OHA Investment Corporation
NGP Capital Resources Co (Form: 10-Q, Received: 05/11/2009 15:03:54)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
  (Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2009
 
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period              to             
 
Commission file number: 814-00672
 

NGP Capital Resources Company
(Exact name of registrant as specified in its charter)
 

 
Maryland
20-1371499
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
   
1221 McKinney Street, Suite 2975
Houston, Texas
77010
(Address of principal executive offices)
(Zip Code)
 
(713) 752-0062
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer    
Accelerated filer     þ
Non-accelerated filer     o
Smaller reporting company     o
   
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o   No þ

As of May 8, 2009, there were 21,628,202 shares of the registrant’s common stock outstanding.

 

 

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
1
   
Item 1. Consolidated Financial Statements
1
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
31
Item 4. Controls and Procedures
31
   
PART II – OTHER INFORMATION
32
   
Item 1. Legal Proceedings
32
Item 1A.  Risk Factors
32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
32
Item 3. Defaults Upon Senior Securities
32
Item 4. Submission of Matters to a Vote of Security Holders
32
Item 5. Other Information
32
Item 6. Exhibits
33

 

 

PART I - FINANCIAL INFORMATION
I tem 1. Consolidated Financial Statements
 
NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED BALANCE SHEETS

   
March   31,   2009
   
December   31,   2008
 
   
(Unaudited)
       
Assets
           
Investments in portfolio securities at fair value (cost: $299,565,738 and $294,432,215, respectively)
  $ 228,217,795     $ 244,229,568  
Investments in corporate notes at fair value (cost: $11,575,262 and $11,586,899, respectively)
    6,113,300       6,350,000  
Investments in commodity derivative instruments at fair value (cost: $480,130 and $774,095, respectively)
    4,729,234       8,212,872  
Investments in U.S. Treasury Bills, at amortized cost which approximates fair value
    76,134,101       -  
Total investments
    315,194,430       258,792,440  
                 
Cash and cash equivalents
    26,916,388       133,805,575  
Accounts receivable
    11,672       41,377  
Interest receivable
    2,730,634       2,410,360  
Prepaid assets
    1,426,983       1,898,905  
Deferred tax assets
    6,252,617       200,000  
Total current assets
    37,338,294       138,356,217  
                 
Deferred tax assets
    797,835       3,600,000  
                 
Total assets
  $ 353,330,559     $ 400,748,657  
                 
Liabilities and stockholders' equity (net assets)
               
Current liabilities
               
Accounts payable and accrued expenses
  $ 328,843     $ 512,926  
Management and incentive fees payable
    1,833,848       2,016,214  
Dividends payable
    4,325,640       8,867,563  
Income taxes payable
    163,569       3,529,308  
Current portion of long-term debt
    75,000,000       75,000,000  
Total current liabilities
    81,651,900       89,926,011  
                 
Deferred tax liabilities
    1,868,009       -  
Long-term debt, less current portion
    27,000,000       45,000,000  
                 
Total liabilities
    110,519,909       134,926,011  
                 
Commitments and contingencies  (Note 8)
               
                 
Stockholders’ equity (net assets)
               
Common stock, $.001 par value, 250,000,000 shares authorized; 21,628,202 shares issued and outstanding
    21,628       21,628  
Paid-in capital in excess of par
    315,184,191       315,184,191  
Undistributed net investment income (loss)
    (1,872,680 )     (3,420,716 )
Undistributed net realized capital gain (loss)
    2,038,312       2,038,312  
Net unrealized appreciation (depreciation) of portfolio securities, corporate notes and commodity derivative instruments
     (72,560,801 )      (48,000,769 )
                 
Total stockholders’ equity (net assets)
    242,810,650       265,822,646  
                 
Total liabilities and stockholders' equity (net assets)
  $ 353,330,559     $ 400,748,657  
                 
Net asset value per share
  $ 11.23     $ 12.29  

(See accompanying notes to consolidated financial statements)

 
1

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   
For the Three Months Ended
 
   
March 31, 2009
   
March 31, 2008
 
Investment income
           
Interest income
  $ 6,194,539     $ 8,952,116  
Royalty income (loss), net of amortization
    (894,302 )     545,850  
Commodity derivative income, net of expired options
    3,173,852       -  
Other income
    58,800       40,370  
                 
Total investment income
    8,532,889       9,538,336  
                 
Operating expenses
               
Management fees
    1,833,848       1,800,206  
Professional fees
    166,727       208,979  
Insurance expense
    200,221       198,817  
Interest expense and fees
    997,842       2,441,076  
State and excise taxes
    5,619       9,516  
Other general and administrative expenses
    796,949       738,600  
                 
Total operating expenses
    4,001,206       5,397,194  
                 
Net investment income (loss) before income taxes
    4,531,683       4,141,142  
                 
Benefit (provision) for income taxes
    1,341,993       -  
                 
Net investment income (loss)
    5,873,676       4,141,142  
                 
Net increase (decrease) in unrealized appreciation (depreciation) on portfolio securities, corporate notes and commodity derivative instruments
    (24,560,032 )     (1,746,162 )
                 
Net increase (decrease) in stockholders' equity (net assets) resulting from operations
  $ (18,686,356 )   $ 2,394,980  
                 
Net increase (decrease) in stockholders' equity (net assets) resulting from operations per common share
  $ (0.86 )   $ 0.14  

(See accompanying notes to consolidated financial statements)

 
2

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS)

                                 
Net Unrealized
       
                                 
Appreciation (Depreciation)
   
Total
 
               
Paid-in Capital
   
Undistributed
   
Undistributed
   
of Portfolio Securities,
   
Stockholders'
 
   
Common Stock
   
in Excess
   
Net Investment
   
Net Realized
   
Corporate Notes and Commodity
   
Equity
 
   
Shares
   
Amount
   
of Par
   
Income (Loss)
   
Capital Gain (Loss)
   
Derivative Instruments
   
(Net Assets)
 
                                           
Balance at December 31, 2008
    21,628,202     $ 21,628     $ 315,184,191     $ (3,420,716 )   $ 2,038,312     $ (48,000,769 )   $ 265,822,646  
Net increase (decrease) in stockholders' equity (net assets) resulting from operations
    -       -       -       5,873,676       -       (24,560,032 )     (18,686,356 )
Dividends declared
    -       -       -       (4,325,640 )     -       -       (4,325,640 )
Balance at March 31, 2009 (unaudited)
    21,628,202     $ 21,628     $ 315,184,191     $ (1,872,680 )   $ 2,038,312     $ (72,560,801 )   $ 242,810,650  

(See accompanying notes to consolidated financial statements)

 
3

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
For The Three Months Ended
 
   
March 31, 2009
   
March 31, 2008
 
Cash flows from operating activities
           
Net increase (decrease) in stockholders' equity (net assets) resulting from operations
  $ (18,686,356 )   $ 2,394,980  
Adjustments to reconcile net increase (decrease) in stockholders' equity (net assets) resulting from operations to net cash used in operating activities
               
Payment-in-kind interest
    (912,526 )     (1,728,817 )
Net amortization of premiums, discounts and fees
    1,445,811       (301,353 )
Change in unrealized (appreciation) depreciation on portfolio securities, corporate notes and commodity derivative instruments
    24,560,032       1,746,162  
Effects of changes in operating assets and liabilities
               
Accounts receivable
    29,705       (11,804 )
Interest receivable
    (320,274 )     (229,571 )
Prepaid assets
    471,922       306,502  
Current portion of deferred income taxes
    (6,052,617 )     -  
Non-current deferred income taxes
    4,670,174       -  
Accounts payable and accrued expenses
    (366,449 )     (301,232 )
Income taxes payable
    (3,365,739 )     -  
Purchase of investments in portfolio securities, corporate notes and commodity derivative instruments
    (11,136,736 )     (25,776,473 )
Redemption of investments in portfolio securities, corporate notes and commodity derivative instruments
    5,775,530       28,024,331  
Net sale (purchase) of investments in U.S. Treasury Bills
    (76,134,101 )     19,947,405  
                 
Net cash provided by (used in) operating activities
    (80,021,624 )     24,070,130  
                 
Cash flows from financing activities
               
Borrowings under revolving credit facility
    27,000,000       10,000,000  
Repayments on revolving credit facility
    (45,000,000 )     (34,750,000 )
Dividends paid
    (8,867,563 )     (9,012,671 )
                 
Net cash provided by (used in) financing activities
    (26,867,563 )     (33,762,671 )
                 
Net increase (decrease) in cash and cash equivalents
    (106,889,187 )     (9,692,541 )
Cash and cash equivalents, beginning of period
    133,805,575       18,437,115  
                 
Cash and cash equivalents, end of period
  $ 26,916,388     $ 8,744,574  

(See accompanying notes to consolidated financial statements)

 
4

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2009
(Unaudited)

Portfolio Company
 
Energy Industry Segment
 
Investment (2) (4)
 
Principal
   
Cost
   
Fair 
Value (3)
 
                           
TARGETED INVESTMENTS (24)
                     
                           
Venoco, Inc. (1)
 
Oil & Natural Gas
 
Senior Notes (7)
  $ 12,000,000     $ 11,937,453     $ 6,540,000  
   
Production and Development
 
(8.75%, due 12/15/2011)
                       
                                 
Chroma Exploration &
 
Oil & Natural Gas
 
9,711 Shares Series A Participating
    -       2,221,710       -  
Production, Inc. (1)
 
Production and Development
 
Convertible Preferred Stock (9)
                       
       
8,868 Shares Series AA Participating
    -       2,089,870       1,000,000  
       
Convertible Preferred Stock (9)
                       
       
8.11 Shares Common Stock (5)
    -       -       -  
       
Warrants (5) (11)
    -       -       -  
                                 
Resaca Exploitation Inc. (1)
 
Oil & Natural Gas
 
Senior Secured
    32,000,000       31,617,332       31,617,332  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(The greater of 10.0% or LIBOR + 6.00%,
                       
       
due 5/01/2012)
                       
       
Common Stock (6,574,216 shares) (5) (6) (20)
    3,235,256       3,235,256       1,299,432  
                                 
Crossroads Energy, LP (1)
 
Oil & Natural Gas
 
Senior Secured
    5,186,941       5,167,097       5,167,097  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(The greater of 10.0% or LIBOR + 5.50%,
                       
       
due 6/29/2009)
                       
       
Overriding Royalty Interest (6)
    10,000       4,726       250,000  
                                 
Rubicon Energy Partners,
 
Oil & Natural Gas
 
LLC Units (4,000 units) (5)
    -       -       750,000  
LLC (8)
 
Production and Development
                           
                                 
BSR Loco Bayou, LLC (1) (10)
 
Oil & Natural Gas
 
Senior Secured
    2,844,820       2,369,720       1,507,631  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(LIBOR + 5.50% cash, LIBOR + 8.50%
                       
       
default, due 8/15/2009) (9)
                       
       
Overriding Royalty Interest
    20,000       19,294       20,000  
       
Warrants (5) (12)
    10,000       10,000       -  
                                 
Sonoran Energy, Inc. (1)
 
Oil & Natural Gas
 
Warrants (5) (13)
    10,000       10,000       -  
   
Production and Development
                           
                                 
Nighthawk Transport I, LP (1)
 
Energy Services
 
Second Lien
    12,957,853       12,334,854       8,929,131  
       
Term Loan B
                       
       
(The greater of 21.0% or LIBOR + 16.50%,
                       
       
w/ PIK option available up to 6.0%,
                       
       
due 10/03/2010)
                       
       
LP Units (5)
    224       224       -  
       
Warrants (5) (14)
    850,000       850,000       -  
                                 
       
Second Lien
    1,450,404       1,430,208       1,075,842  
       
Delayed Draw Term Loan B
                       
       
(The greater of 21.0% or LIBOR + 16.50%,
                       
       
w/ PIK option available up to 6.0%,
                       
       
due 10/03/2010)
                       
                                 
Alden Resources, LLC (1) (21)
 
Coal Production
 
Senior Secured
    36,497,815       34,097,802       28,609,205  
       
Multiple-Advance Term Loan
                       
       
(LIBOR + 8.00% cash, LIBOR + 11.0%
                       
       
default, due 1/05/2013)
                       
       
Royalty Interest
    2,660,000       2,565,017       7,500,000  
       
Warrants (5) (15)
    100,000       100,000       -  

 
5

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2009
(Unaudited)
(Continued)

Portfolio   Company
 
Energy   Industry   Segment
 
Investment   (2)   (4)
 
Principal
   
Cost
   
Fair  
Value   (3)
 
                           
TARGETED INVESTMENTS (24) - Continued
                     
                                 
Tammany Oil & Gas, LLC (1)
 
Oil & Natural Gas
 
Senior Secured
    30,197,804       29,994,883       29,994,883  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(The greater of 11.0% or LIBOR + 6.00%,
                       
       
due 3/21/2010)
                       
       
Overriding Royalty Interest (5) (6)
    200,000       200,000       550,000  
                                 
TierraMar Energy LP (8)
 
Oil & Natural Gas
 
Class A Preferred LP Units (5)
    17,710,788       17,710,788       10,500,000  
   
Production and Development
 
Overriding Royalty Interest
    20,000       16,724       300,000  
                                 
Anadarko Petroleum Corporation
 
Oil & Natural Gas
 
Multiple-Advance Net Profits Interest
    33,105,305       33,196,620       33,196,620  
2007-III Drilling Fund (1)
 
Production and Development
 
(Due 4/23/2032)
                       
                                 
Formidable, LLC (1) (19)
 
Oil & Natural Gas
 
Senior Secured
    37,949,866       37,949,866       5,600,000  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(LIBOR + 5.50% cash, LIBOR + 8.50%
                       
       
default, due 5/31/2008) (9)
                       
       
Warrants (5) (16)
    500,000       500,000       -  
                                 
DeanLake Operator, LLC (8)
 
Oil & Natural Gas
 
Class A Preferred Units (5)
    13,900,255       13,900,255       10,000,000  
   
Production and Development
 
Overriding Royalty Interest
    20,000       18,705       20,000  
                                 
Bionol Clearfield, LLC (1)
 
Alternative Fuels and
 
Senior Secured Tranche C
    5,000,000       5,000,000       5,000,000  
   
Specialty Chemicals
 
Construction Loan
                       
       
(LIBOR + 7.00%, due 9/06/2016)
                       
                                 
BioEnergy Holding, LLC (1)
 
Alternative Fuels and
 
Senior Secured Notes
    11,402,395       10,573,392       10,573,392  
   
Specialty Chemicals
 
(15.00%, due 3/06/2015)
                       
       
BioEnergy International Warrants (5) (17)
    595,845       595,845       595,845  
       
BioEnergy Holding Units (5)
    376,687       376,687       376,687  
                                 
Greenleaf Investments, LLC (1)
 
Oil & Natural Gas
 
Senior Secured
    12,229,693       11,977,877       11,977,877  
   
Production and Development
 
Multiple-Advance Term Loan
                       
       
(The greater of 10.50% or LIBOR + 6.50%,
                       
       
due 4/30/2011)
                       
       
Overriding Royalty Interest (6)
    100,000       77,984       300,000  
                                 
ATP Oil & Gas Corporation (1)
 
Oil & Natural Gas
 
Limited Term Royalty Interest
    32,814,792       22,533,099       10,084,371  
   
Production and Development
                           
                                 
Black Pool Energy
 
Oil & Natural Gas
 
Senior Secured
    5,137,635       4,862,450       4,862,450  
Partners, LLC (1)
 
Production and Development
 
Multiple-Advance Term Loan
                       
       
(The greater of 12.00% or LIBOR +
                       
       
8.00 % cash, 14.00% or LIBOR +
                       
       
10.00% PIK, due 10/24/2011)
                       
       
Overriding Royalty Interest (5) (6)
    10,000       10,000       10,000  
       
Warrants (5) (22)
    10,000       10,000       10,000  
                                 
Subtotal Targeted Investments (66.7% of total investments)
                  $ 299,565,738     $ 228,217,795  

 
6

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2009
(Unaudited)
(Continued)

Issuing Company
 
Energy Industry Segment
 
Investment (2) (4)
 
Principal
   
Cost
   
Fair 
Value (3)
 
                           
CORPORATE NOTES (24)
                     
                           
Pioneer Natural Resources Co.
 
Oil & Natural Gas
Production and Development
 
Senior Notes, 7.2%, due 2028
  $ 10,000,000     $ 11,575,262     $ 6,113,300  
                                 
Subtotal Corporate Notes ( 1.79% of total investments)
              $ 11,575,262     $ 6,113,300  
                                 
COMMODITY DERIVATIVE INSTRUMENTS (24)
                           
                                 
Put Options (18)
     
Put Options with BP Corporation North America, Inc. to sell up to 615,000 MMBtu of natural gas at a strike price of $10.00 per MMBtu. 12 monthly contracts beginning on July 1, 2008 and expiring on June 30, 2009.
          $ 54,405     $ 586,229  
                                 
       
Put Options with BP Corporation North America, Inc. to sell up to 237,750 Bbls of crude oil at a strike price of $101.00 per Bbl. 15 monthly contracts beginning on July 1, 2008 and expiring on September 30, 2009.
            284,900       3,164,568  
                                 
       
Put Options with BP Corporation North America, Inc. to sell up to 32,750 Bbls of crude oil at a strike price of $85.00 per Bbl.  4 monthly contracts beginning on October 1, 2009 and expiring on January 31, 2010.
            140,825       978,437  
                                 
Subtotal Commodity Derivatives ( 1.39% of total investments)
          $ 480,130     $ 4,729,234  
                                 
GOVERNMENT SECURITIES (23)
                           
U.S. Treasury Bills
     
U.S. Treasury Bills, 0.13%, due 05/07/2009
  $ 50,000,000     $ 49,993,500     $ 49,993,500  
U.S. Treasury Bills
     
U.S. Treasury Bills, 0.13%, due 05/07/2009
    26,144,000       26,140,601       26,140,601  
                                 
Subtotal Government Securities (22.25% of total investments)
          $ 76,134,101     $ 76,134,101  
                                 
CASH
                               
Subtotal Cash (7.87% of total investments)
              $ 26,916,388     $ 26,916,388  
                                 
TOTAL INVESTMENTS, CASH AND CASH EQUIVALENTS
              $ 414,671,619     $ 342,110,818  
                                 
LIABILITIES IN EXCESS OF OTHER ASSETS
                      $ (99,300,168 )
                                 
NET ASSETS
                          $ 242,810,650  

 
7

 

NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2009
(Unaudited)
(Continued)

NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS
 
(1)
Portfolio company is not controlled by or affiliated with the Company as defined by the Investment Company Act of 1940.
(2)
Percentages represent interest rates in effect at the end of the period and due dates represent the contractual maturity dates.
(3)
Fair value of targeted investments is determined by or under the direction of the Board of Directors.
(4)
All investments are in entities with primary operations in the United States of America.
(5)
Non-income producing securities.
(6)
Securities are subject to restrictions as to their sale.
(7)
Upon the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco Inc.'s senior notes became collateralized by second priority liens.
(8)
Portfolio company is controlled by the Company as defined by the Investment Company Act of 1940.
(9)
Non-accrual status.
(10)
BSR Loco Bayou was issued a written notice of default.
(11)
Chroma warrants expire on April 5, 2012 and provide the Company the right to purchase 2,462 shares of common stock at a purchase price of $75.00 per share.
(12)
BSR Loco Bayou warrants expire on August 15, 2013 and provide the Company the right to purchase 10,000 investor units at the exercise price of $160.00 per investor unit.
(13)
Sonoran warrants expire on November 28, 2014 and provide the Company the right to purchase shares of common stock up to 2.87 million shares, on a fully diluted basis with anti-dilution provisions, at the exercise price of $0.20 per share.
(14)
Nighthawk warrants expire on May 13, 2017 and provide the Company the right to purchase approximately 7.1% of limited partnership units at the exercise price of $0.001 per unit.
(15)
Alden warrants provide the Company the right to purchase 23% of class C units at an exercise price of $0.739 per unit, expiring in December 2013 and the right to purchase 10% of class C units at an exercise price of $0.739 per unit, expiring in July 2014.
(16)
Formidable warrants expire on March 31, 2015 and provide the Company the right to purchase membership interest representing 30% of all distributions at an exercise price of $1,000 per percentage point.
(17)
BioEnergy International, LLC warrants expire on August 15, 2010 and provide the Company the right to purchase 648,000 units, representing membership interests of BioEnergy International, LLC, at the purchase price of $10.00 per unit.
(18)
Put Options are related to the limited term royalty interest purchased from ATP Oil & Gas Corporation.
(19)
Formidable was issued a written notice of default on February 13, 2009.
(20)
Resaca stock is listed on the Alternative Investment Market of the London Stock Exchange, denominated in British pounds and its reported fair value at March 31, 2009 has been converted to U.S. dollars at the exchange rate effective on March 31, 2009.
(21)
Alden was issued a written notice of default on February 5, 2009 and entered into a forbearance agreement on April 16, 2009.
(22)
Black Pool warrants expire seven years after repayment of principal and interest and provide the Company the right to purchase approximately 25% of membership interest at the exercise price of $0.01 per unit.
(23)
Investments in U.S. Treasury instruments are level 1 securities per SFAS No. 157 hierarchy.
(24)
All investments in portfolio securities, corporate notes and commodity derivative instruments are level 3 securities per SFAS No. 157 hierarchy.
 
(See accompanying notes to consolidated financial statements)

 
8

 
 
  NGP CAPITAL RESOURCES COMPANY
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008

 
Portfolio Company
 
Energy Industry Segment
 
Investment (2) (4)
 
Principal
 
Cost
 
Fair Value (3)
Targeted Investments
   
  
     
  
     
  
     
  
     
  
 
Venoco, Inc. (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Notes (7)
(8.75%, due 12/15/2011)
   
$
12,000,000
   
$
11,932,367
   
$
5,760,000
 
Chroma Exploration & Production, Inc. (1) (23)
   
Oil & Natural Gas
Production and Development
     
9,711 Shares Series A Participating
Convertible Preferred Stock (9)
     
     
2,221,710
     
 
  
   
  
     
8,868 Shares Series AA Participating
Convertible Preferred Stock (9)
     
     
2,089,870
     
1,000,000
 
  
   
  
     
8.11 Shares Common Stock (5)
     
     
     
 
  
   
  
     
Warrants (5) (11)
     
     
     
 
Resaca Exploitation Inc. (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(The greater of 10.0% or LIBOR +
6.00%, due 5/01/2012)
     
28,000,000
     
27,592,657
     
27,592,657
 
  
   
  
     
Common Stock (6,574,216 shares) (5) (6) (20)
     
3,235,256
     
3,235,256
     
1,093,688
 
Crossroads Energy, LP (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(The greater of 10.0% or LIBOR + 5.50%, due 6/29/2009)
     
4,820,204
     
4,781,487
     
4,781,487
 
  
   
  
     
Overriding Royalty Interest (6)
     
10,000
     
5,120
     
250,000
 
Rubicon Energy Partners, LLC (8) (23)
   
Oil & Natural Gas
Production and Development
     
LLC Units (4,000 units) (5)
     
     
     
750,000
 
BSR Loco Bayou, LLC (1) (10) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(LIBOR + 5.50% cash, LIBOR + 8.50%
default, due 8/15/2009) (9)
     
2,888,986
     
2,401,884
     
1,539,795
 
  
   
  
     
Overriding Royalty Interest
     
20,000
     
19,372
     
20,000
 
  
   
  
     
Warrants (5) (12)
     
10,000
     
10,000
     
 
Sonoran Energy, Inc. (1) (23)
   
Oil & Natural Gas
Production and Development
     
Warrants (5) (13)
     
10,000
     
10,000
     
 
Nighthawk Transport I, LP (1) (23)
   
Energy Services
     
Second Lien
Term Loan B
(The greater of 15.0% or
LIBOR + 10.50%, due 10/03/2010)
     
12,895,524
     
12,184,611
     
8,929,131
 
  
   
  
     
LP Units (5)
     
224
     
224
     
 
  
   
  
     
Warrants (5) (14)
     
850,000
     
850,000
     
 
  
   
  
     
Second Lien
Delayed Draw Term Loan B
(The greater of 15.0% or LIBOR +
10.50%, due 10/03/2010)
     
1,443,427
     
1,420,362
     
1,075,842
 
Alden Resources, LLC (1) (21) (23)
   
Coal Production
     
Senior Secured
Multiple-Advance Term Loan
(LIBOR + 8.00% cash, due 1/05/2013
)   
   
36,285,168
     
33,772,038
     
28,283,440
 
  
   
  
     
Royalty Interest
     
2,660,000
     
2,565,017
     
7,500,000
 
  
   
  
     
Warrants (5) (15)
     
100,000
     
100,000
     
 
 
(See accompanying notes to consolidated financial statements)
9

 
NGP CAPITAL RESOURCES COMPANY
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
(continued)

 
Portfolio Company
 
Energy Industry Segment
 
Investment (2) (4)
 
Principal
 
Cost
 
Fair Value (3)
Targeted Investments – Continued
   
  
     
  
     
  
     
  
 
Tammany Oil & Gas, LLC (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(The greater of 11.0% or LIBOR + 6.00%, due 3/21/2010)
     
31,447,804
     
31,197,085
     
31,197,085
 
  
   
  
     
Overriding Royalty Interest (5) (6)
     
200,000
     
200,000
     
550,000
 
TierraMar Energy LP (8) (23)
   
Oil & Natural Gas
Production and Development
     
Overriding Royalty Interest
     
20,000
     
16,828
     
300,000
 
  
   
  
     
Class A Preferred LP Units (5)
     
16,634,830
     
16,634,830
     
13,500,000
 
Anadarko Petroleum Corporation
2007-III Drilling Fund (1) (23)
   
Oil & Natural Gas
Production and Development
     
Multiple-Advance Net Profits Interest
(Due 4/23/2032)
     
37,255,948
     
37,352,982
     
37,352,982
 
Formidable, LLC (1) (19) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(LIBOR + 5.50% cash, LIBOR + 8.50%
default, due 5/31/2008) (9)
     
37,299,054
     
37,299,054
     
22,500,000
 
  
   
  
     
Warrants (5) (16)
     
500,000
     
500,000
     
 
DeanLake Operator, LLC (8) (23)
   
Oil & Natural Gas
Production and Development
     
Class A Preferred Units (5)
     
13,900,255
     
13,900,255
     
10,000,000
 
  
   
  
     
Overriding Royalty Interest
     
20,000
     
18,897
     
20,000
 
Bionol Clearfield, LLC (1) (23)
   
Alternative Fuels and
Specialty Chemicals
     
Senior Secured Tranche C
Construction Loan
(LIBOR + 7.00%, due 9/06/2016)
     
5,000,000
     
5,000,000
     
5,000,000
 
BioEnergy Holding, LLC (1) (23)
   
Alternative Fuels and
Specialty Chemicals
     
Senior Secured Notes
(15.00%, due 3/06/2015)
     
10,606,557
     
9,757,613
     
9,757,613
 
  
   
  
     
BioEnergy International Warrants (5) (17)
     
595,845
     
595,845
     
595,845
 
  
   
  
     
BioEnergy Holding Units (5)
     
376,687
     
376,687
     
376,687
 
Greenleaf Investments, LLC (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(The greater of 10.50% or LIBOR +
6.50%, due 4/30/2011)
     
12,229,693
     
11,951,818
     
11,951,818
 
  
   
  
     
Overriding Royalty Interest (6)
     
100,000
     
86,263
     
300,000
 
ATP Oil & Gas Corporation (1) (23)
   
Oil & Natural Gas
Production and Development
     
Limited Term Royalty Interest
     
32,814,792
     
24,319,585
     
12,219,000
 
Black Pool Energy Partners, LLC (1) (23)
   
Oil & Natural Gas
Production and Development
     
Senior Secured
Multiple-Advance Term Loan
(The greater of 12.00% or LIBOR + 8.00% cash, 14.00% or LIBOR + 10.00% PIK,
due 10/24/2011)
     
302,497
     
12,498
     
12,498
 
  
   
  
     
Overriding Royalty Interest (5) (6)
     
10,000
     
10,000
     
10,000
 
  
           
Warrants (5) (22)
     
10,000
     
10,000
     
10,000
 
Subtotal Targeted Investments (62.2% of total investments)
                   
$294,432,215
     
$244,229,568
 
 
(See accompanying notes to consolidated financial statements)
 
10

 
NGP CAPITAL RESOURCES COMPANY
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
(continued)
 

Issuing Company
 
Energy Industry Segment
 
Investment (2) (4)
 
Principal
 
Cost
 
Fair Value (3)
Corporate Notes
   
  
     
  
     
  
     
  
     
  
 
Pioneer Natural Resources Co. (23)
   
Oil & Natural Gas
Production and Development
     
Senior Notes, 7.2%, due 2028
   
$
10,000,000
   
$
 11,586,899
   
$
6,350,000
 
   
$ 11,586,899
     
$6,350,000
 
 


Commodity Derivative Instruments
   
  
     
  
 
Put Options (18) (23)
   
Put Options with BP Corporation North America, Inc. to sell up to
615,000 MMBtu of natural gas at a strike price of $10.00 per MMBtu.
12 monthly contracts beginning on July 1, 2008 and expiring on June 30, 2009.
   
$
    141,570
   
$
     933,484
 
  
   
Put Options with BP Corporation North America, Inc. to sell up to
237,750 Bbls of crude oil at a strike price of $101.00 per Bbl. 15 monthly
contracts beginning on July 1, 2008 and expiring on September 30, 2009.
     
491,700
     
6,146,906
 
  
   
Put Options with BP Corporation North America, Inc. to sell up to
32,750 Bbls of crude oil at a strike price of $85.00 per Bbl. 4 monthly
contracts beginning on October 1, 2009 and expiring on January 31, 2010.
     
140,825
     
1,132,482
 
 


Subtotal Commodity Derivatives (2.1% of total investments)
   
$    774,095
     
$8,212,872
 
Cash
   
  
     
  
     
  
     
  
     
  
 
Subtotal Cash (34.08% of total investments)
   
$133,805,575
     
$133,805,575
 
Total investments, cash and cash equivalents
   
$440,598,784
   
$
392,598,015
 
Liabilities in excess of other assets
           
$(126,775,369)
 
Net assets
           
$265,822,646
 
 
 
(See accompanying notes to consolidated financial statements)
 
11


 
NGP CAPITAL RESOURCES COMPANY   
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2008
(continued)
 
Notes to Consolidated Schedule of Investments

 
(1)
Portfolio company is not controlled by or affiliated with the Company as defined by the Investment Company Act of 1940.

 
(2)
Percentages represent interest rates in effect at the end of the period and due dates represent the contractual maturity dates.

 
(3)
Fair value of targeted investments is determined by or under the direction of the Board of Directors.

 
(4)
All investments are in entities with primary operations in the United States of America.

 
(5)
Non-income producing securities.

 
(6)
Securities are subject to restrictions as to their sale.

 
(7)
Upon the March 30, 2006 closing of Venoco, Inc.’s TexCal acquisition, Venoco Inc.’s senior notes became collateralized by second priority liens.

 
(8)
Portfolio company is controlled by the Company as defined by the Investment Company Act of 1940.

 
(9)
Non-accrual status.

 
(10)
Portfolio company was issued a written notice of default.

 
(11)
Chroma warrants expire on April 5, 2012 and provide the Company the right to purchase 2,462 shares of common stock at a purchase price of $75.00 per share.

 
(12)
BSR Loco Bayou warrants expire on August 15, 2013 and provide the Company the right to purchase 10,000 investor units at the exercise price of $160.00 per investor unit.

 
(13)
Sonoran warrants expire on November 28, 2014 and provide the Company the right to purchase shares of common stock up to 2.87 million shares, on a fully diluted basis with anti-dilution provisions, at the exercise price of $0.20 per share.

 
(14)
Nighthawk warrants expire on May 13, 2017 and provide the Company the right to purchase approximately 2.5% of limited partnership units at the exercise price of $0.001 per unit.

 
(15)
Alden warrants provide the Company the right to purchase 23% of class C units at an exercise price of $0.739 per unit, expiring in December 2013 and the right to purchase 10% of class C units at an exercise price of $0.739 per unit, expiring in July 2014.

 
(16)
Formidable warrants expire on March 31, 2015 and provide the Company the right to purchase membership interest representing 30% of all distributions at an exercise price of $1,000 per percentage point.

 
(17)
BioEnergy International, LLC warrants expire on August 15, 2010 and provide the Company the right to purchase 648,000 units, representing membership interests of BioEnergy International, LLC, at the purchase price of $10.00 per unit.

 
(18)
Put Options are related to the limited term royalty interest purchased from ATP Oil & Gas Corporation.

 
(19)
Portfolio company was issued a written notice of default on February 13, 2009.

 
(20)
Resaca stock is listed on the Alternative Investment Market of the London Stock Exchange, denominated in British pounds and its reported fair value at December 31, 2008 has been converted to U.S. dollars at the exchange rate effective on December 31, 2008.

 
(21)
Portfolio company was issued a written notice of default on February 5, 2009.

 
(22)
Black Pool warrants expire seven years after repayment of principal and interest and provide the Company the right to purchase approximately 25% of membership interest at the exercise price of $0.01 per unit.

 
(23)
Level 3 security per SFAS No. 157 hierarchy.
 
(See accompanying notes to consolidated financial statements)
12

 
NGP CAPITAL RESOURCES COMPANY
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
 
   
For the Three Months Ended
 
   
March 31, 2009
   
March 31, 2008
 
Per Share Data  (1)
           
             
Net asset value, beginning of period
  $ 12.29     $ 14.30  
                 
Net investment income (loss)
    0.28       0.24  
Net realized and unrealized gain (loss) on portfolio securities, corporate notes and commodity derivative instruments
    (1.14 )     (0.10 )
                 
Net increase (decrease) in stockholders' equity (net assets) resulting from operations
    (0.86 )     0.14  
                 
Dividends declared
    (0.20 )     (0.40 )
                 
Net asset value, end of period
  $ 11.23     $ 14.04  
                 
Market value, beginning of period
  $ 8.37     $ 15.63  
Market value, end of period
  $ 4.97     $ 16.42  
Market value return  (2)
    (38.75 )%     7.68 %
Net asset value return (2)
    (5.75 )%     0.64 %
                 
Ratios and Supplemental Data
               
($ and shares in thousands)
               
                 
Net assets, end of period
  $ 242,811     $ 245,654  
Average net assets
  $ 254,317     $ 247,957  
Common shares outstanding at end of period
    21,628       17,500  
Total operating expenses less management and incentive fees and interest expense/average net assets (3)
    1.87 %     1.87 %
Total operating expenses less management and incentive fees/average net assets (3)
    3.46 %     5.83 %
Total operating expenses/average net assets (3)
    6.38 %     8.75 %
Net investment income (loss)/average net assets (3)
    9.37 %     6.72 %
Net increase (decrease) in net assets resulting from operations/average net assets (3)
    (29.80 )%     3.88 %
Portfolio turnover rate
    2.27 %     11.30 %
 
(1) Per Share Data is based on common shares outstanding at end of period.
(2) Return calculations assume reinvestment of dividends and are not annualized.
(3) Annualized.
 
(See accompanying notes to consolidated financial statements)

 
13

 

NGP CAPITAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
 
Note 1:
Organization

NGP Capital Resources Company (together with its consolidated subsidiaries, where applicable, “NGPC”, or the “Company,” which may also be referred to as “we,” “us,” or “our”) was organized as a Maryland corporation in July 2004. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).  In addition, for federal income tax purposes the Company has elected to be treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”).  The Company has several subsidiaries that are single member limited liability companies and wholly-owned limited partnerships established to hold certain portfolio investments or provide services to the Company in accordance with specific rules prescribed for a company operating as a RIC.  These consolidated subsidiaries are: NGPC Funding GP, LLC, a Texas limited liability company; NGPC Nevada, LLC, a Nevada limited liability company; NGPC Funding, LP, a Texas limited partnership; NGPC Asset Holdings GP, LLC, a Texas limited liability company; NGPC Asset Holdings, LP, a Texas limited partnership; NGPC Asset Holdings II, LP, a Texas limited partnership (“NGPC II”); NGPC Asset Holdings III, LP, a Texas limited partnership and NGPC Asset Holdings V, LP, a Texas limited partnership.  Effective May 28, 2008, NGPC Asset Holdings IV, LP merged with and into NGPC II.  The Company consolidates the results of its subsidiaries for financial reporting purposes.  The Company does not consolidate the financial results of its portfolio companies.

The Company’s investment objective is to generate both current income and capital appreciation through debt investments with certain equity components.
 
The Company is managed and advised, subject to the overall supervision of the Company’s board of directors (the “Board of Directors”), by NGP Investment Advisor, LP (the “Manager”), a Delaware limited partnership owned by NGP Energy Capital Management, L.L.C., and NGP Administration, LLC (the “Administrator”), the Company’s administrator.
 
Note 2:
Significant Accounting Policies
 
The interim unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements have been prepared by management of the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes the disclosures included herein are adequate to make the information presented not misleading.  In the opinion of management, all adjustments which are of a normal recurring nature considered necessary for presentation of the information have been included.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.  Interim results are not necessarily indicative of results for a full year.

The following is a summary of the significant accounting policies consistently applied by the Company in the preparation of its consolidated financial statements:
 
Use of Estimates
 
The interim consolidated financial statements have been prepared in accordance with GAAP that require management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and the accompanying notes to the interim consolidated financial statements.  Actual results could differ from these estimates.

 
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Cash and Cash Equivalents
 
Cash and cash equivalents include short-term, liquid investments in accounts such as demand deposit accounts, money market accounts, certain overnight investment sweep accounts and money market fund accounts.  Cash and cash equivalents are carried at cost, which approximates fair value.

Prepaid Assets
 
Prepaid assets consist of premiums paid for directors’ and officers’ insurance and fidelity bonds with a policy term of one year and fees associated with the establishment of the policy or credit facility. Such premiums and fees are amortized monthly on a straight-line basis over the term of the policy or credit facility.
 
Concentration of Credit Risk
 
The Company places its cash and cash equivalents with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.  On September 15, 2008, Lehman Brothers Holdings Inc. (“Lehman Holdings”) filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court in the Southern District of New York. Subsidiaries of Lehman Holdings were not included in the filing. The business of Lehman Brothers Private Investment Management (“PIM”), including the Company’s money market and bond holdings, was transferred during September 2008 to Barclays Wealth, the wealth management division of Barclays Bank PLC (“Barclays”), which operates in the United States as Barclays Capital Inc. As of March 31, 2009, the Company’s Barclays money market account balance was approximately $60,000 and the fair market value of our senior notes and corporate notes were $6.54 million and $6.11 million, respectively. The Company currently believes that the transfer of its Lehman Brothers account to Barclays will not have a material adverse effect on its financial position, results of operations or cash flows.
 
Valuation of Investments
 
Investments are carried at fair value, as determined in good faith by the Company’s Board of Directors.  On a quarterly basis, the investment team of the Manager prepares valuations for all of the assets in the Company’s portfolio and presents the valuations to the Company’s valuation committee (the “Valuation Committee”) and Board of Directors.  The valuations are determined and recommended by the Valuation Committee to the Board of Directors, which reviews and ratifies the final portfolio valuations.

Investments in securities for which market quotations are readily available are recorded in the financial statements at such market quotations as of the valuation date adjusted for appropriate liquidity discounts, if applicable. For investments in securities for which market quotations are unavailable, or which have various