Edgar Filing: NATURAL GAS SERVICES GROUP INC

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
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.
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(Name of Registrant as Specified in its Charter)

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PRELIMINARY COPY

NATURAL GAS SERVICES GROUP, INC.
2911 South County Road 1260
Midland, Texas 79706

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 18, 2003

NOTICE IS HEREBY GIVEN that an 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 Wednesday, June 18,
2003 at 9:00 a.m., Central Time, for the purpose of considering and voting upon
proposals to:

1. elect one director to serve until the annual meeting of
shareholders to be held in 2004; elect one director to serve
until the annual meeting of shareholders to be held in 2005;
and elect two directors to serve until the annual meeting of
shareholders to be held in 2006 or until their successors are
elected and qualify;

2. adopt an amendment to the articles of incorporation of Natural
Gas Services Group, Inc. to reduce the number of designated
shares of 10% Convertible Series A Preferred Stock; and

3. transact such other business as may lawfully come before the
meeting or at any adjournment(s) of the meeting.

Only shareholders of record at the close of business on May 14, 2003,
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

SCOTT W. SPARKMAN, SECRETARY

Midland, Texas
May 19, 2003

PRELIMINARY COPY

NATURAL GAS SERVICES GROUP, INC.
2911 South County Road 1260
Midland, Texas 79706

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 18, 2003

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 an annual meeting of shareholders to
be held at the Hilton Hotel, 117 West Wall Avenue, Midland, Texas 79701 on
Wednesday, June 18, 2003 at 9:00 a.m., Central Time, and at any adjournment(s)
of the meeting.

This proxy statement and the accompanying proxy will be mailed to
Natural Gas' shareholders on or about May 19, 2003.

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 Natural Gas'
corporate secretary;

o voting in person at the meeting; or

o voting again by submitting a new proxy card.

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 slate
of directors described in the proxy and for the adoption of the amendment to the
articles of incorporation.

VOTING SECURITIES

Voting rights are vested in the holders of Natural Gas' $0.01 par value
common stock and 10% Series A Preferred Stock, 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 May 14, 2003, are entitled to
notice of and to vote at the meeting or any adjournments of the meeting. On May
14, 2003 Natural Gas had 4,857,632 shares of common stock and 381,654 shares of
10% Convertible Series A Preferred Stock outstanding.

ACTIONS TO BE TAKEN AT MEETING

The meeting has been called by the Board of Directors of Natural Gas to
consider and act upon the following matters:

2. adopt an amendment to the articles of incorporation of Natural
Gas Services Group, Inc. to reduce the number of designated
shares of 10% Convertible Series A Preferred Stock; and

3. transact such other business as may lawfully come before the
meeting or at any adjournment(s) of the meeting.

The holders of a majority of the combined outstanding shares of common
stock and 10% Convertible Series A Preferred Stock present at the meeting in
person or represented by proxy shall constitute a quorum. If a quorum is
present, directors are elected by a plurality of the vote, i.e., the candidates
receiving the highest number of votes cast in favor of their election will be
elected to the Board of Directors. As to all other actions voted on at the
meeting, if a quorum is present, the affirmative vote of a majority of the
shares represented in person or by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders. Where brokers have not
received any instruction from their clients on how to vote on a particular
proposal, brokers are permitted to vote on routine proposals but not on
nonroutine matters. The absence of votes on nonroutine matters are "broker
nonvotes." Abstentions and broker nonvotes will be counted as present for
purposes of establishing a quorum, but will have no effect on the election of
directors. Abstentions and broker nonvotes on proposals other than the election
of directors, if any, will be counted as present for purposes of the other
proposals and will count as votes against all other proposals.

PROPOSAL NUMBER ONE

ELECTION OF DIRECTORS

The number of directors on Natural Gas' Board of Directors has been
established by the shareholders as seven directors. Therefore, there currently
are two vacancies on the Board of Directors. The Board of Directors has been
divided into three classes with directors serving staggered terms. With respect
to the existing Board of Directors, the terms of James T. Grigsby and Scott W.
Sparkman will expire at the meeting, the term of Wayne L. Vinson will expire in
2004, and the terms of Charles G. Curtis and Wallace O. Sellers will expire in
2005.

The persons named in the enclosed form of Proxy will vote the shares
represented by such Proxy for the election of the four nominees for director
named below. If, at the time of the meeting, any of these nominees shall become
unavailable for any reason, which event is not expected to occur, the persons
entitled to vote the Proxy will vote for such substitute nominee or nominees, if
any, as they determine in their sole discretion. If elected, Richard L. Yadon,
Gene A. Strasheim, James T. Grigsby and Scott W. Sparkman will hold office until
the annual meetings of shareholders to be held in 2004, 2005 and 2006,
respectively, until their successors are duly elected or appointed or until
their earlier death, resignation or removal. The nominees for director, each of
whom has consented to serve if elected, are as follows:

Director Principal Occupation for At Least the Last
Name of Nominee Since Age Five Years
--------------- -------- --- ------------------------------------------

Richard L. Yadon Not 45 Mr. Yadon is one of the original founders of
currently a Rotary Gas Systems Inc. and has served as
Director advisor to Natural Gas' Board of Directors
since June 2002. Since 1981, Mr. Yadon has
owned and operated Yadeco Pipe & Equipment
and since December 1994, has co-owned and
presided as President of Midland Pipe &
Equipment, Inc. Both companies are directly
related to drilling and completion of oil
and gas wells 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 22 years of experience in the
energy service industry.

Gene A. Strasheim Not 62 Since 2001, Mr. Strasheim has been a
currently a financial consultant to Skyline
Director 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 Deloitte Haskins & Sells, a
large accounting firm. Mr. Strasheim
practiced as a Certified Public Accountant
in three states and has a BS degree from the
University of Wyoming.

James T. Grigsby 1999 55 Mr. Grigsby has been one Natural Gas'
directors since 1999. Since 1996, Mr.
Grigsby has been a director of and a
consultant to Blue River Paint Co., a
development stage environmental friendly
coatings technology company. From 1996 to
1997, Mr. Grigsby was a consultant to
Outlook Window Partnership, a regional wood
window manufacturer. From 1989 to 1996, Mr.
Grigsby was President and Chief Executive
Officer of Seal Right Windows, Inc. and
Chief Executive Officer of Oldach Window
Corp., manufacturers of wood, wood-clad and
vinyl windows and doors. Mr. Grigsby
received a BS degree from the University of
Michigan and an MBA degree from Stanford
University.

Scott W. Sparkman 1998 41 Mr. Sparkman has served as one of Natural
Gas' directors since 1998, has served as
Executive Vice-President of NGE Leasing,
Inc., or NGE, since July 2001, has served as
Secretary and Treasurer of NGE since March
1999 and has served as the Secretary of
Great Lakes Compression, Inc. since February
2001. Mr. Sparkman served as the President
of NGE from December 1998 to July 2001. From
May 1997 to July 1998, Mr. Sparkman served
as Project Manager and Comptroller for
Business Development Strategies, Inc., a
designer of internet websites. Mr. Sparkman
pursued personal business interests from May
1996 to May 1997. From February 1991 to May
1996, Mr. Sparkman served as Vice President
and Director, later as President and
Director, of Diamond S Safety Services,
Inc., a seller and servicer of hydrogen
sulfide monitoring equipment. Mr. Sparkman
filed for personal bankruptcy in 1998 as a
result of personal debt created when there
was a decline in the need for the oilfield
services that were provided by a company
that was owned by Mr. Sparkman. He received
a BBA degree from Texas A&M University.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
ELECTION OF THE NOMINEES LISTED ABOVE.

OTHER DIRECTORS

The current directors of Natural Gas are James T. Grigsby and Scott W.
Sparkman, information pertaining to whom is set forth under "Election of
Directors" above, and Charles G. Curtis, Wallace O. Sellers and Wayne L. Vinson,
information pertaining to whom is set forth below.

Name of Director Principal Occupation for at Least the
Executive Officer Since Age Last Five Years
----------------- ----- --- -------------------------------------

Charles G. Curtis 2001 70 Mr. Curtis has been one of Natural Gas'
directors since April 2001. Since 1992, Mr.
Curtis has been the President and Chief
Executive Officer of Curtis One, Inc. d/b/a/
Roll Stair, 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 B.S. degree from the United
States Naval Academy and a MSAE degree from
the University of Southern California

Wallace O. Sellers 1998 73 Mr. Sellers is one of Natural Gas' founders
and has served as a director and the
Chairman of Natural Gas' Board of Directors
since December 17, 1998. Although Mr.
Sellers retired in December 1994, he served
as Vice-Chairman of the Board and Chairman
of the Executive Committee of Enhance
Financial Services, Inc., a financial
guaranty reinsurer, from January 1995 to
2001. From November 1986 to December 1991 he
was President and Chief Executive Officer of
Enhance. From 1951 to 1986 Mr. Sellers was
employed by Merrill Lynch, Pierce, Fenner &
Smith Incorporated, an investment banker, in
various capacities, including Director of
the Municipal and Corporate Bond Division
and Director of the Securities Research
Division. Immediately prior to his
retirement from Merrill Lynch, he served as
Senior Vice President and director of
Strategic Development. Mr. Sellers received
a BA degree from the University of New
Mexico, an MA degree from New York
University and attended the Advanced
Management Program at Harvard University.
Mr. Sellers is a Chartered Financial
Analyst.

Wayne L. Vinson 2000 44 Mr. Vinson has served as one of Natural Gas'
directors since April 2000, as Natural Gas'
President since July 2001, as Natural Gas'
Executive Vice President from October 31,
2000 to July 2001, as the President of
Rotary Gas Systems, Inc. (and its
predecessor, Hi-Tech Compressor Company)
since February 1994, and as Executive Vice
President of Great Lakes Compression Inc.
since February 2001. He also served as
Natural Gas' Vice President from April 2000
to October 2000. From January 1990 to June
1995, Mr. Vinson served as Vice President
and since June 1995 he has served as
President of Vinson Operating Company, an
oil and gas well operator. Mr. Vinson has
more than 22 years of experience in the
energy services industry.

Natural Gas' Board of Directors held three meetings during the fiscal
year ending December 31, 2002. All of Natural Gas' directors attended all of the
aggregate of (1) the total number of meetings of the Board of Directors (held
during the period for which he has been a director) and (2) the total number of
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 ending December 31, 2002, the Board of Directors conducted eight
meetings by unanimous written consent.

Directors who are not employees are paid $1,000 per quarter and at
December 31 of each year are issued a five year option to purchase 2,500 shares
of Natural Gas' common stock at the then market value. Natural Gas also
reimburses its directors for accountable expenses incurred on Natural Gas'
behalf.

None of Natural Gas' directors is a director of any other entity that
has its securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or that is subject to the requirements of Section 15(d) of the 1934
Act.

PROPOSAL NUMBER TWO

APPROVAL OF AN AMENDMENT TO NATURAL GAS' AMENDED ARTICLES OF
INCORPORATION TO REDUCE THE NUMBER OF DESIGNATED SHARES OF 10%
CONVERTIBLE SERIES A PREFERRED STOCK

Natural Gas' articles of incorporation presently authorize the issuance
of 5,000,000 shares of preferred stock. Of these 5,000,000 shares, Natural Gas
designated 1,177,000 shares as 10% Convertible Series A Preferred Stock. Natural
Gas sold 381,654 shares of its 10% Convertible Series A Preferred Stock in a

private offering in 2001. Natural Gas does not plan on selling additional shares
of 10% Convertible Series A Preferred Stock. Natural Gas' Board of Directors is
recommending that the number of shares of 10% Convertible Series A Preferred
Stock be reduced to 381,654 shares and the balance of 795,346 shares of 10%
Series A Preferred Stock be returned to undesignated shares of preferred stock.
If the number of designated shares of 10% Convertible Series A Preferred Stock
is reduced to 381,654 shares, the Board of Directors will be able to retain the
balance of the shares, or 795,346 shares, for further issuances of preferred
stock.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
PROPOSAL TO APPROVE AN AMENDMENT TO NATURAL GAS' AMENDED
ARTICLES OF INCORPORATION TO REDUCE THE NUMBER OF DESIGNATED
SHARES OF 10% CONVERTIBLE SERIES A PREFERRED STOCK

EXECUTIVE OFFICERS

The executive officers of Natural Gas are Scott W. Sparkman and Wayne
L. Vinson, information pertaining to whom is set forth under "Election of
Directors" and "Other Directors" above, and Earl R. Wait, information pertaining
to whom is set forth below. The executive officers of Natural Gas are elected
annually at the first meeting of the Board of Directors held after each annual
meeting of shareholders. Each executive officer will hold office until his or
her successor duly is elected and qualified, until his or her death or
resignation or until he or she shall be removed in the manner provided by
Natural Gas' bylaws. Earl R. Wait's positions with Natural Gas, the periods
during which he has served as an executive officer of Natural Gas, his age and
his biography are as follows:

Name of Principal Occupation for At Least the
Executive Officer Age Last Five Years
----------------- --- -------------------------------------

Earl R. Wait 59 Mr. Wait has served as Natural Gas' Chief
Financial Officer since May 2000 and Natural
Gas' Treasurer since 1998. Mr. Wait was Natural
Gas' Chief Accounting Officer from 1998 to May
2000. Mr. Wait has been the Chief Financial
Officer and Secretary/Treasurer of Flare King,
Inc. and then Rotary Gas Systems, Inc. since
April 1993, the Assistant Secretary/Treasurer
for Hi-Tech Compressor Company since June 1996,
the Controller and Assistant
Secretary/Treasurer for Hi-Tech Compressor
Company from 1994 to 1999, and the Chief
Accounting Officer and Treasurer of Great Lakes
Compression Inc. since February 2001. Mr. Wait
is a certified public accountant with an MBA in
management and has more than 25 years of
experience in the energy industry.

The following sets forth biographical information for at least the past
five years for two of Natural Gas' employees whom Natural Gas considers to be
key employees.

Name of Employee Age

Wallace C. Sparkman 73 Mr. Sparkman is one of the founders of Natural
Gas and has been the President of NGE since
July 2001, the President of Rotary Gas Systems,
Inc. (and its predecessor, Flare King) from
April 1993 to April 1997. Mr. Sparkman served
as Natural Gas' President from May 2000 to July
2001 and as the President of Great Lakes
Compression, Inc. from February 2001 to July
2001. Mr. Sparkman was Vice President of NGE
from February 1996 to November 1999. Since
December 1998, Mr. Sparkman has acted as a
consultant to Natural Gas' Board of Directors.
From 1985 to 1998, Mr. Sparkman acted as a
management consultant to various entities and
acted as a principal in forming several
privately-owned companies. Mr. Sparkman was a
co-founder of Sparkman Energy Corporation, a
natural gas gathering and transmission company,
in 1979 and served as its Chairman of the
Board, President and Chief Executive Officer
until 1985, when ownership control changed.
From 1968 to 1979, Mr. Sparkman held various
executive positions and served as a director of
Tejas Gas Corporation, a natural gas gathering
and transmission company. At the time of his
resignation from Tejas Gas Corporation in 1979,
Mr. Sparkman was President and Chief Executive
Officer. Mr. Sparkman has more than 34 years of
experience in the energy service industry.

Ronald D. Bingham 58 Mr. Bingham has served as the President of
Great Lakes Compression, Inc. since 2001. From
March 2001 to July 2001, Mr. Bingham was the
General Manager of Great Lakes Compression,
Inc. From January 1989 to March 2001, Mr.
Bingham was the District Manager for Waukesha
Pearce Industries, Inc., a distributor of
Waukesha natural gas engines. Mr. Bingham is a
member of the Michigan Oil and Gas Association
and received a bachelors degree in Graphic Arts
from Sam Houston State University.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Natural Gas' officers and directors and persons who own more than 10%
of the outstanding common stock of Natural Gas to file reports of ownership with
the Securities and Exchange Commission ("SEC"). Directors, officers and greater
than 10% shareholders are required by SEC regulations to furnish Natural Gas
with copies of all Section 16(a) forms they file.

Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to Natural Gas during and for its fiscal year ended December 31, 2002,
there were no directors, officers or more than 10% shareholders of Natural Gas
who failed to timely file a report required by Section 16(a) of the Securities
Exchange Act of 1934 except that Charles G. Curtis filed an amendment to his
Form 3 to add 10% Convertible Series A Preferred Stock he owned, filed an
amendment to a Form 4 to include common stock and warrants that were not
previously reported and was late in filing a Form 4 to report the granting of an
option to him; Diamond S DGT Trust was late in filing its Form 3; James T.
Grigsby filed an amendment to his Form 4 to report warrants that were previously
not included on his Form 4 and was late in filing a Form 4 to report the
granting of an option to him; Alan P. Kurus, a former officer, filed amendments
to his Form 3 to change the nature of his ownership of common stock and to
report a stock option that he owned; Sharon Renee Pipes was late in filing her
Form 3; Wallace O. Sellers was late in filing a Form 4 to report the granting of
an option to him; and Earl R. Wait filed an amendment to his Form 3 to report a
stock option that he owned.

EXECUTIVE COMPENSATION

The following table sets forth information regarding the compensation
paid during the years ended December 31, 2002, 2001 and 2000 by Natural Gas to
Wayne L. Vinson and Earl R. Wait, Natural Gas' only executive officers whose
combined salary and bonuses exceeded $100,000 during the year ended December 31,
2002.

Long-Term
Annual Compensation Compensation Awards
Name and Principal Position Year Salary Bonus Securities Underlying Options
--------------------------- ---- ------ ----- -----------------------------

Wayne L. Vinson 2002 $ 120,000(1) $ 39,452 -0- (2)
Executive Vice President 2001 102,692 25,583 -0-
until 7/25/01 2000 74,423 25,604 -0-
President since 7/25/01

Earl R. Wait 2002 $ 90,000 $ 29,589 15,000
Chief Financial Officer 2001 85,385 23,164 -0-
2000 80,088 7,416 -0-
--------------------------

(1) Does not include any compensation paid to the wife of Wayne L. Vinson
for her services as Natural Gas' accounts payable and payroll clerk for
2002, 2001 and 2000, respectively.

(2) CAV-RDV, Ltd., a Texas limited partnership for the benefit of the
children of Wayne L. Vinson, was issued a five year warrant to purchase
15,756 shares of Natural Gas' common stock at $2.50 per share in
consideration for CAV-RDV, Ltd. guaranteeing a portion of Natural Gas'
debt. The children are eighteen years old or older and Mr. Vinson is
not a partner in CAV-RDV, Ltd. and disclaims beneficial ownership of
the warrants.

Natural Gas has established a bonus program for its officers. At the
end of each of Natural Gas' fiscal years, its Board of Directors reviews its
operating history and determines whether or not any bonuses should be paid to
its officers. If so, the Board of Directors determines what amount should be
allocated. The Board of Directors may discontinue the bonus program at any time.

Option Grants in Last Fiscal Year

The following table sets forth information pertaining to option grants
to Wayne L. Vinson and Earl R. Wait, Natural Gas' only executive officers whose
combined salary and bonuses exceeded $100,000 during the year ended December 31,
2002:

Number of
Securities % of Total Options
Underlying Granted to Employees in
Name Options Fiscal Year Exercise Price Expiration Date
---- ------- ----------- -------------- ---------------

Wayne L. Vinson 0 0 N/A N/A

Earl R. Wait 15,000 35 $3.25 04/23/2012

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

The following table sets forth information pertaining to option
exercises by and fiscal year end option values of options held by, Wayne L.
Vinson and Earl R. Wait, Natural Gas' only executive officers whose combined
salary and bonuses exceeded $100,000 during the year ended December 31, 2002:

Fiscal Year End Option Values
-----------------------------

Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at Fiscal Year In-the-Money Options
Acquired Value End at Fiscal Year End
Name On Exercise Received Exercisable/Unexercisable Exercisable/Unexercisable
---- ----------- -------- ------------------------- -------------------------

Wayne L. Vinson 0 0 0/0 0/0

Earl R. Wait 0 0 0/15,000 0/$9,750

Compensation of Directors

Directors who are not employees are paid $1,000 per quarter and at
December 31 of each year will be issued a five year option to purchase 2,500
shares of Natural Gas' common stock at the then market value. Natural Gas also
reimburses its directors for accountable expenses incurred on its behalf.

1998 Stock Option Plan

Natural Gas has the 1998 Stock Option Plan which provides for the
issuance of options to purchase up to 150,000 shares of its 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 its business. The plan
is administered by the Board of Directors or a compensation committee consisting
of two or more non-employee directors, if appointed. At its discretion, the
administrator of the plan may determine the persons to whom options may be
granted and the terms upon which such options will be granted. In addition, the
administrator of the plan may interpret the plan and may adopt, amend and
rescind rules and regulations for its administration. Options to purchase 12,000
shares of Natural Gas' common stock at an exercise price of $2.00 per share,
options to purchase 42,000 shares of Natural Gas' common stock at an exercise
price of $3.25 per share, and options to purchase 7,500 shares of Natural Gas'
common stock at an exercise price of $3.88 per share have been granted under the
plan and are outstanding.

Compensation Committee

The Compensation Committee of the Board of Directors determines Natural
Gas' executive compensation policy and sets compensation for Natural Gas'
executive officers.

The Compensation Committee's policy is to offer the executive officers
competitive compensation packages that will permit Natural Gas 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
and its shareholders. Currently, executive compensation is comprised of salary
and cash bonuses that may be awarded from time to time such as long-term
incentive opportunities in the form of stock options under Natural Gas' 1998
Stock Option Plan. Messrs. Curtis, Grigsby and Sellers are members of Natural
Gas' Compensation Committee. The Compensation Committee met five times in 2002.

PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of the May 14, 2003, the beneficial
ownership of Natural Gas' common stock and 10% Series A Preferred Stock: (i) by
each of its directors, its nominees for director and its executive officers;
(ii) by all of its executive officers and directors as a group; and (iii) by all
persons known by it to beneficially own more than five percent of its common
stock and of its 10% Series A Preferred Stock:

Shares of
Common Stock
and 10%
Convertible
Series A
Preferred
Stock Percent
Beneficially Beneficially
Name and Address Owned Owned
---------------- ----- -----

Wallace O. and Naudain Sellers 698,159(1) 13.2%
P.O. Box 106, 6539 Upper York Road
Solebury, PA 18963-0106

Wayne L. Vinson 0(2) 0.0%
5619 Fenway
Midland, TX 79707

Scott W. Sparkman 516,467(3) 9.8%
1604 Ventura Avenue
Midland, TX 79705

Charles G. Curtis 70,500(4) 1.3%
1 Penrose Lane
Colorado Springs, CO 80906

James T. Grigsby 81,700(5) 1.8%
3345 Grimsby Lane
Lincoln, NE 68502

Earl R. Wait 75,000(6) 1.4%
109 Seco
Portland, TX 78374

Richard L. Yadon 294,183(7) 5.6%
P.O. Box 8715
Midland, TX 79708-8715

Gene A. Strasheim 0 0.0%
165 Huntington Place
Colorado Springs, CO 80906

All current directors and executive
officers as a group (six persons) 1,441,826(8) 26.7%

CAV-RDV, Ltd. 486,006(2) 9.2%
1541 Shannon Drive
Lewisville, TX 75077
RWG Investments LLC 394,000(9) 7.3%
5980 Wildwood Drive
Rapid City, SD 57902
-----------------------------------

(1) Includes 300,000 shares of common stock owned by the Wallace Sellers,
July 11, 2002 GRAT, warrants to purchase 21,936 shares of common stock,
9,032 shares of common stock and 5,000 shares of common stock at $ 2.50
per share, at $3.25 per share and at $6.25 per share, respectively,
owned by Wallace Sellers, an option to purchase 2,500 shares of common
stock at $3.88 per share owned by Wallace Sellers, 34,691 shares of
common stock owned by Naudain Sellers, and 300,000 shares of common
stock owned by the Naudain Sellers, July 11, 2002 GRAT. Wallace and
Naudain Sellers are husband and wife. Wallace Sellers is the trustee of
his wife's trust and his wife is the trustee of his trust. The
beneficiaries of the trusts are two trusts. The beneficiaries of one
trust are Naudain Sellers and their three children and the
beneficiaries of the other trust are their three children.

(2) CAV-RDV, Ltd., a Texas limited partnership for the benefit of the
children of Wayne L. Vinson, owns 470,250 shares of common stock and
warrants to purchase 15,756 shares of common stock at $2.50 per share
and 2,122 shares of common stock at $3.25 per share, respectively. Both
children are 18 years old or older and Mr. Vinson is not a partner in
CAV-RDV, Ltd. Mr. Vinson disclaims beneficial ownership of any of the
shares of common stock.

(3) Includes 20,000 shares of common stock owned by Scott W. Sparkman and
475,000 shares of common stock and warrants to purchase 21,467 shares
of common stock at $2.50 per share owned by Diamond S DGT, a trust for
which Mr. Sparkman is a co-trustee and co-beneficiary with his sister.

(4) Represents warrants to purchase 40,000 shares of common stock at $3.25
per share, an option to purchase 2,500 shares of common stock at $3.88
per share, warrants to purchase 5,000 shares of common stock at $6.25
per share, and 18,000 shares of common stock which may be obtained upon
conversion of shares of our 10% Convertible Series A Preferred Stock.

(5) Includes warrants to purchase 9,600 shares at $6.25 per share and an
option to purchase 2,500 shares at $3.88 per share.

(6) Includes an option to purchase 15,000 shares of common stock at $3.25
per share that began to vest in April 2003.

(7) Includes warrants to purchase 9,365 shares and 5,318 shares of common
stock at $2.50 per share and $3.25 per share, respectively.

(8) Includes the shares set forth in footnotes (1) through (6) above.

(9) Includes an option to purchase 100,000 shares of common stock at $2.00
per share, warrants to purchase 32,000 shares of common stock at $3.25
per share and 12,000 shares of common stock which may be obtained upon
conversion of shares of our 10% Convertible Series A Preferred Stock.
RWG Investments LLC is a limited liability company the beneficial owner
of which is Roland W. Gentner, 5980 Wildwood Drive, Rapid City, South
Dakota 57902.

TRANSACTIONS WITH MANAGEMENT AND OTHERS AND CERTAIN BUSINESS
RELATIONSHIPS

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

Number of Shares Amount of
Name Underlying Warrants Debt Guaranteed
---- ------------------- ---------------
Wallace O. Sellers 21,936 $ 548,399
Wallace C. Sparkman(1) 21,467 536,671
CAV-RDV, Ltd.(2) 15,756 393,902
Richard L. Yadon 9,365 234,121
----------------------------

(1) Wallace C. Sparkman subsequently transferred his warrants for 21,467
shares to Diamond S DGT, a trust of which Scott W. Sparkman is the
trustee and a beneficiary. Wallace C. Sparkman has represented to
Natural Gas that he has no beneficial interest in Diamond S DGT.

(2) CAV-RDV, Ltd., is a Texas limited partnership for the benefit of the
children of Wayne L. Vinson. Both children are eighteen years old or
older and Mr. Vinson is not a partner in CAV-RDV, Ltd. Mr. Vinson
disclaims beneficial ownership of the warrants.

None of the guarantees are still in effect.

In April 2002, Natural Gas issued five year warrants to purchase shares
of its common stock at $3.25 per share to the following persons for guaranteeing
its restructured bank debt indicated:

Number of Shares Amount of Additional
Name Underlying Warrants Debt Guaranteed
---- ------------------- ---------------
Wallace O. Sellers 9,032 $ 451,601
CAV-RDV, Ltd.(1) 2,122 106,098
Richard L. Yadon 5,318 265,879
---------------------------

(1) CAV-RDV, Ltd., is a Texas limited partnership for the benefit of the
children of Wayne L. Vinson. Both children are eighteen years old or
older and Mr. Vinson is not a partner in CAV-RDV, Ltd. Mr. Vinson
disclaims beneficial ownership of the warrants.

None of the guarantees are still in effect.

Wayne L. Vinson, Earl R. Wait and Wallace C. Sparkman have also
guaranteed approximately $21,479, $53,361 and $48,384, respectively, of
additional debt for Natural Gas without consideration. This debt was incurred
when Natural Gas acquired vehicles, equipment and software. The following
schedule provides information as to the remaining debt balances as of December
31, 2002:

Balance at Interest Maturity
Guarantor December 31, 2002 Rate Date
--------- ----------------- ---- ----
Earl Wait $13,283 1.90% 3/26/2004
Earl Wait 40,078 10.50% 10/10/2005
Wallace Sparkman 48,384 Prime + 1.0% 7/06/2004
Wayne Vinson 1,802 Prime + 1.0% 7/15/2003
Wayne Vinson 11,873 1.90% 4/22/2004
Wayne Vinson 7,804 7.50% 6/21/2004

In October, 1999, RWG Investments, LLC was granted a five year option
to purchase 100,000 shares of its common stock at $2.00 per share in
consideration of one of its members serving as an advisor to Natural Gas.

Hunter Wise Financial Group LLC served as Natural Gas' investment
banker and advisor in connection with its acquisition of the compression related
assets of Dominion Michigan for which Natural Gas paid Hunter Wise a total fee
of $440,000. James T. Grigsby, one of Natural Gas' directors, has a 1% interest
in Hunter Wise.

Charles G. Curtis, one of Natural Gas' directors, Alan P. Kurus, one of
Natural Gas' officers until April 14, 2003, and RWG Investments, LLC, a
beneficial owner of more than 5% of Natural Gas' outstanding stock, purchased
Natural Gas' notes and five year warrants to purchase common stock in a private
offering that commenced in October 2000 and concluded in May 2001. Mr. Curtis
purchased $100,000 of the notes and warrants, Mr. Kurus purchased approximately
$79,000 of the notes and warrants and RWG Investments, LLC purchased $80,000 of
the notes and warrants. The notes and warrants purchased by Mr. Curtis, Mr.
Kurus and RWG Investments, LLC were on the same terms and conditions as sales to
non-affiliated purchasers in the private offering.

Charles G. Curtis, one of Natural Gas' directors, and RWG Investments,
LLC, a beneficial owner of more than 5% of Natural Gas' outstanding stock,
purchased 18,000 shares and 12,000 shares, respectively, or $58,500 and $39,000,
respectively, of Natural Gas' 10% Convertible Series A Preferred Stock in a
private offering that commenced in July 2001. The shares purchased by Mr. Curtis
and RWG Investments, LLC were on the same terms and conditions as sales to
non-affiliated purchasers in the private offering.

Wallace O. Sellers, Charles G. Curtis and James T. Grigsby, Natural
Gas' independent directors, were each paid $1,000 and were each issued an option
to purchase 2,500 shares of Natural Gas' common stock at $3.88 per share for
serving as Natural Gas' directors during the year ended December 31, 2002.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee met five times in 2002 and is responsible for
Natural Gas' internal controls and the financial reports process. Messrs.
Curtis, Grigsby and Sellers are members of Natural Gas' Audit Committee.

Natural Gas' independent accountants are responsible for performing an
independent audit of Natural Gas' 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 Natural Gas'
consolidated financial statements; reviews with the independent accountants
their independent accountants' report; and reviews the activities of the
independent accountants. The Audit Committee selects Natural Gas' independent
accountants each year. The Audit Committee also considers the adequacy of
Natural Gas' internal controls and accounting policies. The chairman and members
of the Audit Committee are all independent directors of Natural Gas within the
meaning of Section 121(A) of the listing standards of the American Stock
Exchange.

The Audit Committee has reviewed and discussed the audited financial
statements with management of Natural Gas. The Audit Committee has discussed
with Natural Gas' independent auditors the matters required to be discussed by
SAS 61. In addition, the Audit Committee has received the written disclosures
and letter from Natural Gas' independent accountants required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
as may be modified or supplemented, and has discussed with the independent
accountants matters pertaining to their independence. The Audit Committee also
considered whether the additional services unrelated to Audit Services performed
by HEIN + ASSOCIATES LLP were compatible with maintaining their independence in
performing their Audit Services. 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 Natural Gas' Annual Report on Form
10-KSB for 2002 for filing with the Securities and Exchange Commission. The
Audit Committee and Board of Directors has also selected HEIN + ASSOCIATES LLP
as Natural Gas' independent accountants for the fiscal year ending December 31,
2003. The members of Natural Gas' Audit Committee are independent. The Audit
Committee has a written Audit Committee Charter that has been adopted by the
Natural Gas Board of Directors and is attached hereto as Exhibit A.

Respectfully submitted by the Audit Committee:

Wallace O. Sellers Charles G. Curtis James T. Grigsby

INDEPENDENT PUBLIC ACCOUNTANTS

The principal accountant selected for Natural Gas' fiscal year ended
December 31, 2003 is HEIN + ASSOCIATES LLP. Representatives of HEIN + ASSOCIATES
LLP, Natural Gas' auditors for Natural Gas' fiscal year ended December 31, 2002,
are expected to be present at the annual meeting of shareholders, they will have
an opportunity to make a statement if they desire to do so and such
representatives are expected to be available to respond to appropriate
questions.

Audit Fees

The aggregate fees billed for professional services rendered by HEIN +
ASSOCIATES LLP for the audit of Natural Gas' financial statements for its fiscal
year ended December 31, 2002 and the review of the financial statements in its
Forms 10-QSB for such fiscal year were $43,691.

Financial Information Systems Design and Implementation Fees

No fees were billed by HEIN + ASSOCIATES LLP during Natural Gas' fiscal
year ended December 31, 2002 for any service related to financial information
systems design and implementation.

All Other Fees

The aggregate fees billed for services rendered by HEIN + ASSOCIATES
LLP, other than as listed above, for Natural Gas' fiscal year ended December 31,
2002 were $29,216.

2002 ANNUAL REPORT TO SHAREHOLDERS

You may obtain Natural Gas' 2002 Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2002 upon written request to Scott W. Sparkman,
Secretary, at its principal offices, 2911 South County Road 1260, Midland, Texas
79706. Each such request must set forth a good faith representation that, as of
May 14, 2003 the person making the request was a beneficial owner of Natural
Gas' common stock or its 10% Convertible Series A Preferred Stock. In addition,
the exhibits to the Annual Report on Form 10-KSB, as amended, for the fiscal
year ended December 31, 2002 may be obtained by any stockholder upon written
request to Mr. Sparkman. Each person making any such request will be required to
pay a fee of $0.25 per page to cover Natural Gas' expenses in furnishing such
exhibits.

SHAREHOLDER PROPOSALS

Proposals of shareholders intended for inclusion in the proxy statement
to be furnished to all shareholders entitled to vote at the 2004 Annual Meeting
of shareholders must be received at Natural Gas' principal executive offices not
later than January 20, 2004 or in the event that the due date of the 2004 Annual
Meeting changes by more than 30 days from the day that the 2004 Annual Meeting
is held, a reasonable time before Natural Gas mails its proxy materials for the
2004 Annual Meeting. 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 Securities and Exchange
Commission for shareholder proposals.

DISCRETIONARY AUTHORITY

If Natural Gas does not have notice of a matter by April 3, 2004, then
the Proxies at Natural Gas' next Annual Meeting of Shareholders will be able to
exercise discretionary authority in voting on such matters.

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. Solicitations will be made only by use of the mails, except that,
if necessary to obtain a quorum, officers and regular employees of Natural Gas
may make solicitations of proxies by telephone or electronic facsimile or by
personal calls. 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 will
reimburse them for their charges and expenses in this connection.

OTHER BUSINESS

Natural Gas' 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.

BY ORDER OF THE BOARD OF DIRECTORS

SCOTT W. SPARKMAN, SECRETARY

Midland, Texas
May 19, 2003

EXHIBIT A

AUDIT COMMITTEE CHARTER
OF
NATURAL GAS SERVICES GROUP, INC.

I. Composition of the Audit Committee. The Audit Committee shall be
comprised of all independent directors to be appointed by the Board of
Directors. To be an independent director, such director shall not be an officer
or employee of the Company or its subsidiaries, shall be free from any
relationship which, in the opinion of the Board of Directors of the Company
("Board"), would interfere with the exercise of his or her independent judgment
in carrying out the responsibilities of a director, shall not own or control 20%
or more of the Company's securities, or such lower measurement as may be
established by the Securities and Exchange Commission ("SEC") in rule making
under Section 302 of the Sarbanes-Oxley Act of 2002, shall be able to read and
understand fundamental financial statements, including the Company's balance
sheet, income statement and cash flow statement, shall not, directly or
indirectly, accept any consulting, advisory or other compensation fee from the
Company, be an affiliated person of the Company of any subsidiary thereof
(except as a member of the Audit Committee, the Board or any Committee of the
Board) and shall otherwise satisfy the applicable membership requirements under
the rules of the American Stock Exchange all as such requirements are
interpreted by the Board. On and after December 31, 2003, or at such time as is
required by the rules of the American Stock Exchange, which ever is earlier, at
least one member of the Audit Committee shall be a "financial expert" as such
term is defined by rules adopted by the SEC.

II. Purposes of the Audit Committee. The Audit Committee's primary duties
and responsibilities are to:

1. Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting and legal
compliance.

2. Monitor the independence and performance of the Company's
independent auditors and internal auditing department.

3. Provide an avenue of communication among the independent auditors,
management, the internal auditing department and the Board.

The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements. Management and the internal auditing department
are responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures that provide for
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit of
the Company's financial statements, reviews of the Company's quarterly financial
statements prior to the filing of each quarterly report on Form I O-Q or Form I
O-QSB, and other procedures. In fulfilling their responsibilities hereunder, it

is recognized that members of the Audit Committee are not fulltime employees of
the Company and are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting or auditing
including in respect of auditor independence. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures or to set auditor
independence standards, and each member of the Audit Committee shall be entitled
to rely on (i) the integrity of those persons and organizations within and
outside the Company from which it receives information (ii) the accuracy of the
financial and other information provided to the Audit Committee by such persons
or organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Board of Directors) and (111) representations made by
management as to any information technology, internal audit and other non-audit
services provided by the auditors to the Company.

Notwithstanding the foregoing, the Audit Committee has the authority to
conduct any investigation appropriate to fulfilling its responsibilities, and
shall have direct access to the independent auditors as well as any employee of
the Company. The Audit Committee has the ability to retain, at the Company's
expense, special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.

III. Meeting of the Audit Committee.

Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.

The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. In addition, the Committee
should meet privately in executive session at least annually with management,
the director of the internal auditing department, the independent auditors, and
as a committee to discuss any matters that the Committee or each of these groups
believe should be discussed.

IV. Audit Committee Responsibilities and Duties.

1. Review Procedures.

The Audit Committee shall:

a. Review and reassess the adequacy of this Charter at least
annually, submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with SEC
regulations.

b. Review the Company's annual audited financial statements
prior to filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding accounting
principles, practices, and judgments.

c. In consultation with management, the independent auditors
and the internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Meet periodically with management to discuss
significant financial risk exposures and the steps management has taken to
monitor, control, and report such exposures. Review significant findings
prepared by the independent auditors and the internal auditing department
together with management's responses.

d. Review with financial management and the independent
auditors the Company's quarterly financial results prior to the release of
earnings and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent auditors
in accordance with SAS 61. The Chair of the Committee may represent the entire
Audit Committee for purposes of this quarterly review.

2. Independent Auditors.

The independent auditors are ultimately accountable to the Audit
Committee. The Audit Committee shall review the independence and performance of
the auditors. The Audit Committee, shall select, evaluate, and where deemed
appropriate, replace the outside auditors (or nominate the outside auditors to
be proposed for shareholder approval in any proxy statement).

The outside auditors shall submit to the Company annually a formal
written statement delineating all relationships between the outside auditors and
the Company ("Statement as to Independence"), addressing each non-audit service
provided to the Company and at least the matters set forth in Independence
Standards Board No. 1.

The Audit Committee shall:

a. Approve the fees and other significant compensation to be
paid to the independent auditors for audit services and approve the retention of
the independent auditors for any non-audit service and the fee for any such
service.

b. On an annual basis, ensure that the independent auditors
prepare and deliver a Statement as to Independence, and review and discuss with
the independent auditors all significant relationships they have with the
Company that could impair the auditors' independence. The Audit Committee shall
take appropriate action to oversee the independence of the independent auditors.

c. Review the independent auditors' audit plan, discussing
scope, staffing, locations, reliance upon management, and internal audit and
general audit approach.

d. Prior to releasing the year-end earnings, discuss the
results of the audit with the independent auditors.

e. Consider the independent auditors' judgment about the
quality and appropriateness of the Company's accounting principles as applied in
its financial reporting.

f. Instruct the independent auditors that the independent
auditors are ultimately accountable to the Audit Committee.

g. Resolve any disagreements between the management of the
Company and the Company's independent auditors.

3. Internal Audit Department and Legal Compliance.

The Audit Committee shall:

a. Review the budget, plan, changes in plan, activities,
organization structure, and qualifications of the internal audit department, as
needed.

b. Review the appointment, performance, and replacement of the
senior internal audit executive.

c. Review significant reports prepared by the internal audit
department together with management's response and follow-up to these reports.

d. Consider any reports or communications (and management's
and/or the internal audit department's responses thereto) submitted to the Audit
Committee by the independent auditors required by or referred to in SAS 6 1, as
may be modified or supplemented.

e. Review on a regular basis with the Company's counsel any
legal matters that could have a material impact on the organization's financial
statements, the Company's compliance with applicable laws and regulations, and
inquiries received from regulators or governmental agencies.

4. Other Audit Committee Responsibilities.

The Audit Committee shall:

a. Annually prepare a report to shareholders as required by
the Securities and Exchange Commission. The report should be included in the
Company's annual proxy statement.

b. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing activities.

c. Periodically perform self-assessment of Audit Committee
performance.

d. Annually review policies and procedures associated with
directors' and officers' expense accounts and perquisites.

e. Approve in advance all director, officer and other person
related party transactions with the Company.

f. Monitor a code of ethics for the Company's Chief Executive
Officer, Chief Financial Officer, Principal Accounting Officer or Controller or
persons performing similar functions.

g. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and for the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.

h. Engage independent counsel and other advisors as it deems
necessary to carry out its duties.

i. Determine funding for independent counsel and other
advisors employed under paragraph IV.4.h of this Charter.

j. Review any other aspects of the Company's affairs as the
Committee deems necessary or appropriate.

k. Perform any other activities consistent with this Charter,
the Company's by-laws, and governing law, as the Committee or the Board deems
necessary or appropriate.

PRELIMINARY COPY

APPENDIX

PROXY

NATURAL GAS SERVICES GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD June 18, 2003

The undersigned hereby constitutes and appoints Wallace O. Sellers and
Scott W. Sparkman, and each of them, the true and lawful attorneys and proxies
of the undersigned with full power of substitution and appointment, for and in
the name, place and stead of the undersigned, to act for and to vote all of the
undersigned's shares of $0.01 par value common stock and 10% Convertible Series
A Preferred Stock of Natural Gas Services Group, Inc., a Colorado corporation,
to be used at an annual meeting of shareholders to be held will be held at the
Hilton Hotel, 117 West Wall Avenue, Midland, Texas 79701 on Wednesday, June 18,
2003 at 9:00 a.m. Central Time, and at any adjournment(s) thereof for the
following purposes:

1. Election of Directors:

[ ] FOR THE DIRECTOR [ ] WITHHOLD AUTHORITY TO VOTE
NOMINEES LISTED BELOW FOR ALL NOMINEES LISTED
BELOW
(EXCEPT AS MARKED TO
THE CONTRARY BELOW)

INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
-----------------------------------------------------------------------
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
-----------------------------------------------------------

Richard L. Yadon

Gene A. Strasheim

James T. Grigsby

Scott W. Sparkman

2. Adopt an amendment to the articles of incorporation of Natural Gas
Services Group, Inc. to reduce the number of designated shares of 10%
Convertible Series A Preferred Stock:

[ ] FOR [ ] AGAINST [ ] ABSTAIN

The undersigned hereby revokes any proxies as to said shares heretofore
given by the undersigned and ratifies and confirms all that said attorneys and
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 AMENDMENT TO
NATURAL GAS' ARTICLES OF INCORPORATION.

It is understood that this proxy confers discretionary authority in
respect to matters not known or determined at the time of the mailing of the
Notice of Annual Meeting of to the undersigned. The proxies and attorneys intend
to vote the shares represented by this proxy on such matters, if any, as
determined by the Board of Directors.

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

Dated and Signed:

, 2003
--------------------------------------

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

Signature(s) should agree with the name(s)
stenciled hereon. Executors, administrators,
trustee, guardians and attorneys should so
indicate when signing. Attorneys should
submit powers of attorney.