I just battled my First NPC, I felt my ship was powerful enough to win but for some reason I lost each round of the fight.

My Enemy was a Rank 5 Common NPC with 20 attack and 5 Defence, and I am a rank 13 with 29 attack and 5 Defence.

Despite having a higher attack value the NPC was doing 10-29 damage to me each round and I was doing roughly 3-10, is this normal would I need to outgun my opponent by a long way in order to be victorious in each battle round?

That is my same problem here. Wish I could find a NPC like that. Seems to me now, you have to get past the shields to do damage to their hull and make sure you have a lot of hull your self. Leave the fight before your hull is gone and repair...then come back and fight them again...repeat till you disable them.

It gets better as you rank up trust me. I can take out around 10 common NPC's before they even touch my hull.

Whilst thats good to know it'll be a very long time before i'm close to your rank. Any ideas on when i may see an improvement in fortunes?

I would say around rank 100 it will get easer to battle NPC's than PVP. Just keep at it and you will be there in no time. Now when I say easer I mean you will be able to take a NPC out in one life maybe two of them in one life it will be a while before you are near what I and some of the guys my rank can do.

One life??? If you can't take out several common npc's either your still a very low level or you very short on defense. Attack will still be more productive for npc farming simply because the more you hit for the more energy efficient it is to farm npcs, but I can easily take out 5-7 of them w/o having to repair.

Dan recently said that the calculation for the strength of low-level NPC's didn't reflect the strength of low level players and he was going to adjust the formula. Whether he has done that (And the difficulty complaints have resulted from this), or he hasn't made the change change yet (Which is why the complaints and why he has said he will make changes) though, i'm not sure.

Damage caused is NOT a simple calculation of attack points vs defence points though. It is also based on the size of your ship vs the enemy ship. Ships that have more decks are easier targets, so have a higher damage cap, ie larger ships are "allowed" to take more damage because they make easier targets. But larger ships can equip a lot more weapons and defensive modules, so the increase in damage you are allowed to take is easily offset by having the best modules you can afford.

Chance also plays into the calculation, which is why each attack will have a varying level of damage caused and taken.

Put all this together, and you can never really be sure of how combat is going to go, which makes the game all that much more fun. But as mojo said, it will get easier as you rank up - and research. Newer weapons and defences are more space efficient, that is, they will give you more attack or defence points per deckspace. Just keep plugging away at the game and you'll get stronger over time. And trust me, the NPC's can give you some fantastic rewards that make you even stronger, so the wait is worth it.