758 for the three months ended March 31, 2012 compared to $9,014,182 for the same period of 2012. This increase was primarily attributable to an increase in revenues, partially offset by increases in cost of services, and depreciation and amortization expenses discussed above. EBITDA increased $12,720,296 to $26,197,357 for the three months ended March 31, 2012, from $13,477,061 for the same period of 2011, an increase of 94.4%. This increase was a result of those factors mentioned above. For a definition of EBITDA, a reconciliation of EBITDA to net income, and discussion of EBITDA, please refer to the section entitled "EBITDA" found below.

Interest expense. Interest expense was $242,345 for the three months ended March 31, 2012 compared to $190,840 for the same period of 2011, an increase of 27.0%. This increase was primarily attributable to our recent purchases of seismic acquisition equipment.

Income tax expense. Income tax expense was $7,848,153 for the three months ended March 31, 2012, compared to $3,059,608 for the same period of 2011. The effective tax rate was 39% for the three months ended March 31, 2012, compared to approximately 35% for the same period of 2011. See Note E of Notes to Consolidated Financial Statements in Item 1.

EBITDA

We define EBITDA as net income plus interest expense, income taxes, and depreciation and amortization expense. We use EBITDA as a supplemental financial measure to assess:

† the financial performance of our assets without regard to financing methods, capital structures, taxes, or historical cost basis;

† our liquidity and operating performance over time and in relation to other companies that own similar assets and that we believe calculate EBITDA in a manner similar to us; and

† the ability of our assets to generate cash sufficient for us to pay potential interest costs.

We also understand that such data is used by investors to assess our performance. However, EBITDA is not a measure of operating income, operating performance, or liquidity presented in accordance with generally accepted accounting principles. When assessing our operating performance or our liquidity, you should not consider this data in isolation or as a substitute for our net income, cash flow from operating activities, or other cash flow data calculated in accordance with generally accepted accounting principles. EBITDA excludes some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Therefore, EBITDA as presented below may not be comparable to similarly titled measures of other companies. Further, the results presented by EBITDA cannot be achieved without incurring the costs that the measure excludes: interest expense, income taxes, and depreciation and amortization.

The following table reconciles our EBITDA to our net income:

                                    Three Months Ended
                                         March 31,
                                    2012           2011
                                        (unaudited)

Net income                      $ 12,384,260   $  5,763,734
Depreciation and amortization      5,722,599      4,462,879
Interest expense                     242,345        190,840
Income tax expense                 7,848,153      3,059,608

EBITDA                          $ 26,197,357   $ 13,477,061

Liquidity and Capital Resources

Cash Flows

Cash flows used in operating activities.

Net cash used in operating activities was $374,187 for the three months ended March 31, 2012, compared to net cash provided by operating activities of $9,084,205 for the same period of 2011. The $9,458,392 decrease during the first three months of 2012 from the same period of 2011 was primarily attributable to the increase in accounts receivable, partially offset by the increase in net income, the timing of billings and revenue recognition, the timing of receipt and payment of invoices, federal and state income taxes payable, and the mix of contracts.

Working capital increased $5,004,428 to $24,860,957 as of March 31, 2012, from the December 31, 2011 working capital of $19,856,529. This increase was primarily due to a $35,060,885 increase in trade accounts receivable, partially offset by a $5,083,820 decrease in cash and cash equivalents, a $1,807,399 decrease in costs and estimated earnings in excess of billings on uncompleted contracts, a $10,744,751 increase in trade accounts payable, a $2,183,464 increase in accrued liabilities, a $3,386,306 increase in billings in excess of costs and estimated earnings on uncompleted contracts and a $4,905,159 increase in federal and state income taxes payable.

Cash flows used in investing activities.

Net cash used in investing activities was $2,509,933 for the three months ended March 31, 2012, and $4,568,187 for the three months ended March 31, 2011. This decrease was primarily due to a decrease of $1,785,549 in cash used for capital expenditures to purchase seismic equipment in 2011.

Cash flows used in financing activities.

Net cash used in financing activities was $2,362,273 for the three months ended March 31, 2012, and $2,116,526 for the three months ended March 31, 2011. The increase was due primarily to principal payments on notes payable.

Capital expenditures.

During the three months ended March 31, 2012, the Company purchased $11,414,433 of vehicles and equipment, primarily to replace similar vehicles and equipment, and purchased new wireless GSR seismic recording channels and equipment. Cash of $2,837,982, a note from a commercial bank of $7,701,800, and $874,651 of capital lease obligations from a vehicle leasing company were used to finance these purchases. Although we do not budget for our capital expenditures, we may purchase additional equipment during 2012 should the demand for our services increase.

Liquidity

Our primary source of liquidity is cash generated from operations and short-term borrowings from commercial banks and equipment lenders. Based on current forecasts, we believe that we have sufficient available cash and borrowing capacity to fund our working capital needs over the next 12 months.

Capital Resources

We have relied on cash generated from operations and short-term borrowings from commercial banks and equipment lenders to fund our working capital requirements and capital expenditures.

The Company has a revolving line of credit agreement with a commercial bank. The borrowing limit under the revolving line of credit agreement is $5,000,000 and was renewed on September 16, 2010, and again on September 16, 2011. The revolving line of credit agreement does not expire until September 16, 2012. Our obligations under this agreement are secured by a security interest in our accounts receivable. Interest on the outstanding amount under the line of credit loan agreement is payable monthly at the greater of the prime rate of interest or five percent. As of March 31, 2012, we had no borrowings outstanding under the line of credit loan agreement.

At March 31, 2012, the Company had five outstanding notes payable to commercial banks for equipment purchases. The notes have interest rates between 4.50% and 6.35%, are due in monthly installments between $46,781 and $187,934 plus interest, have a total outstanding balance of $16,154,769 and are collateralized by equipment. Two notes payable with interest of 6.00% and monthly payments between $55,658 and $88,889 plus interest were paid off in 2011. These notes were collateralized by equipment.

The Company had, at March 31, 2012, two outstanding notes payable to equipment finance companies for equipment purchases. The notes have interest rates between 5.33% and 6.00%, are due in monthly installments between $23,740 and $56,050 plus interest, have a total outstanding balance of $478,742 and are collateralized by equipment. One note payable with interest of 6.38% and a monthly payment of $85,839 plus interest was paid off in 2011. One note payable with interest of 5.75% and a monthly payment of $61,997 plus interest was paid off during March 2012. The notes were collateralized by equipment.

The Company had, at March 31, 2012, two outstanding notes payable to finance companies for corporate insurance. The notes have interest rates between 4.95% and 5.56%, and are due in monthly installments of $17,507 and $17,414 including interest, and have a total outstanding balance of $263,003.

On April 24, 2012, the Company entered into a note payable to a finance company for corporate insurance for $2,726,028. The note has an interest rate of 4.95%, and is due in monthly installments of $309,174 including interest.

Contractual Obligations

We believe that our capital resources, including our short-term investments, funds available under our revolving credit agreement, and cash flow from operations, will be adequate to meet our current operational needs. We believe that we will be able to finance our 2012 capital expenditures through cash flow from operations, borrowings from commercial lenders, and the funds available under our line of credit loan agreement. However, our ability to satisfy working capital requirements, meet debt repayment obligations, and fund future capital requirements will depend principally upon our future operating performance which is subject to the risks inherent in our business, and will also depend on the extent to which the current depressed economy adversely affects the ability of our customers, and/or potential customers, to pay promptly amounts owing to the Company under their service contracts with us.

Off-Balance Sheet Arrangements

As of March 31, 2012, we had no off-balance sheet arrangements.

Critical Accounting Policies

A discussion of our critical accounting policies can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There have been no material changes to these policies (including critical accounting estimates and assumptions or judgments affecting the application of those estimates and assumptions) during the first three months of 2012.

Recently Issued Accounting Pronouncements

A discussion of recently issued accounting pronouncements can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011. There have been no new accounting pronouncements during the first three months of 2012.