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    Stahl & Zelmanovitz

    Email: StahlNYC@AOL.com

    767 Third Avenue — 14th Floor

    Phone: (212) 826-6435

    New York, New York 10017

    Fax: (212) 826-6402

May 6, 2005

VIA EDGAR

United States Securities and Exchange Commission

Division of Corporation Finance

450 Fifth Street, N.W.

Washington, D.C. 20549-0405

    Attention:

    H. Roger Schwall,

    Assistant Director

    Re:

    NGAS Resources, Inc. — Proposed 10-KSB/A, File No. 0-12185

Ladies and Gentlemen:

      This correspondence is provided on behalf of NGAS Resources, Inc. (the “Company”) in
response to the staff’s comment letter dated April 22, 2005 (the “Comment
Letter”) on the Company’s Annual Report on Form 10-KSB (the “Report”). The following
responses are keyed to the numbered paragraphs in the Comment Letter. They include proposed
responsive amendments to the Report, marked to show changes from the Report, for subsequent filing
on Form 10-KSB/A (the “10-KSB/A”).

General

      1. The Company plans to file its periodic reports for periods ending after December 31,
2004 under Regulation S-K rather than Regulation S-B.

Management’s Discussion and Analysis, Liquidity, page 17

      2. The references to working capital adjustments will be deleted in the 10-KSB/A. The
first two paragraphs under the caption “Liquidity” will be revised as follows:

      Liquidity. Net cash provided by our operating activities in 2004 was
$5,307,508. before working capital adjustments and $9,620,345 after accounting for changes in assets and liabilities for the year
Our cash position during 2004 was decreased by the use of $52,691,249 in
investing activities, reflecting net additions of $53,755,431 to our oil and gas properties.
These investments were funded in part with proceeds from institutional private placements
of our common stock and convertible notes and from bank borrowings. See “Capital Resources”
below. As a result of these activities, net cash decreased from $22,594,993 at December 31,
2003 to $11,849,372 at December 31, 2004.

      Net cash provided by our operating activities in 2003 was $6,416,635.
before working capital adjustments and $9,439,021 after accounting for changes in assets and liabilities for the year, including an increase of $3,398,400 in customers’ drilling deposits under turnkey drilling contracts with sponsored Drilling Programs
Our cash position during 2003 was increased by $14,849,966 from financing activities, consisting
primarily of proceeds from the issuance of our common shares and convertible notes. Our
cash position was decreased by the use of $8,725,301 in investing activities, comprised
primarily of $7,346,345 in net additions to our oil and gas properties and $1,341,701 in the
purchase of property and equipment. As a result of these activities, cash and cash
equivalents increased from $7,031,307 at December 31, 2002 to $22,594,993 as of December 31,
2003.

Securities and Exchange Commission

Division of Corporation Finance

May 6, 2005

Page 2

Financial Statements

General

      3. Consolidated statements of changes in shareholders’ equity will be added in the 10-KSB/A as
follows:

    2004

    2003

    2002

    Shares

    Amount

    Shares

    Amount

    Shares

    Amount

    COMMON STOCK

    Beginning balance

    10,676,030

    $
    36,244,623

    5,505,670

    $
    24,589,797

    4,959,112

    $
    24,184,198

    Issued for cash

    2,557,665

    12,200,886

    950,000

    2,460,450

    125,000

    102,500

    Issued to employees as
incentive bonus

    157,250

    674,905

    360,500

    364,680

    204,000

    130,020

    Issued upon exercise of
options and warrants

    1,520,936

    3,507,493

    1,018,131

    1,904,164

    —

    —

    Issued upon conversion of
preferred shares

    —

    —

    625,448

    1,784,493

    4,773

    18,048

    Issued upon conversion of
convertible notes

    560,601

    1,688,590

    2,069,393

    4,976,913

    —

    —

    Issued upon settlement of
accounts payable

    46,352

    181,520

    146,888

    164,126

    212,785

    155,031

    Issued for contract settlement

    86,374

    431,870

    —

    —

    —

    —

    Ending balance

    15,605,208

    54,929,887

    10,676,030

    36,244,623

    5,505,670

    24,589,797

    Treasury stock

    (21,100
    )

    (23,630
    )

    (21,100
    )

    (23,630
    )

    (21,100
    )

    (23,630
    )

    Paid-in-capital — options and
warrants

    1,796,504

    1,140,321

    763,635

    To be issued

    10,070

    50,350

    1,403,335

    5,917,958

    24,887

    55,226

    PREFERRED STOCK

    Beginning balance

    —

    —

    558,476

    1,784,493

    563,249

    1,802,541

    Converted to common shares

    —

    —

    (558,476
    )

    (1,784,493
    )

    (4,773
    )

    (18,048
    )

    Ending balance

    —

    —

    —

    —

    558,476

    1,784,493

    DEFICIT

    Beginning balance

    (17,223,284
    )

    (20,883,424
    )

    (21,518,374
    )

    Net income

    1,611,701

    3,660,140

    634,950

    Ending balance

    (15,611,583
    )

    (17,223,284
    )

    (20,883,424
    )

    TOTAL SHAREHOLDERS’ EQUITY

    $
    41,141,528

    $
    26,055,988

    $
    6,286,097

      4. The Summary of Significant Accounting Policies in Note 1 to the Company’s consolidated
financial statements will be revised in the 10-KSB/A to reflect that the financial statements have
been prepared in accordance with accounting principles generally accepted in Canada. The
disclosure in Note 17 will be expanded in the 10-KSB/A as follows:

Securities and Exchange Commission

Division of Corporation Finance

May 6, 2005

Page 3

      (a) Differences Reflected in Consolidated Financial Statements. The
Company follows accounting principles generally accepted in Canada (“Canadian GAAP”), which are
different in some respects than accounting principles generally accepted in the United
States of America (“U.S. GAAP”). The only differences that affects the Company’s
consolidated financial statements for the reported periods involves the adoption of fair value accounting for stock options described in Note 10, which would not be required until 2005 under U.S. GAAP, and
the accounting treatment of the Company’s investment in municipal bonds described in Note 6, which would be
reportable at fair value under U.S. GAAP.
, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity.
This would have
required prior writedowns to be partially reversed with an addition of $18,484 to other comprehensive income under U.S. GAAP for the year ended December 31, 2004.
the following effects on
shareholders’ equity, as reported under Canadian GAAP:

    As of December 31,

    2004

    2003

    2002

    Total shareholders’ equity, Canadian GAAP

    $
    41,141,528

    $
    26,055,988

    $
    6,286,097

    Accumulated other comprehensive loss

    (63,627
    )

    (82,111
    )

    (82,111
    )

    Total shareholders’ equity, U.S. GAAP

    $
    41,077,901

    $
    25,973,877

    $
    6,203,986

      Comprehensive income under U.S. GAAP would be as follows:

    Year Ended December 31,

    2004

    2003

    2002

    Net income, as reported

    $
    1,611,701

    $
    3,660,140

    $
    634,950

    Other comprehensive income (loss)

    18,084

    —

    (32,377
    )

    Comprehensive income, U.S. GAAP

    $
    1,630,185

    $
    3,660,140

    $
    602,573

      The Comment Letter notes that Canadian issuers generally identify other differences
between accounting policies affecting items such as DD&A, income taxes and capitalized interest.
Differences between Canadian and U.S. accounting principles would have no affect on the Company’s
reported DD&A or income tax liabilities and expenses, other than minor differences in terminology,
and the Company had no capitalization of interest on oil and gas projects or exposure under
derivative financial instruments during the reported periods.

Report of Independent Registered Public Accounting Firm, page F-1

      5. The auditor’s report will be revised in the 10-KSB/A as follows:

We have audited the consolidated balance sheets of NGAS RESOURCES, INC. (formerly
Daugherty Resources, Inc.) as at December 31, 2004 and 2003 and the consolidated statements
of operations, changes in shareholders’ equity
deficit
and cash flows for each of the years in the
three-year period ended December 31, 2004. These consolidated financial statements are the
responsibility of the company’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and with generally accepted auditing standards in Canada.
Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

Securities and Exchange Commission

Division of Corporation Finance

May 6, 2005

Page 4

In our opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 2004 and 2003 and the
results of its operations, changes in its shareholders’ equity and its cash flows for each
of the years in the three-year period ended December 31, 2004 in accordance with accounting
principles generally accepted in
the United States of America and in
Canada.

Consolidated Balance Sheets, page F-2

      6. To clarify the Company’s accounting treatment of customer drilling deposits as a current
liability, the line item on the balance sheet will be cross referenced to Note 1, and an accounting
policy paragraph will be added under Note 1 to the consolidated financial statements in the
10-KSB/A as follows:

      (h) Customer Drilling Deposits. At the commencement of operations, each
Drilling Program acquires drilling rights for specified wells from DPI and enters into a
turnkey drilling contract with DPI for drilling and completing the wells at specified
prices. Upon the closing of Drilling Program financings, DPI receives the net proceeds from
the financings as customers’ drilling deposits under the turnkey drilling contracts. These
payments totaled $31,278,330 in 2004 and $22,279,750 in 2003. The Company recognizes
revenues from drilling operations on the completed contract method as the wells are drilled,
rather than when funds are received. Customer drilling deposits aggregating $12,652,001 at
December 31, 2004 and $10,162,600 at December 31, 2003 represent unapplied turnkey payments
for wells that were not yet drilled as of the balance sheet dates.

      7. An explanatory roll-forward for shares to be issued will be added in Note 10 to the
consolidated financial statements in the 10-KSB/A as follows:

    Number of

    Common Shares to be Issued

    Shares

    Amount

    Balance, December 31, 2002

    —

    $
    —

    Issuable for contract settlement(1)

    100,000

    500,000

    Issuable in financing transaction(2)

    1,303,335

    5,417,958

    Balance, December 31, 2003

    1,403,335

    5,917,958

    Issued in contract settlement(1)

    (86,374
    )

    (431,870
    )

    Contract settlement in cash in lieu of common shares

    (3,556
    )

    (17,780
    )

    Issued in financing transaction(2)

    (1,303,335
    )

    (5,417,958
    )

    Balance, December 31, 2004

    10,070

    $
    50,350

    (1)
    Reflects shares issuable in a contract settlement, of which 3,335 shares were settled in
cash during 2004 and 10,070 shares remained unissued at December 31, 2004.

    (2)
    Reflects shares issuable under a securities purchase agreement dated December 31, 2003,
providing for an institutional private placement of common stock and warrants. A portion
of the proceeds from the financing were received in January 2004, resulting in the
classification of all the shares subscribed in the financing as common shares to be issued
at December 31, 2003.

Securities and Exchange Commission

Division of Corporation Finance

May 6, 2005

Page 5

Consolidated Statements of Operations, page F-3

      8. The only component of DD&A expense that relates to the Company’s cost of sales is
depreciation of vehicles and other field equipment used its drilling, producing and gas gathering
activities. This will be addressed in the 10-KSB/A by adding this DD&A component to the associated
direct expenses, with corresponding classification adjustments to the balance of reported DD&A.
For clarification, Note 1(e) to the consolidated financial statements in the 10-KSB/A will be
supplemented as follows:

      (e) Property and Equipment. Property and equipment are stated at cost,
amortized on a straight-line basis over the useful life of the assets, ranging from 3 to 25
years. Depreciation of equipment used in the Company’s drilling, producing and gas
gathering operations is recognized as a component of direct expenses for each of those
activities, aggregating $197,038 in 2004, $140,758 in 2003 and $89,989 in 2002.

Consolidated Statements of Cash Flows, page F-4

      9. The consolidated statements of cash flows will be revised in the 10-KSB/A to remove the
line item captioned “Subscriptions receivable” from operating activities and add a line item
captioned “Decrease (increase) in subscriptions receivable” under financing activities.

Note 1 — Summary of Significant Accounting Policies, page F-5

Oil and Gas Properties

      10. Note 1(d) to the consolidated financial statements will be revised in the 10-KSB/A as
follows:

      (i) Accounting Treatment for Costs Incurred. The Company follows the
successful efforts method of accounting for its oil and gas activities. Accordingly,
property acquisition costs,
costs of successful exploratory wells,
development costs and the cost of support equipment and
facilities are capitalized. Drilling costs for exploratory wells are initially capitalized
pending determination of proved reserves but are charged to expense if no proved reserves
are found within one year after completion of drilling. Other exploration costs, including
geological and geophysical expenses, leasehold expiration costs and delay rentals, are
expensed as incurred.
Costs of unsuccessful exploratory wells are expensed when determined to be non-productive.
The costs associated with drilling and equipping wells not yet completed are capitalized as uncompleted
wells, equipment and facilities.
Production costs, overhead and all exploration costs other than costs
of exploratory drilling are charged to expense as incurred.

Supplemental Oil and Gas Reserve Information, page F-19

      11(a). By copy of this letter, the Company has provided Ronald Winfrey with requested
supplemental materials, in both hard copy and electronic spreadsheet form (the “Supplemental
Materials”). The Supplemental Materials include the reserve report underlying the oil and gas
reserve data in the Report (the “Reserve Report”), prepared by Wright & Company, Inc.,
independent petroleum consultants (“Wright & Co.”). Subject to the conditions of Rule 4l8
under the Securities Act of 1933, the Company is requesting the return of the Supplement
Information upon completion of the staff’s review. A stamped return envelope has been provided
with the Supplemental Materials for that purpose.

      11(b). The Company aff