The number of shares of the registrant’s Common Stock, $.001 par value, outstanding as of November 9, 2005 was 17,400,100.
NGP CAPITAL RESOURCES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
Note 1: Organization
NGP Capital Resources Company (the “Company”) was organized as a Maryland corporation in July 2004. The Company has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company intends to qualify for tax purposes as a regulated investment company, (“RIC”), under the Internal Revenue Code of 1986, as amended (the “Code”) for 2005 and later years. 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 investment companies. The Company consolidates the results of its subsidiaries for financial reporting purposes. The financial results of the Company's portfolio investments are not consolidated in the Company's consolidated financial statements.
The Company was created to invest primarily in small and mid-size energy companies, which are generally defined as companies that have net asset values or annual revenues of less than $500 million. 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, by NGP Investment Advisor, L.P. (the “Manager”), a Delaware limited partnership owned by Natural Gas Partners, LLC and NGP Administration LLC (the “Administrator”), the Company’s administrator.
Note 2: Significant Accounting Policies
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from the accompanying unaudited interim consolidated financial statements. The unaudited consolidated financial statements in this quarterly report have been prepared consistent with the accounting policies reflected in the Company’s annual financial statements included in the Company’s Form 10-K for the year ended December 31, 2004 filed with the SEC and should be read in conjunction therewith. In management’s opinion, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such consolidated financial statements. Interim results are not necessarily indicative of results for a full year. The following is a summary of the significant accounting policies followed by the Company in the preparation of its consolidated financial statements:
Use of Estimates
The 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 consolidated financial statements and the accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments with original maturities of three months or less when purchased. Cash and cash equivalents are carried at cost which approximates fair value as of September 30, 2005.
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 credit facility. Such premiums and fees are amortized monthly on a straight line basis.
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.
Valuation of Investments
Each quarter the Manager prepares and presents to the Valuation Committee of the Board of Directors the portfolio investment valuations using the most recent portfolio company financial statements and forecasts. The Valuation Committee consults with the officers or employees of the Manager who are managing the portfolio to obtain further updates on the performance of specific investments as well as the underlying assets and operations of portfolio companies, including information such as industry trends, new product development, and other operational issues. The valuations are reviewed by the Valuation Committee of the Board of Directors and presented to the overall Board of Directors, which reviews and approves the portfolio investment valuations in accordance with the following valuation policy.
Investments are carried at fair value, as determined in good faith under the direction of the Board of Directors. Securities that are publicly traded are valued at the closing price on the valuation date. For debt and equity securities of companies that are not publicly traded, or for which there are various degrees of trading restrictions, the Manager prepares a valuation analysis, which for equity securities, uses traditional valuation methodologies to estimate the enterprise value of the portfolio company issuing the securities and, in the case of debt securities, consists of traditional valuation methodologies to estimate the value of the assets of the portfolio company. The methodologies for determining asset valuations include estimates based on: the liquidation or collateral value of the portfolio company’s assets, the discounted value of expected future net cash flows from the assets and third party valuations of the portfolio company’s assets, such as engineering reserve reports of oil and gas properties. The methodologies for determining enterprise valuations include estimates based on: valuations of comparable public companies, recent sales of comparable companies, the value of recent investments in the equity securities of the portfolio company and the asset valuation methodologies described above. The Manager utilizes some or all of the above valuation methods to determine the estimated enterprise value of the company. In valuing convertible debt or equity securities, the Manager values the Company’s equity investments based on the Company’s pro rata share of the residual equity value available after deducting all outstanding debt from the estimated enterprise value. The Manager values non-convertible debt securities at amortized cost (historical cost adjusted for original issue discount, or OID, and market premium or discount) to the extent that the estimated value of the assets of the portfolio company exceeds the outstanding debt of the portfolio company. If the estimated asset value is less than the outstanding debt of the company, the Manager reduces the value of the Company’s debt investment beginning with the junior most debt such that the asset value less the value of the outstanding debt is zero. If there is sufficient asset value to cover the face amount of a debt security that has been discounted due to the detachable equity warrants received with that security, that detachable equity warrant will be initially valued such that the sum of the discounted debt security and the detachable equity warrant equal the face value of the debt security. Thereafter, the Manager will value such assets at fair value using a number of the valuation methodologies described above. It is possible that market interest rates could fall to a degree that the estimated fair value of fixed rate loans could increase to an amount greater than amortized cost. In such instances where the Manager determines that the effect of such changes in market interest rates results in a measurable change in the market for private, structured loans, the fair value of such loans in the Company’s portfolio will be increased accordingly.
Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different from the valuations currently assigned.
Securities Transactions, Interest and Dividend Income Recognition
All securities transactions are accounted for on a trade-date basis. Interest income is recorded on the accrual basis to the extent that such amounts are expected to be collected. Premium and discount are accreted into interest income using the effective interest method. Detachable warrants, other equity securities or property interests such as overriding royalty interests obtained in conjunction with the acquisition of debt securities are recorded separately from the debt securities at their initial fair value, with a corresponding amount recorded as a discount to the associated debt security. Income from overriding royalty interests is recognized as received and the recorded assets are charged depletion using the unit of production depletion method. The portion of the loan origination fees paid that represent additional yield or discount on a loan are deferred and accreted into interest income over the life of the loan using the effective interest method. Upon the prepayment of a loan or debt security, any unamortized loan origination fees are recorded as interest income and any unamortized premium or discount is recorded as a realized gain or loss. Market premiums or discounts on acquired loans or fixed income investments are accreted into interest income using the effective interest method. Dividend income is recognized on the ex-dividend date. Accruing interest or dividends on investments is deferred when it is determined that the interest or dividend is not collectible. Collectibility of the interest and dividends is assessed, based on many factors including the portfolio company’s ability to service its loan based on current and projected cash flows as well as the current valuation of the company’s assets. For investments with payment-in-kind, or PIK, interest, the Manager bases income accruals on the valuation of the PIK notes or securities received from the borrower. If the portfolio company’s asset valuation indicates a value that is not sufficient to cover the contractual interest due on the PIK notes, management will not accrue interest income on the notes.
A change in a portfolio company’s operating performance and cash flows can impact a portfolio company’s ability to service our debt and therefore could impact our interest income recognition.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the year, net of recoveries. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period.
Fee Income Recognition
Fees primarily include financial advisory, transaction structuring, loan financing, commitment and prepayment fees. Financial advisory fees represent amounts received for providing advice and analysis to companies and are recognized as earned when such services are performed provided collection is probable. Transaction structuring and loan financing fees represent amounts received for structuring, financing, and executing transactions and are generally payable only if the transaction closes. Such fees are deferred and accreted into interest income over the life of the loan using the effective interest method. Commitment fees represent amounts received for committed funding and are generally payable whether or not the transaction closes. On transactions that close within the commitment period, commitment fees are deferred and accreted into interest income over the life of the loan using the effective interest method. Commitment fees on transactions that do not close are generally recognized over the time period the commitment is outstanding. Prepayment fees are recognized as they are received.
Dividends
Dividends to stockholders are recorded on the ex-dividend date. The Company intends to qualify for tax purposes as a regulated investment company, (“RIC”), under the Internal Revenue Code of 1986, as amended (the “Code”) for 2005 and later years. In order to maintain the Company’s status as a RIC, the Company is required to distribute at least 90% of its investment company taxable income. In addition, the Company must distribute at least 98% of its taxable income (both ordinary income and net capital gains) to avoid excise tax. The Company intends to make distributions to stockholders on a quarterly basis of substantially all net operating taxable income. The Company also intends to make distributions of net realized capital gains, if any, at least annually. The amount to be paid out as a dividend is determined by the Board of Directors each quarter and is based on the annual taxable earnings estimated by the Manager. Based on that estimate, a dividend is declared each quarter and paid shortly thereafter.
For the period ending December 31, 2004, the Company was treated as a “C” corporation and had no taxable income and therefore did not declare a dividend for that period. On March 18, 2005, the Company declared a dividend of $0.12 per common share, which was paid in cash on April 15, 2005 to stockholders of record on March 31, 2005. On June 17, 2005, the Company declared a dividend of $0.125 per common share, which was paid on July 15, 2005 to stockholders of record on June 30, 2005. On September 19, 2005, the Company declared a dividend of $0.14 per common share, which was paid on October 14, 2005 to stockholders of record on September 30, 2005. The Company has established an “opt out” dividend reinvestment plan for its common stockholders. As a result, if the Company declares a cash dividend, a stockholder’s cash dividend will be automatically reinvested in additional shares of the Company’s common stock unless the stockholder specifically “opts out” of the dividend reinvestment plan and elects to receive cash dividends. For the June 2005 dividend, holders of 1,215,870 shares participated in the dividend reinvestment plan. As a result, of the $2,175,013 total amount distributed, $151,984 was used by the dividend reinvestment plan agent to acquire shares in the open market for credit to the accounts of the plan participants who so elected. For the September 2005 dividend, holders of 1,488,904 shares participated in the dividend reinvestment plan. As a result, of the $2,436,014 total amount distributed, $208,447 was used by the dividend reinvestment plan agent to acquire shares in the open market for credit to the accounts of the plan participants who so elected.
The Company may not be able to achieve operating results that will allow it to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, the Company may be limited in its ability to make distributions due to the asset coverage test for borrowings, when applicable to it as a business development company under the 1940 Act and due to provisions in the Company’s credit facilities. If the Company does not distribute a certain percentage of its taxable income annually, it will suffer adverse tax consequences, including possible loss of its status as a regulated investment company. The Company cannot assure stockholders that they will receive any distributions or distributions at a particular level.
Note 3: Credit Facility
On May 17, 2005, the Company entered into a Revolving Credit Agreement (the “Credit Agreement”), among the Company, the lenders party thereto and SunTrust Bank, as administrative agent for the lenders.
Under the Credit Agreement, the lenders agreed to extend credit to the Company in an initial aggregate principal or face amount not exceeding $60,000,000 at any one time outstanding. The Credit Agreement is a 364-day revolving credit facility (with a stated maturity date of May 15, 2006) and is secured by substantially all of the Company’s assets. The credit facility is guaranteed by certain of the Company’s subsidiaries. Initially, the credit facility is collateralized by and limited by the amount of cash and cash equivalent collateral. However, at such time as the Company’s consolidated ratio of net asset value to total indebtedness is at least 3.50:1.00, such cash collateral requirement may be released at the discretion of the administrative agent. During the time the credit facility is secured by cash collateral, pricing will be set at 25 basis points over LIBOR, and, after release of the cash collateral, pricing will be set at a spread of 125 to 250 basis points over LIBOR based on the ratio of total indebtedness to net asset value. The Credit Agreement contains affirmative and reporting covenants. The Credit Agreement also contains certain financial ratio and restrictive covenants, including: (a) maintaining a ratio of net asset value to total indebtedness (excluding hedging liabilities) of not less than 2.25:1.0, (b) maintaining a ratio of net asset value to total indebtedness (including hedging liabilities) of not less than 2.0:1.0, (c) maintaining a ratio of net income plus interest, taxes, depreciation and amortization expenses (“EBITDA”) to interest expense of not less than 3.0:1.0, (d) if the maturity of the credit facility is extended, maintaining a ratio of total indebtedness to EBITDA to be determined, (e) limitations on additional indebtedness, (f) limitations on liens, (g) limitations on mergers and other fundamental changes, (h) limitations on dividends during events of default and material events of default, (i) limitations on disposition of assets other than in the normal course of business, (j) limitations on transactions with affiliates, (k) limitations on agreements that prohibit liens on properties of the Company and its subsidiary guarantors, (l) limitations on sale and leaseback transactions and (m) limitations on speculative hedging transactions.
The Company has not yet borrowed any amounts under the Credit Agreement. The Credit Agreement will be used to supplement the Company’s equity capital to make additional portfolio investments.
Note 4: Issuance of Common Stock
On August 6, 2004, the Company, in its initial capitalization transaction, sold 100 shares to Natural Gas Partners, LLC for $15.00 per share. On November 9, 2004, the Company’s Registration Statement (Registration No. 333-118279) was declared effective by the SEC in connection with the public offering of 16,000,000 shares of common stock (plus up to 2,400,000 additional shares of common stock upon the exercise of the underwriters’ over-allotment option), which commenced on November 10, 2004. The number of securities registered, including the shares of common stock subject to the underwriters’ over-allotment option, was 18,400,000, of which 17,400,000 were sold to the public at a price of $15.00 per share.
The net proceeds from the initial public offering of the shares of common stock, after deducting expenses of approximately $2,308,000 and underwriting discounts and commissions of $0.825 per share, were approximately $244,337,000.
Note 5: Investment Management
The Company has entered into an investment advisory agreement with the Manager under which the Manager, subject to the overall supervision of the Company’s Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, the Company. For providing these services, the Manager receives a fee from the Company, consisting of two components — a base management fee and an incentive fee.
Under the investment advisory agreement, beginning on December 1, 2005 and thereafter, the base management fee will be calculated quarterly as 0.45% of total assets of the Company. Prior to December 1, 2005, the quarterly base management fee is equal to the lesser of $900,000 or 0.375% of the Company’s total assets. For services provided under the investment advisory agreement from November 9, 2004 through and including November 30, 2005, the base management fee is payable monthly in arrears. For services provided under the investment advisory agreement after that time, the base management fee will be payable quarterly in arrears. Until June 30, 2005 (completion of two full fiscal quarters after the closing of the offering), the total assets upon which the quarterly base management fee was calculated was equal to the net proceeds of the offering. Thereafter, the base management fee was calculated based on the average value of the Company’s total assets at the end of the two most recently completed fiscal quarters. The base management fee for the partial month of November 2004 was pro rated.
The $300,000 management fee payable as of September 30, 2005, is due to the Manager as the base management fee for the month of September 2005.
The incentive fee under the investment advisory agreement consists of two parts. The first part, which is calculated and payable quarterly in arrears, equals 20% of the excess, if any, of the Company’s net investment income for the quarter that exceeds a quarterly hurdle rate equal to 2% (8% annualized) of the Company’s net assets.
For this purpose, net investment income means interest income, dividend income, and any other income (including any other fees, such as commitment, origination, syndication, structuring, diligence, managerial assistance, monitoring, and consulting fees or other fees that the Company receives from portfolio companies) accrued during the fiscal quarter, minus the Company’s operating expenses for the quarter (including the base management fee, expenses payable under the administration agreement, any interest expense and dividends paid on issued and outstanding preferred stock, if any, but excluding the incentive fee). Net investment income includes, in the case of investments with a deferred interest feature (such as premium and discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that the Company has not yet received in cash. Net investment income does not include any realized capital gains, realized capital losses, or unrealized capital appreciation or depreciation.
The Manager has agreed that payment of the investment income related portion of the incentive fee will not commence until December 1, 2005. The incentive fees due in any fiscal quarter thereafter will be calculated as follows:
• no incentive fee in any fiscal quarter in which our net investment income does not exceed the hurdle rate.
• 20% of the amount of the Company’s net investment income, if any, that exceeds the hurdle rate in any fiscal quarter.
These calculations will be appropriately pro rated for any period of less than three months.
The second part of the incentive fee (the “Capital Gains Fee”) will be determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory agreement, as of the termination date), and will equal (1) 20% of (a) the Company’s net realized capital gain (realized capital gains less realized capital losses) on a cumulative basis from the closing date of this offering to the end of such fiscal year, less (b) any unrealized capital depreciation at the end of such fiscal year, less (2) the aggregate amount of all Capital Gains Fees paid to the Manager in prior fiscal years.
Realized capital gains on a security will be calculated as the excess of the net amount realized from the sale or other disposition of such security over the original cost for the security. Realized capital losses on a security will be calculated as the amount by which the net amount realized from the sale or other disposition of such security is less than the original cost of such security. Unrealized capital depreciation on a security will be calculated as the amount by which the original cost of such security exceeds the fair value of such security at the end of a fiscal year. All period-end valuations will be determined by the Company in accordance with GAAP and the 1940 Act.
The Manager has agreed that, beginning on November 9, 2006, and to the extent permissible under federal securities laws and regulations, including Regulation M, it will utilize 30% of the fees it receives from the capital gains portion of the incentive fee (up to a maximum of $5 million in the aggregate) to purchase shares of the Company’s common stock in open market purchases through an independent trustee or agent. Any sales of such stock will comply with any applicable six-month holding period under Section 16(b) of the Securities Act of 1933 and all other restrictions contained in any law or regulation, to the fullest extent applicable to any such sale. Any change in this voluntary agreement will not be implemented without at least 90 days’ prior notice to stockholders and compliance with all applicable laws and regulations.
The Company has entered into an administration agreement with the Administrator, under which the Administrator furnishes the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities and performs, or oversees the performance of, administrative services, which include being responsible for the financial records that the Company is required to maintain and preparing reports to the Company’s stockholders and reports filed with the SEC.
In addition, the Manager assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. Payments under the administration agreement are equal to amounts based upon the allocable portion of the Administrator’s costs and expenses in performing its obligations under the administration agreement. The Administrator bills the Company for charges under the administration agreement monthly in arrears.
Of the $258,028 in accounts payable as of September 30, 2005, $7,434 is due to the Administrator for expenses incurred on the Company’s behalf for the month of September 2005.
Note 6: Organizational Expenses and Offering Costs
A portion of the net proceeds of the offering were used for organizational expenses and offering costs of approximately $705,000 and $2,308,000, respectively, recognized in fiscal year 2004. There were no organizational expenses or offering costs incurred for the quarter ended September 30, 2005. For the nine months ended September 30, 2005, the Company recognized organizational expenses and offering costs of approximately $1,100 and $7,600, respectively. Organizational expenses were expensed as incurred. Offering costs were charged to paid-in capital in excess of par.
Note 7: Federal Income Taxes
The Company intends to qualify for tax purposes as a regulated investment company, (“RIC”), under the Internal Revenue Code of 1986, as amended (the “Code”) for 2005 and later years. As a RIC, the Company generally will not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify as a RIC, the Company is required, among other things, to distribute to its stockholders at least 90% of taxable income, as defined by the Code, and to meet certain asset diversification requirements. In 2004, the Company did not meet the RIC asset diversification requirements and was treated as a “C” corporation for tax purposes. For the three and nine months ending September 30, 2005, the Company met all RIC asset diversification requirements and thus did not incur any federal income tax liability for the period.
Differences between the effective income tax rate and the statutory Federal tax rate were as follows:
| | | For the Nine Months | | Period August 6, 2004 | |
| | | ended September 30, 2005 | | (commencement of operations) | |
| | | (unaudited) | | through December 31, 2004 | |
| | | | | | |
| Statutory federal rate on loss from continuing operations | | | — | | | 34 | % |
| Effect of net deferred tax assets | | | — | | | -34 | % |
| Effective tax rate on earnings from continuing operations | | | — | | | 0 | % |
The tax effects of temporary differences that give rise to the deferred tax assets and liabilities are as follows:
| | | For the Nine Months | | Period August 6, 2004 | |
| | | ended September 30, 2005 | | (commencement of operations) | |
| | | (unaudited) | | through December 31, 2004 | |
| | | | | | |
| Deferred tax assets: | | | | | | | |
| Net operating loss carryforwards | | | — | | $ | 142,471 | |
| Net organization costs | | | — | | | 225,347 | |
| Total gross deferred tax assets | | | — | | | 367,818 | |
| Less valuation allowance | | | — | | | (101,805 | ) |
| Net deferred tax assets | | | — | | | 266,013 | |
| Deferred tax liabilities: | | | — | | | | |
| Unrealized gains, net | | | — | | | (98,868 | ) |
| Prepaid expenses | | | — | | | (167,145 | ) |
| Total gross deferred tax liabilities | | | — | | | (266,013 | ) |
| Net deferred tax assets | | | — | | $ | 0 | |
Note 8: Commitments and Contingencies
As of September 30, 2005, the Company had investments in or commitments to fund loan facilities to 7 portfolio companies totaling $122 million, on which $106 million was drawn. In addition, the Company has continuing obligations under the investment advisory agreement with the Manager and the administration agreement with the Administrator. The agreements provide that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Manager, the Administrator and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with them will be entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Manager’s or Administrator’s services under the agreements or otherwise as the Company’s investment adviser or administrator. The agreements also provide that the Manager, the Administrator and their affiliates will not be liable to the Company or any stockholder for any error of judgment, mistake of law, any loss or damage with respect to any of the Company’s investments, or any action taken or omitted to be taken by the Manager or the Administrator in connection with the performance of any of their duties or obligations under the agreements or otherwise as investment adviser or administrator to the Company, except to the extent specified in Section 36(b) of the 1940 Act concerning loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services.. In the normal course of business, the Company enters into a variety of undertakings containing a variety of representations that may expose the Company to some risk of loss. The amount of future loss, if any arising from such undertakings, while not quantifiable, is not expected to be significant.
Note 9: Reclassifications
Certain reclassifications have been made to the 2004 financial statements in order for them to conform to the 2005 presentation.
Note 10: Subsequent Events
On October 31, 2005 Millennium Offshore Group, Inc. repaid in full the $22.5 million balance outstanding on its $25 million Senior Secured Bridge Loan, which represented approximately 9% of our total investments as of September 30, 2005. In addition, Millennium repurchased our overriding royalty interest in its properties resulting in a capital gain of approximately $1 million, which will be recognized in the fourth quarter of 2005.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Certain statements in this report that relate to estimates or expectations of our future performance or financial condition may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to:
• our future operating results;
• our business prospects and the prospects of our portfolio companies;
• the impact of investments that we expect to make;
• the dependence of our future success on the general economy and its impact on the industries in which we invest;
• the ability of our portfolio companies to achieve their objectives;
• our expected financings and investments;
• future changes in laws and regulations;
• the adequacy of our cash resources and working capital;
• the timing of cash flows, if any, from the operations of our portfolio companies; and
• the ability of our manager to locate suitable investments for us and to monitor and administer our investments.
We may use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from our historical experience and present expectations. Undue reliance should not be placed on such forward-looking statements, as such statements speak only as of the date on which they are made. Additional information regarding these and other risks and uncertainties is contained in our periodic filings with the SEC.
Overview
We are a financial services company, which commenced operations on August 6, 2004, created to invest primarily in debt securities of small and mid-size energy companies. On November 9, 2004, we completed our initial public offering and became an externally managed, non-diversified, closed-end investment company and elected to be treated as a business development company under the 1940 Act. As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for tax purposes we intend to operate so as to be treated as a RIC under the Code for 2005 and later years. Pursuant to these elections, we generally will not have to pay corporate-level taxes on any income and capital gains we distribute to our stockholders.
Our investment objective is to generate both current income and capital appreciation primarily through debt investments with certain equity components. A key focus area for our targeted investments in the energy industry is domestic exploration and production, or E&P, businesses and midstream businesses that gather, process and transport oil and gas. We also evaluate investment opportunities outside of the oil and gas business, such as coal businesses, and businesses engaged in the downstream sector, including power and electricity investment opportunities. Our investments will generally range in size from $10 million to $50 million, although a few investments may be substantially in excess of this range. Our targeted investments primarily consist of debt instruments, including senior and subordinated loans combined in one facility with an equity component, subordinated loans and subordinated loans with equity components and redeemable preferred stock or similar securities.
To maintain our status as a business development company, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). If we invest in an issuer that, at the time of the investment, has outstanding securities as to which a broker or dealer may extend or maintain margin credit or “marginable securities,” these acquired assets cannot normally be treated as qualifying assets. This results from the definition of “eligible portfolio company” under the 1940 Act, which in part looks to whether a company has outstanding securities that are eligible for margin credit. Amendments promulgated in 1998 by the board of Governors of the Federal Reserve System to Regulation T under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), expanded the definition of marginable security to include any non-equity security. These amendments have raised questions as to whether a private company that has outstanding debt securities would qualify as an eligible portfolio company. We have noted that under applicable self-regulatory organization rules that govern the ability of brokers and dealers to extend margin credit, many non-equity securities issued by private companies may not be effectively marginable. In November 2004, the SEC issued a proposed rule to eliminate the marginable security concept and to define eligible portfolio companies generally as issuers that do not have a class of securities listed on an exchange or quoted on the Nasdaq Stock Market. If adopted, this rule would eliminate the current uncertainty as to the definition of eligible portfolio company. The comment period on the proposed rule ended in January 2005. While the SEC has proposed the foregoing rule, which will correct the current uncertainty, there is no assurance that the rule will be adopted as proposed or at all. Legislation has also been filed in Congress that would correct this uncertainty. There is no assurance that such legislation will be passed.
We continue to monitor this issue closely and intend to adjust our investment focus as needed to comply with and/or take advantage of any future administrative position, judicial decision or legislative action.
Portfolio and Investment Activity
During the three months ended September 30, 2005, we added two companies to our portfolio. We extended a $25 million senior secured bridge loan to Millenium Offshore Group, Inc. to refinance existing debt and provide working capital, with an initial committed funding limit of $25 million. On September 30, 2005, $22.5 million was drawn on the facility. On October 31, 2005, Millennium Offshore Group, Inc. repaid in full the outstanding balance on the facility (See Note 10 - Subsequent Events). We acted as arranger and agent for a $50 million senior secured multiple-advance term loan extended to Chroma Exploration and Production, Inc., a Texas based developer and producer of oil and gas properties in Texas and Louisiana. Currently, committed and available amounts total $19.5 million, with our commitment of 50%, or $9.8 million, and the remaining commitments provided by other lenders. On September 30, 2005, $9.8 million was drawn on the facility. We also received an overriding royalty interest in Chroma’s properties and purchased $2 million of a $19.7 million Series A Participating Convertible Preferred Stock issue by Chroma. We expect the amount committed and available for funding on the Chroma facility to increase over time and that the company will draw additional amounts on its facility as the development of its oil and gas properties progresses.
During the third quarter, we sold $15 million of our portfolio of investment grade senior notes issued by independent exploration and production companies, realizing a positive return.
As of September 30, 2005 our portfolio was invested as follows: 19.3% in senior subordinated secured notes, 9.0% in senior secured bridge loans, 8.5% in senior secured multiple-advance term loans, .8% in participating convertible preferred stock, 5.1% in corporate senior notes, 8.3% in investment grade senior notes, 42.3% in U.S. Treasury Bills, and 6.7% in cash and cash equivalents. At September 30, 2005, the weighted average yield, excluding capital gains and royalty income, of our targeted investments was 12.8%. The weighted average yield of our investment grade senior notes was 5.4%. The weighted average yield of our U.S. Treasury Bills and cash equivalents was 2.7%. Computed yields use interest rates as of the balance sheet date and include amortization of loan origination fees, original issue discount and market premium or discount, weighted by their respective costs when averaged.
Results of Operations
We were incorporated on July 15, 2004 and commenced operations in August 2004. Therefore, there is no comparable period from the prior year with which to compare the results of operations for the three and nine month periods ended September 30, 2005.
Investment Income
We generate revenue in the form of interest income on the debt securities that we own, dividend income on any common or preferred stock that we own, and capital gains or losses on any debt or equity securities that we acquire in portfolio companies and subsequently sell. Our targeted investments, if in the form of debt securities, typically have a term of three to seven years and bear interest at a fixed or floating rate. To the extent achievable, we seek to collateralize our investments by obtaining security interests in our portfolio companies’ assets. We also may acquire minority or majority equity interests in our portfolio companies, which may pay cash or in-kind dividends on a recurring or otherwise negotiated basis. In addition, we may generate revenue in other forms including due diligence fees, fees for providing managerial assistance, and possibly consultation fees. Any such fees generated in connection with our investments are recognized as earned.
Investment income for the quarter ended September 30, 2005 was $4.4 million with $2.9 million attributable to targeted investments in portfolio companies and $1.5 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes. This compares to interest income for the quarter ended June 30, 2005 of $3.7 million with $2.0 million attributable to targeted investments in portfolio companies and $1.7 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes.
Investment income for the nine months ended September 30, 2005 was $12.3 million with $7.7 million attributable to targeted investments in portfolio companies and $4.6 million attributable to investments in cash equivalents, agency notes and auction rate securities and investment grade senior notes.
Operating Expenses
For the quarter ended September 30, 2005, operating expenses were $1.5 million compared to $1.7 million for the quarter ended June 30, 2005. This amount consisted of investment advisory and management fees of $0.9 million and insurance expenses, administrative services fees, professional fees, directors’ fees, organization costs and other general and administrative expenses of $0.6 million. In comparison, those amounts were $0.9 million and $0.8 million, respectively, for the quarter ended June 30, 2005.
For the nine months ended September 30, 2005, operating expenses were $4.9 million. This amount consisted of investment advisory and management fees of $2.7 million and insurance expenses, administrative services fees, professional fees, directors’ fees, organization costs and other general and administrative expenses of $2.2 million.
The operating expenses for the three and nine month periods represented our allocable portion of the total organizational and operating expenses incurred by us, our manager, and our administrator, as determined by our Board of Directors and representatives of our manager and our administrator taking into account our start-up nature. As our operations continue to mature, the amount of operating expenses allocated to us under the terms of our investment advisory and administration agreements with our manager and our administrator could likely increase. In addition, according to the terms of the investment advisory agreement, beginning on December 1, 2005 and thereafter the base management fee will be calculated quarterly as 0.45% of the average of the total assets of the Company as of the end of the two previous quarters, an increase from the lesser of $900,000 or 0.375% of such average. Although we would anticipate any increased expenses to be mitigated by increased operating revenues, our net income and dividends in future periods could be reduced by increases in operating expenses.
Net Investment Income
For the quarter ended September 30, 2005, net investment income was $2.8 million compared to $1.9 million for the quarter ended June 30, 2005 due to increased interest on the higher portfolio balances and lower legal fees. For the nine months ended September 30, 2005, net investment income was $7.3 million.
Unrealized Appreciation or Depreciation on Investments
For the quarter ended September 30, 2005, net unrealized appreciation was $0.4 million, compared to ($0.1) million for the quarter ended June 30, 2005. The increase was attributable to unrealized appreciation on our portfolio securities of $0.9 million and unrealized depreciation on our investment grade senior notes of ($0.5) million. For the nine months ended September 30, 2005, net unrealized depreciation was ($1.0) million, attributable to unrealized appreciation on our portfolio securities of $0.4 million and net unrealized depreciation on our investment grade senior notes of ($1.4) million.
Net Realized Gains
For the quarter ended September 30, 2005, we realized a capital gain of $173,000 on the sale of $15 million in investment grade senior notes. For the nine months ended September 30, 2005, net realized capital gains were $317,000 from the sale of $25 million in investment grade senior notes.
Net Increase in Stockholders’ Equity from Operations
For the quarter ended September 30, 2005, we had a net increase in stockholders’ equity (net assets) resulting from operations of $3.4 million, or $0.20 per share, compared to $1.9 million, or $0.11 per share for the quarter ended June 30, 2005. For the nine months ended September 30, 2005, we had a net increase in stockholders’ equity (net assets) resulting from operations of $6.6 million, or $0.38 per share.
Financial Condition, Liquidity and Capital Resources
During the first nine months of this fiscal year, we generated cash from operations, including interest earned on our portfolio securities, as well as our investments in investment grade senior notes, U.S. government securities and other high-quality debt securities that mature in one year or less. During the nine months ended September 30, 2005 we received repayment from Crescent Resources of its $10.8 million Senior Subordinated Secured Bridge Loan. At September 30, 2005, we had cash and cash equivalents of $16.5 million, investments in U.S. Treasury Bills of $104.0 million and investments in investment grade senior notes of $20.4 million.
Our investments in portfolio securities at September 30, 2005 totaled $105 million. Six of our investments are in the form of credit facilities under which we have commitments to fund a total of $107.5 million. As of September 30, 2005, the outstanding balances on these facilities totaled $92.2 million. We expect to fund our investments in 2005 from the balance of the net proceeds from our IPO and income earned on our portfolio and temporary investments. In future periods, we also plan to generate additional cash from borrowings under our senior secured revolving credit facility. In May 2005, we entered into a senior credit facility having an initial term of one year providing for borrowings of up to $60 million. The credit facility is secured by substantially all of our assets. Initially, the credit facility is collateralized by cash and cash equivalent investments and the interest rate applicable to borrowings is LIBOR plus 25 basis points. Once we are more fully invested, as long as the ratio of net asset value to total indebtedness is at least 3.5 to 1, the interest rate applicable to borrowings will be LIBOR plus a range of 125 to 250 basis points, depending on the ratio of total debt to net asset value. The credit facility contains covenants and events of default customary for financings of this type. We have not yet borrowed any amounts under the Credit Agreement. In the future, we may also fund a portion of our investments with issuances of equity or senior debt securities. We may also securitize a portion of our investments in mezzanine or senior secured loans or other assets. We expect our primary use of funds to be investments in portfolio companies, cash distributions to holders of our common stock and payment of fees and other operating expenses.
Dividends
We intend to be taxed as a regulated investment company under Subchapter M of the Code for 2005 and beyond. As a RIC, we will be required to distribute annually at least 90% of our investment company taxable income and at least 98% of our capital gain net income to avoid excise tax. We intend to make distributions to our stockholders on a quarterly basis of substantially all of our net operating taxable income. We also currently intend to make distributions of net realized capital gains, if any, at least annually. However, we may in the future decide to retain capital gains for investment and designate such retained dividends as a deemed distribution.
On September 19, 2005, we declared a dividend of $0.14 per common share, which was paid on October 14, 2005 to stockholders of record on September 30, 2005. We have established an “opt out” dividend reinvestment plan for our common stockholders. As a result, if we declare a cash dividend in future periods, a stockholder’s cash dividend will be automatically reinvested in additional shares of our common stock unless the stockholder specifically “opts out” of the dividend reinvestment plan and elects to receive cash dividends. For the September 2005 dividend, holders of 1,488,904 shares participated in the dividend reinvestment plan. As a result, of the $2,436,014 total amount distributed, $208,456 was used by the dividend reinvestment plan agent to acquire 14,410 shares in the open market for credit to the accounts of the plan participants. On June 17, 2005, we declared a quarterly dividend in the amount of $0.125 per common share for shareholders of record on June 30, 2005. The dividend was paid in cash on July 15, 2005. On March 18, 2005, we declared a quarterly dividend in the amount of $0.12 per common share for shareholders of record on March 31, 2005. This dividend was paid in cash on April 15, 2005.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings when applicable to us as a business development company under the 1940 Act and due to provisions in our credit facilities. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our status as a regulated investment company. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
Portfolio Credit Quality
We maintain a system to evaluate the credit quality of our loans. This system is intended to reflect the performance of a portfolio company’s business, the collateral coverage of a loan, and other factors considered relevant. As of September 30, 2005, all of our investments in portfolio companies were performing satisfactorily.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our business activities contain elements of risk. We consider the principal market risks to be fluctuations in interest rates and the valuation of our investment portfolio. To date we have not used derivative financial instruments to mitigate either of these risks, though we may do so in the future. The return on our investments is generally not directly affected by foreign currency fluctuations.
We primarily invest in illiquid debt securities of energy companies. In some cases these investments include additional equity components. Our investments are generally subject to restrictions on resale and generally have no established trading market. We value substantially all of our investments at fair value as determined in good faith by the Board of Directors in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. (See Note 2: Significant Accounting Policies - Valuation of Investments.)
In addition, the illiquidity of our investments may adversely affect our ability to dispose of debt and equity securities at times when it may be otherwise advantageous for us to liquidate such investments. Alternatively, if we were forced to immediately liquidate some or all of the investments in the portfolio, the proceeds of such liquidation could be significantly less than the current value of such investments.
Once we have fully invested the net proceeds from our initial public offering, we intend to borrow money to make investments. Once we borrow money to make investments, our net investment income will be dependent upon the difference or spread between the rate at which we borrow funds and the rate at which we invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income.
We anticipate that we will use a combination of long-term and short-term borrowings and equity capital to finance our investing activities. We have obtained a revolving line of credit as a means to bridge to long-term financing. We expect that our long-term fixed-rate investments will be financed primarily with long-term fixed-rate debt and equity. Our variable rate investments will generally be financed with variable rate debt and equity. In addition, we may use interest rate risk management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. Management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act as of September 30, 2005. Based on this evaluation our chief executive officer and chief financial officer concluded that, as of September 30, 2005, our disclosure controls and procedures were effective to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported on a timely basis and accumulated and made known to management, including the chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.
(b) Changes in internal control over financial reporting. In evaluating changes in internal control over financial reporting during the quarter ended September 30, 2005, management identified no changes in its internal control over financial reporting that occurred during the quarter ended September 30, 2005 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting, other than the changes implemented as remedial steps for the material weakness in internal control over financial reporting as first disclosed in our Form 10-K/A for the year ended December 31, 2004, relating to the incorrect recording and reporting of (i) the market price for our common stock at December 31, 2004 as $15.07 as opposed to $15.37 and (ii) the total return on our common stock for the period then ended as 0.47% as opposed to 2.47%.
As described in Item 4 (b) on Forms 10-Q for the periods ending March 31, 2005 and June 30, 2005, management identified various remedial steps that were in the process of being implemented with respect to the previously disclosed material weakness. As of September 30, 2005, management has evaluated the remedial action, reviewed each of the remediated controls and found the controls to be operating effectively. As a result of these new control processes and procedures, management believes it has remediated the material weakness in its internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a defendant in any material legal proceeding, nor to our knowledge, is any material legal proceeding threatened against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On November 9, 2004, our Registration Statement (Registration No. 333-118279) was declared effective by the SEC in connection with our initial public offering of 16,000,000 shares of common stock (plus up to 2,400,000 additional shares of common stock upon the exercise of the underwriters’ over-allotment option), which commenced trading on November 10, 2004. The initial public offering did not terminate prior to the sale of all the securities registered. The initial public offering consisted solely of one class of common stock. The number of securities registered, including the shares of common stock subject to the underwriters’ over-allotment option, was 18,400,000, of which 17,400,000 were sold to the public. The aggregate price of the offering amount registered was $276,000,000 and the aggregate offering price of the shares sold was $261,000,000.
From November 9, 2004, the effective date of the Registration Statement, to December 31, 2004, we incurred total expenses in connection with the issuance and distribution of our common stock registered in the amount of $16,663,000, including underwriting discounts and commissions in the amount of $14,355,000, expenses paid to or for underwriters in the amount of $750,000, and other expenses in the amount of $1,558,000. All expense payments were made directly or indirectly to persons other than directors, officers, or their associates; persons owning ten percent of more of any class of our securities; and our affiliates. The net offering proceeds received by us from the initial public offering of the shares of common stock, after deducting expenses and underwriting discounts and commissions were approximately $244,337,000.
We plan to use the net proceeds received from the initial public offering for investing in portfolio companies in accordance with our investment objectives and strategies as described in our Registration Statement and incorporated herein by reference. From November 15, 2004, the day we received the net proceeds from the initial public offering, to December 31, 2004, we invested $66 million in the debt securities of portfolio companies and paid a management fee to our manager in the amount of $452,676, organization costs in the amount $704,808, and general and administrative expenses (including payments to the administrator) in the amount of $285,771. In the nine months ended September 30, 2005, we funded investments in portfolio companies in the amount of $49.2 million, paid management fees to our advisor in the amount of $2,700,000, general and administrative expenses of $2,159,964, and recognized organization costs and offering expenses of $1,111 and $7,606, respectively. At September 30, 2005, we had cash and cash equivalents of $16.5 million, investments in U.S. Treasury Bills of $104 million, investments in high grade corporate senior notes of $20.4 million, and targeted investments in portfolio companies of $105 million.
We did not repurchase any shares during the period covered by this report.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits.
No. | | Exhibit |
3.1 | — | Articles of Incorporation of NGP Capital Resources Company dated as of July 15, 2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
3.2 | — | Articles of Amendment and Restatement of NGP Capital Resources Company dated as of October 29, 2004 (filed as Exhibit 3.2 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
3.3 | — | Bylaws of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s Registration Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
4.1 | — | Specimen certificate of NGP Capital Resources Company’s common stock, par value $0.001 per share (filed as Exhibit (d) to the Company’s Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
4.2 | — | Dividend Reinvestment Plan (filed as Exhibit (e) to the Company’s Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
10.1 | — | Investment Advisory Agreement dated as of November 9, 2004, between NGP Capital Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
10.2 | — | Administration Agreement dated as of November 9, 2004, by and between NGP Capital Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
10.3 | — | Form of Indemnification Agreement between NGP Capital Resources Company and each member of the Board of Directors and each executive officer of the Company dated March 30, 2005 (filed as Exhibit 10.1 to the Company’s Form 8-K dated April 5, 2005 and incorporated herein by reference) |
10.4 | — | Revolving Credit Agreement dated May 17, 2005 by and between NGP Capital Resources Company, the lenders party thereto and SunTrust Bank, as administrative agent for the lenders |
| 31.1 | — | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Executive Officer |
| 31.2 | — | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Financial Officer |
| 32.1 | — | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer |
| 32.2 | — | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | NGP CAPITAL RESOURCES COMPANY |
| | | |
| | By: | /s/ John H. Homier |
| | | John H. Homier |
| | | President and Chief Executive Officer |
| | | |
| | | |
| | | NGP CAPITAL RESOURCES COMPANY |
| | | |
| | By: | /s/ Richard A. Bernardy |
| | | Richard A. Bernardy |
| | | Secretary, Treasurer and Chief Financial Officer |
| | | |
| Date: November 10, 2005 | | |
Index to Exhibits
No. | | Exhibit |
3.1 | — | Articles of Incorporation of NGP Capital Resources Company dated as of July 15, 2004 (filed as Exhibit (a)(1) to the Company’s Registration Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
3.2 | — | Articles of Amendment and Restatement of NGP Capital Resources Company dated as of October 29, 2004 (filed as Exhibit 3.2 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
3.3 | — | Bylaws of NGP Capital Resources Company (filed as Exhibit (b) to the Company’s Registration Statement on Form N-2 dated November 9, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
4.1 | — | Specimen certificate of NGP Capital Resources Company’s common stock, par value $0.001 per share (filed as Exhibit (d) to the Company’s Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
4.2 | — | Dividend Reinvestment Plan (filed as Exhibit (e) to the Company’s Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 dated October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference) |
10.1 | — | Investment Advisory Agreement dated as of November 9, 2004, between NGP Capital Resources Company and NGP Investment Advisor, LP (filed as Exhibit 10.1 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
10.2 | — | Administration Agreement dated as of November 9, 2004, by and between NGP Capital Resources Company and NGP Administration, LLC (filed as Exhibit 10.2 to the Company’s Form 10-K dated April 8, 2005 and incorporated herein by reference) |
10.3 | — | Form of Indemnification Agreement between NGP Capital Resources Company and each member of the Board of Directors and each executive officer of the Company dated March 30, 2005 (filed as Exhibit 10.1 to the Company’s Form 8-K dated April 5, 2005 and incorporated herein by reference) |
10.4 | — | Revolving Credit Agreement dated May 17, 2005 by and between NGP Capital Resources Company, the lenders party thereto and SunTrust Bank, as administrative agent for the lenders |
| 31.1 | — | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Executive Officer |
| 31.2 | — | Certification required by Rule 13a-14(a)/15d-14(a) by the Chief Financial Officer |
| 32.1 | — | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Executive Officer |
| 32.2 | — | Certification required by Rule 13a-14(b)/15d-14(b) and Section 906 of the Sarbanes Oxley Act of 2002 by the Chief Financial Officer |
