Natural Gas Services Group Announces Diluted EPS of $0.24/Share for the 2nd Quarter of 2009 and $0.55/Share for the Comparative

Gross Margin, EBITDA and Rental Revenue Increase for the Comparative Six Month Periods


MIDLAND, Texas, Aug. 6  /PRNewswire-FirstCall/ -- Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of equipment and services to the natural gas industry, announces its financial results for the second quarter and six months ended June 30, 2009.

Natural Gas Services Group, Inc. Financial Results:

Revenue: Our total revenue decreased from $19.5 million to $16.8 million, or 14.0%, for the three months ended June 30, 2009, compared to the same period ended June 30, 2008. This decrease was primarily the result of a 49.8% decrease in sales revenue, a segment of the business hit proportionally hard in the current environment.  However, rental revenue increased 18.6%, and service and maintenance revenue decreased 15.6%.  Total revenues for the comparable six months decreased 4.2%, to $36.8 million from $38.4 million which was mainly the result of 38.6% decrease in our sales revenue. This was offset by an increase in rental revenue of 29.6% and service and maintenance revenue decrease of 4.6%.

Operating income:  There was a decrease in operating income to $4.6 million from $5.1 million, or 10.0%, for the three months ended June 30, 2009, compared to the same period ended June 30, 2008.  We posted an increase to $10.7 million from $10.6 million, or 0.9%, for the six months ended June 30, 2009 compared to the same period ended June 30, 2008.  Operating income primarily grew from the increase in rental revenue which generates higher margins.  Additionally, operating income was positively affected by greater efficiencies in our field service operations on our rental units resulting in improved margins.

Net income:  Our net income for the three months ended June 30, 2009, decreased 13.8% to $2.9 million, as compared to net income of $3.3 million for the same period in 2008. Net income for the first six months of 2009 decreased 2.6% to $6.7 million, when compared to net income of $6.9 million for the same period in 2008.  This was mainly the result of decreased third party unit sales.

Earnings per share:  Our earnings per diluted share was $0.24 for the three months ending June 30, 2009 as compared to $0.27 for the same 2008 period, a 11.1% decrease.  Comparing the six months of 2008 versus 2009, our earnings per diluted share fell from $0.56 to $0.55, or 1.8%.

EBITDA: Our EBITDA decreased (see discussion of EBITDA at the end of this release) 1.9% to $7.5 million for the second quarter ended June 30, 2009, versus $7.7 million for the same period in 2008.  EBITDA increased 6.6% to $16.5 million for the quarter ended June 30, 2009 versus $15.5 million for the same period ended June 30, 2008.

Cash flow: At June 30, 2009, we had cash and cash equivalents of $11.7 million, working capital of $39.1 million, and total debt of $14.9 million, of which $3.4 million was classified as current. We had positive net cash flow from operating activities of $16.9 million during first six months of 2009.

Selected data: The table below shows our revenues, gross margin, exclusive of depreciation, and gross margin for the quarters and six month periods ended June 30, 2009 and 2008.  Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.

                             Three months ended         Six months ended
                                  June 30,                   June 30,
                                  --------                   --------
                             2008          2009         2008         2009
                             ----          ----         ----         ----
   Sales                   $9,159        $4,599      $18,785      $11,528
   Rental                  10,095        11,969       19,105       24,757
   Service and maintenance    224           189          521          497
                              ---           ---          ---          ---
   Total Revenue           19,478        16,757       38,411       36,782
   Gross margin (1)         8,994         9,220       17,922       19,812
   Net Income              $3,333        $2,872       $6,850       $6,669
   Earnings per share
   (diluted)                $0.27         $0.24        $0.56        $0.55

  (1) For a reconciliation of gross margin to its most directly comparable
  financial measure calculated and presented in accordance with GAAP,
  please read  "Non-GAAP Financial Measures" in this report.




Rental fleet: As of June 30, 2009, we had 1,771 natural gas compressors in our rental fleet totaling 223,041 horsepower, as compared to 1,546 natural gas compressors totaling 188,462 horsepower at June 30, 2008.  As of June 30, 2009, we had 1,345 natural gas compressors rented compared to 1,388 at June 30, 2008.

Non GAAP Measures: "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        Six months ended
  (in thousands of dollars)            June 30,                  June 30,
                                       --------                  --------
                                  2008          2009         2008       2009
                                  ----          ----         ----       ----
   Net income                   $3,333        $2,872       $6,850     $6,669
     Interest expense              193           154          434        314
     Provision for income taxes  1,760         1,546        3,688      3,599
     Depreciation and
      amortization               2,364         2,935        4,489      5,893
                                 -----         -----        -----      -----
   EBITDA                       $7,650        $7,507      $15,461    $16,475
     Other operating expenses    1,485         1,654        2,835      3,231
     Other expense (income)       (141)           59         (374)       106
                                  ----            --         ----        ---
   Gross margin                 $8,994        $9,220      $17,922    $19,812
                                ======        ======      =======    =======




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.  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.

Cautionary Note Regarding Forward-Looking Statements:  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.

Conference Call Details:

Teleconference: Friday, August 7, 2009 at 10:00 a.m. Central (11:00 a.m. Eastern).  Live via phone by dialing 800-624-7038, passcode "Natural Gas Services".   All attendees and participants to the conference call should arrange to call in at least 5 minutes prior to the start time.

Live Webcast: The webcast will be available in listen only mode via our website http://www.ngsgi.com/, investor relations section.

Webcast Replay: For those unable to attend the live teleconference, a Webcast replay of the call will be available within 2 hours at the NGS website at http://www.ngsgi.com/  under the Investor Relations section and will remain accessible for 30 days.

Stephen Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing second quarter and six months ending June 30, 2009 financial results.

About Natural Gas Services Group, Inc. (NGS):

NGS is a leading provider of small to medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas industry, i.e., coalbed methane, gas shales and tight gas. The Company manufactures, fabricates, rents and maintains natural gas compressors that enhance the production of natural gas wells. The Company also designs and sells custom fabricated natural gas compressors to particular customer specifications and sells flare systems for gas plant and production facilities. NGS is headquartered in Midland, Texas with manufacturing facilities located in Tulsa, Oklahoma, Lewiston, Michigan and Midland, Texas and service facilities located in major gas producing basins in the U.S.

  For More Information, Contact:      Kimberly Huckaba, Investor Relations
                                      [phone]
                                      http://www.ngsgi.com/



                              NATURAL GAS SERVICES GROUP, INC.
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                          (in thousands, except per share amounts)
                                        (unaudited)
                                              December 31,     June 30,
                                              ------------     --------
                                                  2008           2009
                                                  ----           ----
                          ASSETS
  Current Assets:
    Cash and cash equivalents                    $1,149        $11,687
    Short-term investments                        2,300              -
    Trade accounts receivable, net of
     doubtful accounts of $177 and $293,
    respectively                                 11,321          5,799

    Inventory, net of allowance for
     obsolescence of $500 and $254,
     respectively                                31,931         27,445
    Prepaid income taxes                            244            801
    Prepaid expenses and other                       87            231
                                                     --            ---
       Total current assets                      47,032         45,963

    Rental equipment, net of accumulated
     depreciation of $24,624 and $29,310,
     respectively                               111,967        113,723
    Property and equipment, net of
     accumulated depreciation of $6,065 and
     $6,400, respectively                         8,973          8,303
  Goodwill, net of accumulated
   amortization of $325, both periods            10,039         10,039
  Intangibles, net of accumulated
   amortization of $1,198 and $1,347,
   respectively                                   3,020          2,871
  Other assets                                       19             19
                                                     --             --
       Total assets                            $181,050       $180,918
                                               ========       ========

           LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities:
    Current portion of long-term debt            $3,378         $3,378
    Accounts payable                              8,410          1,189
    Accrued liabilities                           3,987          1,925
    Current income tax liability                    110             99
    Deferred income                                  38            281
                                                     --            ---
       Total current liabilities                 15,923          6,872

  Long term debt, less current portion            6,194          4,505
  Line of credit                                  7,000          7,000
  Deferred income tax payable                    21,042         24,552
  Other long term liabilities                       441            562
                                                    ---            ---
       Total liabilities                         50,600         43,491


  Stockholders' equity:
    Preferred stock, 5,000 shares
     authorized, no shares issued or
     outstanding                                      -              -
      Common stock, 30,000 shares authorized,
       par value $0.01;12,094 and 12,097
       shares issued and outstanding,
       respectively                                 121            121
    Additional paid-in capital                   83,937         84,245
    Retained earnings                            46,392         53,061
                                                 ------         ------
       Total stockholders' equity               130,450        137,427
                                                -------        -------
       Total liabilities and stockholders'
        equity                                 $181,050       $180,918
                                               ========       ========



                         NATURAL GAS SERVICES GROUP, INC.
                     CONDENSED CONSOLIDATED INCOME STATEMENTS
                     (in thousands, except earnings per share)
                                   (unaudited)
                    Three months ended June 30,    Six months ended June 30,
                    ---------------------------    -------------------------
                        2008         2009              2008         2009
                        ----         ----              ----         ----
  Revenue:
  Sales, net           $9,159       $4,599            $18,785     $11,528
  Rental income        10,095       11,969             19,105      24,757
  Service and
   maintenance income     224          189                521         497
                          ---          ---                ---         ---
     Total revenue     19,478       16,757             38,411      36,782
                       ------       ------             ------      ------

  Operating costs and
   expenses:
  Cost of sales,
   exclusive of
   depreciation
   stated
   separately
   below                6,238        3,253             12,631       7,782
  Cost of rentals,
   exclusive of
   depreciation
   stated separately
   below                4,094        4,152              7,498       8,841
  Cost of service and
   maintenance,
   exclusive of
   depreciation
   stated separately
   below                  152          132                360         347
  Selling, general, and
   administrative
   expense              1,485        1,654              2,835       3,231
  Depreciation and
   amortization         2,364        2,935              4,489       5,893
                        -----        -----              -----       -----
        Total operating
         costs and
         expenses      14,333       12,126             27,813      26,094
                       ------       ------             ------      ------

  Operating income      5,145        4,631             10,598      10,688

  Other income
   (expense):
  Interest expense       (193)        (154)              (434)       (314)
  Other income (expense)  141          (59)               374        (106)
                          ---          ---                ---        ----
     Total other income
      (expense)           (52)        (213)               (60)       (420)
                          ---         ----                ---        ----

  Income before
   provision for
   income taxes         5,093        4,418             10,538      10,268

  Provision for
   income taxes         1,760        1,546              3,688       3,599

  Net income           $3,333       $2,872             $6,850      $6,669
                       ======       ======             ======      ======


        Earnings per
         share:
        Basic           $0.28        $0.24              $0.57       $0.55
        Diluted         $0.27        $0.24              $0.56       $0.55
        Weighted
         average shares
         outstanding:
        Basic          12,088       12,095             12,087      12,094
        Diluted        12,152       12,099             12,150      12,102



                         NATURAL GAS SERVICES GROUP, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (in thousands)
                                    (unaudited)

                                                Six months ended
                                                    June 30,
                                                    --------
                                           2008                 2009
                                           ----                 ----
  CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                           $6,850               $6,669
       Adjustments to reconcile net
        income to net cash provided by
        operating activities:
          Depreciation and amortization    4,489                5,893
          Deferred taxes                   3,688                3,599
          Employee stock options expense     181                  299
          Loss or (Gain) on disposal
           of assets                         (14)                 (44)
       Changes in current assets and
        liabilities:
          Trade accounts receivables, net    798                5,522
          Inventory, net                  (9,332)               4,800
          Prepaid income taxes and
           prepaid expenses                  558                 (701)
          Accounts payable and accrued
           liabilities                     4,682               (9,283)
          Current income tax liability      (220)                (100)
          Deferred income                  1,670                  243
          Other                               18                    -
                                              --                   --
  NET CASH PROVIDED BY OPERATING
   ACTIVITIES                             13,368               16,897
                                          ------               ------

  CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchase of property and
           equipment                     (21,897)              (7,235)
          Purchase of short-term
           investments                      (294)                   -
          Redemption of short-term
           investments                    12,528                2,300
          Proceeds from sale of
           property and equipment             35                  135
                                              --                  ---
  NET CASH USED IN INVESTING ACTIVITIES   (9,628)              (4,800)
                                          ------               ------

  CASH FLOWS FROM FINANCING ACTIVITIES:
          Proceeds from line of credit       500                    -
          Proceeds from other long-term
           liabilities, net                  150                  121
          Repayments of long-term debt    (2,689)              (1,689)
          Repayments of line of credit    (1,100)                   -
          Proceeds from exercise of
           stock options                      44                    9
                                              --                   --
  NET CASH USED IN FINANCING ACTIVITIES   (3,095)              (1,559)
                                          ------               ------

  NET CHANGE IN CASH                         645               10,538

  CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                       245                1,149
                                             ---                -----
  CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                            $890              $11,687
                                            ====              =======
  SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
     Interest paid                          $477                 $322
     Income taxes paid                      $220                 $658


DATASOURCE: Natural Gas Services Group, Inc.



CONTACT:  Kimberly Huckaba, Investor Relations, [phone],





Web Site:  http://www.ngsgi.com/ 

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