Good morning ladies and gentlemen, and welcome to the Natural Gas Services Group 2015 Third Quarter Earnings Call. [Operator Instructions] Your call leaders for today's call are Alicia Dada, IR Coordinator; Steve Taylor, Chairman, President and CEO. I will now turn the call over to Ms. Dada. You may begin.

Thank you and good morning, listeners. Please allow me to take a moment to read our following forward-looking statement prior to commencing our earnings call. Except for the historical information contained herein, the statements in this morning's conference call are forward-looking and are made pursuant to the Safe Harbor provisions as outlined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements, as you may know, involve known and unknown risks and uncertainties which may cause Natural Gas Services Group's actual results in the future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; and new governmental safety, health or environmental regulations which could require Natural Gas Services Group to make significant capital expenditures. The forward-looking statements included in this conference call are made as of the date of this call, and Natural Gas Services undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to, factors described in our recent press release and also under the caption Risk Factors in the company's annual report on Form 10-K filed with the Securities and Exchange Commission. Having all that stated, I will turn the call over to Steve Taylor, who is President, Chairman and CEO of Natural Gas Services Group. Steve?

Thank you, Alicia and Erika, and good morning, everyone and welcome to Natural Gas Services Group's third quarter 2015 earnings review. NGS posted solid operating results this quarter and continue to be well positioned to continuing our performance. Although our industry is going to through a severe downturn, and every company is affected by it, NGS's gas compression and production oriented services do enable us to avoid some of the immediate and most severe impacts. So with that said, let's go ahead and review the numbers. Starting with total revenue, I'm looking at the year-over-year comparative quarters, our total revenues decreased 17% or $4.4 million from $25.6 million in the third quarter of 2014 to $21.2 million in the third quarter of 2015, well over down 8% for about $1.7 million dollars for the quarter as compared to last year. Our service and maintenance revenues grew 14%. Quarterly total sales declined from $5.2 million to $2.5 million. For the sequential quarters of the second quarter of 2015 compared to the third quarter of 2015, total revenues were down 12.5% from $24.2 million to $21.2 million. Primarily from our sales revenues which were off $1.8 million and rental revenues over down $1.2 million. Reviewing the comparative nine month year-to-date periods, total revenues rose slightly from $69.9 million to $70.2 million with rentals and sales as 1% of the respective revenue levels last year. Moving to total gross margin and comparing the third quarter of last year to this current quarter, total gross margin was down 13% from $14 million to $12 million. Third quarter 2014 gross margins registered at 54% of revenue and improved to 57% in the third quarter of 2015. Sequentially total gross margin was off 14% to $12 million held in the 57% to 58% range relative to…

[Operator Instructions] Rob Brown from Lake Street Capital.

Just wanted to get a sense of how the utilization trends are sort of proceeding into the year and your view in how they go into next year and maybe when they bottom, seems like things are holding in pretty well but just wanted to get your view in the next sort of six months or so?

You've asked me the price of oil and gas, right, [ph] which is -- I looking the correlation you might think. We're trending -- it looks like I was trending about two to three points per quarter down. So you just type that easy math, your mid-line next year, you're in the mid-60s or something like that and I thank you it wouldn't continue if that right as you start getting towards maybe the bottom of the cycle or the lower activity levels, almost start to mitigate some plots and flat for a bit and start backup. So it's hard to get us just historically, what we've seen this time, two to three points a quarter, it looks like what it's doing and that I mean if the just does one or two point to some recovery, it doesn't mean if it does three or four, it's getting worse, it's just the on average that's what -- that's kind of what I'm expecting right now.

Okay. And along those lines do you feel like your fleet now is sort of optimized or do you have any -- I guess what's that risk for the retirements, if anything?

We don't anticipate any further retirements, we did that one in the second quarter and that's the first time we've ever done that in the company's history. So company is 16-year old, that's the first time we've done that. And that was primarily as I mentioned last time; just driven by the consistently low priced gas markets, a lot of the majority I think 85% to 90% of that equivalent was just dry gas or any type of equipment. Now as I mentioned we are -- well and again, that stuff is about -- I think if I remember it right, it was 11 years old average age, we do a 15-year depreciation. So more than two-thirds of its live or perform, more than two-thirds of its live and we reduced the fleet of that 9% although it's all about, I think about the 2% that's been very impacts. So it's obviously -- I think the right move at the right time, now I anticipate doing anything, we're -- now we are looking to -- fill some of the gas for the equipment we've got, we're still running in the gas supplies in the 60% top 65% utilization on some of the equivalent but we are looking in the mid-summer converted some because VRU, the vapor recovery units, some of those smaller ones. And when we're more open to sell some of the equipment if a customer long or wants something like that, we're in the past year we would tend not to sell-off real equipment because we want to actually deliver gets the better, it gets from a return standpoint. But that stuff being pretty hard to move in these low gas priced markets, we're not averse to sell so much stuff but I wouldn't expect simply selling the whole lot or anything else and we don't have any plans right now to retiring further.

Okay, good. Thank you. Just quickly one more, I just wanted to get your sense on sales revenue line was quite strong, your backlog was good, what's the dynamic going on there, and you said it was pricing but what's happening in that segment?

Well surprising because typically in these markets -- this is capital equipment, people are buying and that's the first thing that gets cut the capital budgets. So this is surprising part of it. Now, what's happening is pretty much what we've seen over the last year, we've got two or three good legacy customers and like our equipment, like how we do it etcetera and they are still placing orders. So our sales revenue level this year will of course, the year-to-date number is the same as it was last year and sort of a full-year based on the backlog is going to be the same as it was last year too. So that has had zero impact the past year. And it's just -- we've got a couple of pretty good customers that are large customers, good balance sheets, they are not sitting here trying to pull back, I think they are actually trying to take advantage of some of the market, not that it impacts us a whole lot because you know we've priced according to our cost starting from margin standpoint. So as our cost of goods go down, we're going to -- we can pass those along still maintain some pretty decent margins on the equipment. So it's just kind of fine dynamic, I wouldn't have predicted it a year ago but we're certainly happy to have it.

Okay, thanks.

Thanks, Rob.

[Operator Instructions] Joe Gibney from Capital One.

Just a quick question on 400 plus co-star units in your fleet, just curious how many hints do you have in the field and maybe how many are in the queue to get rolled out in the first part of 2016, just trying to get a sense of the component of your mix at this point?

Yes, I mean it's going to be slow, we've got eight or nine out in the field now installed, and I think maybe about half of them runs as -- we got about have them started. So it all looks good, no operating problems or anything else. We've got five more on the shop and these units are about twice the cost of what we traditionally have built in the past, if you recall our standard gas lift units, the 200 horse units have been $160,000 to $180,000 range; these are running and creating $400,000 range. So we've got five of those in the shop, we're getting some pretty good interest off of it, and we're building advanced course you want to hold that equipment and advance in this kind of market but since don't have this -- because of this market and because there is a fair amount of other equipment out there from our competition, we've got to have a stuff in ready. So I think as these start rolling through, we will build these five, get them placed, just keep replacing that, so we see the ramp up as far as acceptance goes, we'll manage that going up and just try to have some equipment available in the fleet. So right now it's a pretty small population obviously and as I've said in the past, I don't think we'll see really any contribution from that over this downturn, that's number one. It's a project deduction for us, the market is going to be prepped forward and I'll just run a downturn anyways. So there is some headwinds to it but I'm encouraged by the recession we've had so far.

Okay. And then just the other question I was trying to figure -- the topics of left alone for the last couple of quarters given where the market has been and your referenced in your comments there some level of traction on the smaller sides. I know previously this was under 5% of your total revenue associated with VRUs. Where do we stand on that now, if you're getting little bit more traction or it's still sort of in that very diminished ballpark?

Yes, it's still, I'm not going to show it very much and move little much and for the same reasons as bigger horsepower, it's -- we've got it down market. It's a new product for us going around things like that, so same headwinds. And on both those, the bigger horsepower, the smaller stuff, we knew this, we knew we're introducing the stuff in the down market and the market is very cost conscious and everything else we want to go ahead and get it out. You just down market, to educate the market, the customers, prep the market and everything else. So it's still a good traction but I think we've got we've got five or ten of those slated to go through the shops and again most of those like commissioned in the comments are conversions from existing equipment. So we're getting a little better price point out those going forward. So on either one I think it's -- we're just using this next year to just soften market out for the future bombardment hopefully.

Okay, good deal, I appreciate it.

Thanks, Joe.

[Operator Instructions] Jason Wangler from Wunderlich.

We're just curious to appreciate the utilization commentary and just maybe not pressing too hard on what we're seeing in real time, so to speak but just as you saw the quarter play out and prices kind of got weaker throughout it, was the utilization as you've commented in the past, was it kind of a person most of type situation was there, some big fluctuations throughout it?

Now I mean it's -- I mean you can get some monthly variations, obviously if you get a bunch back to warrants and then maybe a nice month in this bad, so you get those variations but the trend seems to be about the same. In fact I looked at -- yes, showing me trying to terminate a trend on it here, yes they just figured some of the numbers and you assisted and go month-by-month and you're looking back, course looking back it's all -- but when you look at the numbers you're kind of like, I was getting my thought, this is them. But they all kind of feel down right because the trend is down. You get variations but again, I think that the average seems to be that 2% to 2.5% to 3% a quarter. So you divide that by three, that's 1% a month but that just even…

Okay. And obviously this is a little more real time but what's going on in Natural Gas, the units that's have been out there are obviously and really resilient to last few years but just curious, are you hearing anything from that side just because now all the sudden that's cropping up in the last month or so with the weak gas prices.

Yes, it's not as apparent obviously as the oil thing and still a majority of equipment we're seeing come back is all shale oriented and gas. But there has been more gas oriented terminations come back as I saw a year ago but it's hard to say if that's just -- that is because of the low price or just a general cost cutting environment in the business because when you get into this, operators don't look at -- cut some calls some because he sees still some old stuff that has come out, obviously, that comes off even some of the gas stuff but it's not been as -- it's not obviously been as much as old stuff and I don't -- it hadn't been, I guess the best way to characterize it is, it hadn't been an alarm going off at this point.

Sure. And if I could speak one more, again not holding your feet to the fire too much but it seems like so many operators have been pretty opaque about what 2016 looks like. Obviously the seasonality is expected to kind of come this year but that should really not affect you as much given the equipment has to be out there but have you really gotten much indication of what 2016 looks from anybody or is it more just still real time, we're going to worry about this week and we'll get to next week when we get there?

Yes, I mean it's -- everybody is pretty -- they are tightlipped or just don't know. And I think it's just as much to the latter as the former. I think we'll start to see, we'll see how the budget start coming out, will see some of them towards the end of this year, first to next because these sound like last year by what -- some of what till March to tell you what they're going do that year because things are so uneven. So I think we'll see that but we're prepared for the continuation of a down market in the 2016 and I think that's – if it perks up a little quicker, great, we're in excellent shape but we're not presuming anything for 2016, I think you need to be prepared for continuation of a tough market. I'm not asking it to get any tougher, I think it's just going to continue tough and we've proven our ability to get through that this time and the times before. So we'll just continue to watch our cost, try to compete as respectfully as we can and try to get some of these new products out.

Well, if you find that bottom you don't need a phone call. And I appreciate it.

I'd like to know. Thanks.

[Operator Instructions] At this time we have no further questions.

Okay, thanks Erica. And I think everybody for joining me on the call. I appreciate your time this morning and we look forward to speaking with you on the next quarter's call. Thanks.