NGAS Announces Record 2004 Drilling Activity

NGAS Resources reports record drilling activity for 2004. During the year, NGAS drilled 155 successful wells representing a 74% increase over 2003 drilling operations, when the Company drilled 89 wells. The Company also announced an operational update including fourth quarter highlights.

2004 Partnerships

NGAS sponsored, through its subsidiary Daugherty Petroleum, Inc., two partnerships during 2004. NGAS continued its increased participation by purchasing a 30 percent working interest in each partnership well. After each partnership reaches payout, the Company's working interest will increase from 30 percent to 45 percent.

The initial 2004 partnership that closed in May proportionately funded 50 wells, all of which have been successfully drilled. To date, 25 wells are on line and producing, with the remainder completed and awaiting pipeline hook-up.

The year-end 2004 partnership closed in October with a maximum raise of $20.8 million and proportionately funded 90 wells. To date, 42 wells have been drilled and 7 wells are on line and producing. Currently, six drilling rigs are operating to complete the year-end program by March 31, 2005.

4th Quarter Operations

During the fourth quarter, NGAS drilled 46 successful wells, completed 28 and turned 35 wells on line. In addition, the Company completed 18 miles of gathering line ranging from 2-inch plastic to 8-inch steel.

Work continues on the 18-mile Leatherwood extension of the Company's 8-inch steel gathering system; however, NGAS has revised it projected completion date for the project to June 30, 2005. The delay was caused by the record rainfall that Kentucky experienced during 2004 combined with unexpected right-of-way complications. NGAS expects natural gas to commence flowing from wells located along the western segment of the gathering line prior to the completion date.

In addition, NGAS integrated the operations of assets acquired in three previously announced acquisitions. Those acquisitions added approximately 90,000 gross (69,000 net) acres and an approximate 30.1 Bcfe of proved reserves at a combined cost of $34.8 million. All the acquired assets are located in the Company's core area in the southern Appalachian Basin.

Gas Contracts

NGAS utilizes numerous contracts to market its natural gas. As of this date, approximately 45% of the Company's natural gas is covered by fixed price, fixed volume contracts. The contract prices range from $5.83 to $8.16 per dekatherm, with a weighted average price of $6.28. The remainder of the gas is covered by contracts with pricing terms generally tied to the Columbia Gas Transmission - Appalachian index. The contracts expire over the next three to 22 months.

2005 Drilling Programs

NGAS has just released its initial 2005 drilling program that is expected to raise up to $12.25 million to partially fund 50 wells on NGAS drilling prospects. NGAS will participate by purchasing 30 percent working interest in each well. Drilling will commence immediately following the completion of drilling on the year-end 2004 program.

CEO's Comment

"The year 2004 was a banner year for NGAS in terms of oil and gas production, reserves and acreage increases," stated William S. Daugherty, President & CEO of NGAS. "We were able to enhance our management staff by adding strategic team members who are very experienced in oil and gas operations in the Appalachian Basin. With our expanded asset base, control of 250,000 acres, interests in 580 wells, and expanded pipeline operations, NGAS is positioned for accelerated growth."

NGAS Resources is a natural resources company focused on natural gas development drilling and reserve growth. NGAS controls approximately 250,000 acres in the Appalachian Basin where it owns 154 miles of gas gathering lines and interest in over 575 wells. Based in Lexington, Kentucky, the Company specializes in developing its own geological prospects concentrated in the Appalachian Basin.

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