Natural Gas Services (NGS) 8-K Natural Gas Services Group, Inc. Announces Record First Quarter Net Income and Earnings Per Share

Exhibit 99

[LOGO]

FOR IMMEDIATE RELEASE	NEWS
May 10, 2007	Amex – NGS

NATURAL GAS SERVICES GROUP, INC. ANNOUNCES RECORD FIRST QUARTER
NET INCOME AND EARNINGS PER SHARE

23% Increase In Revenue For The Three Months to $16.7 Million
58% Increase in Net Income For The Three Months to $2.7 Million

MIDLAND, Texas, May 10, 2007– Natural Gas Services Group, Inc. (AMEX:NGS), a leading provider of gas compression equipment and services to the natural gas industry, announces its financial results for the first quarter ended March 31, 2007.

Natural Gas Services Group, Inc.

	First		First
(in thousands of dollars,	Quarter		Quarter
except per share amounts)	2006		2007		Change
	(unaudited)
Revenue	$	13,578	$	16,712		23	%
Operating income		3,053		4,203		38	%
Net income		1,696		2,681		58	%
EPS (Basic)		0.18		0.22		22	%
EPS (Diluted)		0.17		0.22		29	%
EBITDA		4,460		6,272		41	%
Weighted avg. shares outstanding:
Basic		9,664		12,061
Diluted		9,860		12,083

Revenue:Total revenue increased from $13.6 million to $16.7 million, or 23%, for the three months ended March 31, 2007, compared to the same period ended March 31, 2006. This was mainly the result of increased rental revenue and additional compressor sales. Rental revenue increased 31% and sales revenue increased 19%; offset by a decrease in service and maintenance revenue of 4%.

Operating income:Operating income increased from $3.1 million to $4.2 million, or 38%, for the three months ended March 31, 2007, compared to the same period ended March 31, 2006. This is mainly the result of increased margins from outside sales of compressor units, parts and rebuilds and the increased rental fleet activity.

Net income:Net income for first quarter ended March 31, 2007, increased 58% to $2.7 million or $.22 per share (diluted), as compared to net income of $1.7 million or $.17 per share (diluted) for the same period in 2006. This increase resulted mainly from the relative increase in compressor rental revenue as a percentage of the total revenue and an increase in gross profit on compressor sales. At the same time our other income increased approximately $212 thousand resulting from additional interest income earned from increased cash balances and our short-term investments.

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EBITDA (see discussion of EBITDA at the end of this release) increased 41% to approximately $6.3 million for the first quarter ended March 31, 2007, versus $4.5 million for the same period in 2006.

Steve Taylor, President and CEO of Natural Gas Services Group, Inc. said, “We are very pleased to, again, report a record quarter for NGS. We grew our rental and sales revenues in both the comparative and sequential quarters while also increasing our total gross margin. This, in conjunction with controlling our expenses, increased our operating and net income margins. We continue to be optimistic about the balance of the year and look forward to continued good results.”

The Company has scheduled a conference call Thursday, May 10, 2007 at 10:00 AM Central Daylight Time to discuss 2007 First Quarter Financial Results.

What: Natural Gas Services Group, Inc. 2007 First Quarter Financial Results Conference Call

When: May 10, 2007 at 10:00 AM Central Daylight Time

How: Live via phone by dialing 800-624-7038. Code: Natural Gas Services. Participants to the Conference call should call in at least 5 minutes prior to the start time.

Steve Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing first quarter financial results.

About Natural Gas Services Group, Inc. (NGS)
NGS manufactures, fabricates, sells, rents and services natural gas compressors that enhance the production of natural gas wells. The Company also manufactures and sells flare systems and flare ignition systems for plant and production facilities.

For More Information, Contact: Jim Drewitz, Investor Relations

972-355-6070
jim@jdcreativeoptions.com

Or visit the Company’s website at www.ngsgi.com

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“EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization. EBITDA is a measure used by analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs. Therefore, EBITDA gives the investor information as to the cash generated from the operations of a business. However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America (“GAAP”), and should not be considered a substitute for other financial measures of performance. EBITDA as calculated by NGS may not be comparable to EBITDA as calculated and reported by other companies. The most comparable GAAP measure to EBITDA is net income. The reconciliation of net income to EBITDA and gross margin is as follows:

	Three months ended
	March 31,
(in thousands of dollars)	2006			2007
Net income	$	1,696		$	2,681
Interest expense, net		500			300
Provision for income taxes		997			1,574
Depreciation and amortization		1,267			1,717
EBITDA	$	4,460		$	6,272
Other operating expenses		1,268			1,200
Other expense (income)		(140	)		(352	)
Gross Margin		5,588			7,120

We define gross margin as total revenue less cost of sales (excluding depreciation and amortization expense). Gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key components of our operations. Because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue and selling, general and administrative expense is a necessary cost to support our operations and required corporate activities. Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP. Our gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS’s actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS’s products and services; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

	December 31, 2006		March 31, 2007
			(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	4,391	$	9,248
Short-term investments		25,052		22,326
Trade accounts receivable, net of doubtful accounts of $110		8,463		6,050
Inventory, net of allowance for obsolescence of $347		16,943		19,276
Prepaid expenses and other		321		353
Total current assets		55,170		57,253
Rental equipment, net of accumulated depreciation of $11,320 and $12,562, respectively		59,866		62,373
Property and equipment, net of accumulated depreciation of $3,679 and $3,875, respectively		6,714		6,596
Goodwill, net of accumulated amortization $325		10,039		10,039
Intangibles, net of accumulated amortization of $819 and $900, respectively		3,650		3,569
Other assets		113		186
Total assets	$	135,552	$	140,016
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt	$	3,442	$	3,378
Current portion of subordinated notes-related parties		1,000		1,000
Line of credit		—		—
Accounts payable		2,837		5,104
Accrued liabilities		2,077		2,187
Current portion of tax liability		1,056		3,068
Deferred income		225		759
Total current liabilities		10,637		15,496
Long-term debt, less current portion		12,950		12,106
Subordinated notes-related parties, less current portion		1,000		—
Deferred income tax payable		9,764		8,285
Total liabilities		34,351		35,887
Stockholders’ Equity:
Common stock, 30,000 shares authorized, par value $0.01; 12,046 and 12,067 shares issued and outstanding, respectively		120		121
Additional paid-in capital		82,560		82,806
Retained earnings		18,521		21,202
Total stockholders’ equity		101,201		104,129
Total liabilities and stockholders’ equity	$	135,552	$	140,016

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CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)

	Three months ended March 31,
	2006			2007
Revenue:
Sales, net	$	7,993		$	9,506
Service and maintenance income		278			266
Rental income		5,307			6,940
Total revenue		13,578			16,712
Operating costs and expenses:
Cost of sales, exclusive of depreciation stated separately below		5,719			6,670
Cost of service and maintenance, exclusive of depreciation stated separately below		191			187
Cost of rentals, exclusive of depreciation stated separately below		2,080			2,735
Selling expense		302			178
General and administrative expense		966			1,022
Depreciation and amortization		1,267			1,717
Total operating costs and expenses		10,525			12,509
Operating income		3,053			4,203
Other income (expense):
Interest expense		(500	)		(300	)
Other income		140			352
Total other income (expense)		(360	)		52
Income before provision for income taxes		2,693			4,255
Provision for income taxes		997			1,574
Net income	$	1,696		$	2,681
Earnings per share:
Basic	$	0.18		$	0.22
Diluted	$	0.17		$	0.22
Weighted average shares outstanding:
Basic		9,664			12,061
Diluted		9,860			12,083

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)

	Three Months Ended March 31,
	2006			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,696		$	2,681
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,267			1,717
Deferred taxes		834			(1,479	)
Employee stock options expensed		73			97
Gain on sale of property and equipment		—			(8	)
Changes in current assets and liabilities:
Trade and other receivables		66			2,413
Inventory and work in progress		(3,809	)		(2,333	)
Prepaid expenses and other		182			(32	)
Accounts payable and accrued liabilities		2,797			2,377
Current tax liability		—			2,012
Deferred income		(37	)		534
Other assets		2			(42	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,071			7,937
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(5,145	)		(4,040	)
Purchase of short-term investments		—			(274	)
Redemption of short-term investments		—			3,000
Proceeds from sale of property and equipment		—			33
NET CASH USED IN INVESTING ACTIVITIES		(5,145	)		(1,281	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit		734			—
Repayments of long-term debt		(6,809	)		(1,908	)
Proceeds from exercise of stock options and warrants		83			109
Proceeds from sale of stock, net of transaction costs		47,176			—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		41,184			(1,799	)
NET CHANGE IN CASH		39,110			4,857
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		3,271			4,391
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	42,381		$	9,248
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	456		$	305
Income taxes paid	$	163		$	999

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