NGS Reports Double-Digit Percentage Increase in Revenue and Net Income Year-over-Year Third Quarter 2013 Earnings of 27 cents per Diluted Share

MIDLAND, Texas November 7, 2013 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas industry, announces its financial results for the three and nine months ended September 30, 2013.

Revenue: Total revenue was $21.9 million, an increase from $19.3 million, or 13%, for the three months ended September 30, 2013, compared to the same period ended September 30, 2012. This increase is primarily due to an increase in rentals to $17.8 million for the period ended September 30, 2013 compared to $14.1 million for the same three month period in 2012.  Rental revenues increased 26% in the same year-over-year period and 7% sequentially. Total revenues increased 8% between the second quarter of 2013 and this current period with two-thirds of this attributable to rental income.

Gross Margins: Total gross margin increased 17% from $10.2 million for the three months ended September 30, 2012 to $11.9 million for the same period ended September 30, 2013.  Sequentially, gross margin decreased 4% from $12.3 million to $11.9 million. Overall gross margin percentage was 54% for the three months ended September 30, 2013, compared to 53% for the same period ended September 30, 2012. This increase is due to a larger portion of our business being generated from the higher margin rentals business.

Operating Income: Operating income for the three months ended September 30, 2013 was $5.1 million, up 20% from the comparative prior year's level of $4.2 million. This increase was primarily driven by a shift in our product mix towards rentals.  Sequentially, operating income decreased $756 thousand to $5.1 million for the three months ended September 30, 2013 from $5.8 million.  This decrease was primarily caused by a quarter to quarter shift to the relatively lower margin sales business from rentals, but was also impacted by a slight increase in SG&A expenses and higher depreciation expense due to rental fleet additions.

Net Income:  Net income for the three months ended September 30, 2013 increased 30% to $3.4 million, when compared to net income of $2.6 million for the same period in 2012.  Net income margins for the three months ended September 30, 2013 increased to 16% from 14% for the three months ended September 30, 2012. This increase was primarily because of the higher predominance of compressor rentals in this period, and a slightly lower effective tax rate. Net income decreased $450 thousand in sequential quarters from $3.8 million to $3.4 million for the same reasons as noted with operating income.

Earnings per share:  Comparing the third quarter of 2013 versus 2012, earnings per diluted share improved to 27 cents from 21 cents, or 29%.  Diluted earnings per share decreased 13% per share, to 27 cents from 31 cents, between sequential quarters.

EBITDA:  EBITDA increased 21% to $9.9 million or 45% of revenue for the three months ended September 30, 2013 versus $8.2 million or 42% of revenue for the same three months ended September 30, 2012. Please see discussion of Non-GAAP Financial Measures, below.

Cash flow: At September 30, 2013, cash and cash equivalents were approximately $27.7 million; working capital was $52.7 million with a total debt level of $747 thousand, all of which was classified as non-current. Positive net cash flow from operating activities was approximately $28.4 million during the first nine months of 2013 compared to $31.5 million for the same period in 2012.  The changes in operating cash flow relate to the cash contribution from net income and normal changes in our working capital accounts.

Commenting on third quarter 2013 results, Stephen C. Taylor, President and CEO, said:

"NGS performed well this quarter led by significant growth and progress in our core rental gas compression business. Revenues grew at a high rate with year-over-year revenue gains of 26% along with 7% revenue growth on a quarterly basis. We continue to anticipate further gains in this part of our business and as a result have ramped up our fabrication throughput by approximately 20% this year when compared to 2012. Our compressor sales business rebounded from last quarter's revenue levels and is on pace with the rate of growth we have forecast. After last quarter's exceptionally high levels, rental and sales margins returned to their typical range and we anticipate them continuing at that pace which, by the way, are industry leading margins. At this point, our customers are estimating additional growth in 2014 and we are confident we will be able to remain a significant supplier of their wellhead compression needs."

Selected data: The table below shows revenues, percentage of total revenues, gross margin, exclusive of depreciation, and gross margin percentage of each business segment for the three months ended September 30, 2013 and 2012.  Gross margin is the difference between revenue and cost of sales, exclusive of depreciation.

(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" below.

Non GAAP Financial 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:

"Gross margin" is defined 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 management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components.  Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support 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 the company's performance.  As an indicator of operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP.  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 most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Conference Call Details:

Teleconference: Thursday, November 7, 2013 at 10:00 a.m. Central (11:00 a.m. Eastern).  Live via phone by dialing 800-624-7038, pass code "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 www.ngsgi.com, investor relations section.

Webcast Reply: For those unable to attend or participate, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.

Stephen C. Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three months and nine months ended September 30, 2013.

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., coal bed methane, gas shale 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.