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Natural Gas Systems, Inc. Reports Proved Reserves Nearly Triple During Fiscal Year 2005

Posted on: Monday, 22 August 2005, 09:00 CDT

HOUSTON, Aug. 22 /PRNewswire-FirstCall/ -- NATURAL GAS SYSTEMS, INC. ("NGS" or the "Company") today reported that its fiscal yearend proved reserves as of July 1, 2005 increased to 893,700 barrels of oil equivalent, compared to 323,700 barrels of oil equivalent as of July 1, 2004. The proved reserves estimate was prepared by the Company's independent reservoir engineering firm and showed an increase of 176% in net proved reserves and 177% increase in PV10 over the prior year. PV10 is the future net revenues of the estimated proved reserves, net of operating costs and associated capital expenses, in effect on June 30, 2005 and discounted at a ten percent rate.

The increase in net reserves was primarily due to two previously reported purchases of oil reserves in north central Louisiana, and development activities in the Delhi Field that identified eight new drilling locations with proved undeveloped reserves, net of revisions. The Company is conducting a development program that includes drilling seven of the eight locations within the next ninety days. Originally scheduled to begin drilling in May 2005, the program has been delayed while the contracted drilling rig underwent repairs, thereby delaying the associated potential net production and revenues. The Company has further identified seven additional drilling locations for undeveloped reserves during its ongoing study of the Delhi Field that have not been reviewed nor included in the reserves report.

Robert Herlin, President of NGS, stated "As we learn more about the Delhi Field, hidden opportunities are becoming more apparent. Having already produced approximately 200 million barrels of oil through primary and a form of secondary recovery methods, industry guidelines suggest that substantial additional oil is likely still in place. In keeping with our stated corporate mission, our goal is to identify and unlock remaining economic unproven reserves in the Delhi Field."

Separately, ongoing work in the Tullos Field area has identified numerous shut-in wells that we believe can be restored to production following the planned addition of water disposal capacity. The Company has also identified what it believes to be undeveloped infill drilling potential.

These potential additions have been not been evaluated by the independent reservoir engineering firm. The proved reserves estimate does include the results of the previously announced re-completion of the Delhi Ut. 87-2, adjusted for mechanical problems encountered subsequent to the re-completion. The Company has elected to operate the well at about half of the previous rate of production until a replacement well can be drilled as part of the current development program.

Net Proved Reserves as at July 1, 2005 (based on NYMEX prices in effect on June 30, 2005)

Oil, bbls Gas, mcf Oil PV10 (includes NGLs) Equivalent, Future Net Revenues BOE Discounted at 10% Proved Developed Producing 384,400 122,000 404,700 $5,557,000 Other Proved Developed 155,900 274,000 201,600 $4,030,000 Total Proved Developed 540,300 396,000 606,300 $9,587,000 Proved Undeveloped 231,400 336,000 287,400 $7,891,000 Total Proved 771,700 732,000 893,700 $17,478,000

Robert Herlin further noted, "We are pleased to show rapid growth in our reserves, particularly given that our finding, development and acquisition cost for proved reserve additions, net of revisions, was less than $6 per barrel of oil equivalent for fiscal 2005. We believe that substantial additional potential remains to be tapped in the Delhi Field and that our proved reserves in the Tullos Area do not yet fully reflect the potential to restore the majority of the 100 shut-in wells to production and increase water disposal capacity."

NGS (http://www.natgas.us/) acquires and develops oil and gas resources and applies conventional and specialized technology to accelerate production and develop incremental reserves. NGS owns 100% of the working interest in the 13,636 acre Delhi Field in northeastern Louisiana that has historically produced over 200 million barrels of oil since discovery in 1945, according to outside engineers. NGS also owns a 100% working interest in approximately 146 producing wells and 99 shut-in wells in the Tullos Urania and nearby fields in north central Louisiana.

Safe Harbor Statement

This press release includes certain "Forward-Looking Statements" within the meaning of section 21E of the United States Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements regarding potential results and future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update or review any forward-looking statement, whether as a result of new information, future events, or otherwise. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, those factors that are disclosed under the heading "Risk Factors" and elsewhere in our documents filed from time to time with the United States Securities and Exchange Commission and other regulatory authorities. Statements regarding our ability to apply our potential technology applications in the re-development of oil and gas fields, production volumes, success in our drilling and development activity, prices, future revenues and income and cash flows and other statements that are not historical facts contain predictions, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Estimates of proved reserves by independent engineers are based upon current information and reflect definitions and guidelines established by the SEC and Society of Petroleum Engineers, and estimates of future net revenues discounted at ten percent are not intended to be an estimate of market value. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved and these statements will prove to be accurate. Important factors could cause actual results to differ materially from those included in the forward-looking statements.

For additional information contact: Investor Contact: John Liviakis, Liviakis Financial Communications, Inc. (415) 389-4670 NGS Contact: Sterling McDonald, Chief Financial Officer (713) 935-0122

Natural Gas Systems, Inc.

CONTACT: Investor: John Liviakis, Liviakis Financial Communications,Inc., +1-415-389-4670; or Sterling McDonald, Chief Financial Officer, NGS,+1-713-935-0122

Web site: http://www.natgas.us/

Source: PRNewswire-FirstCall

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