Edgar Filing: NATURAL GAS SERVICES GROUP INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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NATURAL GAS SERVICES GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)

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NATURAL GAS SERVICES GROUP, INC.

2911 South County Road 1260
Midland, Texas 79706

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 20, 2006

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Natural
Gas Services Group, Inc., a Colorado corporation, will be held at the Hilton
Hotel, 117 West Wall Avenue, Midland, Texas 79701 on Tuesday, June 20, 2006 at
9:00 a.m., Central Time, for the purpose of considering and voting upon
proposals:

o To elect two directors to serve until the annual meeting of
shareholders to be held in 2009, or until their successors are elected
and qualify;

o To consider and vote upon a proposal to amend the Natural Gas Services
Group, Inc. 1998 Stock Option Plan to (1) increase the number of
shares authorized for issuance thereunder from 150,000 to 550,000
shares of common stock; (2) extend the time that options can be
granted from December 17, 2008 to March 1, 2016; (3) reduce the
minimum exercise price of incentive stock options from 140% of the
fair market value of our common stock on the date of grant to 100% of
the fair market value of our common stock on the date of grant; (4)
eliminate a provision in the plan providing that the number of shares
subject to the plan can be increased up to 400,000 shares without
shareholder approval; and (5) to eliminate a provision authorizing the
right to exchange, in a cashless transaction, all or any part of a
stock option for shares of common stock; and

o To transact such other business as may properly be presented at the
meeting or at any adjournment(s) of the meeting.

Only shareholders of record at the close of business on April 26, 2006 are
entitled to notice of and to vote at the meeting and at any adjournment(s) of
the meeting.

The enclosed proxy is solicited by and on behalf of the Board of Directors
of Natural Gas Services Group, Inc. All shareholders are cordially invited to
attend the meeting in person. Whether you plan to attend or not, please date,
sign and return the accompanying proxy card in the enclosed return envelope, to
which no postage need be affixed if mailed in the United States. The giving of a
proxy will not affect your right to vote in person if you attend the meeting.

BY ORDER OF THE BOARD OF DIRECTORS

Stephen C. Taylor

Chairman of the Board, President and
Chief Executive Officer

Midland, Texas
May 18, 2006

NATURAL GAS SERVICES GROUP, INC.

2911 South County Road 1260
Midland, Texas 79706

PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 20, 2006

This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Natural Gas Services Group, Inc., a
Colorado corporation, to be used at the annual meeting of shareholders to be
held at the Hilton Hotel, 117 West Wall Avenue, Midland, Texas 79701 on Tuesday,
June 20, 2006 at 9:00 a.m., Central Time, and at any adjournment(s) of the
meeting.

This proxy statement and the accompanying proxy is being mailed to
shareholders on or about May 18, 2006.

Any person signing and mailing the enclosed proxy may revoke it at any time
before it is voted by:

o giving written notice of the revocation to Stephen C. Taylor, our
President, at Natural Gas Services Group, Inc., 2911 South County
Road 1260, Midland, Texas 79706;

o voting in person at the meeting; or

o voting again by submitting a new proxy card bearing a later date.

Only the latest dated proxy card, including one which a person may vote in
person at the meeting, will count. If not revoked, the proxy will be voted at
the meeting in accordance with the instructions indicated on the proxy by the
shareholder, or, if no instructions are indicated, will be voted "FOR" the
election of two directors to serve until the 2009 annual meeting of shareholders
and "FOR" the proposal to amend the 1998 Stock Option Plan.

VOTING SECURITIES

Voting rights are vested in the holders of common stock of Natural Gas
Services Group, Inc., with each share entitled to one vote. Cumulative voting in
the election of directors is not permitted. Only shareholders of record at the
close of business on April 26, 2006 are entitled to notice of and to vote at the
meeting or any adjournments of the meeting. On April 26, 2006, there were
11,927,949 shares of common stock outstanding.

We will make a complete list of shareholders eligible to vote at the annual
meeting available for examination during the ten days prior to the annual
meeting. During such time, you may visit our executive offices during ordinary
business hours to examine the shareholder list for any purpose germane to the
annual meeting.

ACTIONS TO BE TAKEN AT MEETING

The annual meeting has been called by the Board of Directors of Natural Gas
Services Group, Inc. to consider and act upon the following matters:

o To elect two directors to serve until the annual meeting of
shareholders to be held in 2009, or until their successors are elected
and qualify;

o To transact such other business as may properly come before the
meeting or at any adjournment(s) of the meeting.

Quorum. The holders of a majority of the outstanding shares of common stock
present at the meeting in person or represented by proxy will constitute a
quorum.

Vote Required. If a quorum is present, directors are elected by a plurality
of the votes cast at the Annual Meeting. This means that the two nominees
receiving the highest number of votes cast in favor of their election will be
elected to the Board of Directors. Assuming the presence of a quorum, a majority
of the votes cast is required for approval of the proposal to amend the 1998
Stock Option Plan. All other matters are approved if the votes cast in favor of
the matter exceed the votes cast against the matter.

Broker Non-Votes. A broker non-vote occurs when a shareholder that owns
shares in "street name" through a nominee (usually a bank or a broker) fails to
provide the nominee with voting instructions, and the nominee does not have
discretionary authority to vote the shares with respect to the matter to be
voted on, or otherwise fails to vote the shares. Broker non-votes are included
in determining whether a quorum is present but are not considered a vote cast.
Broker non-votes will not affect the outcome of a vote on a particular matter.

Abstentions and Withheld Votes. Abstentions and withheld votes with respect
to a proposal are counted for purposes of establishing a quorum. If a quorum is
present, withheld votes will have no effect on the outcome of the vote for
directors. Abstentions are not counted as a vote for or against a matter, but
are considered votes cast on a matter.

Other Business at the Meeting. We are not aware of (and have not received
any notice with respect to) any business to be transacted at the Annual Meeting
other than as described in this proxy statement. If any other matters properly
come before the Annual Meeting, Stephen C. Taylor and Richard L. Yadon, the
named proxies, will vote the shares represented by proxies on such matters in
accordance with their discretion and best judgment.

PROPOSAL 1 - ELECTION OF DIRECTORS

Our Board of Directors is divided into three classes, each class to be as
nearly equal in number as possible. At each annual meeting of shareholders,
members of one of the classes, on a rotating basis, are elected for a three-year
term. The authorized number of directors is currently set at seven. Our current
directors are listed below by the year in which their terms expire:

Terms Expiring at the Terms Expiring at the Terms Expiring at the
2006 Annual Meeting 2007 Annual Meeting 2008 Annual Meeting
---------------------------------- ----------------------------- ---------------------------

William F. Hughes, Jr. Richard L. Yadon Charles G. Curtis

Alan A. Baker Paul D. Hensley Gene A. Strasheim

Stephen C. Taylor

The terms of two current directors, Mr. Hughes and Mr. Baker, expire at the
2006 Annual Meeting of Shareholders.

Shareholders will be electing two directors at the meeting. The Board is
recommending William F. Hughes, Jr. for re-election to the Board of Directors to
serve for a three-year term expiring at the annual meeting of shareholders in
2009. Mr. Hughes was previously elected by the shareholders. The Board is also
recommending Alan A. Baker for election to the Board of Directors to serve for a
three-year term expiring at the annual meeting of shareholders in 2009. Mr.
Baker was appointed as a director by the Board on March 20, 2006 to fill a
vacancy created by the retirement in December 2005 of Wallace C. Sparkman, our
former Chairman of the Board of Directors and Chief Executive Officer. Mr.
Sparkman's term would have expired at our 2006 Annual Meeting of Shareholders
and, under Colorado law, the term of a director who is elected by the remaining
directors to fill a vacancy expires at the next annual meeting of shareholders.
Consequently, Mr. Baker's current term expires at the 2006 Annual Meeting of
Shareholders.

The persons named in the enclosed form of proxy will vote the shares
represented by such proxy for the election of the two nominees for director
named above. If, at the time of the meeting, either one of these nominees
becomes unavailable for any reason, which is not expected, the persons entitled
to vote the proxy will vote for such substitute nominee or nominees, if any, as
they determine in their sole discretion, or we may reduce the size of the Board.

Biographical information for each person nominated as a director, and for
each person whose term of office as a director will continue after the 2006
Annual Meeting, is set forth below.

Nominees for Directors for Terms to Expire in 2009

William F. Hughes, Jr.

William F. Hughes, Jr., 53, has served as a director of Natural Gas
Services Group since 2003. Since 1983, Mr. Hughes has been co-owner of The Whole
Wheatery, LLC, a natural foods store located in Lancaster, California. Mr.
Hughes holds a Bachelor of Science degree in Civil Engineering from the United
States Air Force Academy and a Master of Science in Engineering from the
University of California at Los Angeles.

Alan A. Baker

Alan A. Baker, 74, was appointed as a director of Natural Gas Services
Group on March 20, 2006 to fill a vacancy on the Board of Directors created by
the retirement on December 31, 2005 of Wallace C. Sparkman, our former Chairman
of the Board of Directors and Chief Executive Officer. Mr. Baker presently
serves as a consultant to Halliburton Company and previously served as
President, Chairman and Chief Executive Officer of Halliburton Company's Energy
Services Group, Houston, Texas, from 1991 until his retirement in 1995. Mr.
Baker joined Halliburton Services in 1954 after graduating with a degree in
petroleum engineering from Marietta College in Ohio. Mr. Baker has served
Halliburton Services as Senior Vice President for U.S. Operations, Senior Vice
President for International Operations and as President of the Vann Systems
Division of Halliburton Company. Mr. Baker also served as a member of
Halliburton's executive committee. Mr. Baker has served on the Boards of Noble
Affiliates, National Gas and Oil, Crestar Energy of Canada and the Mid-Continent
Oil and Gas Association. He is Trustee Emeritus of Marietta College and is a
registered professional engineer.

The Board of Directors recommends that shareholders vote "for" both
nominees named above.

Continuing Directors Whose Terms Expire in 2008

Charles G. Curtis

Charles G. Curtis, 73, has served as a director since April 2001. Since
2002, substantially all of Mr. Curtis' business activities have been devoted to
managing personal investments. From 1992 until 2002, Mr. Curtis was the
President and Chief Executive Officer of Curtis One, Inc., a manufacturer of
aluminum and steel mobile stools and mobile ladders. From 1988 to 1992, Mr.
Curtis was the President and Chief Executive Officer of Cramer, Inc., a
manufacturer of office furniture. Mr. Curtis has a Bachelor of Science degree
from the United States Naval Academy and a Master of Science in Aeronautical
Engineering degree from the University of Southern California.

Gene A. Strasheim

Gene A. Strasheim, 65, has served as a director since 2003. From 2001 to
2005, Mr. Strasheim has been a financial consultant to Skyline
Electronics/Products, a manufacturer of circuit boards and large remotely
controlled digital interstate highway signs. From 1992 to 2001, Mr. Strasheim
was the Chief Financial Officer of Skyline Electronics/Products. From 1985 to
1992, Mr. Strasheim was the Vice President-Finance and Treasurer of CF&I Steel
Corporation. Prior to that, Mr. Strasheim was the Vice President-Finance for two
companies and was a partner with the public accounting firm of Deloitte Haskins
& Sells. Mr. Strasheim has practiced as a certified public accountant in three
states. Mr. Strasheim holds a Bachelor degree in Business from the University of
Wyoming.

Stephen C. Taylor

Stephen C. Taylor, 52, was elected by the Board of Directors of Natural Gas
Services Group to assume the position of President and Chief Executive Officer
in January 2005. Mr. Taylor was elected as a Director at the annual meeting of
shareholders in June 2005. Effective January 1, 2006, Mr. Taylor was appointed
Chairman of the Board of Directors. Immediately prior to joining Natural Gas
Services Group, Mr. Taylor held the position of General Manager -- US Operations
for Trican Production Services, Inc. from 2002 through 2004. Mr. Taylor joined
Halliburton Resource Management in 1976, becoming its Vice President --
Operations in 1989. Beginning in 1993, he held multiple senior level management
positions with Halliburton Energy Services until 2000 when he was elected Senior
Vice President/Chief Operating Officer of Enventure Global Technology, LLC, a
joint-venture deep water drilling technology company owned by Halliburton
Company and Shell Oil Company. Mr. Taylor elected early retirement from
Halliburton Company in 2002 to join Trican Production Services, Inc. Mr. Taylor
holds a Bachelor of Science degree in Mechanical Engineering from Texas Tech
University and a Master of Business Administration degree from the University of
Texas at Austin.

Continuing Directors Whose Terms Expire in 2007

Richard L. Yadon

Richard L. Yadon, 48, has served as a director since 2003. Mr. Yadon is one
of the founders of Rotary Gas Systems Inc., a former subsidiary of Natural Gas
Services Group, and served as an advisor to the Board of Directors of Natural
Gas Services Group from June 2002 to June 2003. Since 1981, Mr. Yadon has owned
and operated Yadeco Pipe & Equipment. Since December 1994, he has co-owned and
served as President of Midland Pipe & Equipment, Inc. Both companies are engaged
in the business of providing oil and gas well drilling and completion services
and equipment to oil and gas producers conducting operations in Texas, New
Mexico, Louisiana and Oklahoma. Since 1981, he has owned Yadon Properties, which
owns and operates real estate in Midland, Texas. Mr. Yadon has 25 years of
experience in the energy service industry.

Paul D. Hensley

Paul D. Hensley, 53, was appointed as a director of Natural Gas Services
Group in January 2005 to fill a vacancy on the Board of Directors and was
elected as a director at the annual meeting of shareholders held in June 2005.
He is the founder of and has served as President of Screw Compression Systems,
Inc., or "SCS", since SCS'

inception in 1997. SCS became a wholly owned subsidiary of Natural Gas Services
Group in January 2005 when we purchased all of the outstanding capital stock of
SCS. Mr. Hensley has over 30 years of industry experience.

THE BOARD OF DIRECTORS AND ITS COMMITTEES

Natural Gas' Board of Directors held six meetings during the fiscal year
ended December 31, 2005. Each director attended at least 75% of the total number
of Board meetings held while such person was a director. Each director also
attended at least 75% of all of the meetings held by all committees of the Board
of Directors for which he served (during the periods that he served). The Board
of Directors acts from time to time by unanimous written consent in lieu of
holding a meeting. During the fiscal year ended December 31, 2005, the Board of
Directors took action by unanimous written consent two times.

We typically schedule a Board meeting in conjunction with our annual
meeting of shareholders. Although we do not have a formal policy on the matter,
we expect our directors to attend each annual meeting, absent a valid reason,
such as illness or an unavoidable schedule conflict. Last year, all but one of
the individuals then serving as directors attended our annual meeting of
shareholders. The director not in attendance at the annual meeting was
restricted from traveling because of health reasons and was not standing for
re-election at last year's annual meeting.

To assist it in carrying out its duties, the Board has delegated certain
authority to three separately designated standing committees. These committees
are described below.

Audit Committee

The members of the Audit Committee throughout fiscal year 2005 were Gene A.
Strasheim (Chairman), Charles G. Curtis, William F. Hughes, Jr. and Richard L.
Yadon, all of whom are currently serving on the Audit Committee. Wallace O.
Sellers also served on the Audit Committee until June 2005 when his term as a
director expired. Mr. Sellers did not stand for re-election at the 2005 annual
meeting of shareholders.

The primary functions of the Audit Committee include:

o assisting the Board in fulfilling its oversight responsibilities
as they relate to our accounting policies, internal controls,
financial reporting practices and legal and regulatory
compliance;

o hiring independent auditors;

o monitoring the independence and performance of our independent
auditors;

o maintaining, through regularly scheduled meetings, a line of
communication between the Board, our financial management and
independent auditors; and

o overseeing compliance with our policies for conducting business,
including ethical business standards.

The Audit Committee met four times during the last fiscal year.

Our Board of Directors has determined that Gene A. Strasheim is qualified
as an "audit committee financial expert" as that term is defined in the rules of
the Securities and Exchange Commission.

Our common stock is listed for trading on the American Stock Exchange.
Under rules of the American Stock Exchange, the Audit Committee is to be
comprised of three or more directors, each of whom must be "independent". Our
Board has determined that all of the members of the Audit Committee are
independent, including Mr. Strasheim, as defined in the listing standards of the
American Stock Exchange, or "AMEX", and the rules of the Securities and Exchange
Commission.

The Board of Directors has adopted an Audit Committee Charter. A copy of
the charter can be found on our website (www.ngsgi.com).

Compensation Committee

During 2005, the Compensation Committee was comprised of William F. Hughes,
Jr. (Chairman), Charles G. Curtis, Gene A. Strasheim and Richard L. Yadon, all
of whom are currently serving on the Committee. Wallace O. Sellers also served
on the Compensation Committee for a portion of 2005.

The Compensation Committee assists the Board in overseeing:

o the management of our human resources, including compensation and
benefits programs, and the evaluation of the Chief Executive
Officer's performance and compensation; and

o the evaluation of management.

The Compensation Committee's policy is to offer the executive officers
competitive compensation packages that will permit us to attract and retain
individuals with superior abilities and to motivate and reward such individuals
in an appropriate fashion in the long-term interests of Natural Gas Services
Group and its shareholders. Currently, executive compensation is comprised of
salary and cash bonuses and other compensation that may be awarded from time to
time such as long-term incentive opportunities in the form of stock options
under our 1998 Stock Option Plan.

During the last fiscal year there were six meetings of the Compensation
Committee.

Our Board has determined that all of the members of the Compensation
Committee are independent, as defined in the listing standards of AMEX and the
rules of the Securities and Exchange Commission.

A current copy of our Compensation Committee Charter is available on our
website (www.ngsgi.com).

Governance, Personnel Development, and Nominating Committee

During 2005, the Governance, Personnel Development and Nominating Committee
was composed of Charles G. Curtis (Chairman), William F. Hughes, Jr., Gene A.
Strasheim and Richard L. Yadon, all of whom are currently serving on the
Committee. Wallace O. Sellers also served on the Governance, Personnel
Development, and Nominating Committee for a portion of 2005.

The functions of the Governance, Personnel Development, and Nominating
Committee include:

o identifying individuals qualified to become board members,
consistent with the criteria approved by the Board;

o recommending director nominees and individuals to fill vacant
positions;

o assisting the Board in interpreting the Governance Guideline, the
Code of Business Conduct and Ethics and any other similar
governance documents adopted by the Board;

o overseeing the evaluation of the Board and its committees;

o generally overseeing the governance of the Board; and

o overseeing executive development and succession and diversity
efforts.

The Governance, Personnel Development, and Nominating Committee met five
times during the last fiscal year.

The Board of Directors has adopted a Corporate Governance Charter for this
Committee. A current copy of the charter is available on our website
(www.ngsgi.com).

Our Board of Directors has determined that each of the Committee members is
"independent", as defined under the applicable rules and listing standards of
AMEX.

Our Governance, Personnel Development, and Nominating Committee will
consider a director candidate recommended by a shareholder. A candidate must be
highly qualified in terms of business experience and be both willing and
expressly interested in serving on the Board. A shareholder wishing to recommend
a candidate for the Committee's consideration should forward the candidate's
name and information about the candidate's qualifications to Natural Gas
Services Group, Inc., Nominating Committee, 2911 South County Road 1260,
Midland, Texas 79706, Attn.: Charles G. Curtis, Chairman. Submissions must
include sufficient biographical information concerning the recommended
individual, including age, employment history for at least the past five years
indicating employer's names and description of the employer's business,
educational background and any other biographical information that would assist
the Committee in determining the qualifications of the individual. The Committee
will consider recommendations received by a date not later than 120 calendar
days before the date our proxy statement was released to shareholders in
connection with the prior year's annual meeting for nomination at that annual
meeting. The Committee will consider nominations received after that date at the
annual meeting subsequent to the next annual meeting.

The Committee evaluates nominees for directors recommended by shareholders
in the same manner in which it evaluates other nominees for directors. Minimum
qualifications include the factors discussed above.

CODE OF ETHICS

Our Board of Directors has adopted a Code of Business Conduct and Ethics,
or "Code", which is posted on our website (www.ngsgi.com). You may also obtain a
copy of our Code by requesting a copy in writing at 2911 SCR 1260, Midland,
Texas 79706 or by calling us at (432) 563-3974.

Our Code provides general statements of our expectations regarding ethical
standards that we expect our directors, officers and employees, including our
Chief Executive Officer and Chief Financial Officer, to adhere to while acting
on our behalf. Among other things, the Code provides that:

o we will comply with all laws, rules and regulations;

o our directors, officers and employees are to avoid conflicts of
interest and are prohibited from competing with us or personally
exploiting our corporate opportunities;

o our directors, officers and employees are to protect our assets
and maintain our confidentiality;

o we are committed to promoting values of integrity and fair
dealing; and that

o we are committed to accurately maintaining our accounting records
under generally accepted accounting principles and timely filing
our periodic reports.

Our Code also contains procedures for our employees to report, anonymously
or otherwise, violations of the Code.

EXECUTIVE OFFICERS

Biographical information for the executive officers of Natural Gas Services
Group who are not directors is set forth below. There are no family
relationships between any director or executive officer and any other director
or executive officer. Executive officers serve at the discretion of the Board of
Directors and until their successors have been duly elected and qualified,
unless sooner removed by the Board of Directors. Officers are elected by the
Board of Directors annually at its first meeting following the Annual Meeting of
Shareholders.

Earl R. Wait, 62, became Vice President -- Accounting in January 2006. He
served as our Chief Financial Officer from May 2000 to January 2006. He has also
served as our Treasurer since 1998. Mr. Wait was our Chief Accounting Officer
from 1998 to May 2000. During the period from 1993 to 2003, he also served as an
officer or director of our former subsidiaries. Mr. Wait is a certified public
accountant, has a Bachelor of Business Administration degree from Texas A&M
University -- Kingsville and holds a Master of Business Administration degree
from Texas A&M University -- Corpus Christi and has more than 25 years of
experience in the energy industry.

S. Craig Rogers, 43, has served as Vice President -- Operations since June
2003. He served as Operations Manager for a former subsidiary from 1995 to
December 31, 2003, and Vice President of the former subsidiary from April 2002
to December 31, 2003. From March 1987 to January 1995, Mr. Rogers was the Shop
Manager for Compressor Systems, Inc., a major manufacturer of natural gas
compressors. Mr. Rogers has over 25 years of industry experience.

William R. Larkin, 40, has served as Vice President -- Sales and Marketing
since June 2004. He held various positions with Compressor Systems, Inc. from
1993 until his employment with Natural Gas Services Group. Mr. Larkin's
positions with Compressor Systems, Inc. included those of Business Unit Manager,
Manager of Engineering, Asset Manager and Regional Sales Manager. Mr. Larkin
holds a Bachelor of Science degree in Mechanical Engineering from the University
of Texas at Austin and has over 19 years of industry experience.

James R. Hazlett, 50, has served as Vice President -- Technical Services
since June 2005. Mr. Hazlett has served as vice president of sales for Screw
Compression Systems, Inc. since 1997, a position he continues to hold. Mr.
Hazlett holds an Industrial Engineering degree from Texas A&M University and has
over 27 years of industry experience.

PERFORMANCE GRAPH

COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG NATURAL GAS SERVICES GROUP, INC., THE
AMEX COMPOSITE INDEX AND THE
S&P 500 ENERGY EQUIPMENT AND SERVICES INDEX

Base
Period
10/21/02 12/31/02 12/31/03 12/31/04 12/31/05
-------- -------- -------- -------- --------

Natural Gas Services Group, Inc. $100 $ 91.29 $130.59 $221.88 $399.06

AMEX Composite Index $100 $101.54 $144.55 $176.67 $216.67

S&P 500 Energy Equipment & Services Index $100 $108.38 $129.59 $175.41 $263.05

----------

* Assumes that the value of the investment in our common stock and each index
was $100 on October 21, 2002, the date of our initial public offering, and
that all dividends were reinvested. Historical stock performance during
this period may not be indicative of future stock performance.

EXECUTIVE COMPENSATION

Report of the Compensation Committee

Compensation Policy

Our philosophy is to use a comprehensive compensation program consisting of
short and long term incentives for executive officers that aligns executive
compensation with the interests of our shareholders and enhances the Company's
profitability. The goal of our compensation policy is to provide a cash and
stock based compensation package that attracts and retains executive officers,
that is competitive with companies of similar size in the oilfield services
sector and that is based on corporate and individual performance. The
Compensation Committee of the Board of Directors reviews our executive
compensation programs annually to ensure these programs are competitive and
reasonable and to ensure the programs are appropriately applied to each
executive officer.

The fiscal year 2005 review process involved, among other things, the
Compensation Committee's examination of:

o each executive's performance compared to the goals and objectives for
the executive;

o the nature, scope and level of the Executive's responsibilities; and

o each executive's contribution to the Company's financial results and
effectiveness in exemplifying and promulgating the Company's core
values - safety, service and integrity.

Based upon this review, the Compensation Committee found the total
compensation of the Chief Executive Officer and the other executive officers to
be reasonable, both in the aggregate and on an individual basis.

Compensation Policy Components

Base Salary. Base salaries are competitive with those offered by companies
of similar size in the oilfield services sector. Individual salaries, which are
reviewed annually, are based on individual skills and performance and market
comparisons. Based upon its analysis, the Compensation Committee approved the
increase of the base salaries of the Company's executive officers for fiscal
year 2005. In establishing base salaries for our executives, we rely upon our
judgment and not specific measurements or benchmarks. We consider historical
salaries of our officers, salaries being paid by our competitors, the
contributions made by the individual officers to the Company's growth and
performance, levels of responsibility and execution of the Company's strategy.

Incentive Bonus. The Compensation Committee has adopted a bonus program to
provide each executive officer with the potential to earn a cash bonus expressed
as a percentage of salary. The amount of the bonus paid to each executive
officer for fiscal year 2005 was determined by the Compensation Committee. Each
year, we establish a maximum potential cash bonus amount for each executive,
which is expressed as a percentage of each executive's base salary. Last year,
these potential cash bonus amounts ranged from 20% to 45% of base salaries. We
then compare the Company's actual performance against targeted amounts for total
revenues, EBITDA and net income before taxes. In determining each executive's
cash bonus, we assign a weight to each of these three performance measures and
we also weight a fourth performance measure that we refer to as
"personal/other". Last year, the Company met or exceeded its targets and each of
our executives received the maximum bonus amount that could be awarded.

Stock Option Grants. The use of stock options is considered to be an
important incentive to our executive officers for working toward our long term
growth. We believe that stock options provide our executive officers with a
benefit that will increase only to the extent that the value of our common stock
increases. The number of options granted to an executive officer is based on the
officers' achievements in increasing the value of the Company's common stock to
date, competitive market data for each officer position, and on the executive
officer's ability to impact overall performance. The options granted are subject
to vesting over a three year period and have exercise

prices equal to the market value of our stock on the date of the grant. In
fiscal year 2005, Mr. Taylor received a grant of 45,000 shares of common stock
in accordance with his employment agreement.

Retirement Savings Program. Our 401(k) savings plan provides employees,
including executive officers, the opportunity to defer a portion of their salary
on a pre-tax basis through contributions to an account from which the employee
may direct how the funds are invested. We match fifty percent of the first six
percent of such employee contributions, with a maximum match of three percent of
the employee's compensation. Employees vest in the Company's contribution over
six years, based on length of employment.

Fiscal Year 2005 Compensation for the President and Chief Executive Officer

Mr. Taylor, our Chief Executive Officer, joined the Company in January
2005. His employment agreement with the Company covers a period of three years.
In fiscal year 2005, and under the terms of Mr. Taylor's employment agreement,
he received a base salary of $155,000. His targeted bonus was 45% of this base
salary and the Compensation Committee awarded him $69,750, or 100% of the
targeted amount. In accordance with the terms of his employment agreement, Mr.
Taylor was granted a stock option to purchase 45,000 shares of common stock. In
addition, the Company made matching contributions to Mr. Taylor's 401(k)
account.

Mr. Taylor's compensation was determined using substantially the same
criteria utilized to determine compensation for our other executive officers, as
described earlier in this report. Mr. Taylor's 2005 bonus amount was in
recognition of the Company's performance in fiscal year 2005 and Mr. Taylor's
contributions to that performance. In January 2006, Mr. Taylor's base salary was
increased to $175,000 as a result of the Compensation Committee's annual review
required by Mr. Taylor's employment agreement.

Compensation Deductions Limitations

Section 162(m) of the Internal Revenue Code, as amended, limits the
deductibility of certain compensation expenses in excess of $1,000,000 to any
one individual in any fiscal year. Compensation that is "performance based" is
excluded from this limitation. For compensation to be "performance based," it
must meet certain criteria including certain predetermined objective standards
approved by stockholders. We believe that maintaining the discretion to evaluate
the performance of our management is an important part of our responsibilities
and benefits the Company's stockholders. We periodically assess the potential
application of Section 162(m) on incentive compensation awards and other
compensation decisions.

Summary

In making decisions regarding executive compensation, the Committee
compares current levels with those of our companies within the oilfield services
sector. The Committee uses its discretion to determine a comprehensive
compensation package of short and long term incentives that are competitive
within the industry. In conclusion, it is our opinion that the compensation
programs are appropriately applied to the Company's executive officers,
competitive and reasonable. In addition, our compensation programs are necessary
to attract and retain executive officers who are essential to the continued
development and success of the Company, to compensate those executive officers
for their contributions and to enhance shareholder value.

Compensation Committee

William F. Hughes, Jr., Chairman
Charles G. Curtis
Gene A. Strasheim
Richard L. Yadon

Summary of Annual Compensation

The following table sets forth information regarding the compensation we
paid for the fiscal years ended December 31, 2005, 2004 and 2003 to (1) each
person who served as our Chief Executive Officer during 2005 and (2) each of our
other four most highly compensated executive officers in 2005 (collectively, the
"named executive officers").

Summary Compensation Table

Long-Term
Annual Compensation Compensation Awards
-------------------------------------- ------------------------------
Other Annual Restricted Securities All Other
Salary Bonus Compensation Stock Underlying Compensation
Name and Principal Position Year ($) ($) ($) Awards($) Options/SARS (#) ($)(1)
----------------------------- ------ -------- ------- --------------- ---------- ---------------- ------------

Stephen C. Taylor ........... 2005(2) 149,462 69,750 34,172(3) -- 45,000 3,726
Chairman, President
and Chief Executive
Officer

Wallace C. Sparkman ......... 2005(4) 121,027 44,000 5,253(3) -- -- --
Former Director, 2004 120,000 53,500 -- -- -- --
Chairman and Chief
Executive Officer

Paul D. Hensley ............. 2005(5) 129,681 50,680 6,202(3) -- -- 6,772
Director, President of SCS

Earl R. Wait ................ 2005 94,720 35,000 18,600(3) -- -- 4,326
Vice President - 2004 90,000 40,250 -- -- -- 6,135
Accounting 2003 90,000 41,256 -- -- -- 3,600

James R. Hazlett ............ 2005(6) 105,000 36,750 9,600(3) -- -- --
Vice President -
Technical Services

S. Craig Rogers ............. 2005 98,764 35,000 9,465(3) -- -- 4,270
Vice President - 2004 95,000 42,750 -- -- -- 3,980
Operations 2003 88,500 37,669 -- -- -- 3,444

----------

(1) The amounts shown in this column represent voluntary contributions made by
Natural Gas Services Group to the 401(k) Plan in which all employees are
generally eligible to participate.

(2) Mr. Taylor was first employed by us on January 13, 2005.

(3) The executive officers named above receive various perquisites provided by
or paid for by Natural Gas Services Group pursuant to company policies. SEC
rules require disclosure of perquisites and other personal benefits,
securities or property for a named executive officer unless the aggregate
amount of that type of compensation is the lesser of either $50,000 or 10%
of the total annual salary and bonus reported for that named executive
officer. SEC rules also require us to disclose, via footnote or otherwise,
each perquisite or other personal benefit exceeding 25% of the total
perquisites and other personal benefits reported for a named executive
officer. Although the perquisites received by the named executive officers
in 2005 did not meet the disclosure threshold, in an effort to promote
greater transparency and disclosure regarding the compensation of the named
executive officers, we have determined to start providing, beginning with
the 2005 fiscal year, perquisite information even though the thresholds
have not been met.

Perquisites received are as follows:

Health Personal Use
Automobile Insurance of Company
Allowance Premiums Automobiles Other Total
Year ($) ($)(a) ($) ($) ($)
-------- ------------- ----------- -------------- ----------- ----------

Stephen C. Taylor 2005 -- 3,032 1,476(b) 29,664(c) 34,172

Wallace C. Sparkman 2005 9,000 5,253 -- -- 14,253

Paul D. Hensley 2005 -- 6,202 -- -- 6,202

Earl R. Wait 2005 9,000 9,600 -- -- 18,600

James R. Hazlett 2005 -- 9,600 -- -- 9,600

S. Craig Rogers 2005 -- 8,630 835(b) -- 9,465

----------

(a) This compensation represents annual premiums paid by Natural Gas
Services Group for health insurance provided to officers.

(b) Such amount has been calculated in accordance with Internal Revenue
Service requirements.

(c) When we hired Mr. Taylor in January 2005, and as provided in our
employment agreement with Mr. Taylor, we agreed to provide certain
"one-time" benefits to him in order to retain his services. These
benefits included allowing Mr. Taylor to select a company vehicle,
payment of relocation expenses and the reimbursement to him of an
amount equal to three regularly scheduled mortgage payments on his
prior residence. Such amount includes the reimbursement to Mr. Taylor
of $20,000 for his relocation expenses and $9,664 in reimbursement of
three mortgage payments made by Mr. Taylor for his prior residence.

(4) On January 1, 2004, we employed Mr. Sparkman as our Director of Investor
Relations. He served in this capacity until March 2004 when he was elected
to serve as interim President and Chief Executive Officer following the
death of Wayne L. Vinson, our former President, Chief Executive Officer and
a director. The salary paid to Mr. Sparkman during 2004 was paid under an
oral arrangement between Mr. Sparkman and us. As a result of Mr. Taylor's
employment by us and the increase in his responsibilities following his
employment, Mr. Sparkman's annual salary was reduced to $110,000 in August
2005. Mr. Sparkman retired from his employment with us and as Chairman
effective as of December 31, 2005.

(5) When we acquired SCS on January 3, 2005, Mr. Hensley retained and has
continued in his position as President of SCS.

(6) Mr. Hazlett became an executive officer in June 2005.

Bonus Program

We have established a cash bonus program for our officers and selected
senior managers. For annual periods beginning after December 31, 2004, program
participants are eligible for cash awards based upon the attainment of certain
pre-determined financial, operational and personal performance parameters. Our
Compensation Committee will review our operating history, each participant's
bonus-based performance and the recommendations of the President and determine
whether or not any bonuses should be paid under the program. If so, the Board of
Directors, upon recommendation of the Compensation Committee, will determine the
amounts to be paid, with any bonus being paid after the completion of the final
audit of the fiscal year. The Board of Directors may change or discontinue the
bonus program at any time.

Option Grants in Last Fiscal Year

Although we use stock options as part of the overall compensation of
Directors, officers and employees, Stephen C. Taylor was the only named
executive officer that was granted a stock option during 2005. In the following
table, we show certain information about the stock option granted to Mr. Taylor.

Option/SAR Grants in Last Fiscal Year

Potential Realizable
Individual Grants Value at Assumed
-------------------------------------------------- Annual Rates of
Number of Percent of Total Stock Price
Securities Options/SARs Appreciation for
Underlying Granted to Exercise or Option Term(1)
Options/Sars Employees in Base Price Expiration -----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% 10%
---- -------------- ----------------- ----------- --------------- --------- ---------

Stephen C. Taylor .... 45,000(2) 100% 9.22 August 24, 2015 $260,929 $661,244

----------

(1) These amounts are calculated based on the indicated annual rates of
appreciation and annual compounding from the date of grant to the end of
the option term. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock and overall stock
market conditions. There is no assurance that the amounts reflected in this
table will be achieved.

(2) A nonstatutory stock option to purchase 45,000 shares of common stock was
granted to Mr. Taylor on August 24, 2005. The option is exercisable in
three equal annual installments, commencing on January 13, 2006. For
additional information about the stock option granted to Mr. Taylor and our
compensation agreement with him, you should refer to "- Compensation
Agreements with Management" below.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

The following table sets forth, as of and for the year ended December 31,
2005, information pertaining to stock option exercises and fiscal year end
values of stock options held by the named executive officers.

Number of Unexercised Value of Unexercised
Securities Underlying In-the-Money
Shares Options/SARs at Options/SARS at
Acquired Fiscal Year End Fiscal Year End ($)(2)
On Value ------------------------------- -----------------------------
Name Exercise Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------------------ ---------- -------------- ------------ --------------- ----------- --------------

Stephen C. Taylor ...... -- -- -- 45,000 -- 348,300

Wallace C. Sparkman .... -- -- -- -- -- --

Paul D. Hensley ........ -- -- -- -- -- --

Earl R. Wait ........... -- -- 15,000 -- 205,650 --

James R. Hazlett ....... -- -- -- -- -- --

S. Craig Rogers ........ -- -- 12,000 -- 164,520 --

----------

(1) The value realized is equal to the fair market value of a share of common
stock on the date of exercise, less the exercise price of the stock options
exercised.

(2) The value of unexercised in-the-money options is equal to the fair market
value of a share of common stock at fiscal year-end ($16.96 per share),
based on the closing price of the common stock, less the exercise price.

Compensation of Directors

Our Directors who are not employees are paid $2,500 per quarter, and the
Chairman of the Audit Committee receives an additional $1,250 per quarter. As
additional compensation for their services during the preceding year, our
non-employee Directors are also granted, on or about December 31 of each year, a
non-statutory stock option to purchase 2,500 shares of our common stock at the
then market value. Under this stock option policy, on December 30, 2005, we
granted to each of our four non-employee Directors a stock option to purchase
2,500 shares of our common stock at an exercise price of $16.96 per share, the
fair market value of our common stock on the date of grant. The stock options
granted on December 30, 2005 are exercisable immediately and expire ten years
from the date of grant. We also reimburse our Directors for accountable expenses
incurred on our behalf.

1998 Stock Option Plan

Our 1998 Stock Option Plan provides for the issuance of options to purchase
up to 150,000 shares of our common stock. The purpose of the plan is to attract
and retain the best available personnel for positions of substantial
responsibility and to provide additional incentive to employees and consultants
and to promote the success of our business. The plan is administered by the
Compensation Committee of the Board of Directors. At its discretion, the
Compensation Committee may determine the persons to whom options may be granted
and the terms upon which such options will be granted. In addition, the
Compensation Committee may interpret the plan and may adopt, amend and rescind
rules and regulations for its administration. At May 1, 2006, stock options to
purchase a total of 101,002 shares of our common stock were outstanding under
the 1998 Stock Option Plan, which includes 10,000 shares underlying stock
options granted on December 30, 2005 to our four non-employee Directors under
the compensation arrangements described above under "-- Compensation of
Directors." As described below under "-- Compensation Agreements with
Management", one additional stock option to purchase 45,000 shares of common
stock, which was not granted under the 1998 Stock Option Plan, and which was
granted without stockholder approval, was also outstanding at that same date. A
total of 9,500 shares of common stock were available at May 1, 2006 for future
grants of stock options under the 1998 Stock Option Plan.

Equity Compensation Plans

The following is a table with information regarding our equity compensation
plans as of December 31, 2005:

(c)
(a) (b) Number of Securities
Number of Securities Weighted-average Remaining Available for
to be Issued Upon Exercise Price of Future Issuance Under Equity
Exercise of Outstanding Compensation Plans
Outstanding Options, Options, Warrants (Excluding Securities
Plan Category Warrants and Rights and Rights Reflected in Column (a))
----------------------------- ----------------------- -------------------- ------------------------------

Equity compensation
plans approved by
security holders ............ 101,668 $7.01 9,500

Equity compensation
plans not approved by
security holders ............ 99,028 $5.61 --

Total ....................... 200,696 $6.32 9,500

Compensation Agreements with Management

On August 24, 2005, we entered into a three year employment agreement with
Stephen C. Taylor to serve as our President and Chief Executive Officer. The
employment agreement provides for an annual base salary of $155,000; an annual
bonus of up to 45% of Mr. Taylor's annual base salary; four weeks of vacation
each year; a

vehicle allowance; moving expense reimbursement of up to $20,000; reimbursement
for three monthly mortgage payments made by Mr. Taylor for his prior residence
in Houston, Texas; and standard medical and other benefits provided to all of
our employees. The agreement contains provisions restricting the use of
confidential information, requiring that business opportunities and intellectual
property developed by Mr. Taylor become our property; and prohibiting Mr. Taylor
from competing with us during his employment and for the two years following the
date he ceases to be employed by us within the areas consisting of Midland and
Ector Counties, Texas, Tulsa County, Oklahoma and all adjacent counties. The
agreement is subject to termination upon certain "fundamental changes;" the
death or mental or physical incapacity or inability of Mr. Taylor; the voluntary
resignation or retirement of Mr. Taylor; or the termination of Mr. Taylor's
employment for "cause", within the meaning of the agreement. If Mr. Taylor's
employment is terminated as the result of a fundamental change or other than for
cause, he is entitled to receive a single lump sum cash payment equal to 200% of
his base salary. As an inducement to obtain Mr. Taylor's services, we also
agreed to grant to Mr. Taylor a stock option to purchase 45,000 shares of common
stock. We granted the option to Mr. Taylor, without stockholder approval, on
August 24, 2005. The option is exercisable in three equal annual installments,
commencing on January 13, 2006. The per share exercise price of the option is
$9.22, the fair market value of our common stock on January 13, 2005, the date
we initially hired Mr. Taylor. The option expires ten years from the date of
grant.

When we acquired SCS on January 3, 2005, Paul D. Hensley, one of the former
stockholders of SCS, entered into a three year employment agreement with SCS to
serve as the President of SCS. Mr. Hensley is also currently a director of SCS
and a Director of Natural Gas Services Group, Inc. The employment agreement
provides for an annual base salary in the amount of $126,700 and participation
by Mr. Hensley in our employee benefit plans. The agreement also contains
provisions restricting the use of confidential information; requiring that
business opportunities and intellectual property developed by Mr. Hensley become
the property of SCS; and prohibiting Mr. Hensley from competing with us within
an area consisting of Tulsa County, Oklahoma and all adjacent counties. The
agreement may be terminated by us for "cause", within the meaning of the
agreement, and automatically terminates upon the occurrence of any "fundamental
change" with respect to SCS or Natural Gas Services Group. The agreement also
automatically terminates upon the death, voluntary resignation or retirement of
Mr. Hensley or the inability of Mr. Hensley to perform his duties for a
consecutive period of 120 days or a non-consecutive period of 180 days during
any twelve month period.

On January 3, 2005, James R. Hazlett, one of the former stockholders of
SCS, also entered into a three year employment agreement with SCS to continue in
his position as a Vice President of SCS. In June 2005, Mr. Hazlett also became
Vice President-Technical Services of Natural Gas Services Group. The employment
agreement provides for an annual base salary in the amount of $105,000 and
participation by Mr. Hazlett in our employee benefit plans. The agreement
contains provisions restricting the use of confidential information; requiring
that business opportunities and intellectual property developed by Mr. Hazlett
become the property of SCS; and prohibiting Mr. Hazlett from competing with us
within an area consisting of Tulsa County, Oklahoma and all adjacent counties.
The agreement may be terminated by us for "cause", within the meaning of the
agreement, and automatically terminates upon the occurrence of any "fundamental
change" with respect to SCS or Natural Gas Services Group. The agreement also
automatically terminates upon the death, voluntary resignation or retirement of
Mr. Hazlett or the inability of Mr. Hazlett to perform his duties for a
consecutive period of 120 days or a non-consecutive period of 180 days during
any twelve month period.

On October 13, 2003, we entered into an employment agreement with William
R. Larkin. The contract's initial term of employment was from October 13, 2003
to April 13, 2005, and currently continues until terminated by either party upon
thirty days advance written notice. The contract provides for an annual base
salary of not less than $90,000 per year, participation in our bonus program and
other normal company benefits. In addition to customary confidentiality
provisions, the contract further provides that any and all inventions, designs,
improvements and discoveries made by Mr. Larkin will belong to us. If
terminated, Mr. Larkin is entitled to severance pay in an amount equal to three
months of base salary.

On January 1, 2004, we employed Wallace C. Sparkman as our Director of
Investor Relations. Upon the death of Wayne L. Vinson in March 2004, Mr.
Sparkman was elected to serve as our interim President and Chief Executive
Officer. Mr. Sparkman served as our President and Chief Executive Officer until
January 13, 2005, when we hired Stephen C. Taylor to serve in these capacities.
After January 13, 2005, Mr. Sparkman assisted us with the transition of Mr.
Taylor into the roles of President and Chief Executive Officer and resumed his
investor relations

duties. On June 14, 2005, Mr. Sparkman was elected to replace Wallace O. Sellers
as Chairman of the Board of Directors following Mr. Seller's retirement. Under
our oral arrangement with Mr. Sparkman, he served as an at-will employee with a
base salary of $120,000 per year. This arrangement was terminated on December
31, 2005 when Mr. Sparkman retired from employment with us and as Chairman of
the Board and a member of our Board of Directors. Upon the announcement of his
retirement, we entered into a Retirement Agreement with Mr. Sparkman. Under this
agreement, we agreed that Mr. Sparkman would remain eligible for the 2005 fiscal
year for participation in our cash bonus program. We also agreed to pay Mr.
Sparkman a one-time cash bonus in the amount of $30,000, and pay six months of
insurance premiums to maintain supplemental Medicare insurance coverage for
himself and his wife. We estimate that the amount of these insurance premium
reimbursements will be approximately $4,700. Having expressed interest in
pursuing other business ventures, we requested, and Mr. Sparkman agreed, that he
would not compete with us for a period of one year following the date he retired
within the areas consisting of Midland and Ector Counties, Texas, Tulsa County,
Oklahoma and all adjacent counties.

Certain Relationships and Related Transactions

Acquisition of Screw Compression Systems, Inc.

In October 2004, we entered into a Stock Purchase Agreement with Screw
Compression Systems, Inc. or "SCS", and the three stockholders of SCS, Paul D.
Hensley, James R. Hazlett and Tony Vohjesus. Under this agreement, we purchased
all of the outstanding shares of capital stock of SCS from Messrs. Hensley,
Hazlett and Vohjesus. Mr. Hensley is currently the president of SCS and a
Director of Natural Gas Services Group. Mr. Hazlett became Vice President -
Technical Services of Natural Gas Services Group in June 2005 and also continues
to serve as a vice president of SCS. Mr. Vohjesus remains employed by SCS as a
vice president. The acquisition was completed on January 3, 2005 and SCS is now
operated as a wholly owned subsidiary of Natural Gas Services Group.

Under terms of the Stock Purchase Agreement, we appointed Mr. Hensley as a
Director of Natural Gas Services Group in January, 2005 to fill a vacancy
existing on its Board of Directors, to hold office until the 2005 annual meeting
of shareholders. Mr. Hensley was nominated for election as a Director at the
2005 annual meeting of shareholders and was elected as a Director at the annual
meeting of shareholders held in June 2005.

Based on Mr. Hensley's pro rata ownership of SCS, he received $5.6 million
in cash; 426,829 shares of Natural Gas Services Group common stock; and a
promissory note issued by Natural Gas Services Group in the original principal
amount of $2.1 million, bearing interest at the rate of 4.00% per annum,
maturing January 3, 2008 and secured by a letter of credit in the aggregate face
amount of $1.4 million. Mr. Hazlett received $800,000 in cash; 60,976 shares of
Natural Gas Services Group common stock; and a promissory note in the original
principal amount of $300,000, bearing interest at the rate of 4.00% per annum,
maturing January 3, 2008 and secured by a letter of credit in the aggregate face
amount of $200,000. Mr. Vohjesus received $1,600,000 in cash; 121,951 shares of
Natural Gas Services Group common stock; and a promissory note in the principal
amount of $600,000, bearing interest at the rate of 4.00% per annum, maturing
January 3, 2008 and secured by a letter of credit in the aggregate fact amount
of $400,000. The promissory notes are payable in three equal annual
installments, with the first installments being due and payable on January 3,
2006. Subject to the consent of the holder of each respective note, principal
payments may be made by Natural Gas Services Group in shares of common stock
valued at the average daily closing prices of the common stock on the American
Stock Exchange for the twenty consecutive trading days commencing thirty days
before the due date of the principal payment, or by combination of cash and
shares of common stock.

Under terms of a Stockholders' Agreement entered into as required by the
Stock Purchase Agreement, for a period of two years following the closing, each
of Messrs. Hensley, Hazlett and Vohjesus has the right, subject to certain
limitations, to include or "piggyback" the shares of common stock he received in
the transaction in any registration statement we file with the Securities and
Exchange Commission. The Stockholders' Agreement also provides that Messrs.
Hensley, Hazlett and Vohjesus will not for a period of three years acquire or
agree, offer, seek or propose to acquire beneficial ownership of any assets or
businesses or any additional securities issued by us, or any rights or options
to acquire such ownership; contest any election of directors by the stockholders
of Natural Gas Services Group; or induce or attempt to induce any other person
to initiate any shareholder proposal or a tender offer

for any of our voting securities; or enter into any discussions, negotiations,
arrangements or understandings with any third party with respect to any of the
foregoing.

Guarantees of Indebtedness

In March 2001, we issued warrants that will expire on December 31, 2006 to
purchase shares of our common stock at $2.50 per share to the following persons
for guaranteeing the amount of our debt indicated:

Number of Shares Amount of Debt
Name Underlying Warrants Guaranteed
---- ----------------------- -------------------

Wallace O. Sellers(1) .................................... 21,936 $548,399
Wallace C. Sparkman(2) ................................... 21,467 $536,671
CAV-RDV, Ltd.(3) ......................................... 15,756 $393,902
Richard L. Yadon ......................................... 9,365 $234,121

----------

(1) Mr. Sellers served as a Director from December 1998 until June 2005
after declining to stand for re-election at the 2005 annual meeting of
shareholders because of health reasons.

(2) Mr. Sparkman transferred such warrants to Diamond S DGT Trust, a trust
of which Mr. Sparkman's son, Scott W. Sparkman, is the trustee and a
beneficiary. Scott W. Sparkman served as Secretary of Natural Gas
Services Group from 1998 until his resignation on April 3, 2006.

(3) CAV-RDV, Ltd. is a limited partnership that was controlled by Wayne L.
Vinson, our former President, Chief Executive Officer and a director.

All of the guaranties were released by our bank lender upon completion of
our initial public offering in October 2002.

In April 2002, we issued five year warrants to purchase shares of our
common stock at $3.25 per share to each of the following persons for
guaranteeing a portion of our bank debt as follows:

Number of Shares Amount of Debt
Name Underlying Warrants Guaranteed
---- ----------------------- -------------------

Wallace O. Sellers ....................................... 9,032 $451,601
CAV-RDV, Ltd. ............................................ 2,122 $106,098
Richard L. Yadon ......................................... 5,318 $265,879

All of the guaranties were released by our bank lender in June 2003.

During the period from March 2001 to September 2005, Wayne L. Vinson, Earl
R. Wait and Wallace C. Sparkman also guaranteed payment of approximately
$197,000, $84,000 and $92,000, respectively, of additional obligations to third
party vendors when we acquired vehicles, equipment and software. The last of
these obligations was satisfied in September 2005, and none of the guaranties
remain in effect. No warrants or other consideration was given by us to Messrs.
Vinson, Wait or Sparkman in exchange for their guaranties of these vendor
obligations.

Consulting Fees

During 2002 and 2003, we paid management consulting fees to LaSabre
Services, Inc., a corporation owned and controlled by Wallace C. Sparkman, our
former Chairman of the Board of Directors and Chief Executive Officer. We paid
approximately $109,000 for these services in 2003. We terminated these payments
to LaSabre at the end of December 2003 when Mr. Sparkman became an employee of
Natural Gas Services Group in January 2004, as described above under
"-Compensation Agreements With Management."

PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of April 26, 2006, the beneficial
ownership of our common stock by (i) each of our directors (and nominees for
director), (ii) each of our executive officers; (iii) all of our executive
officers and directors (and nominees) as a group; and (iv) each person known by
us to beneficially own more than five percent of our common stock. Except as
otherwise indicated below, each of the individuals named in the table has sole
voting and investment power, or shares such powers with his spouse, with respect
to the shares set forth opposite his name.

Percent
Name and Address Amount and Nature Of
of Beneficial Owner of Beneficial Ownership(1) Class
------------------------------ --------------------------- ------------

Alan A. Baker -- --
2702 Briar Knoll Court
Sugar Land, Texas 77479

Charles G. Curtis 83,000(2) *
1 Penrose Lane
Colorado Springs, Colorado 80906

Paul D. Hensley 326,829 2.74%
3005 N. 15th Street
Broken Arrow, Oklahoma 74012

William F. Hughes, Jr. 199,500(3) 1.67%
42921 Normandy Lane
Lancaster, California 93536

Gene A. Strasheim 8,500(4) *
165 Huntington Place
Colorado Springs, Colorado 80906

Stephen C. Taylor 15,000(5) *
2911 South County Road 1260
Midland, Texas 79706

Richard L. Yadon 276,683(6) 2.32%
4444 Verde Glen Ct.
Midland, Texas 79707

William R. Larkin -- --
2911 South County Road 1260
Midland, Texas 79706

S. Craig Rogers 14,125(7) *
2911 South County Road 1260
Midland, Texas 79706

Earl R. Wait 45,520(8) *
2911 South County Road 1260
Midland, Texas 79706

James R. Hazlett 50,976 *
2911 South County Road 1260
Midland, Texas 79706

All directors (and nominees) and executive
officers as a group (11 persons) 1,020,133(9) 8.46%

----------

* Less than one percent.

(1) The number of shares listed includes all shares of common stock owned by,
or which may be acquired within 60 days of April 26, 2006 upon the exercise
of warrants and stock options held by the shareholder (or group).
Beneficial ownership is calculated in accordance with the rules of the
Securities and Exchange Commission.

(2) Includes 40,000 shares of common stock that may be acquired upon the
exercise of warrants and 10,000 shares that may be acquired upon the
exercise of stock options granted under our 1998 Stock Option Plan.

(3) Includes 190,500 shares of common stock indirectly owned by Mr. Hughes
through the William and Cheryl Hughes Family Trust and 7,500 shares that
may be acquired upon the exercise of stock options granted under our 1998
Stock Option Plan. Mr. and Mrs. Hughes are co-trustees of the William and
Cheryl Hughes Family Trust and have shared voting and investment powers
with respect to the shares held by the trust. Mr. and Mrs. Hughes are
beneficiaries of the trust along with their two children.

(4) Includes 5,000 shares of common stock that may be acquired upon exercise of
stock options granted under our 1998 Stock Option Plan.

(5) Includes 15,000 shares of common stock that may be acquired upon exercise
of a stock option granted to Mr. Taylor as an inducement for his
employment.

(6) Includes 14,683 shares of common stock that may be acquired upon the
exercise of warrants and 7,500 shares that may be acquired upon the
exercise of stock options granted under our 1998 Stock Option Plan.

(7) Includes 12,000 shares of common stock that may be acquired upon the
exercise of a stock option granted under our 1998 Stock Option Plan.

(8) Includes 15,000 shares of common stock that may be acquired upon exercise
of a stock option granted under our 1998 Stock Option Plan.

(9) Includes 72,000 shares of common stock that may be acquired upon the
exercise of stock options and 54,683 shares that may be acquired upon the
exercise of warrants to purchase common stock.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our Directors
and officers to file periodic reports of beneficial ownership with the
Securities and Exchange Commission. These reports show the Directors' and
officers' ownership, and the changes in ownership, of common stock and other
equity securities of Natural Gas Services Group.

Based solely on a review of the Forms 3, 4 and 5 and amendments thereto
furnished to us for 2005, certain of our Directors and officers did not file on
a timely basis reports of transactions in our equity securities required by
Section 16(a) of the Securities Exchange Act of 1934. These transactions and
related reports are described in the following paragraphs.

On June 14, 2005, James R. Hazlett was appointed Vice President - Technical
Services. A Form 3 Report reflecting Mr. Hazlett's appointment as an officer was
filed on October 5, 2005, or 103 days late.

On August 4, 2005, S. Craig Rogers exercised a warrant to purchase 1,000
shares of common stock. A Form 4 Report reflecting the exercise of the warrant
was filed on September 29, 2005, or 52 days late.

On September 1, 2005, William R. Larkin exercised an option to purchase
4,000 shares of common stock. On September 6, 2005, 3,000 of such shares were
sold in open market transactions, and the remaining 1,000 shares were sold in an
open market transaction on September 7, 2005. Mr. Larkin reported these
transactions in a Form 4 Report filed with the Securities and Exchange
Commission on September 29, 2006. The report of the option exercise was 24 days
late; the report of the sale of 3,000 shares of common stock on September 6,
2005 was 21 days late; and the report of the sale of 1,000 shares of stock on
September 7, 2005 was 17 days late.

On August 29, 2005, William F. Hughes exercised a warrant to purchase
60,000 shares of common stock. A Form 4 Report reporting the exercise of the
warrant was filed on September 6, 2005, or 6 days late.

REPORT OF THE AUDIT COMMITTEE

Our Audit Committee is responsible for overseeing the integrity of Natural
Gas' financial statements; financial reporting processes; compliance with legal
and regulatory requirements; the independent auditor's qualifications and
independence; and the performance of Natural Gas' internal accounting functions
and independent auditors.

Our independent accountants are responsible for performing an independent
audit of our consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and issuing an
independent accountants' report on such financial statements. The Audit
Committee reviews with management our consolidated financial statements; reviews
with the independent accountants their independent accountants' report; and
reviews the activities of the independent accountants. The Audit Committee
selects our independent accountants each year. The Audit Committee also
considers the adequacy of our internal controls and accounting policies. The
chairman and members of the Audit Committee are all independent directors of our
Board of Directors within the meaning of Section 121(A) of the listing standards
of the American Stock Exchange.

The Audit Committee has reviewed and discussed our audited financial
statements with management of Natural Gas Services Group. The Audit Committee
has discussed with our independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communications with Audit
Committees), as amended by Statement on Auditing Standards No. 90 (Audit
Committee Communications). In addition, the Audit Committee has received the
written disclosures and the letter from our independent accountants required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and has discussed with the independent accountants matters
pertaining to their independence. Based upon the reviews and discussions
referred to above, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in our Annual Report on Form
10-K for 2005 for filing with the Securities and Exchange Commission. The Audit
Committee and Board of Directors has also selected Hein & Associates LLP as our
independent accountants for the fiscal year ending December 31, 2006.

Respectfully submitted by the Audit Committee,

Gene A. Strasheim, Chairman
Charles G. Curtis
William F. Hughes, Jr.
Richard L. Yadon

APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee has reappointed the firm of Hein & Associates LLP as
independent auditors for the fiscal year ending December 31, 2006.
Representatives of Hein & Associates LLP are expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
at the annual meeting if they desire to do so. It is expected that such
representatives will be available to respond to appropriate questions.

Principal Accountant Fees

Our principal accountant for the fiscal years ended December 31, 2005 and
2004 was Hein & Associates LLP.

Audit Fees

The aggregate fees billed for professional services rendered by Hein &
Associates LLP for the audit of our financial statements for our fiscal years
ended December 31, 2005 and 2004 and for the review of our financial statements
in our Forms 10-QSB for the fiscal quarters in such fiscal years were $177,278
and $82,172, respectively. These fees also include update audit procedures
performed by Hein & Associates LLP for the issuance of consents for the
inclusion of their audit opinions in registration statements we filed with the
SEC during these years.

Audit-Related Fees

The aggregate fees billed for assurance and related services by Hein &
Associates LLP during the fiscal years ended December 31, 2005 and 2004 were
approximately $154,851 and $67,000, respectively. These fees were mainly related
to the audits for our acquisition of Screw Compression Systems, Inc., procedures
performed in connection with a registration statement on Form S-1 filed with the
Securities and Exchange Commission and consultation regarding Sarbanes-Oxley
internal controls implementation.

Tax Fees

The aggregate fees billed for professional services rendered by Hein &
Associates LLP for the fiscal year ended December 31, 2004 for tax compliance,
tax advice and tax planning were $18,330. The nature of the services comprising
these fees included the review of our 2004 tax return. We were not billed for
such services during the year ended December 31, 2005.

All Other Fees

No other fees were billed by Hein & Associates LLP during our fiscal years
ended December 31, 2004 and 2005.

As of the date of this proxy statement, our Audit Committee had not
established general pre-approval policies and procedures for the engagement of
our principal accountant to render audit or non-audit services. However, in
accordance with Section 10A(i) of the Securities Exchange Act of 1934, as
amended, and because we do not have a general pre-approval policy, our Audit
Committee, as a whole, specifically pre-approves each audit or non-audit service
before our accountant is engaged to provide those services.

Certain rules of the Securities and Exchange Commission provide that an
auditor is not independent of an audit client if the services it provides to the
client are not appropriately approved, subject, however, to a de minimus
exception contained in the rules. The Audit Committee pre-approved all services
provided by Hein & Associates LLP in 2005 and the de minimus exception was not
used.

PROPOSAL 2 - AMENDMENT OF THE 1998 STOCK OPTION PLAN

Description of the Proposed Amendments

On December 18, 1998, the Board of Directors adopted the 1998 Stock Option
Plan of Natural Gas Services Group, Inc. (the "1998 Plan"), and directed that
the 1998 Plan be submitted to the shareholders for approval. The 1998 Plan
became effective when it received such approval on December 18, 1998.

On May 9, 2006, the Compensation Committee of the Board of Directors voted
to amend the 1998 Plan and on May 9, 2006, the Board of Directors directed that
such amendments be submitted for the approval of shareholders at the 2006 Annual
Meeting of Shareholders. Such amendments will become effective if a majority of
the votes cast are in favor of the proposal. If the amendments are not approved,
the 1998 Plan will remain in force as originally adopted.

The proposed amendments change the 1998 Plan in five principal respects as
follows:

1. The number of shares of common stock authorized for issuance under the
1998 Plan will be increased from 150,000 to 550,000 shares of common stock.

2. The Compensation Committee will have a longer period during which it may
grant options. The 1998 Plan, prior to amendment, provided that no grants could
be made after December 17, 2008. As provided in the amendment, options can be
granted until March 1, 2016.

3. The 1998 Plan, prior to amendment, provided that the exercise price of
incentive stock options granted to employees who do not own more than 10% of our
common stock would be not less than 140% of the fair market value per share of
our common stock on the date of grant. The amendment provides that the exercise
price of incentive stock options granted to such employees under the 1998 Plan
will be not less than 100% of the fair market value of our common stock on the
date of grant.

4. The 1998 Plan, prior to amendment, contained a provision allowing the
Compensation Committee to increase, without shareholder approval, the number of
shares of stock subject to the 1998 Plan from 150,000 shares to 400,000 shares.
This provision of the 1998 Plan is eliminated in the amendment.

5. The 1998 Plan, prior to amendment, provided that the Compensation
Committee, in its sole discretion, could provide an optionee with the right to
exchange, in a cashless transaction, all or part of a stock option for shares of
our common stock on terms and conditions determined by the Compensation
Committee. This provision of the 1998 Plan could potentially result in adverse
accounting consequences under FASB Statement No. 123(R), which was recently
adopted by Natural Gas Services Group. Therefore, this provision of the 1998
Plan is eliminated in the amendment.

The purposes of the 1998 Plan, which are unchanged by the proposed
amendment, are to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to employees and
consultants and to promote the success of our business.

Summary Description of the 1998 Plan

The following summary of the 1998 Plan, as amended, is qualified in its
entirety by reference to the text of the 1998 Plan, as amended, which is
attached as Exhibit A. The 1998 Plan has been and will continue to be
administered by the Compensation Committee of the Board of Directors. The
Compensation Committee has full and final authority, in its discretion, to grant
incentive stock options or nonstatutory stock options, to select the persons who
would be granted stock options and determine the number of shares subject to
each option, the duration and exercise period of each option and the terms and
conditions of each option granted.

The major provisions of the 1998 Plan as amended are as follows:

Eligibility. The Compensation Committee is authorized to grant stock
options to any person selected by the Compensation Committee, including
employees, officers who are also directors of Natural Gas Services Group,
directors who are not employees of Natural Gas Services Group and
consultants. Incentive stock options may be granted only to employees of
Natural Gas Services Group.

Option Price. The option exercise price for shares of common stock
issued upon exercise of an option is such price as is determined by the
Compensation Committee. However, for incentive stock options granted to
employees the option price will be not less than 100% of the fair market
value of the Company's common stock on the date the option is granted,
except that if an incentive stock option is granted to an employee who owns
more than 10% of Natural Gas' outstanding common stock, the option price
will be not less than 110% of the fair market value of the common stock on
the date of grant. Fair market value for purposes of the 1998 Plan is the
closing price of the common stock as reported on the American Stock
Exchange on the relevant date.

Duration of Options. Each stock option will terminate on the date
fixed by the Compensation Committee, which shall be not more than ten years
after the date of grant. However, in the case of an incentive stock option
granted to an employee who, at the time the option is granted, owns stock
representing more than 10% of the outstanding stock of Natural Gas Services
Group, the term of the option will be five years from the date of grant or
such shorter time as may be provided in the stock option agreement.

Exercise Period. In the case of incentive stock options, if an
optionee's employment is terminated for any reason, except death or
disability, the optionee has three months in which to exercise an option
(but only to the extent exercisable on the date of termination) unless the
option by its terms expires earlier. If the employment of the optionee
terminates by reason of total and permanent disability, the option may be
exercised during the period of twelve months following termination of
employment. If an optionee dies while an employee or within three months
from the date of termination, the right to exercise shall terminate twelve
months from the date of death. The options terminate immediately prior to
the dissolution or liquidation of Natural Gas Services Group, unless the
Compensation Committee gives each optionee the right to exercise his option
as to all or any part of the option, including shares as to which the
option would not otherwise be exercisable. If Natural Gas Services Group
sells all or substantially all of its assets or merges with or into another
entity in a transaction in which it is not the survivor, options will be
assumed or an equivalent option will be substituted by the successor
corporation, unless the Compensation Committee determines that the optionee
has the right to exercise the option as to all of the shares, including
shares as to which the option would not otherwise be exercisable. The
Compensation Committee has the right to alter the terms of any option at
grant or while outstanding pursuant to the terms of the 1998 Plan.

Payment. Payment for stock purchased on the exercise of a stock option
must be made in full at the time the stock option is exercised. The
Compensation Committee may, in its discretion, permit payment for the
exercise price to be made in cash, check, other shares of common stock
having a fair market value on the date of exercise equal to the aggregate
exercise price of the shares as to which the option is exercised, or any
combination of such methods of payment, or such other consideration and
method of payment for the issuance of shares as permitted under the
Colorado Business Corporation Act. Additionally, the Compensation Committee
may permit the exercise of an option as a "net issuance" or "cashless"
transaction on terms and conditions established by the Compensation
Committee.

Shares That May Be Issued under the 1998 Plan. A maximum of 550,000
shares of Natural Gas' common stock, as may be adjusted as described below,
may be issued upon exercise of stock options granted under the 1998 Plan.
This number includes the number of shares of Natural Gas' common stock
originally authorized in 1998 (150,000 shares). Consequently, a total of
400,000 additional shares will be authorized pursuant to the proposed
amendment. The 400,000 additional shares available represent approximately
3.35% of Natural Gas' common stock issued and outstanding on April 26,
2006. At the date of this proxy statement, 140,500 shares of common stock
have already been issued or are subject to currently outstanding stock
options, leaving 9,500 shares of common stock available from the 150,000

shares originally authorized. The number of shares available under the 1998
Plan is subject to adjustment in the event of any stock split, stock
dividend, recapitalization, spin-off or other similar action. If any stock
option terminates or is canceled for any reason without having been
exercised in full, the shares of stock not issued will then become
available for additional grants of options.

Estimate of Benefits. The number of stock options that will be awarded
to Natural Gas' Chief Executive Officer and the other four most highly
compensated executive officers of Natural Gas Services Group under the 1998
Plan are not currently determinable. Information regarding awards to
Natural Gas' Chief Executive Officer and the other four most highly
compensated executive officers in 2005 is provided on page 14 of this proxy
statement. In addition, stock options to purchase a total of 10,000 shares
were granted in December 2005 to directors who are not employees.

Federal Income Tax Consequences

Incentive Stock Options. Some of the options granted under the 1998 Plan
may constitute "incentive stock options" ("ISOs") within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). Under present
federal tax regulations, there will be no federal income tax consequences to
either Natural Gas Services Group or an optionee upon the grant of an ISO, nor
will an optionee's exercise of an ISO result in federal income tax consequences
to Natural Gas Services Group. Although an optionee will not realize ordinary
income upon his exercise of an ISO, the excess of the fair market value of the
common stock acquired at the time of exercise over the option price may
constitute an adjustment in computing alternative minimum taxable income under
Section 56 of the Code and, thus, may result in the imposition of the
"alternative minimum tax" pursuant to Section 55 of the Code on the optionee. If
an optionee does not dispose of common stock acquired through an ISO within one
year of the ISO's date of exercise, any gain realized upon a subsequent
disposition of common stock will constitute long-term capital gain to the
optionee. If an optionee disposes of the common stock within such one-year
period, an amount equal to the lesser of (i) the excess of the fair market value
of the common stock on the date of exercise over the option price or (ii) the
actual gain realized upon such disposition will constitute ordinary income to
the optionee in the year of the disposition. An additional gain upon such
disposition will be taxed as short-term capital gain. Natural Gas Services Group
will receive a deduction in the amount equal to the amount constituting ordinary
income to an optionee.

Nonstatutory Options. Certain stock options which do not constitute ISOs
("nonstatutory options") may also be granted under the 1998 Plan. Under present
federal income tax regulations, there will be no federal income tax consequences
to either Natural Gas Services Group or the optionee upon the grant of a
nonstatutory option. However, the optionee will realize ordinary income upon the
exercise of a nonstatutory option in an amount equal to the excess of the fair
market value of the common stock acquired upon the exercise of such option over
the option price, and Natural Gas Services Group will receive a corresponding
deduction. The gain, if any, realized upon a subsequent disposition of such
common stock will constitute short- or long-term capital gain, depending on the
optionee's holding period.

The federal income tax consequences described in this section are based on
laws and regulations in effect on the date of this proxy statement, and there is
no assurance that the laws and regulations will not change in the future and
affect the tax consequences of the matters discussed in this section.

Termination of and Amendments to the 1998 Plan

The Board of Directors may terminate or amend the 1998 Plan from time to
time in any manner permitted by applicable laws and regulations, except that no
additional shares of common stock of Natural Gas Services Group may be allocated
to the 1998 Plan and no change in the class of employees eligible to receive
incentive stock options or any other material amendment to the 1998 Plan may be
made without the approval of the shareholders.

Market Price of the Company's Common Stock

The closing market price of Natural Gas' common stock as reported on the
American Stock Exchange for May 9, 2006 was $17.56 per share.

Recommendation of the Board of Directors

The Board believes the proposed amendments to the 1998 Plan are in the best
interests of Natural Gas Services Group and its shareholders, as the
availability of an adequate number of shares reserved for grant under the 1998
Plan and the other amended terms described above will assist in the recruitment
and retention of the best available personnel.

The Board of Directions of Natural Gas Services Group recommends a vote FOR
the proposal to amend the 1998 Stock Option Plan. Proxies received by the Board
of Directors will be so voted unless shareholders specify in their proxies a
contrary choice.

SHAREHOLDER PROPOSALS

Under SEC Rule 14a-8, if a shareholder wants us to include a proposal in
our proxy statement and form of proxy for presentation at our 2007 annual
meeting of shareholders, the proposal must be received by us at our principal
executive offices at 2911 South County Road 1260, Midland, Texas 79706 by
January 13, 2007, unless the date of our 2007 annual meeting of shareholders is
more than 30 days from the anniversary date of our 2006 Annual Meeting of
Shareholders, in which case the deadline is a reasonable time before we print
and mail our proxy materials for the 2007 annual meeting of shareholders. The
proposal should be sent to the attention of the Secretary of Natural Gas
Services Group.

The SEC also sets forth procedures under which shareholders may make
proposals outside of the process described above in order for a shareholder to
introduce an item of business at an annual meeting of shareholders. A proposal
may not be presented at the 2007 annual meeting and no persons may be nominated
for election to the Board at that meeting unless we receive notice of the
proposal or nomination no later than March 29, 2007. Your notice should be
addressed to President, Natural Gas Services Group, Inc., 2911 South County Road
1260, Midland, Texas 79706. Your notice must comply with the requirements set
forth in our bylaws, a copy of which may be obtained from the Secretary of
Natural Gas Services Group.

In order to curtail controversy as to the date on which a proposal was
received by us, it is suggested that proponents submit their proposals by
certified mail-return receipt requested. Such proposals must also meet the other
requirements established by the SEC for shareholder proposals.

SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Because of Natural Gas' small size, to date we have not developed formal
processes by which shareholders may communicate directly with directors.
Instead, we believe that our informal process permitting communications to be
sent to the Board of Directors either generally or in care of a corporate
officer, has served the shareholders' needs. Until formal procedures are
developed and posted on our website (www.ngsgi.com), any communication to the
Board of Directors may be mailed to the Board, in care of the President of
Natural Gas Services Group, Inc. at 2911 South County Road 1260, Midland, Texas
79706. Shareholders should clearly note on the mailing envelope that the letter
is a "Shareholder-Board Communication." All such communications should identify
the author as a shareholder and clearly state whether the intended recipients
are all members of the Board of Directors or just certain specified individual
directors. The Secretary of Natural Gas will make copies of all such
communications and circulate them to the appropriate director or directors.

SOLICITATION OF PROXIES

The cost of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to shareholders, will be borne by Natural Gas
Services Group. In addition to soliciting proxies by mail, Natural Gas Services
Group and its directors, officers and regular employees may also solicit proxies
personally, by telephone or by other appropriate means. No additional
compensation will be paid to directors, officers or other regular employees for
such services. Banks, brokerage houses, custodians, nominees and fiduciaries
will be requested to

forward the proxy soliciting material to the beneficial owners of Natural Gas'
shares held of record by such persons and Natural Gas Services Group will
reimburse them for their charges and expenses in this connection.

OTHER MATTERS

Our Board of Directors does not know of any matters to be presented at the
meeting other than the matters set forth herein. If any other business should
come before the meeting, the person's names in the enclosed proxy card will vote
such proxy according to their judgment on such matters.

You may obtain our 2005 Annual Report on Form 10-K for the fiscal year
ended December 31, 2005 without charge upon written request to Stephen C.
Taylor, President, at Natural Gas Services Group, Inc., 2911 South County Road
1260, Midland, Texas 79706. In addition, the exhibits to the Annual Report on
Form 10-K for the fiscal year ended December 31, 2005 may be obtained by any
shareholder upon written request to Mr. Taylor.

BY ORDER OF THE BOARD OF DIRECTORS

Stephen C. Taylor
Chairman of the Board, President and
Chief Executive Officer

Midland, Texas
May 18, 2006

Exhibit A

NATURAL GAS SERVICES GROUP, INC.
1998 STOCK OPTION PLAN

(as amended on May 9, 2006)

1. Purposes of this Plan. The purposes of this 1998 Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants and
to promote the success of the Company's business. Options granted hereunder may
be either "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, or "nonstatutory stock options," at the
discretion of the Board and as reflected in the terms of the written stock
option agreement.

2. Definitions. As used herein, the following definitions shall apply:

a. "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company if no Committee is appointed.

b. "Code" shall mean the Internal Revenue Code of 1986, as amended.

c. "Common Stock" shall mean the $0.01 par value common stock of the
Company.

d. "Company" shall mean Natural Gas Services Group, Inc., a Colorado
corporation.

e. "Committee" shall mean the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of this Plan, if one is appointed, or
the Board if no committee is appointed.

f. "Consultant" shall mean any person who is engaged by the Company or by
any Parent or Subsidiary to render consulting services and is compensated for
such consulting services, but does not include a director of the Company who is
compensated for services as a director only with the payment of a director's fee
by the Company.

g. "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave, military
leave, or any other leave of absence approved by the Board, provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.

h. "Employee" shall mean any person, including officers and directors,
employed by the Company or by any Parent or Subsidiary. The payment of a
director's fee by the Company shall not be sufficient to constitute "employment"
by the Company.

i. "Incentive Stock Option" shall mean an Option which is intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and which shall be clearly identified as such in the written Stock Option
Agreement provided by the Company to each Optionee granted an Incentive Stock
Option under this Plan.

j. "Non-Employee Director" shall mean a director who:

(i) Is not currently an officer (as defined in Section 16a-1(1) of the
Securities Exchange Act of 1934, as amended) of the Company or of a Parent
or Subsidiary or otherwise currently employed by the Company or by a Parent
or Subsidiary.

(ii) Does not receive compensation, either directly or indirectly,
from the Company or from a Parent or Subsidiary, for services rendered as a
Consultant or in any capacity other than as a director, except for an
amount that does not exceed the dollar amount for which disclosure would be
required pursuant to Item 404(a) of Regulation S-K adopted by the United
States Securities and Exchange Commission.

(iii) Does not possess an interest in any other transaction for which
disclosure would be required pursuant to Item 404(a) of Regulation S-K
adopted by the United States Securities and Exchange Commission.

k. "Nonstatutory Stock Option" shall mean an Option granted under this Plan
which does not qualify as an Incentive Stock Option and which shall be clearly
identified as such in the written Stock Option Agreement provided by the Company
to each Optionee granted a Nonstatutory Stock Option under this Plan. To the
extent that the aggregate fair market value of Optioned Stock to which Incentive
Stock Options granted under Options to an Employee are exercisable for the first
time during any calendar year (under this Plan and all plans of the Company or
any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Nonstatutory Stock Options under this Plan. The aggregate fair market value of
the Optioned Stock shall be determined as of the date of grant of each Option
and the determination of which Incentive Stock Options shall be treated as
qualified incentive stock options under Section 422 of the Code and which
Incentive Stock Options exercisable for the first time in a particular year in
excess of the $100,000 limitation shall be treated as Nonstatutory Stock Options
shall be determined based on the order in which such Options were granted in
accordance with Section 422(d) of the Code.

l. "Option" shall mean an Incentive Stock Option, a Nonstatutory Stock
Option or both as identified in a written Stock Option Agreement representing
such stock option granted pursuant to this Plan.

m. "Optioned Stock" shall mean the Common Stock subject to an Option.

n. "Optionee" shall mean an Employee or other person who is granted an
option.

o. "Parent" shall mean a "parent corporation" of the Company, whether now
or hereafter existing, as defined in Section 424(e) of the Code.

p. "Plan" shall mean this 1998 Stock Option Plan.

q. "Share" shall mean a share of the Common Stock of the Company, as
adjusted in accordance with Section 11 of this Plan.

r. "Stock Option Agreement" shall mean the agreement to be entered into
between the Company and each Optionee which shall set forth the terms and
conditions of each Option granted to each Optionee, including the number of
Shares underlying such Option and the exercise price of each Option granted to
such Optionee under such agreement.

s. "Subsidiary" shall mean a "subsidiary corporation" of the Company,
whether now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to this Plan. Subject to the provisions of Section 11 of this
Plan, the maximum aggregate number of Shares which may be optioned and sold
under this Plan is 550,000 shares of Common Stock. The Shares may be authorized,
but unissued, or reacquired Common Stock. If an Option should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless this Plan shall have
been terminated, become available for future grant under this Plan.

4. Administration of this Plan.

a. Procedure. This Plan shall be administered by the Board or a Committee
appointed by the Board consisting of two or more Non-Employee Directors to
administer this Plan on behalf of the Board, subject to such terms and
conditions as the Board may prescribe.

(i) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board (which for purposes of this paragraph
(a)(i) of this Section 4 shall be the Board of Directors of the Company).
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution

therefor, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer this Plan.

(ii) Members of the Board who are granted, or have been granted,
Options may vote on any matters affecting the administration of this Plan
or the grant of any Options pursuant to this Plan.

b. Powers of the Board. Subject to the provisions of this Plan, the Board
shall have the authority, in its discretion:

(i) To grant Incentive Stock Options, in accordance with Section 422
of the Code, and Nonstatutory Stock Options or both as provided and
identified in a separate written Stock Option Agreement to each Optionee
granted such Option or Options under this Plan; provided however, that in
no event shall an Incentive Stock Option and a Nonstatutory Stock Option
granted to any Optionee under a single Stock Option Agreement be subject to
a "tandem" exercise arrangement such that the exercise of one such Option
affects the Optionee's right to exercise the other Option granted under
such Stock Option Agreement;

(ii) To determine, upon review of relevant information and in
accordance with Section 8(b) of this Plan, the fair market value of the
Common Stock;

(iii) To determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with
Section 8(a) of this Plan;

(iv) To determine the Employees or other persons to whom, and the time
or times at which, Options shall be granted and the number of Shares to be
represented by each Option;

(v) To interpret this Plan;

(vi) To prescribe, amend and rescind rules and regulations relating to
this Plan;

(vii) To determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option;

(viii) To accelerate or defer (with the consent of the Optionee) the
exercise date of any Option, consistent with the provisions of Section 7 of
this Plan;

(ix) To authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted
by the Board; and

(x) To make all other determinations deemed necessary or advisable for
the administration of this Plan.

c. Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other permissible holders of any Options granted under this Plan.

5. Eligibility.

a. Persons Eligible. Options may be granted to any person selected by the
Board. Incentive Stock Options may be granted only to Employees. An Employee,
who is also a director of the Company, its Parent or a Subsidiary, shall be
treated as an Employee for purposes of this Section 5. An Employee or other
person who has been granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options.

b. No Effect on Relationship. This Plan shall not confer upon any Optionee
any right with respect to continuation of employment or other relationship with
the Company nor shall it interfere in any way with his right or the Company's
right to terminate his employment or other relationship at any time.

6. Term of Plan. This Plan, as amended, became effective on June 21, 2006. It
shall continue in effect until March 1, 2016, unless sooner terminated under
Section 13 of this Plan.

7. Term of Option. The term of each Option shall be 10 years from the date of
grant thereof or such shorter term as may be provided in the Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, if the Option is an Incentive Stock Option, the term of the Option
shall be five years from the date of grant thereof or such shorter time as may
be provided in the Stock Option Agreement.

8. Exercise Price and Consideration.

a. Exercise Price. The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but the per Share exercise price under an Incentive Stock Option shall be
subject to the following:

(i) If granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall not be less than 110% of the fair market
value per Share on the date of grant.

(ii) If granted to any other Employee, the per Share exercise price
shall not be less than 100% of the fair market value per Share on the date
of grant.

b. Determination of Fair Market Value. The fair market value per Share on
the date of grant shall be determined as follows:

(i) If the Common Stock is listed on the New York Stock Exchange, the
American Stock Exchange or such other securities exchange designated by the
Board, or admitted to unlisted trading privileges on any such exchange, or
if the Common Stock is quoted on a National Association of Securities
Dealers, Inc. system that reports closing prices, the fair market value
shall be the closing price of the Common Stock as reported by such exchange
or system on the day the fair market value is to be determined, or if no
such price is reported for such day, then the determination of such closing
price shall be as of the last immediately preceding day on which the
closing price is so reported;

(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or so quoted, the fair market value shall be the average
of the last reported highest bid and the lowest asked prices quoted on the
National Association of Securities Dealers, Inc. Automated Quotations
System or, if not so quoted, then by the National Quotation Bureau, Inc. on
the day the fair market value is determined; or

(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or so quoted, and bid and asked prices are not reported,
the fair market value shall be determined in such reasonable manner as may
be prescribed by the Board.

c. Consideration and Method of Payment. The consideration to be paid for
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Board and may consist entirely of cash,
check, other shares of Common Stock having a fair market value on the date of
exercise equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, or any combination of such methods of payment, or
such other consideration and method of payment for the issuance of Shares to the
extent permitted under the Colorado Business Corporation Act.

9. Exercise of Option.

a. Procedure for Exercise: Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of this
Plan.

An Option may not be exercised for a fraction of a Share.

An option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Stock
Option Agreement by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been received
by the Company. Full payment, as authorized by the Board, may consist of a
consideration and method of payment allowable under Section 8(c) and this
Section 9(a) of this Plan. Until the issuance (as evidenced by the appropriate
entry on the books of the Company or of the duly authorized transfer agent of
the Company) of the stock certificate evidencing such Shares, no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of this Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of this
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

b. Termination of Status as an Employee. In the case of an Incentive Stock
Option, if any Employee ceases to serve as an Employee, he may, but only within
such period of time not exceeding three months as is determined by the Board at
the time of grant of the Option after the date he ceases to be an Employee of
the Company, exercise his Option to the extent that he was entitled to exercise
it at the date of such termination. To the extent that he was not entitled to
exercise the Option at the date of such termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.

c. Disability of Optionee. In the case of an Incentive Stock Option,
notwithstanding the provisions of Section 9(b) above, in the event an Employee
is unable to continue his employment with the Company as a result of his total
and permanent disability (as defined in Section 22(e)(3) of the Code), he may,
but only within such period of time not exceeding 12 months as is determined by
the Board at the time of grant of the Option from the date of termination,
exercise his Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise the Option
at the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.

d. Death of Optionee. In the case of an Incentive Stock Option, in the
event of the death of the Optionee:

(i) During the term of the Option if the Optionee was at the time of
his death an Employee and had been in Continuous Status as an Employee or
Consultant since the date of grant of the Option, the Option may be
exercised, at any time within 12 months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent that the right to
exercise would have accrued had the Optionee continued living and remained
in Continuous Status as an Employee 12 months after the date of death; or

(ii) Within such period of time not exceeding three months as is
determined by the Board at the time of grant of the Option after the
termination of Continuous Status as an Employee, the Option may be
exercised, at any time within 12 months following the date of death, by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent that the right to
exercise had accrued at the date of termination.

10. Nontransferability of Options. Unless permitted by the Code, in the case of
an Incentive Stock Option, the Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent and distribution and may be exercised, during the lifetime
of the Optionee, only by the Optionee.

11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under this Plan but as to which no Options have yet been granted or
which have been returned to this Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each

such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another entity in a transaction in
which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.

12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or other
person to whom an Option is so granted within a reasonable time after the date
of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.

13. Amendment and Termination of this Plan.

a. Amendment and Termination. The Board may amend or terminate this Plan
from time to time in such respects as the Board may deem advisable; provided
that, the following revisions or amendments shall require approval of the
shareholders of the Company in the manner described in Section 17 of this Plan:

(i) Any change in the designation of the class of Employees eligible
to be granted Incentive Stock Options; or

(ii) Any material amendment under this Plan that would have to be
approved by the shareholders of the Company for the Board to continue to be
able to grant Incentive Stock Options under this Plan.

b. Effect of Amendment or Termination. Any such amendment or termination of
this Plan shall not affect Options already granted and such Options shall remain
in full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Optionee and the Board, which
agreement must be in writing and signed by the Optionee and the Company.

14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, applicable state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of legal counsel for the Company with
respect to such compliance.

As a condition to the existence of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.

15. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of this Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's legal counsel to be necessary for the lawful issuance
and sale of any Share hereunder, shall relieve the Company of any liability
relating to the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

16. Stock Option Agreement. Each Option granted to an Employee or other persons
shall be evidenced by a written Stock Option Agreement in such form as the Board
shall approve.

17. Shareholder Approval. Continuance of this Plan, as amended, shall be subject
to approval by the shareholders of the Company on or before July 31, 2006.

18. Information to Optionees. The Company shall provide to each Optionee, during
the period for which such Optionee has one or more Options outstanding, copies
of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under this Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.

19. Gender. As used herein, the masculine, feminine and neuter genders shall be
deemed to include the others in all cases where they would so apply.

20. CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.

NATURAL GAS SERVICES GROUP, INC.

[ ] Mark this box with an X if you have made
changes to your name or address details above.

================================================================================
Annual Meeting Proxy Card
================================================================================
A Election of Directors

1. The Board of Directors recommends a vote FOR the listed nominees.

For Withhold
01 - William F. Hughes, Jr. [ ] [ ]

For Withhold
02 - Alan A. Baker [ ] [ ]

B Proposal

The Board of Directors recommends a vote FOR the following proposal.

2. Approval of the amendment of the Natural Gas For Against Abstain
Services Group, Inc. 1998 Stock Option Plan. [ ] [ ] [ ]

C Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, and the Proxy Statement and Annual Report furnished therewith.

Signature(s) should agree with the name(s) stenciled hereon. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian or
custodian, please give full title. Attorneys should submit powers of attorney.

Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)

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

================================================================================
Proxy - NATURAL GAS SERVICES GROUP, INC.
================================================================================

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 20, 2006

The undersigned hereby appoints Stephen C. Taylor and Richard L. Yadon, and
each of them, proxies, with full power of substitution, for and in the name,
place and stead of the undersigned, to vote all of the undersigned's shares of
common stock in Natural Gas Services Group, Inc. at the Annual Meeting of
Shareholders to be held at the Hilton Hotel, 117 West Wall Avenue, Midland,
Texas 79701 on June 20, 2006 at 9:00 a.m. Central Time, and at any
adjournment(s) thereof for the purposes stated on the reverse side.

The undersigned hereby revokes any proxies as to said shares heretofore given
by the undersigned and ratifies and confirms all that said proxies lawfully
may do by virtue hereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THEN THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AT THE MEETING FOR THE ELECTION OF THE DIRECTORS AND FOR THE APPROVAL OF THE
AMENDMENT OF THE 1998 STOCK OPTION PLAN.

It is understood that this proxy confers discretionary authority with respect
to matters not known or determined at the time of the mailing of the Notice of
Annual Meeting of Shareholders to the undersigned. The proxies will vote the
shares represented by this proxy at their discretion on any other matters that
may properly come before the meeting.