UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)

| | x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
| | - | ---------------------------------------------------------------------------------------

For the quarterly period ended March
31, 2014

or

| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------

For the transition period from _____________
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          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                         |  |                    
|909 Fannin, Suite 3800                   |  | 77010              
|Houston, Texas                           |  | (Zip Code)         
|(Address of principal executive offices) |  |                    

(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 x No  ̈



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  x | Non-accelerated filer   ̈                    | Smaller reporting company   ̈
|-------------------------- | -------------------- | ------------------------------------------- | ----------------------------
|                           |                      | (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  ̈ No x



As of May 8, 2014, there were 20,499,188
shares of the registrant’s common stock outstanding.











Table
of Contents



|PART I – FINANCIAL INFORMATION                                                                 | 1 
|---------------------------------------------------------------------------------------------- | --
|                                                                                               |   
|Item 1. Financial Statements.                                                                  | 1 
|                                                                                               |   
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 25
|                                                                                               |   
|Item 3. Quantitative and Qualitative Disclosures About Market Risk.                            | 32
|                                                                                               |   
|Item 4. Controls and Procedures.                                                               | 32
|                                                                                               |   
|PART II – OTHER INFORMATION                                                                    | 33
|                                                                                               |   
|Item 1. Legal Proceedings.                                                                     | 33
|                                                                                               |   
|Item 1A. Risk Factors.                                                                         | 33
|                                                                                               |   
|Item 6. Exhibits.                                                                              | 33
|                                                                                               |   
|SIGNATURES                                                                                     | 34











PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.



NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED BALANCE
SHEETS

(In Thousands, Except
Share and Per Share Amounts)



|                                                                                                       |  | March 31,   |         |   | December 31, |  
|------------------------------------------------------------------------------------------------------ |  | ----------- | ------- | - | ------------ | -
|                                                                                                       |  | 2014        |         |   | 2013         |  
|                                                                                                       |  | (Unaudited) |         |   |              |  
|Assets                                                                                                 |  |             |         |   |              |  
|Investments in portfolio securities at fair value                                                      |  |             |         |   |              |  
|Control investments - majority owned                                                                   |  |             |         |   |              |  
|(cost: $28,267 and $27,459, respectively)                                                              |  | $           | 21,597  |   |              | $
|Affiliate investments                                                                                  |  |             |         |   |              |  
|(cost: $17,597 and $17,510, respectively)                                                              |  |             | 15,242  |   |              |  
|Non-affiliate investments                                                                              |  |             |         |   |              |  
|(cost: $166,762 and $176,988, respectively)                                                            |  |             | 166,521 |   |              |  
|Total portfolio investments                                                                            |  |             | 203,360 |   |              |  
|Investments in U.S. Treasury Bills at fair value                                                       |  |             |         |   |              |  
|(cost: $46,001 and $46,000, respectively)                                                              |  |             | 46,001  |   |              |  
|Total investments                                                                                      |  |             | 249,361 |   |              |  
|Cash and cash equivalents                                                                              |  |             | 33,138  |   |              |  
|Accounts receivable and other current assets                                                           |  |             | 390     |   |              |  
|Interest receivable                                                                                    |  |             | 2,350   |   |              |  
|Prepaid assets                                                                                         |  |             | 2,672   |   |              |  
|Total current assets                                                                                   |  |             | 38,550  |   |              |  
|Total assets                                                                                           |  | $           | 287,911 |   |              | $
|                                                                                                       |  |             |         |   |              |  
|Liabilities and net assets                                                                             |  |             |         |   |              |  
|Current liabilities                                                                                    |  |             |         |   |              |  
|Accounts payable and accrued expenses                                                                  |  | $           | 2,281   |   |              | $
|Management and incentive fees payable                                                                  |  |             | 1,346   |   |              |  
|Dividends payable                                                                                      |  |             | 3,280   |   |              |  
|Income taxes payable                                                                                   |  |             | 111     |   |              |  
|Short-term debt                                                                                        |  |             | 45,000  |   |              |  
|Total current liabilities                                                                              |  |             | 52,018  |   |              |  
|Long-term debt                                                                                         |  |             | 57,000  |   |              |  
|Total liabilities                                                                                      |  |             | 109,018 |   |              |  
|Commitments and contingencies  (Note 6)                                                                |  |             |         |   |              |  
|Net assets                                                                                             |  |             |         |   |              |  
|Common stock, $.001 par value, 250,000,000 shares authorized; 20,499,188 shares issued and outstanding |  |             | 20      |   |              |  
|Paid-in capital in excess of par                                                                       |  |             | 247,759 |   |              |  
|Undistributed net investment income (loss)                                                             |  |             | (1,949  | ) |              |  
|Undistributed net realized capital gain (loss)                                                         |  |             | (60,788 | ) |              |  
|Net unrealized appreciation (depreciation) on investments                                              |  |             | (6,149  | ) |              |  
|Total net assets                                                                                       |  |             | 178,893 |   |              |  
|Total liabilities and net assets                                                                       |  | $           | 287,911 |   |              | $
|Net asset value per share                                                                              |  | $           | 8.73    |   |              | $



(See accompanying notes to consolidated
financial statements)



1







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED STATEMENTS
OF OPERATIONS

(In Thousands, Except
Per Share Data)

(Unaudited)



|                                                                                                   |  | For The Three Months Ended |       
|-------------------------------------------------------------------------------------------------- |  | -------------------------- | ------
|                                                                                                   |  | March 31,                  |       
|                                                                                                   |  | 2014                       |       
|Investment income                                                                                  |  |                            |       
|Interest income:                                                                                   |  |                            |       
|Control investments - majority owned                                                               |  | $                          | 578   
|Affiliate investments                                                                              |  |                            | 518   
|Non-affiliate investments                                                                          |  |                            | 3,669 
|Dividend income:                                                                                   |  |                            |       
|Non-affiliate investments                                                                          |  |                            | 983   
|Royalty income, net of amortization:                                                               |  |                            |       
|Control investments - majority owned                                                               |  |                            | 21    
|Non-affiliate investments                                                                          |  |                            | 25    
|Other income                                                                                       |  |                            | 64    
|Total investment income                                                                            |  |                            | 5,858 
|Operating expenses                                                                                 |  |                            |       
|Interest expense and bank fees                                                                     |  |                            | 613   
|Management and incentive fees                                                                      |  |                            | 1,346 
|Professional fees, net of legal fees of $557 and $1,698 related to the ATP bankruptcy (See Note 6) |  |                            | 743   
|Insurance expense                                                                                  |  |                            | 179   
|Other general and administrative expenses                                                          |  |                            | 1,044 
|Total operating expenses                                                                           |  |                            | 3,925 
|Income tax provision (benefit), net                                                                |  |                            | 19    
|Net investment income                                                                              |  |                            | 1,914 
|Net realized capital gain (loss) on investments                                                    |  |                            |       
|Control investments - majority owned                                                               |  |                            | (325  
|Affiliate investments                                                                              |  |                            | 95    
|Non-affiliate investments                                                                          |  |                            | (9,382
|Total net realized capital gain (loss) on investments                                              |  |                            | (9,612
|Net unrealized appreciation (depreciation) on investments                                          |  |                            |       
|Control investments - majority owned                                                               |  |                            | (3,428
|Affiliate investments                                                                              |  |                            | (1,888
|Non-affiliate investments                                                                          |  |                            | 6,635 
|Benefit (provision) for taxes on unrealized  appreciation (depreciation) on investments            |  |                            | -     
|Total net unrealized appreciation (depreciation) on investments                                    |  |                            | 1,319 
|                                                                                                   |  |                            |       
|Net decrease in net assets resulting from operations                                               |  | $                          | (6,379
|                                                                                                   |  |                            |       
|Net decrease in net assets resulting from operations per common share                              |  | $                          | (0.31 
|                                                                                                   |  |                            |       
|Dividends declared per common share                                                                |  | $                          | 0.16  
|Weighted average shares outstanding - basic and diluted                                            |  |                            | 20,499



(See accompanying notes to consolidated
financial statements)



2







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED STATEMENT
OF CHANGES IN NET ASSETS

(In Thousands)

(Unaudited)



|                                                                |  |              |        |  |           |   |    | Paid-in        |  |   |               |  |  | Undistributed  |        |   | Net Unrealized |   |         |            | 
|--------------------------------------------------------------- |  | ------------ | ------ |  | --------- | - | -- | -------------- |  | - | ------------- |  |  | -------------- | ------ | - | -------------- | - | ------- | ---------- | 
|                                                                |  |              |        |  |           |   |    | Capital        |  |   | Undistributed |  |  | Net Realized   |        |   | Appreciation   |   |         |            | 
|                                                                |  | Common Stock |        |  | in Excess |   |    | Net Investment |  |   | Capital       |  |  | (Depreciation) |        |   | Total          |  
|                                                                |  | Shares       |        |  | Amount    |   |    | of Par         |  |   | Income (Loss) |  |  | Gain (Loss)    |        |   | on Investments |   |         | Net Assets | 
|Balance at December 31, 2013                                    |  |              | 20,499 |  |           | $ | 20 |                |  | $ | 247,759       |  |  | $              | (583   | ) |                | $ | (51,176 | )          | 
|Net increase (decrease) in net assets resulting from operations |  |              | -      |  |           |   | -  |                |  |   | -             |  |  |                | 1,914  |   |                |   | (9,612  | )          | 
|Dividends declared                                              |  |              | -      |  |           |   | -  |                |  |   | -             |  |  |                | (3,280 | ) |                |   | -       |            | 
|Balance at March 31, 2014                                       |  |              | 20,499 |  |           | $ | 20 |                |  | $ | 247,759       |  |  | $              | (1,949 | ) |                | $ | (60,788 | )          | 



(See accompanying notes to consolidated
financial statements)



3







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED STATEMENTS
OF CASH FLOWS

(In Thousands)

(Unaudited)



|                                                                                                                                      |  | For The Three Months Ended March 31, |        
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | -------
|                                                                                                                                      |  | 2014                                 |        
|Cash flows from operating activities                                                                                                  |  |                                      |        
|Net decrease in net assets resulting from operations                                                                                  |  | $                                    | (6,379 
|Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used in) operating activities: |  |                                      |        
|Payment-in-kind interest                                                                                                              |  |                                      | (310   
|Net amortization of premiums, discounts and fees                                                                                      |  |                                      | (135   
|Net realized capital (gain) loss on investments                                                                                       |  |                                      | 9,612  
|Net unrealized depreciation (appreciation) on investments                                                                             |  |                                      | (1,319 
|Net deferred income tax provision (benefit)                                                                                           |  |                                      | -      
|Effects of changes in operating assets and liabilities:                                                                               |  |                                      |        
|Accounts receivable and other current assets                                                                                          |  |                                      | 74     
|Interest receivable                                                                                                                   |  |                                      | 47     
|Prepaid assets                                                                                                                        |  |                                      | 421    
|Payables and accrued expenses                                                                                                         |  |                                      | 947    
|Purchase of investments in portfolio securities                                                                                       |  |                                      | (1,116 
|Proceeds from redemption of investments in portfolio securities                                                                       |  |                                      | 1,279  
|Purchase of investments in U.S. Treasury Bills                                                                                        |  |                                      | (46,001
|Proceeds from redemption of investments in U.S. Treasury Bills                                                                        |  |                                      | 46,000 
|Net cash provided by (used in) operating activities                                                                                   |  |                                      | 3,120  
|Cash flows from financing activities                                                                                                  |  |                                      |        
|Borrowings under revolving credit facilities                                                                                          |  |                                      | 76,000 
|Repayments on revolving credit facilities                                                                                             |  |                                      | (72,000
|Dividends paid                                                                                                                        |  |                                      | (3,280 
|Net cash provided by financing activities                                                                                             |  |                                      | 720    
|Net increase (decrease) in cash and cash equivalents                                                                                  |  |                                      | 3,840  
|Cash and cash equivalents, beginning of period                                                                                        |  |                                      | 29,298 
|Cash and cash equivalents, end of period                                                                                              |  | $                                    | 33,138 



(See accompanying notes to consolidated
financial statements)



4







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

March 31, 2014

(In Thousands, Except
Share Amounts and Percentages)

(Unaudited)







|Portfolio Company                                                     |  | Industry Segment           |  | Investment (1)                          |  | Principal |        |   | Cost   |   |        | Fair Value (2) |       
|--------------------------------------------------------------------- |  | -------------------------- |  | --------------------------------------- |  | --------- | ------ | - | ------ | - | ------ | -------------- | ------
|PORTFOLIO INVESTMENTS                                                 |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Control
    Investments - Majority Owned (50% or more owned)          |  |                            |  |                                         |  |           |        |   |        |   |        |               
|Contour Highwall                                                      |  | Coal Mining                |  | Senior Secured Term Loan                |  | $         | 10,551 |   |        | $ | 10,582 |                |       
|Holdings, LLC                                                         |  |                            |  | (12%, due 10/14/2015)                   |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 800 Membership Units representing       |  |           |        |   |        |   | -      |                |       
|                                                                      |  |                            |  | 80% of the common equity (10)           |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Spirit Resources, LLC                                                 |  | Oil & Natural Gas          |  | Tranche A - Senior Secured Term Loan    |  |           | 5,500  |   |        |   | 5,423  |                |       
|                                                                      |  | Production and Development |  | (The greater of 8% or LIBOR + 4%,       |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | due 4/28/2015)                          |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | Tranche B - Senior Secured Term Loan    |  |           | 4,252  |   |        |   | 4,252  |                |       
|                                                                      |  |                            |  | (The greater of 15% PIK or LIBOR + 11%, |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | due 10/28/2015) (6)                     |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 80,000 Preferred Units representing     |  |           |        |   |        |   | 8,000  |                |       
|                                                                      |  |                            |  | 100% of the outstanding equity          |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 3% Overriding Royalty Interest          |  |           |        |   |        |   | 10     |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Subtotal Control
    Investments - Majority Owned (50% or more owned) |  |                            |  |                                         |  | $         | 28,267 |   |        | $ | 21,597 |               
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Affiliate
    Investments - (5% to 25% owned)                         |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|OCI Holdings, LLC                                                     |  | Home Health Services       |  | Subordinated Note                       |  | $         | 15,344 |   |        | $ | 15,097 |                |       
|                                                                      |  |                            |  | (The greater of 11% or LIBOR + 10%      |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | cash plus 2% PIK, due 8/15/2018) (14)   |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | NGP/OCI Investments, LLC Class A        |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | Units representing 24.07% ownership     |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | of OCI Holdings, LLC                    |  |           |        |   |        |   | 2,500  |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Subtotal Affiliate
    Investments - (5% to 25% owned)                |  |                            |  |                                         |  |           |        | $ | 17,597 |   |        | $              | 15,242
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Non-affiliate
    Investments - (Less than 5% owned)                  |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|ATP Oil & Gas Corporation                                             |  | Oil & Natural Gas          |  | Limited Term Royalty Interest           |  |           |        |   |        | $ | 28,070 |                |       
|                                                                      |  | Production and Development |  | (Notional rate of 13.2%) (5)            |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Castex Energy 2005, LP                                                |  | Oil & Natural Gas          |  | Redeemable Preferred LP Units           |  | $         | 50,000 |   |        |   | 50,031 |                |       
|                                                                      |  | Production and Development |  | (current pay 8% cash, due 7/1/2016) (9) |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Chroma Exploration &                                                  |  | Oil & Natural Gas          |  | 13,051 Shares Series A Participating    |  |           |        |   |        |   | 2,222  |                |       
|Production, Inc.                                                      |  | Production and Development |  | Convertible Preferred Stock (6)         |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 11,918 Shares Series AA Participating   |  |           |        |   |        |   | 2,090  |                |       
|                                                                      |  |                            |  | Convertible Preferred Stock (6)         |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 8.11 Shares Common Stock                |  |           |        |   |        |   | -      |                |       
|                                                                      |  |                            |  |                                         |  |           |        |   |        |   |        |                |       
|Crossroads Energy                                                     |  | Oil & Natural Gas          |  | Senior Secured Term Loan                |  |           | 8,975  |   |        |   | 8,508  |                |       
|Development, LLC                                                      |  | Production and Development |  | (The greater of 11.5% or LIBOR +        |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 10.5%, due 5/24/2016)                   |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 2% Overriding Royalty Interest          |  |           |        |   |        |   | 160    |                |       
|                                                                      |  |                            |  | Warrants (11)                           |  |           |        |   |        |   | 237    |                |       



(See accompanying
notes to consolidated financial statements)



5







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

March 31, 2014

(In Thousands, Except
Share Amounts and Percentages)

(Unaudited)

(Continued)



|Portfolio Company                                                 |  | Industry Segment               |  | Investment (1)                           |  | Principal |         |   | Cost    |   |         | Fair Value (2) |        
|----------------------------------------------------------------- |  | ------------------------------ |  | ---------------------------------------- |  | --------- | ------- | - | ------- | - | ------- | -------------- | -------
|PORTFOLIO
    INVESTMENTS - Continued                             |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Non-affiliate
    Investments - (Less than 5% owned)  - Continued |  |                                |  |                                          |  |           |         |   |         |   |         |               
|Globe BG, LLC                                                     |  | Coal Production                |  | Contingent earn-out related to July 2011 |  |           |         |   |         | $ | -       |                |        
|                                                                  |  |                                |  | sale of royalty interests in             |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | Alden Resources, LLC (8)                 |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Huff Energy Holdings, Inc.                                        |  | Oil & Natural Gas              |  | Senior Secured Term Loan                 |  | $         | 6,700   |   |         |   | 6,626   |                |        
|                                                                  |  | Production and Development     |  | (The greater of 12.5% or LIBOR +         |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | 8.5%, due 11/20/2015)                    |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | 3% Overriding Royalty Interest (12)      |  |           |         |   |         |   | 42      |                |        
|                                                                  |  |                                |  | Warrants (13)                            |  |           |         |   |         |   | 42      |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|KOVA International, Inc.                                          |  | Medical Supplies               |  | Senior Subordinated Notes                |  |           | 9,000   |   |         |   | 8,847   |                |        
|                                                                  |  | Manufacturing and Distribution |  | (12.75%, due 8/15/2018)                  |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Midstates Petroleum Company                                       |  | Oil & Natural Gas              |  | Senior Unsecured Notes                   |  |           | 13,000  |   |         |   | 13,358  |                |        
|                                                                  |  | Production and Development     |  | (10.75%, due 10/1/2020) (3) (5) (15)     |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Myriant Corporation                                               |  | Alternative Fuels and          |  | 131,741 shares of common stock,          |  |           |         |   |         |   | 419     |                |        
|                                                                  |  | Specialty Chemicals            |  | representing 0.56% of the outstanding    |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | common shares Warrants (7)               |  |           |         |   |         |   | 49      |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Nekoosa Coated Products                                           |  | Coated Paper Products          |  | Second Lien Term Loan                    |  |           | 17,836  |   |         |   | 17,527  |                |        
|Holdings, Inc.                                                    |  | Manufacturing and Distribution |  | (13% cash plus 2% PIK, due 10/22/2018)   |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Shoreline Energy, LLC                                             |  | Oil & Natural Gas              |  | Second Lien Term Loan                    |  |           | 14,000  |   |         |   | 13,608  |                |        
|                                                                  |  | Production and Development     |  | (The greater of 10.25% or LIBOR plus     |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | 9%, or the greater of 10.25% or          |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  | Prime plus 8%, due 3/27/2019)            |  |           |         |   |         |   |         |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Talos Production, LLC                                             |  | Oil & Natural Gas              |  | Senior Unsecured Notes                   |  |           |         |   |         |   |         |                |        
|                                                                  |  | Production and Development     |  | (9.75%, due 2/15/2018) (3)               |  |           | 15,000  |   |         |   | 14,926  |                |        
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|Subtotal Non-affiliate
    Investments - (Less than 5% owned)     |  |                                |  |                                          |  |           |         | $ | 166,762 |   |         | $              | 166,521
|Subtotal Portfolio Investments (81.6% of total investments)       |  |                                |  |                                          |  | $         | 212,626 |   |         | $ | 203,360 |               
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|GOVERNMENT SECURITIES                                             |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|U.S. Treasury Bills (4)                                           |  |                                |  |                                          |  | $         | 46,001  |   |         | $ | 46,001  |                |        
|Subtotal
    Government Securities (18.4% of total investments)   |  |                                |  |                                          |  | $         | 46,001  |   |         | $ | 46,001  |               
|                                                                  |  |                                |  |                                          |  |           |         |   |         |   |         |                |        
|TOTAL
    INVESTMENTS                                             |  |                                |  |                                          |  |           |         |   |         | $ | 258,627 |                |        



(See accompanying notes to consolidated
financial statements)



6







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

March 31, 2014

(Unaudited)

(Continued)



NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS



| | 1) | All of our portfolio investments are collateral for obligations under our Investment Facility. Our investments in U.S. Treasury
Bills are collateral for obligations under our Treasury Facility. See Note 3 of Notes to Consolidated Financial Statements. Percentages
represent interest rates in effect at the end of the period and due dates represent the contractual maturity dates. Warrants, common
stocks, units and earn-outs are non-income producing securities, unless otherwise stated.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Our Board of Directors determines, in good faith, the final estimates of fair value of our investments. Fair value estimates
are determined using unobservable inputs (Level 3 hierarchy), unless otherwise stated.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | Fair value estimate is determined using prices with observable market inputs (Level 2 hierarchy). See Note 7 of Notes to Consolidated
Financial Statements.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4) | Fair value is determined using prices for identical securities in active markets (Level 1 hierarchy). See Note 7 of Notes to
Consolidated Financial Statements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5) | We have determined that this investment is not a "qualifying asset" under Section 55(a) of the 1940 Act. Under the
1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent
at least 70% of our total assets. The status of these assets under the 1940 Act is subject to change. We monitor the status of
these assets on an ongoing basis.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6) | Non-accrual status.
| | -- | -------------------

| | 7) | Myriant Corporation warrants expire on August 15, 2015 and provide us the right to purchase 32,680 shares of Myriant Corporation
common stock at a purchase price of $10.00 per share.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8) | Contingent payment of up to $6.8 million is dependent upon Alden Resources, LLC’s ability to achieve certain sales volume
and operating efficiency levels during the three year period ending July 2014.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 9) | Upon redemption, we will receive the outstanding face amount plus an option to elect to receive either: a) a cash payment resulting
in a total 12% IRR (inclusive of the 8% cash distributions) or b) our pro rata share of 2% of the outstanding regular limited partner
interests in Castex Energy 2005, LP (0.67% net to us).
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10) | The fair value of our Contour Highwall Holdings, LLC membership units also includes the value attributable to our ownership
of 8,000 shares of Bundy Auger Mining, Inc. common stock.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 11) | Crossroads Energy Development, LLC, or Crossroads, warrants expire seven years after repayment of the Term Loan and entitle
us to purchase 21,529 Class A Units for $0.01 per unit, representing 18% ownership in Crossroads, with a step-down feature to 9%
based on the achievement of certain return thresholds upon liquidation or settlement.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 12) | Huff Energy Holdings, Inc., or HEH, overriding royalty interests are after payout. HEH has the right to purchase the overriding
royalty interests on, or before, the maturity date of the term loan for $50,000, provided that the Term Loan is repaid by the maturity
date.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 13) | HEH warrants expire seven years after repayment of the Term Loan and entitle us to purchase 30% of the outstanding equity at
$0.01 per share. HEH has the right to purchase these warrants on, or before, the maturity date of the term loan for $50,000, provided
that the Term Loan is repaid by the maturity date.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 14) | OCI Holdings, LLC is in violation of financial covenants under the Subordinated Note as of March 31, 2014. We are currently
in negotiations to revise covenant thresholds.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 15) | In April 2014, we sold all of our investment in Midstates Petroleum Company Senior Unsecured Notes for $14.1 million.
| | --- | ---------------------------------------------------------------------------------------------------------------------



(See accompanying notes to consolidated
financial statements)



7







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

December 31, 2013

(In Thousands, Except
Share Amounts and Percentages)



|Portfolio Company                                                     |  | Industry Segment           |  | Investment (1)                           |  | Principal |        |   | Cost   |   |        | Fair Value (2) |       
|--------------------------------------------------------------------- |  | -------------------------- |  | ---------------------------------------- |  | --------- | ------ | - | ------ | - | ------ | -------------- | ------
|PORTFOLIO INVESTMENTS                                                 |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Control Investments - Majority Owned (50% or more owned)              |  |                            |  |                                          |  |           |        |   |        |   |        |               
|Contour Highwall                                                      |  | Coal Mining                |  | Senior Secured Term Loan                 |  | $         | 10,344 |   |        | $ | 10,379 |                |       
|Holdings, LLC (8)                                                     |  |                            |  | (12%, due 10/14/2015)                    |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 800 Membership Units representing        |  |           |        |   |        |   | -      |                |       
|                                                                      |  |                            |  | 80% of the common equity (11)            |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Spirit Resources, LLC                                                 |  | Oil & Natural Gas          |  | Tranche A - Senior Secured Term Loan     |  |           | 5,500  |   |        |   | 5,406  |                |       
|                                                                      |  | Production and Development |  | (The greater of 8% or LIBOR + 4%,        |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | due 4/28/2015)                           |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | Tranche B - Senior Secured Term Loan     |  |           | 3,664  |   |        |   | 3,664  |                |       
|                                                                      |  |                            |  | (The greater of 15% PIK or LIBOR + 11%,  |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | due 10/28/2015)                          |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 80,000 Preferred Units representing      |  |           |        |   |        |   | 8,000  |                |       
|                                                                      |  |                            |  | 100% of the outstanding equity           |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 3% Overriding Royalty Interest           |  |           |        |   |        |   | 10     |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Subtotal Control
    Investments - Majority Owned (50% or more owned) |  |                            |  |                                          |  | $         | 27,459 |   |        | $ | 24,218 |               
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Affiliate
    Investments - (5% to 25% owned)                         |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|OCI Holdings, LLC                                                     |  | Home Health Services       |  | Subordinated Note                        |  | $         | 15,268 |   |        | $ | 15,010 |                |       
|                                                                      |  |                            |  | (The greater of 11% or LIBOR + 10%       |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | cash plus 2% PIK, due 8/15/2018)         |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | NGP/OCI Investments, LLC Class A         |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | Units representing 24.07% ownership      |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | of OCI Holdings, LLC                     |  |           |        |   |        |   | 2,500  |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Subtotal Affiliate
    Investments - (5% to 25% owned)                |  |                            |  |                                          |  |           |        | $ | 17,510 |   |        | $              | 17,043
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Non-affiliate
    Investments - (Less than 5% owned)                  |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|ATP Oil & Gas Corporation                                             |  | Oil & Natural Gas          |  | Limited Term Royalty Interest            |  |           |        |   |        | $ | 28,704 |                |       
|                                                                      |  | Production and Development |  | (Notional rate of 13.2%) (5)             |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Castex Energy 2005, LP                                                |  | Oil & Natural Gas          |  | Redeemable Preferred LP Units            |  | $         | 50,000 |   |        |   | 50,034 |                |       
|                                                                      |  | Production and Development |  | (current pay 8% cash, due 7/1/2016) (10) |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Chroma Exploration &                                                  |  | Oil & Natural Gas          |  | 13,051 Shares Series A Participating     |  |           |        |   |        |   | 2,222  |                |       
|Production, Inc.                                                      |  | Production and Development |  | Convertible Preferred Stock (6)          |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 11,918 Shares Series AA Participating    |  |           |        |   |        |   | 2,090  |                |       
|                                                                      |  |                            |  | Convertible Preferred Stock (6)          |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 8.11 Shares Common Stock                 |  |           |        |   |        |   | -      |                |       
|                                                                      |  |                            |  |                                          |  |           |        |   |        |   |        |                |       
|Crossroads Energy                                                     |  | Oil & Natural Gas          |  | Senior Secured Term Loan                 |  |           | 8,975  |   |        |   | 8,463  |                |       
|Development, LLC                                                      |  | Production and Development |  | (The greater of 11.5% or LIBOR +         |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 10.5%, due 5/24/2016)                    |  |           |        |   |        |   |        |                |       
|                                                                      |  |                            |  | 2% Overriding Royalty Interest           |  |           |        |   |        |   | 166    |                |       
|                                                                      |  |                            |  | Warrants (12)                            |  |           |        |   |        |   | 237    |                |       



(See accompanying notes to consolidated
financial statements)



8







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

December 31, 2013

(In Thousands, Except
Share Amounts and Percentages)

(Continued)



|Portfolio Company                                                 |  | Industry Segment               |  | Investment
    (1)                       |  | Principal |         |  | Cost |   |         | Fair
    Value (2) | 
|----------------------------------------------------------------- |  | ------------------------------ |  | ---------------------------------------- |  | --------- | ------- |  | ---- | - | ------- | ------------------ | 
|PORTFOLIO
    INVESTMENTS -  Continued                            |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Non-affiliate
    Investments - (Less than 5% owned) -  Continued |  |                                |  |                                          |  |           |         |  |      |   |         |                   
|Globe BG, LLC                                                     |  | Coal Production                |  | Contingent earn-out related to July 2011 |  |           |         |  |      | $ | -       |                    | 
|                                                                  |  |                                |  | sale of royalty interests in             |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | Alden Resources, LLC (9)                 |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|GMX Resources, Inc.                                               |  | Oil & Natural Gas              |  | Senior Secured Second-Priority Notes     |  | $         | 12,661  |  |      |   | 9,452   |                    | 
|                                                                  |  | Production and Development     |  | (9%, due 3/2/2018) (6) (15)              |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Huff Energy Holdings, Inc.                                        |  | Oil & Natural Gas              |  | Senior Secured Term Loan                 |  |           | 7,000   |  |      |   | 6,916   |                    | 
|                                                                  |  | Production and Development     |  | (The greater of 12.5% or LIBOR +         |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | 8.5%, due 11/20/2015)                    |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | 3% Overriding Royalty Interest (13)      |  |           |         |  |      |   | 42      |                    | 
|                                                                  |  |                                |  | Warrants (14)                            |  |           |         |  |      |   | 42      |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|KOVA International, Inc.                                          |  | Medical Supplies               |  | Senior Subordinated Notes                |  |           | 9,000   |  |      |   | 8,841   |                    | 
|                                                                  |  | Manufacturing and Distribution |  | (12.75%, due 8/15/2018)                  |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Midstates Petroleum Company                                       |  | Oil & Natural Gas              |  | Senior Unsecured Notes                   |  |           | 13,000  |  |      |   | 13,367  |                    | 
|                                                                  |  | Production and Development     |  | (10.75%, due 10/1/2020) (3) (5)          |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Myriant Corporation                                               |  | Alternative Fuels and          |  | 131,741 shares of common stock,          |  |           |         |  |      |   | 419     |                    | 
|                                                                  |  | Specialty Chemicals            |  | representing 0.56% of the outstanding    |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | common
    shares Warrants (7)           |  |           |         |  |      |   | 49      |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Nekoosa Coated Products                                           |  | Coated Paper Products          |  | Second Lien Term Loan                    |  |           | 17,748  |  |      |   | 17,427  |                    | 
|Holdings, Inc.                                                    |  | Manufacturing and Distribution |  | (13% cash plus 2% PIK, due 10/22/2018)   |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Shoreline Energy, LLC                                             |  | Oil & Natural Gas              |  | Second Lien Term Loan                    |  |           | 14,000  |  |      |   | 13,594  |                    | 
|                                                                  |  | Production and Development     |  | (The greater of 10.25% or LIBOR plus     |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | 9%, or the greater of 10.25% or          |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  | Prime plus 8%, due 3/27/2019)            |  |           |         |  |      |   |         |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Talos Production, LLC                                             |  | Oil & Natural Gas              |  | Senior Unsecured Notes                   |  |           |         |  |      |   |         |                    | 
|                                                                  |  | Production and Development     |  | (9.75%, due 2/15/2018) (3)               |  |           | 15,000  |  |      |   | 14,923  |                    | 
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|Subtotal Non-affiliate
    Investments - (Less than 5% owned)     |  |                                |  |                                          |  | $         | 176,988 |  |      | $ | 170,110 |                   
|Subtotal
    Portfolio Investments (82.1% of total investments)   |  |                                |  |                                          |  | $         | 221,957 |  |      | $ | 211,371 |                   
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|GOVERNMENT SECURITIES                                             |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|U.S. Treasury Bills (4)                                           |  |                                |  |                                          |  | $         | 46,000  |  |      | $ | 46,000  |                    | 
|Subtotal
    Government Securities (17.9% of total investments)   |  |                                |  |                                          |  | $         | 46,000  |  |      | $ | 46,000  |                   
|                                                                  |  |                                |  |                                          |  |           |         |  |      |   |         |                    | 
|TOTAL
    INVESTMENTS                                             |  |                                |  |                                          |  |           |         |  |      | $ | 267,957 |                    | 



(See accompanying notes to consolidated
financial statements)



9







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED SCHEDULE
OF INVESTMENTS

December 31, 2013

(Continued)



NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS



| | 1) | All of our portfolio investments are collateral for obligations under our Investment Facility. Our investments in U.S. Treasury
Bills are collateral for obligations under our Treasury Facility. See Note 3 of Notes to Consolidated Financial Statements. Percentages
represent interest rates in effect at the end of the period and due dates represent the contractual maturity dates. Warrants, common
stocks, units and earn-outs are non-income producing securities, unless otherwise stated.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Our Board of Directors determines, in good faith, the final estimates of fair value of our investments. Fair value estimates
are determined using unobservable inputs (Level 3 hierarchy), unless otherwise stated.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3) | Fair value estimate is determined using prices with observable market inputs (Level 2 hierarchy). See Note 7 of Notes to Consolidated
Financial Statements.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4) | Fair value is determined using prices for identical securities in active markets (Level 1 hierarchy). See Note 7 of Notes to
Consolidated Financial Statements.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5) | We have determined that this investment is not a "qualifying asset" under Section 55(a) of the 1940 Act. Under the
1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent
at least 70% of our total assets. The status of these assets under the 1940 Act is subject to change. We monitor the status of
these assets on an ongoing basis.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6) | Non-accrual status.
| | -- | -------------------

| | 7) | Myriant Corporation warrants expire on August 15, 2015 and provide us the right to purchase 32,680 shares of Myriant Corporation
common stock at a purchase price of $10.00 per share.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 8) | Effective January 14, 2013, Pallas Contour Mining, LLC changed its name to Contour Highwall Holdings, LLC.
| | -- | ----------------------------------------------------------------------------------------------------------

| | 9) | Contingent payment of up to $6.8 million is dependent upon Alden Resources, LLC’s ability to achieve certain sales volume
and operating efficiency levels during the three year period ending July 2014.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10) | Upon redemption, we will receive the outstanding face amount plus an option to elect to receive either: a) a cash payment resulting
in a total 12% IRR (inclusive of the 8% cash distributions) or b) our pro rata share of 2% of the outstanding regular limited partner
interests in Castex Energy 2005, LP (0.67% net to us).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 11) | The fair value of our Contour Highwall Holdings, LLC membership units also includes the value attributable to our ownership
of 8,000 shares of Bundy Auger Mining, Inc. common stock.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 12) | Crossroads Energy Development, LLC, or Crossroads, warrants expire seven years after repayment of the Term Loan and entitle
us to purchase 21,529 Class A Units, representing 18% ownership in Crossroads, for $0.01 per unit.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 13) | Huff Energy Holdings, Inc., or HEH, overriding royalty interests are after payout. HEH has the right to purchase the overriding
royalty interests on, or before, the maturity date of the term loan for $50,000, provided that the Term Loan is repaid by the maturity
date.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 14) | HEH warrants expire seven years after repayment of the Term Loan and entitle us to purchase 30% of the outstanding equity at
$0.01 per share. HEH has the right to purchase these warrants on, or before, the maturity date of the term loan for $50,000, provided
that the Term Loan is repaid by the maturity date.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 15) | On January 14, 2014, we sold all of our investment in GMX Resources, Inc. Senior Secured Second-Priority Notes for $70,000.
| | --- | ---------------------------------------------------------------------------------------------------------------------------



(See accompanying notes to consolidated
financial statements)



10







NGP CAPITAL RESOURCES
COMPANY

CONSOLIDATED FINANCIAL
HIGHLIGHTS

(Unaudited)



|                                                                                |  | For The Three Months Ended March 31, |        
|------------------------------------------------------------------------------- |  | ------------------------------------ | -------
|Per Share Data  (1)                                                             |  | 2014                                 |        
|Net asset value, beginning of period                                            |  | $                                    | 9.20   
|Net investment income                                                           |  |                                      | 0.09   
|Net realized and unrealized loss on investments (2)                             |  |                                      | (0.40  
|Net decrease in net assets resulting from operations                            |  |                                      | (0.31  
|Dividends declared                                                              |  |                                      | (0.16  
|Net asset value, end of period                                                  |  | $                                    | 8.73   
|                                                                                |  |                                      |        
|Market value, beginning of period                                               |  | $                                    | 7.47   
|Market value, end of period                                                     |  | $                                    | 6.76   
|Market value return  (3)                                                        |  |                                      | (7.3   
|Net asset value return (3)                                                      |  |                                      | (2.8   
|                                                                                |  |                                      |        
|Ratios and Supplemental Data                                                    |  |                                      |        
|($ and shares in thousands)                                                     |  |                                      |        
|Net assets, end of period                                                       |  | $                                    | 178,893
|Average net assets                                                              |  | $                                    | 186,856
|Common shares outstanding, end of period                                        |  |                                      | 20,499 
|Net investment income/average net assets (4)                                    |  |                                      | 4.2    
|Portfolio turnover rate                                                         |  |                                      | 0.5    
|Total operating expenses/average net assets (4) (5)                             |  |                                      | 8.5    
|Net decrease in net assets resulting from operations/average net assets
    (4) |  |                                      | (13.9  
|                                                                                |  |                                      |        
|Expense Ratios (as a percentage of average net assets) (4)                      |  |                                      |        
|Interest expense and bank fees                                                  |  |                                      | 1.3    
|Management and incentive fees                                                   |  |                                      | 2.9    
|Other operating expenses (5)                                                    |  |                                      | 4.3    
|Total operating expenses (5)                                                    |  |                                      | 8.5    



| | (1) | Per Share Data is based on weighted average number of
common shares outstanding for the period.
| | --- | -----------------------------------------------------------------------------------------------

| | (2) | May include a balancing amount necessary to reconcile
the change in net asset value per share with other per share information presented. This amount may not agree with the aggregate
gains and losses for the period because the difference in the net asset value at the beginning and end of the period may not equal
the per share changes of the line items disclosed.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Return calculations assume reinvestment of dividends
and are not annualized.
| | --- | ----------------------------------------------------------------------------

| | (4) | Annualized.
| | --- | -----------

| | (5) | Net of legal fee reimbursements of $0.6 million and $1.7
million in 2014 and 2013, respectively. Excluding these legal fee reimbursements, other operating expense ratio and total operating
expense ratios would have been 5.5% and 9.7% and 6.1% and 10.5%, respectively, for the three months ended March 31, 2014 and 2013.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(See accompanying notes to consolidated
financial statements)



11







NGP CAPITAL RESOURCES
COMPANY

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

March 31, 2014

(Unaudited)



Note 1: Organization and Recent Developments



These consolidated financial statements
present the financial position, results of operations and cash flows of NGP Capital Resources Company and its consolidated subsidiaries.
The terms “we,” “us,” “our” and “NGPC” refer to NGP Capital Resources Company and
its consolidated subsidiaries. We are a financial services company organized in July 2004 as a Maryland corporation to invest primarily
in small and mid-size private energy companies. In 2012, we expanded our investment strategy to also include middle market companies
not engaged in the energy industry. Our investment objective is to generate both current income and capital appreciation primarily
through debt investments with certain equity components. We are a closed-end, non-diversified management investment company that
has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, or the 1940 Act.
In addition, for federal income tax purposes we operate so as to be treated as a regulated investment company, or RIC, under the
Internal Revenue Code of 1986, as amended, or the Code. We have several direct and indirect subsidiaries that are single member
limited liability companies and wholly-owned limited partnerships established to hold certain portfolio investments or provide
services to us in accordance with specific rules prescribed for a company operating as a RIC. We consolidate the financial results
of our wholly-owned subsidiaries for financial reporting purposes, and we do not consolidate the financial results of our portfolio
companies. Our external manager, NGP Investment Advisor, LP, or our Manager, conducts our operations pursuant to an Investment
Advisory Agreement (see Note 4). NGP Energy Capital Management, L.L.C., or NGP, and NGP Administration, LLC, or our Administrator,
together own 100% of our Manager.



In September 2013, our Board of Directors engaged financial
advisor Keefe, Bruyette & Woods, a Stifel company, or KBW, to evaluate strategic alternatives to enhance stockholder value.
The Board of Directors, with the assistance of KBW, is considering a range of options, which may include a sale or merger of our
company, the acquisition of existing investment portfolios, or a combination, joint venture or other strategic alliance with another
company. No decision has been made to enter into a transaction at this time, and there can be no assurance that we will enter into
a transaction in the future.



Note 2: Basis of Presentation



These interim unaudited consolidated financial
statements include the accounts of NGPC and its subsidiaries. We eliminate all significant intercompany accounts and transactions.



We prepare the interim consolidated financial
statements, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. We omit
certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America, or GAAP, pursuant to such rules and regulations. We believe we include
all adjustments, which are of a normal recurring nature, so that these financial statements fairly present our financial position,
results of operations and cash flows. Interim results are not necessarily indicative of results for a full year. You
should read these unaudited consolidated financial statements in conjunction with the consolidated financial statements and related
notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.



Preparing interim consolidated financial
statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and the accompanying notes to the consolidated financial statements, including the estimated fair values of
our investment portfolio discussed in Note 7. Although we believe our estimates and assumptions are reasonable, actual results
could differ from these estimates.



12







Dividends



We record dividends to stockholders on the
ex-dividend date. We currently intend that our distributions each year will be sufficient to maintain our status as a RIC for federal
income tax purposes and to eliminate federal excise tax liability. We currently intend to make distributions to stockholders on
a quarterly basis that total substantially all net taxable income for the year. We also intend to make distributions of net
realized capital gains, if any, at least annually. However, we may in the future decide to retain such capital gains for investment
and designate such retained amounts as deemed distributions. Each quarter, our Manager estimates our annual taxable earnings. The
Board of Directors considers this estimate and determines the distribution amount, if any. We generally declare our dividends each
quarter and pay them shortly thereafter. The following table summarizes our recent distribution history:



|                   |  | Per Share |      |  |             |                    |             
|------------------ |  | --------- | ---- |  | ----------- | ------------------ | ------------
|Declaration Date   |  | Amount    |      |  | Record Date |                    | Payment Date
|March 18, 2013     |  | $         | 0.16 |  |             | March 29, 2013     |             
|June 10, 2013      |  |           | 0.16 |  |             | June 28, 2013      |             
|September 10, 2013 |  |           | 0.16 |  |             | September 30, 2013 |             
|December 3, 2013   |  |           | 0.16 |  |             | December 27, 2013  |             
|March 18, 2014     |  |           | 0.16 |  |             | March 31, 2014     |             



Note 3: Credit Facilities and Borrowings



On May 23, 2013, we entered into a $72.0
million Third Amended and Restated Revolving Credit Agreement, or the Investment Facility, which replaced our previous investment
credit facility. The total amounts outstanding under the Investment Facility were $57.0 million and $53.0 million as of March 31,
2014 and December 31, 2013, respectively. Substantially all of our assets except our investments in U.S. Treasury Bills are collateral
for the obligations under the Investment Facility. The Investment Facility matures on May 23, 2016, and bears interest, at our
option, at either (i) LIBOR plus 325 to 475 basis points, or (ii) the base rate plus 225 to 375 basis points, both based on our
amounts outstanding. As of March 31, 2014, the average interest rate on our outstanding balance of $57.0 million was 3.9%, and
an additional $15.0 million was available for borrowing under the Investment Facility. We repaid $44.0 million of the outstanding
balance in April and May 2014.



On March 31, 2011, we entered into a $30.0
million Treasury Secured Revolving Credit Agreement, or the Treasury Facility, which was later increased to $45.0 million, that
can only be used to purchase U.S. Treasury Bills. Proceeds from the Treasury Facility facilitate the growth of our investment portfolio
and provide flexibility in the sizing of our portfolio investments. On September 24, 2013, we entered into a fourth amendment to
the Treasury Facility which extended the expiration date to September 24, 2014 and increased the applicable margins to either (i)
LIBOR plus 150 basis points or (ii) the base rate plus 50 basis points. We have the right at any time to prepay the loans, in whole
or in part, without premium or penalty. As of March 31, 2014, we had $45.0 million outstanding and no additional amount available
for borrowing under the Treasury Facility, and the interest rate on our outstanding balance was 1.7% (LIBOR plus 150 basis points).
We repaid the entire balance outstanding under the Treasury Facility in April 2014 with proceeds from the sale of U.S. Treasury
Bills.



The Investment and Treasury Facilities contain
affirmative and reporting covenants and certain financial ratio and restrictive covenants that apply to our subsidiaries and us.
We complied with these covenants as of March 31, 2014 and had no existing defaults or events of default under either facility.
The most restrictive covenants are:



|· | maintaining a ratio of net asset value to consolidated total indebtedness (excluding net hedging liabilities) of not less than 2.25:1.0                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|· | maintaining a ratio of net asset value to consolidated total indebtedness (including net hedging liabilities) of not less than 2.0:1.0,                                           
|· | maintaining a ratio of EBITDA (excluding revenue from cash collateral) to interest expense (excluding interest on loans under the Treasury Facility) of not less than 3.0:1.0, and
|· | maintaining a ratio of collateral to the aggregate principal amount of loans under the Treasury Facility of not less than 1.02:1.0.                                               



13







Note 4: Investment Management



Investment Advisory Agreement



We have an Investment Advisory Agreement
with our Manager under which our Manager administers our day-to-day operations and provides investment advisory services to us.
Our Manager is subject to the overall supervision of our Board of Directors. For providing these services, we pay our Manager a
fee, consisting of two components — a base management fee and an incentive fee.



Base Management Fee: According to
the Investment Advisory Agreement, we calculate the base management fee as 0.45% of the average of our total assets as of the end
of the two previous quarters. We record and pay this base management fee quarterly in arrears.



Incentive Fee: The incentive fee
under the Investment Advisory Agreement consists of two parts. We calculate the first part of the incentive fee, the Investment
Income Incentive Fee, as 20% of the excess, if any, of our net investment income for the quarter that exceeds a quarterly hurdle
rate equal to 2% (8% annualized) of our net assets. We calculate and pay this Investment Income Incentive Fee quarterly in arrears.
For the purpose of this fee calculation, net investment income means interest income, dividend income, royalty 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 we receive from portfolio companies) accrued during the fiscal quarter, minus
our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement,
and interest expense, but excluding the incentive fee). Accordingly, we may pay an incentive fee based partly on accrued interest,
the collection of which is uncertain or deferred. Net investment income includes, in the case of investments with a deferred interest
feature (such as original issue discount, or OID, debt instruments with payment-in-kind interest and zero coupon securities), accrued
income that we have not yet received in cash. Net investment income does not include any realized capital gains, realized capital
losses, or unrealized capital appreciation or depreciation. For the three-month periods ended March 31, 2014 and 2013, we did not
incur any Investment Income Incentive Fees.



We calculate the second part of the incentive
fee, the Capital Gains Fee, as (1) 20% of (a) our net realized capital gains (realized capital gains less realized capital losses)
on a cumulative basis from the closing date of our initial public 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 our Manager
in prior fiscal years. We determine and pay the Capital Gains Fee in arrears as of the end of each fiscal year (or upon termination
of the Investment Advisory Agreement, as of the termination date). For accounting purposes only, in order to reflect the theoretical
Capital Gains Fee that would be payable for a given period as if all unrealized capital gains were realized, we accrue a Capital
Gains Fee as described above (in accordance with the terms of the Investment Advisory Agreement), plus 20% of unrealized capital
gains on investments held at the end of such period. It should be noted that the portion of the accruals for the Capital Gains
Fees attributable to unrealized capital gains will not necessarily be payable under the Investment Advisory Agreement, and may
never be paid based on the computation of Capital Gains Fees in subsequent periods. As of March 31, 2014, we had cumulative net
capital losses of $85.5 million and cumulative net unrealized capital depreciation of $6.1 million. We have not incurred any Capital
Gains Fees since 2007.



Our Board of Directors originally approved
the Investment Advisory Agreement on November 9, 2004. Our Board of Directors or the holders of a majority of our outstanding voting
securities must approve the continuation of the Investment Advisory Agreement at least annually. Additionally, in either case,
the approval must be by a majority of our independent directors. On October 30, 2013, our Board of Directors, including all of
the independent directors, approved an extension of the Investment Advisory Agreement through November 9, 2014.



The Investment Advisory Agreement may be
terminated at any time, without the payment of any penalty, by a vote of our Board of Directors or the holders of a majority of
our shares on 60 days’ written notice to our Manager, and would automatically terminate in the event of its “assignment”
(as defined in the 1940 Act). Either party may terminate the Investment Advisory Agreement without penalty upon not more than 60
days’ written notice to the other.



14







Pursuant to the Investment Advisory Agreement,
our Manager pays the compensation and routine overhead expenses of the investment professionals of our management team and their
respective staffs, when and to the extent engaged in providing management and investment advisory services to us. We bear all other
costs and expenses of our operations and transactions. Our Manager is a registered investment adviser under the Investment Advisers
Act of 1940.



Administration Agreement



We have an Administration Agreement with
our Administrator, under which our Administrator furnishes us with office facilities, equipment and clerical, bookkeeping and recordkeeping
services at such facilities. Under the Administration Agreement, our Administrator also performs, or oversees the performance by
third parties of, our required administrative services which include responsibility for the financial records that we are required
to maintain and preparation of reports to our stockholders and reports filed with the SEC. In addition, our Administrator assists
in determining and publishing our net asset value, oversees the preparation and filing of our tax returns, the printing and dissemination
of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional
services rendered to us by others. To the extent permitted under the 1940 Act, our Administrator may also provide, on our behalf,
significant managerial assistance to our portfolio companies. We base payments under the Administration Agreement upon the allocable
portion of our Administrator’s costs and expenses incurred in connection with administering our business. The Administration
Agreement may be terminated at any time, without penalty, by a vote of our Board of Directors or by our Administrator upon 60 days’
written notice to the other party, and will automatically terminate in the event of its “assignment” (as defined in
the 1940 Act).



We owed $289,000 and $296,000 to our Administrator
as of March 31, 2014 and December 31, 2013, respectively, for expenses incurred on our behalf for the final month of the respective
quarterly period. We include these amounts in accounts payable and accrued expenses. Our Board of Directors originally approved
the Administration Agreement on November 9, 2004. Our Board of Directors and a majority of our independent directors must approve
the continuation of the Administration Agreement at least annually. On October 30, 2013, our Board of Directors, including all
of the independent directors, approved an extension of the Administration Agreement through November 9, 2014.



Note 5: Federal Income Taxes



We currently qualify for tax purposes as
a RIC under Subchapter M of Chapter 1 of the Code, as amended. As a RIC, the IRS generally will not tax the portion of our investment
company taxable income and net capital gain (i.e., realized net long term capital gains in excess of realized net short term capital
losses) distributed to stockholders. To qualify as a RIC, we are required, among other things, to distribute to our stockholders
at least 90% of investment company taxable income, as defined by the Code, and to meet certain asset diversification requirements.



Certain of our wholly-owned subsidiaries,
or Taxable Subsidiaries, have elected to be taxed as corporations for federal income tax purposes. The Taxable Subsidiaries
hold certain of our portfolio investments and are consolidated for financial reporting purposes, but not for income tax reporting
purposes. These Taxable Subsidiaries permit us to hold equity investments in portfolio companies that are “pass through”
entities for tax purposes, in order to comply with the “source income” requirements contained in the RIC tax regulations.
The Taxable Subsidiaries may generate net income tax expense or benefit, which is reflected on our consolidated statements of operations.



Note 6: Commitments and Contingencies



As of March 31, 2014, we had investments
in or commitments to fund investments in 15 portfolio companies totaling $217.7 million. Of this total, $215.2 million was outstanding
and $2.5 million remained committed and available to fund. Generally, these commitments have fixed expiration dates, and we may
not fund the entire $2.5 million of commitments before they expire. We do not report the unfunded portions of these commitments
on our consolidated balance sheets.



We have continuing obligations under the
Investment Advisory Agreement with our Manager and under the Administration Agreement with our Administrator. See Note 4. The agreements
provide that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard
of its duties and obligations, our Manager, our Administrator and their officers, managers, agents, employees, controlling persons,
members and any other person or entity affiliated with them will be entitled to indemnification from us for any damages, liabilities,
costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering
of our Manager’s or Administrator’s services under the agreements or otherwise as our investment adviser or administrator.
The agreements also provide that our Manager, our Administrator and their affiliates will not be liable to us or any stockholder
for any error of judgment, mistake of law, any loss or damage with respect to any of our investments or any action taken or omitted
to be taken by our Manager or our Administrator in connection with the performance of any of their duties or obligations under
the agreements or otherwise as investment adviser or administrator to us, 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, we enter into a variety of undertakings containing a variety of representations that may expose
us to some risk of loss. We do not expect significant losses, if any, from such undertakings.



15







Legal Proceedings



From time to time, we are involved in various
legal proceedings arising in the normal course of business. While we cannot predict the outcome of these proceedings with certainty,
we do not believe that an adverse result in any pending legal proceeding other than those described below, individually or in the
aggregate, would be material to our business, financial condition or cash flows.



ATP Litigation. On August 17, 2012,
ATP Oil & Gas Corporation, or ATP, filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the Southern District of Texas. Prior to the bankruptcy filing, we purchased limited term overriding royalty interests,
or ORRIs, in certain offshore oil and gas producing properties operated by ATP (generally, the Gomez and Telemark properties).
On August 23, 2012, on a motion filed by ATP (Bankr. Dkt. No.15), the bankruptcy judge presiding over ATP’s case signed an
order (Bankr. Dkt. No. 191) ordering ATP to pay amounts received after August 17, 2012 to those parties it believes are entitled
to receive them, including the ORRI holders, provided that the owners of the ORRIs execute a disgorgement agreement providing for
the repayment to ATP of any amounts that the bankruptcy court later finds to have been inappropriately paid. We executed the disgorgement
agreement and began receiving monthly distributions in September 2012 from ATP of our share of production proceeds received by
ATP after August 17, 2012. As of March 31, 2014, our unrecovered investment was $28.3 million, and we had received aggregate production
payments of $26.5 million subject to the disgorgement agreement. In addition, as of March 31, 2014, we had incurred legal and consulting
fees totaling $3.6 million in connection with the enforcement of our rights under the ORRIs, $3.2 million of which has been added
to the unrecovered investment balance under the terms of the ORRI transaction documents. Legal and consulting fees totaling $0.4
million and $0.5 million as of March 31, 2014 and December 31, 2013, respectively, are included in accounts receivable and other
current assets on our consolidated balance sheets.



On October 17, 2012, we filed a lawsuit
against ATP styled: NGP Capital Resources Company v. ATP Oil & Gas Corporation, Adv. Proc. No. 12-03443, in the U.S.
Bankruptcy Court for the Southern District of Texas, seeking a declaration that the ORRIs are our property and not property of
ATP and that the conveyance and purchase and sale documents are not executory contracts that may be rejected in order to remove
or recharacterize our interests in the properties. ATP filed an answer and counterclaim in which it (a) denies that the ORRIs are
valid and enforceable, (b) seeks a declaration that (i) the ORRIs are a financing agreement and not a true sale and (ii) the ORRIs
are executory contracts that are subject to rejection under 11 U.S.C. Sec. 365, and (c) seeks disgorgement from us of amounts paid
to us since August 17, 2012, the date of filing of ATP’s Chapter 11 proceeding. The United States, on behalf of the Department
of the Interior, intervened in the lawsuit, arguing that the underlying leases are unexpired leases of real property or executory
contracts (and not real property conveyances) and are subject to rejection by ATP. Certain service companies claiming statutory
liens or privileges have intervened in the lawsuit for the purposes of establishing that their liens and privileges are superior
to our rights and asserting related claims for disgorgement of proceeds paid to us by ATP. The Bank of New York Mellon Trust Company,
N.A., the secondary lien holder, has also intervened in the lawsuit, arguing (i) the ORRIs are a financing agreement and not a
true sale, (ii) our claims are barred, waived, released and/or otherwise foreclosed by the express terms of the conveyance of the
ORRIs, and (iii) either we have not met a condition precedent or we failed to perform or substantially perform our contractual
obligations. The issues in the lawsuit have been bifurcated such that the issues of (i) whether the conveyances and transactions
between us and ATP constituted outright transfers of ownership and (ii) whether the conveyances are executory contracts or leases
that ATP may reject, will be tried first. This lawsuit is currently pending, and the initial trial date was abated along with certain
other deadlines pending consideration of various motions. In that context, a Motion for Summary Judgment that we filed was denied,
and we have filed a motion to appeal such denial on an interlocutory basis. A new scheduling order has not been entered. We intend
to vigorously defend our position that the ORRIs constitute real property interests and are fully valid and enforceable pursuant
to their terms, and we intend to vigorously defend our position that the service companies’ statutory liens and privileges
do not attach to our ORRIs and/or are not superior to our rights.



16







On April 23, 2013, the Department of the
Interior, on behalf of the Bureau of Safety and Environmental Enforcement, issued an order directing that the wells on the Gomez
properties be shut in and that operations cease. Operations and production ceased on the Gomez properties on April 30, 2013. On
June 13, 2013, the Court entered an order (Bankr. Dkt. No. 1999) approving ATP’s request (set forth in Bankr. Dkt. No. 1902)
to reject and/or abandon and relinquish its interests in the Gomez properties and related agreements, or the Abandonment Order.
Our cash flows attributable to the ORRIs have been reduced since we no longer receive payments attributable to the Gomez properties.



On May 7, 2013, ATP conducted an auction
of its assets, and ATP selected a credit bid from Credit Suisse AG, as administrative and collateral agent to those lenders who
are parties to that certain Senior Secured Super Priority Priming Debtor in Possession Credit Agreement dated August 29, 2012,
or the DIP Lenders, based on a reduction in the amount of ATP’s outstanding indebtedness to Credit Suisse AG, or the Credit
Bid, as the highest and best bid. The Credit Bid did not include an offer to purchase the Gomez properties but it included an offer
to purchase the Telemark properties. On October 17, 2013, the Court entered its Final Order approving the sale (Bankr. Dkt. No.
2706). Under the Final Order, Bennu Oil & Gas, LLC, or Bennu, a newly formed company owned by the DIP Lenders, was authorized
to purchase certain ATP assets, including the Telemark properties, as well as claims asserted by ATP in our pending lawsuit relating
to the Telemark properties. Our ORRI continues to burden the Telemark properties subject to a resolution of the issues in our pending
lawsuit against ATP. The sale to Bennu closed on November 1, 2013.



Separately, ATP and/or the Committee of
Unsecured Creditors has threatened to bring a fraudulent transfer action against us, in which ATP and/or the Committee would allege
that (a) ATP was insolvent at the time of the assignment of the ORRIs to us, (b) that ATP received less than fair value from us
in exchange for the assignments of the ORRIs and (c) as a result, the assignments should be set aside.  We vigorously deny
these allegations.



Note 7: Fair Value



Investments consisted of the following as of March
31, 2014 and December 31, 2013:



|                                 |  | March 31, 2014 |         |  | December 31, 2013 | 
|-------------------------------- |  | -------------- | ------- |  | ----------------- | 
|                                 |  |                |         |  | % of              | 
|(Dollar amounts in thousands)    |  | Cost           |         |  | Total             | 
|Portfolio investments            |  |                |         |  |                   | 
|Senior secured debt              |  | $              | 35,391  |  |                   | 
|Subordinated debt                |  |                | 83,363  |  |                   | 
|Limited term royalties           |  |                | 28,070  |  |                   | 
|Contingent earn-out              |  |                | -       |  |                   | 
|Royalty interests                |  |                | 212     |  |                   | 
|Redeemable preferred units       |  |                | 50,031  |  |                   | 
|Equity securities                |  |                |         |  |                   | 
|Membership and partnership units |  |                | 10,500  |  |                   | 
|Participating preferred stock    |  |                | 4,312   |  |                   | 
|Common stock                     |  |                | 419     |  |                   | 
|Warrants                         |  |                | 328     |  |                   | 
|Total equity securities          |  |                | 15,559  |  |                   | 
|Total portfolio investments      |  |                | 212,626 |  |                   | 
|Government securities            |  |                |         |  |                   | 
|U.S. Treasury Bills              |  |                | 46,001  |  |                   | 
|Total investments                |  | $              | 258,627 |  |                   | 



We account for all of the assets in our
portfolio at fair value, following the provisions of the Financial Accounting Standards Board Accounting Standards Codification
Fair Value Measurements and Disclosures, or ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair
value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements
for fair value measurements.



17







On a quarterly basis, the investment team
of our Manager prepares fair value estimates for all of the assets in our portfolio utilizing the income approach and market approach
in accordance with ASC 820 and presents them to our Valuation Committee. The Valuation Committee recommends its fair value estimates
to our Board of Directors, which in good faith determines the final estimates of fair value for each investment. We record investments
in securities for which market quotations are readily available at such market quotations in our financial statements as of the
valuation date. For investments in securities for which market quotations are unavailable, or which have various degrees of trading
restrictions, the investment team of our Manager prepares valuation analyses as generally described below.



| | · | Investment Team Valuation. The investment professionals of our Manager prepare fair value estimates for each investment.
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | Investment Team Valuation Documentation. The investment team documents and discusses its preliminary fair value estimates
with senior management of our Manager.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Presentation to Valuation Committee. Senior management presents the valuation analyses and fair value estimates to the
Valuation Committee of our Board of Directors.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Third Party Valuation Activity. The Valuation Committee and our Board of Directors, in their discretion, may retain
an independent valuation firm to review any or all of the valuation analyses and fair value estimates provided by the investment
team of our Manager. The Valuation Committee retained an independent valuation firm in connection with the fair value estimates
of our middle market non-energy investments beginning with the quarter ended September 30, 2013. As of March 31, 2014, our middle
market non-energy investments collectively represented 21% of the total fair value of our portfolio investments at such date.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Board of Directors and Valuation Committee. The Board of Directors and Valuation Committee review and discuss the valuation
analyses and fair value estimates provided by the investment team of our Manager and the analysis of the independent valuation
firm, if applicable.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Final Valuation Determination. Our Board of Directors discusses the fair value estimates recommended by the Valuation
Committee and determines the fair value of each investment in our portfolio, in good faith, based on the input of the investment
team of our Manager, our Valuation Committee and the independent valuation firm, if any.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ASC 820 defines fair value as the price
that a seller would receive for an asset or pay to transfer a liability in an orderly transaction between independent, knowledgeable
and willing market participants at the measurement date. The fair value definition focuses on exit price in the principal, or most
advantageous, market and prioritizes the use of observable market inputs over unobservable entity-specific inputs. In accordance
with ASC 820, we categorize our investments based on the inputs to our valuation methodologies as follows:



| | · | Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at
the date of measurement.
| | - | ----------------------------------------------------------------------------------------------------------------------------------



| | · | Level 2  — Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value
drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices
are not current, little public information exists or instances where prices vary substantially over time or among brokered market
makers.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 3 — Model-derived valuations in which one or more significant inputs or significant value drivers are
unobservable. Unobservable inputs are those inputs that reflect our own assumptions that market participants would use to price
the asset or liability based on the best available information.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Fair value accounting classifies financial
assets and liabilities in their entirety based on the lowest level of input that is significant to the estimated fair value measurement.
Our assessment of the significance of a particular input to the estimated fair value measurement requires judgment, and may affect
the valuation of assets and liabilities and their placement within the fair value hierarchy levels.



18









Debt Securities and Limited-Term Royalties:
  In estimating the fair value of our debt investments, we first assess the overall financial health of the portfolio
company through an evaluation of a number of factors, including, as relevant, historical and projected financial results, the portfolio
company's enterprise value, and the nature and realizable value of any collateral. In estimating the portfolio company’s
enterprise value, we analyze the discounted value of estimated future net cash flows of the portfolio company, derived, when appropriate,
from third party valuations of a portfolio company’s assets, such as engineering reserve reports of oil and natural gas properties.
We also use a market approach in estimating the portfolio company’s estimated enterprise value, considering recent comparable
transactions involving similar businesses or assets. We also may consider the markets in which the portfolio company operates;
comparison to a peer group of publicly traded securities; the size and scope of the portfolio company and its specific strengths
and weaknesses; recent purchases or sales of securities by the portfolio company; recent offers to purchase the portfolio company;
the estimated value of comparable securities; and other relevant factors. Based upon these analyses, we assess the sources
of cash flow available to the portfolio company to service its debt and the underlying credit risk, and determine an appropriate
yield, or discount rate, to apply to our anticipated cash flows to be collected from each debt investment, recognizing that the
collection of contractual cash flows may come from one or a combination of cash flows generated from continuing operations of the
portfolio company, liquidation of collateral or sale of the portfolio company.  The appropriateness of the yield on our
investments is directly relative to our judgment of the associated risks, using observable yield or price data for similar or comparable
debt investments when available. Fair value measurements using the discounted cash flow method can be sensitive to significant
changes in the inputs. A significant increase (decrease) in the discount rate for a particular security may result in a lower (higher)
value for that security.



We invest primarily in illiquid debt investments
in small private companies, many of which are in the early stages of development, or are start-up companies in need of growth development
capital. There is limited activity, transparency and variable data in the markets in which we invest. We have observed
that there is limited correlation in yield and price data in our principle market when compared to overall market trends based
upon debt investments we have made throughout our history. In circumstances where there is limited observable  price
or yield data of similar or comparable securities, we base our considerations on our assessments of the credit trends and underlying
performance of our portfolio companies and of the markets in which we invest, relying on the collective judgment of the investment
team of our Manager, our Valuation Committee members and our Board of Directors, which is based on their extensive experience and
expertise investing in public and non-public securities markets.



Equity Securities: We
record our investments in preferred and common equity securities (including warrants or options to acquire equity securities) at
fair value based on our pro rata share of the residual equity value available after deducting all outstanding debt and other obligations,
as applicable, from the estimated enterprise value of the portfolio company. To estimate the enterprise value of the portfolio
company, we analyze the discounted cash flows of the portfolio company and indicative pricing (on a proved reserve and/or units-of-production
basis, as appropriate) in recent comparable market transactions as mentioned above, adjusted for lack of marketability due to the
illiquid nature or other restrictions on the sale of the security. In most cases, we may compute an average of the calculated values
of our share of the residual equity value (using multiple approaches or various assumptions) in determining the fair value of the
equity security to be reported in our financial statements. Estimating a company’s enterprise value involves judgment, and
residual equity values can be relatively volatile based on changes in market conditions, the company’s financial performance
and outlook, and other factors. Fair value measurements using market comparables can be sensitive to significant changes in the
inputs. A significant increase (decrease) in the reserve multiple, or a significant decrease (increase) in the discount for lack
of marketability, for a particular equity security may result in a higher (lower) fair value for that security.



In some cases, where we deem recent or pending
financing or recapitalization transactions involving the portfolio company to be more indicative of enterprise value, we use such
recent transactions to value the enterprise, in lieu of the discounted cash flow or market comparables. In addition, in cases where
we deem appropriate, we utilize an option pricing method, or OPM, to value the various preferred stock, common stock and warrants
we have in companies with complex capital structures. The OPM treats preferred stock, common stock and warrants as call options
on the enterprise value, with exercise prices based on liquidation preference of the security. The OPM commonly uses the Black-Scholes
model to price the call option and considers the various terms of the stockholder agreements upon liquidation of the enterprise.
In addition, the OPM implicitly considers the effect of the liquidation preference as of a future liquidation date, not as of the
valuation date.



Royalty Interests: We record our
investments in overriding royalty interests at fair value based on a multiple of cash flows generated by such investments, multiples
from transactions involving the sale of comparable assets and/or the discounted value of expected future net cash flows from such
investments, adjusted for lack of marketability due to the illiquid nature or other restrictions on the sale of our investment.
We derive appropriate cash flow multiples from the review of comparable transactions involving similar assets. We derive the discounted
value of future net cash flows, when appropriate, from third party valuations of a portfolio company’s assets, such as engineering
reserve reports of oil and natural gas properties. A significant increase (decrease) in the cash flow multiple, or a significant
decrease (increase) in the discount for lack of marketability, for a particular investment may result in a higher (lower) fair
value for that investment.



19









Contingent Earn-Out: Our contingent
earn-out investment resulted from the sale of our investment in Alden Resources, LLC to Globe BG, LLC in July 2011. The amount
of the payment, up to $6.8 million, is based on a formula involving the number of clean tons of coal produced multiplied by the
difference between the company’s cost of production in 2010 and the cost of production during the optimal consecutive twelve-month
period during the three-year period ending July 2014. We based our valuation of the earn-out on a weighted average of the discounted
value of the earn-out payment computed under twenty scenarios with various production and production cost assumptions. A significant
increase (decrease) in production, a significant decrease (increase) in cost of production, or a significant decrease (increase)
in the discount rate may result in a higher (lower) value of the earn-out.



Commodity Derivative Instruments:
We record all derivative instruments at fair value. Quoted market prices are the best evidence of estimated fair value. We estimate
the fair value of the crude oil and natural gas options using a market-based valuation methodology based upon forward commodity
price and volatility curves. Independent pricing services provide the curves, which reflect broker market quotes. We consider these
investments as Level 2 on the valuation hierarchy, as the values represent quoted prices for similar instruments in active markets.



We hold certain investments in debt or equity
securities that are publicly traded, but for which there are relatively few transactions or for which trading activity is relatively
infrequent. We value these investments at broker quotes as of the balance sheet date or at prices for which such securities were
most recently traded. We consider these investments as Level 2 on the valuation hierarchy, as the values represent quoted prices
for identical instruments in thinly-traded markets.



Due to the inherent uncertainty in the valuation
process, the fair value estimates for our investments may differ materially from the values that would have been used had a ready
market for the securities existed. Additionally, changes in the market environment, portfolio company performance and other events
that may occur over the lives of the investments may cause the gains or losses ultimately realized on our investments to be materially
different than the valuations currently assigned.



We have investments in our portfolio that
contain payment-in-kind, or PIK, provisions. We compute PIK interest income or PIK dividend income at the contractual rate specified
in each investment agreement and add that amount to the principal balance of the investment. For those investments with PIK interest
or PIK dividends, we calculate our income accruals on the principal balance plus any PIK amounts. If the portfolio company’s
projected cash flows, further supported by estimated total enterprise value, are not sufficient to cover the contractual principal
and interest or dividend amounts, as applicable, we do not accrue interest income or dividend income on the investment. To maintain
our RIC status, we must pay out this non-cash income to stockholders in the form of dividends, even though we have not yet collected
the cash.



Fair value accounting classifies financial
assets and liabilities in their entirety based on the lowest level of input that is significant to the estimated fair value measurement.
Our assessment of the significance of a particular input to the estimated fair value measurement requires judgment, and may affect
the valuation of assets and liabilities and their placement within the fair value hierarchy levels. We did not have any liabilities
measured at fair value at March 31, 2014 or December 31, 2013.



During the three-month period ended March
31, 2014, none of our investments in portfolio companies changed between the categories of Control Investment-Majority Owned, Affiliate
Investments and Non-Affiliate Investments, and there were no transfers between Levels 3, 2 or 1 during the three-month periods
ended March 31, 2014 and 2013. During the three-month period ended March 31, 2013, our investment in Spirit Resources, LLC changed
from a Non-Affiliate Investment to a Control Investment-Majority Owned.



The following tables set forth our financial
assets by level within the fair value hierarchy that we accounted for at fair value as of March 31, 2014 and December 31, 2013
(in thousands):



20







|                                           |  | Total |         |  | Level 1 |   |        | Level 2 |  |   | Level 3 | 
|------------------------------------------ |  | ----- | ------- |  | ------- | - | ------ | ------- |  | - | ------- | 
|March 31, 2014:                            |  |       |         |  |         |   |        |         |  |   |         | 
|Portfolio investments                      |  |       |         |  |         |   |        |         |  |   |         | 
|Control investments - majority owned       |  |       |         |  |         |   |        |         |  |   |         | 
|Senior secured debt                        |  | $     | 20,303  |  |         | $ | -      |         |  | $ | -       | 
|Royalty interests                          |  |       | 510     |  |         |   | -      |         |  |   | -       | 
|Equity securities                          |  |       | 784     |  |         |   | -      |         |  |   | -       | 
|Total control investments - majority owned |  |       | 21,597  |  |         |   | -      |         |  |   | -       | 
|Affiliate investments                      |  |       |         |  |         |   |        |         |  |   |         | 
|Subordinated debt                          |  |       | 14,480  |  |         |   | -      |         |  |   | -       | 
|Equity securities                          |  |       | 762     |  |         |   | -      |         |  |   | -       | 
|Total affiliate investments                |  |       | 15,242  |  |         |   | -      |         |  |   | -       | 
|Non-affiliate investments                  |  |       |         |  |         |   |        |         |  |   |         | 
|Senior secured debt                        |  |       | 15,675  |  |         |   | -      |         |  |   | -       | 
|Subordinated debt                          |  |       | 70,603  |  |         |   | -      |         |  |   | 29,767  | 
|Limited term royalties                     |  |       | 25,968  |  |         |   | -      |         |  |   | -       | 
|Contingent earn-out                        |  |       | -       |  |         |   | -      |         |  |   | -       | 
|Redeemable preferred units                 |  |       | 53,260  |  |         |   | -      |         |  |   | -       | 
|Royalty interests                          |  |       | 585     |  |         |   | -      |         |  |   | -       | 
|Equity securities                          |  |       | 430     |  |         |   | -      |         |  |   | -       | 
|Total non-affiliate investments            |  |       | 166,521 |  |         |   | -      |         |  |   | 29,767  | 
|Total portfolio investments                |  |       | 203,360 |  |         |   | -      |         |  |   | 29,767  | 
|Government securities                      |  |       |         |  |         |   |        |         |  |   |         | 
|U.S. Treasury Bills                        |  |       | 46,001  |  |         |   | 46,001 |         |  |   | -       | 
|Total investments                          |  | $     | 249,361 |  |         | $ | 46,001 |         |  | $ | 29,767  | 



|December 31, 2013:                         |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|------------------------------------------ |  | - | ------- |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|Portfolio investments                      |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|Control investments - majority owned       |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|Senior secured debt                        |  | $ | 19,508  |  |  | $ | -      |  |  | $ | -      |  |  | $ | 19,508  | 
|Royalty interests                          |  |   | 518     |  |  |   | -      |  |  |   | -      |  |  |   | 518     | 
|Equity securities                          |  |   | 4,192   |  |  |   | -      |  |  |   | -      |  |  |   | 4,192   | 
|Total control investments - majority owned |  |   | 24,218  |  |  |   | -      |  |  |   | -      |  |  |   | 24,218  | 
|Affiliate investments                      |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|Subordinated debt                          |  |   | 15,268  |  |  |   | -      |  |  |   | -      |  |  |   | 15,268  | 
|Equity securities                          |  |   | 1,775   |  |  |   | -      |  |  |   | -      |  |  |   | 1,775   | 
|Total affiliate investments                |  |   | 17,043  |  |  |   | -      |  |  |   | -      |  |  |   | 17,043  | 
|Non-affiliate investments                  |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|Senior secured debt                        |  |   | 15,975  |  |  |   | -      |  |  |   | -      |  |  |   | 15,975  | 
|Subordinated debt                          |  |   | 70,292  |  |  |   | -      |  |  |   | 29,474 |  |  |   | 40,818  | 
|Limited term royalties                     |  |   | 28,966  |  |  |   | -      |  |  |   | -      |  |  |   | 28,966  | 
|Contingent earn-out                        |  |   | -       |  |  |   | -      |  |  |   | -      |  |  |   | -       | 
|Redeemable preferred units                 |  |   | 52,760  |  |  |   | -      |  |  |   | -      |  |  |   | 52,760  | 
|Royalty interests                          |  |   | 588     |  |  |   | -      |  |  |   | -      |  |  |   | 588     | 
|Equity securities                          |  |   | 1,529   |  |  |   | -      |  |  |   | -      |  |  |   | 1,529   | 
|Total non-affiliate investments            |  |   | 170,110 |  |  |   | -      |  |  |   | 29,474 |  |  |   | 140,636 | 
|Total portfolio investments                |  |   | 211,371 |  |  |   | -      |  |  |   | 29,474 |  |  |   | 181,897 | 
|Government securities                      |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|U.S. Treasury Bills                        |  |   | 46,000  |  |  |   | 46,000 |  |  |   | -      |  |  |   | -       | 
|Total investments                          |  | $ | 257,371 |  |  | $ | 46,000 |  |  | $ | 29,474 |  |  | $ | 181,897 | 



21







The following tables present roll-forwards
of the changes in the estimated fair value during the three-month periods ended March 31, 2014 and March 31, 2013 for all investments
for which we determine estimated fair value using unobservable (Level 3) factors (in thousands):



|                                                  |  | Senior Secured |        |   | Subordinated    |   |         | Interests, Royalty |  |   |            |   |  |             |  
|------------------------------------------------- |  | -------------- | ------ | - | --------------- | - | ------- | ------------------ |  | - | ---------- | - |  | ----------- | -
|                                                  |  | Debt and       |        |   | Debt and        |   |         | Interests          |  |   |            |   |  |             |  
|                                                  |  | Limited Term   |        |   | Redeemable      |   |         | and Equity         |  |   | Contingent |   |  | Total       |  
|                                                  |  | Royalties      |        |   | Preferred Units |   |         | Securities         |  |   | Earn-out   |   |  | Investments |  
|Three Months Ended March 31, 2014:                |  |                |        |   |                 |   |         |                    |  |   |            |   |  |             |  
|Fair value at December 31, 2013                   |  | $              | 64,449 |   |                 | $ | 108,846 |                    |  | $ | 8,602      |   |  | $           | -
|Total gains, (losses) and amortization:           |  |                |        |   |                 |   |         |                    |  |   |            |   |  |             |  
|Net realized gains (losses)                       |  |                | -      |   |                 |   | (9,382  | )                  |  |   | -          |   |  |             | -
|Net unrealized gains (losses)                     |  |                | (2,433 | ) |                 |   | 8,979   |                    |  |   | (5,525     | ) |  |             | -
|Net amortization of premiums, discounts and fees  |  |                | 108    |   |                 |   | 38      |                    |  |   | (6         | ) |  |             | -
|New investments, repayments and settlements, net: |  |                |        |   |                 |   |         |                    |  |   |            |   |  |             |  
|New investments                                   |  |                | 1,116  |   |                 |   | -       |                    |  |   | -          |   |  |             | -
|Payment-in-kind                                   |  |                | 145    |   |                 |   | 165     |                    |  |   | -          |   |  |             | -
|Repayments and settlements                        |  |                | (1,439 | ) |                 |   | (70     | )                  |  |   | -          |   |  |             | -
|Fair value at March 31, 2014                      |  | $              | 61,946 |   |                 | $ | 108,576 |                    |  | $ | 3,071      |   |  | $           | -



Of the $1.0 million in net unrealized gains
presented in the table above, $8.4 million of unrealized losses were attributable to assets we held at March 31, 2014. We present
net unrealized gains (losses) on our consolidated statements of operations as “Net unrealized appreciation (depreciation)
on investments.”



|                                                  |  |                |         |   |                 |   |        | Net Profits        |  |   |            |   |  |             |     
|------------------------------------------------- |  | -------------- | ------- | - | --------------- | - | ------ | ------------------ |  | - | ---------- | - |  | ----------- | ----
|                                                  |  | Senior Secured |         |   | Subordinated    |   |        | Interests, Royalty |  |   |            |   |  |             |     
|                                                  |  | Debt and       |         |   | Debt and        |   |        | Interests          |  |   |            |   |  |             |     
|                                                  |  | Limited Term   |         |   | Redeemable      |   |        | and Equity         |  |   | Contingent |   |  | Total       |     
|                                                  |  | Royalties      |         |   | Preferred Units |   |        | Securities         |  |   | Earn-out   |   |  | Investments |     
|Three Months Ended March 31, 2013:                |  |                |         |   |                 |   |        |                    |  |   |            |   |  |             |     
|Fair value at December 31, 2012                   |  | $              | 101,234 |   |                 | $ | 81,357 |                    |  | $ | 2,863      |   |  | $           | 240 
|Total gains, (losses) and amortization:           |  |                |         |   |                 |   |        |                    |  |   |            |   |  |             |     
|Net unrealized gains (losses)                     |  |                | (118    | ) |                 |   | (6,828 | )                  |  |   | (2,599     | ) |  |             | (180
|Net amortization of premiums, discounts and fees  |  |                | 86      |   |                 |   | 18     |                    |  |   | -          |   |  |             | -   
|New investments, repayments and settlements, net: |  |                |         |   |                 |   |        |                    |  |   |            |   |  |             |     
|New investments                                   |  |                | 2,989   |   |                 |   | 23,524 |                    |  |   | 2,485      |   |  |             | -   
|Restructuring                                     |  |                | (8,000  | ) |                 |   | -      |                    |  |   | 8,000      |   |  |             | -   
|Payment-in-kind                                   |  |                | 36      |   |                 |   | 493    |                    |  |   | -          |   |  |             | -   
|Repayments and settlements                        |  |                | (4,965  | ) |                 |   | (9,848 | )                  |  |   | -          |   |  |             | -   
|Fair value at March 31, 2013                      |  | $              | 91,262  |   |                 | $ | 88,716 |                    |  | $ | 10,749     |   |  | $           | 60  



Of the $9.7 million in net unrealized losses
presented in the table above, $9.3 million was attributable to assets we held at March 31, 2013.



22







The following table summarizes the significant
unobservable inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique
as of March 31, 2014 (dollars in thousands):



|                                                                |  | Fair Value as of   |         |  | Valuation |                                | Significant             |                                    | Range of |                   | Weighted |        
|--------------------------------------------------------------- |  | ------------------ | ------- |  | --------- | ------------------------------ | ----------------------- | ---------------------------------- | -------- | ----------------- | -------- | -------
|Type of Investment                                              |  | March
    31, 2014 |         |  | Technique |                                | Unobservable
    Inputs |                                    | Inputs   |                   | Average  |        
|Senior
    debt securities and limited term royalties           |  | $                  | 61,946  |  |           | Discounted cash flow           |                         | Discount rate                      |          | 8.0% - 22.5%      |          |        
|                                                                |  |                    |         |  |           |                                |                         |                                    |          |                   |          |        
|Subordinated debt
    securities and redeemable preferred units |  |                    | 41,316  |  |           | Discounted cash flow           |                         | Discount rate                      |          | 11.4% - 19.5%     |          |        
|                                                                |  |                    | 67,260  |  |           | Market comparables             |                         | Reserve multiples (1)              |          | $9.00 - $15.00    |          | $12.38 
|                                                                |  |                    |         |  |           |                                |                         | Production multiples (2)           |          | $24.00 - $51.00   |          | $34.97 
|                                                                |  |                    |         |  |           |                                |                         | EBITDA multiples                   |          | 3.5x - 5.0x       |          |        
|                                                                |  |                    | 108,576 |  |           |                                |                         |                                    |          |                   |          |        
|                                                                |  |                    |         |  |           |                                |                         |                                    |          |                   |          |        
|Royalty interests and equity securities                         |  |                    | 1,546   |  |           | Market comparables             |                         | EBITDA multiples                   |          | 4.0x - 6.5x       |          |        
|                                                                |  |                    |         |  |           |                                |                         | Discount for lack of marketability |          | 20%               |          |        
|                                                                |  |                    | 387     |  |           | Market comparables             |                         | Reserve multiples (1)              |          | $6.00 - $20.00    |          | $17.26 
|                                                                |  |                    |         |  |           |                                |                         | Production multiples (2)           |          | $100.00 - $150.00 |          | $125.00
|                                                                |  |                    | 1,095   |  |           | Market comparables             |                         | Cash flow  multiples               |          | 6.0x - 8.0x       |          |        
|                                                                |  |                    |         |  |           |                                |                         | Discount rate                      |          | 10% - 20%         |          |        
|                                                                |  |                    |         |  |           |                                |                         |                                    |          |                   |          |        
|                                                                |  |                    | 43      |  |           | Recent or pending transactions |                         | N/A                                |          | N/A               |          |        
|                                                                |  |                    | 3,071   |  |           |                                |                         |                                    |          |                   |          |        
|                                                                |  |                    |         |  |           |                                |                         |                                    |          |                   |          |        
|                                                                |  | $                  | 173,593 |  |           |                                |                         |                                    |          |                   |          |        



________________

| | (1) | Based on recent comparable transactions involving similar assets, expressed as price per unit of
equivalent barrel of oil in proved reserves.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Based on recent comparable transactions involving similar assets, expressed as price per daily
production of equivalent barrel of oil in proved reserves.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



23







Note 8: Commodity Derivative Instruments



We use commodity derivative instruments
from time to time to manage our exposure to commodity price fluctuations. We use all of our derivatives for risk management purposes
and do not hold any amounts for speculative or trading purposes. These contracts generally consist of options contracts on underlying
commodities. We do not designate these instruments as hedging instruments for financial accounting purposes and, as a result, we
recognize the change in the instruments’ fair value currently on the consolidated statement of operations as net increase
(decrease) in unrealized appreciation (depreciation) on investments. All of our oil put options had expired as of September 30,
2013.



The components of gains (losses) on commodity
derivative instruments are as follows (in thousands):



|                                               |  | For the Three Months Ended |  
|---------------------------------------------- |  | -------------------------- | -
|                                               |  | March 31,                  |  
|                                               |  | 2014                       |  
|                                               |  |                            |  
|Unrealized gains on commodity derivatives      |  | $                          | -
|Realized losses on commodity derivatives       |  |                            | -
|                                               |  |                            |  
|Net losses on commodity derivative instruments |  | $                          | -



24







Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.



You should read the following analysis
of our financial condition and results of operations in conjunction with management’s discussion and analysis contained in
our 2013 Annual Report on Form 10-K, as well as our consolidated financial statements and the notes thereto included in this Quarterly
Report on Form 10-Q.



Forward-Looking Statements



Certain statements in this Quarterly Report
on Form 10-Q 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. These forward-looking statements are subject
to various risks and uncertainties, which could cause actual results and conditions to differ materially from those projected,
including, but not limited to,



| | • | uncertainties associated with the timing of transaction closings;
| | - | -----------------------------------------------------------------

| | • | changes in the prospects of our portfolio companies;
| | - | ----------------------------------------------------

| | • | changes in interest rates;
| | - | --------------------------

| | • | the future operating results of our portfolio companies and their ability to achieve their objectives;
| | - | ------------------------------------------------------------------------------------------------------

| | • | changes in regional, national or international economic conditions and their impact on the industries in which we invest;
| | - | -------------------------------------------------------------------------------------------------------------------------

| | • | continued disruption of credit and capital markets;
| | - | ---------------------------------------------------

| | • | changes in the conditions of the industries in which we invest;
| | - | ---------------------------------------------------------------

| | • | the adequacy of our cash resources and working capital;
| | - | -------------------------------------------------------

| | • | the timing of cash flows, if any, from the operations of our portfolio companies;
| | - | ---------------------------------------------------------------------------------

| | • | the ability of our Manager to locate suitable investments for us and to monitor and administer the investments; and
| | - | -------------------------------------------------------------------------------------------------------------------

| | • | other factors enumerated in our filings with the Securities and Exchange Commission, or the SEC.
| | - | ------------------------------------------------------------------------------------------------



We may use words such as “anticipates,”
“believes,” “intends,” “plans,” “expects,” “projects,” “estimates,”
“will,” “should,” “may” and similar expressions to identify forward-looking statements. These
forward-looking statements are subject to various risks and uncertainties. Certain factors could cause actual results and conditions
to differ materially from those projected and our historical experience. You should not place undue reliance on such forward-looking
statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statements
made herein, unless required by law.



Overview



We are a financial services company created
to invest primarily in debt securities of small and mid-size private energy companies. In 2012, we expanded our investment strategy
to also include middle market companies not engaged in the energy industry. We have elected to be regulated as a business development
company, or BDC, under the Investment Company Act of 1940, or the 1940 Act, and, 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,”
which include securities of private U.S. companies, U.S. companies whose securities are listed on a national securities exchange
but whose market capitalization is less than $250 million, cash, cash equivalents, U.S. government securities and high-quality
debt investments that mature in one year or less. In addition, for federal income tax purposes we operate so as to be treated as
a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended. Pursuant to these elections, we generally
do not have to pay corporate-level taxes on any income and capital gains we distribute to our stockholders. We have several direct
and indirect subsidiaries that are single member limited liability companies and wholly-owned limited partnerships established
to hold certain portfolio investments or provide services to us in accordance with specific rules prescribed for a company operating
as a RIC. We consolidate the financial results of our subsidiaries for financial reporting purposes, and do not consolidate the
financial results of our portfolio companies.



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 investments in the energy industry is domestic upstream businesses that produce, develop, acquire and explore for oil and
natural gas. We also evaluate investment opportunities in such businesses as coal, power and energy services. We also target middle
market investments within diversified industry sectors, including manufacturing, value-added distribution, business services, healthcare
products and services, consumer services and select other sectors. Our investments generally range in size from $10 million to
$50 million; however, we may invest more or less depending on market conditions and our Manager’s view of a particular investment
opportunity. Our portfolio investments primarily consist of debt instruments, including senior and subordinated loans combined
in one facility, sometimes with an equity component, and subordinated loans, sometimes with equity components. We may also invest
in preferred stock and other equity securities or royalty interests on a stand-alone basis.



25







We generate revenue in the form of interest
income on the debt securities and limited-term royalty interests that we own, dividend income on common or preferred stock that
we own, royalty income on royalty interests that we own and capital gains or losses on debt or equity securities that we acquire
in portfolio companies and subsequently sell. Our 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 paid-in-kind, or PIK, dividends on a recurring or otherwise negotiated basis. In
addition, we may generate revenue in other forms including commitment, origination, structuring, administration or due diligence
fees; fees for providing managerial assistance; and possibly consultation fees. We recognize any such fees generated in connection
with our investments as earned.



Our level of investment activity can and
does vary substantially from period to period depending on many factors. Some of these factors are the amount of debt and equity
capital available to energy companies, the level of acquisition and divestiture activity for such companies, the level and volatility
of energy commodity prices, the general economic environment and the competitive environment for the types of investments we make,
and our own ability to raise capital to fund our investments, both through issuance of debt and equity securities. While we currently
have capital available to invest, we do not have unlimited capital. We remain committed to our underwriting and investment disciplines
in selectively investing in appropriate risk-reward opportunities within the energy and middle market sectors.



In September 2013, our Board of Directors
engaged financial advisor Keefe, Bruyette & Woods, a Stifel company, or KBW, to evaluate strategic alternatives to enhance
stockholder value. The Board of Directors, with the assistance of KBW, is considering a range of options, which may include a sale
or merger of our company, the acquisition of existing investment portfolios, or a combination, joint venture or other strategic
alliance with another company. No decision has been made to enter into a transaction at this time, and there can be no assurance
that we will enter into a transaction in the future.



Portfolio and Investment Activity



In April 2014, we sold our $13.0 million
face amount of Midstates Petroleum Company, or Midstates, 10.75% Senior Subordinated Notes at an average price of 108.1, resulting
in a capital gain of $0.7 million, or $0.03 per common share. Our investment in the Midstates Senior Subordinated Notes, which
originated in October 2012, generated an internal rate of return of 14.6% with a return on investment of 1.2x.



In January 2014, we accepted a third party
bid to purchase our GMX Resources, Inc., or GMX, Senior Secured Second-Priority Notes due 2018, or the GMX 2018 Notes, for $70,000.
This transaction resulted in a realized capital loss of $9.4 million, or $0.47 per share, which was entirely offset by the reversal
of previously recognized unrealized depreciation on this investment. GMX’s bankruptcy filing in 2013 severely impacted our
investment, which generated an internal rate of return of -21.2% and a return on investment of 0.5x.



In 2011 and 2012, we purchased from ATP
Oil & Gas Corporation, or ATP, limited-term overriding royalty interests, or ORRIs, in certain offshore oil and gas producing
properties operated by ATP in the Gulf of Mexico, including $25.0 million paid on July 3, 2012. Under this arrangement, we purchased
the right to portions (ranging from 5.0% to 10.8%) of the monthly production proceeds from the various oil and gas properties subject
to the ORRIs in ATP’s Gomez and Telemark properties. The terms of the ORRIs provide that they will terminate after we actually
receive payments that equal a defined sum calculated (generally) based on our investment in the ORRIs plus a time-value factor
at a rate of 13.2 % per annum. On August 17, 2012, ATP filed for protection under Chapter 11 of the U.S. Bankruptcy Code. For more
information, please refer to the discussion of the ATP Litigation under the heading “Legal Proceedings” in Note 6,
“Commitments and Contingencies,” to Notes to Consolidated Financial Statements included elsewhere in this Quarterly
Report on Form 10-Q. As of March 31, 2014, our unrecovered investment was $28.3 million, and we had received aggregate production
payments of $26.5 million subject to a disgorgement agreement. In addition, as of March 31, 2014, we had incurred legal and consulting
fees totaling $3.6 million in connection with the enforcement of our rights under the ORRIs, $3.2 million of which has been added
to the unrecovered investment balance under the terms of the ORRI agreements. Legal and consulting fees totaling $0.4 million and
$0.5 million as of March 31, 2014 and December 31, 2013, respectively, are included in accounts receivable and other current assets
on our consolidated balance sheets.



26







From commencement of investment operations
in November 2004 through March 31, 2014, we have invested $1.1 billion in 47 portfolio companies and received principal repayments,
realizations and settlements of $897.5 million. The following table summarizes our investment activity for the three months ended
March 31, 2014 and 2013 (dollars in millions):



|                                                   |  | 2014 |       |   | 2013 |  
|-------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Investment portfolio, beginning of period          |  | $    | 227.9 |   |      | $
|New investments                                    |  |      | -     |   |      |  
|Additional investments in existing clients         |  |      | 1.4   |   |      |  
|Principal repayments, realizations and settlements |  |      | (14.1 | ) |      |  
|Investment portfolio, end of period                |  | $    | 215.2 |   |      | $
|                                                   |  |      |       |   |      |  
|Number of portfolio clients at end of period       |  |      | 15    |   |      |  



The table below shows our portfolio investments
by type as of March 31, 2014 and December 31, 2013. We compute yields on investments using interest rates as of the balance sheet
date and include amortization of original issue discount, or OID, and market premium or discount, royalty interest income, net
profits income and other similar investment income, weighted by their respective costs when averaged. We compute the yield on income
from derivatives using estimated derivative income, net of expired options costs. These yields do not include income from any investments
on non-accrual status but do include the cost basis of such investments in the denominator. Such weighted average yields are not
necessarily indicative of expected total returns on a portfolio.



|                                     |  | March 31, 2014 |      |   | December
    31, 2013   | 
|------------------------------------ |  | -------------- | ---- | - | ----------------------- | 
|                                     |  | Weighted       |      |   |                         | 
|                                     |  | Average        |      |   | Percentage of Portfolio | 
|                                     |  | Yields         |      |   | Cost                    | 
|Senior secured debt                  |  |                | 10.9 | % |                         | 
|Subordinated debt                    |  |                | 12.3 | % |                         | 
|Limited term royalties               |  |                | 13.8 | % |                         | 
|Contingent earn-out                  |  |                | 0.0  | % |                         | 
|Royalty interests                    |  |                | 79.1 | % |                         | 
|Redeemable preferred units           |  |                | 8.0  | % |                         | 
|Equity securities                    |  |                |      |   |                         | 
|Membership and partnership
    units |  |                | 0.0  | % |                         | 
|Participating preferred stock        |  |                | 0.0  | % |                         | 
|Common stock                         |  |                | 0.0  | % |                         | 
|Warrants                             |  |                | 0.0  | % |                         | 
|Total equity securities              |  |                | 0.0  | % |                         | 
|Total portfolio investments          |  |                | 10.4 | % |                         | 



As of March 31, 2014 and December 31, 2013,
the total fair value of our portfolio investments was $203.4 million and $211.4 million, respectively. Of those fair value totals,
approximately $173.6 million, or 85%, as of March 31, 2014, and $181.9 million, or 86%, as of December 31, 2013, are measured using
significant unobservable (i.e., Level 3) inputs.





27









Results of Operations



Investment Income



During the three months ended March 31,
2014, our total investment income was $5.9 million, increasing $0.1 million, or 1%, compared to $5.8 million in the corresponding
period of 2013. The small increase in 2014 was primarily attributable to overriding royalty income earned on investments made in
2013. Our portfolio balance, on a cost basis, decreased from $222.0 million to $212.6 million during the first quarter of 2014,
primarily due to the realization of the GMX 2018 Notes. During the first quarter of 2013, our portfolio balance increased from
$217.8 million to $245.0 million, primarily as a result of net new investments in excess of redemptions and settlements. Our weighted
average yield increased from 9.9% at March 31, 2013 to 10.4% at March 31, 2014, primarily as a result of the realization of our
non-accruing investment in the GMX 2018 Notes during January 2014, and the addition of new investments during 2013 with higher
interest rates.



The table below summarizes our non-accruing
and non-income producing investments:



|                                                                           |  | March 31, 2014 |        |  | December 31, 2013 |  
|-------------------------------------------------------------------------- |  | -------------- | ------ |  | ----------------- | -
|(Dollars in thousands)                                                     |  | Cost           |        |  | Fair Value        |  
|Non-accruing investments                                                   |  |                |        |  |                   |  
|Chroma Exploration & Production, Inc.                                      |  | $              | 4,312  |  |                   | $
|GMX Resources, Inc. second-priority notes (sold in January 2014)           |  |                | -      |  |                   |  
|Spirit Resources, LLC Tranche B term loan (non-accrual 3/31/14)            |  |                | 4,252  |  |                   |  
|Total non-accruing investments                                             |  |                | 8,564  |  |                   |  
|Non-income producing investments                                           |  |                |        |  |                   |  
|Contour Highwall Holdings, LLC units                                       |  |                | -      |  |                   |  
|Crossroads Energy Development, LLC warrants                                |  |                | 237    |  |                   |  
|Globe BG, LLC (contingent Alden Resources royalty earn-out)                |  |                | -      |  |                   |  
|Huff Energy Holdings, Inc. warrants and overriding royalty (after pay-out) |  |                | 84     |  |                   |  
|Myriant Corporation common stock and warrants                              |  |                | 468    |  |                   |  
|NGP/OCI Investments, LLC Class A Units                                     |  |                | 2,500  |  |                   |  
|Spirit Resources, LLC preferred units                                      |  |                | 8,000  |  |                   |  
|Total non-income producing investments                                     |  |                | 11,289 |  |                   |  
|Total non-accruing and non-income producing investments                    |  | $              | 19,853 |  |                   | $



Operating Expenses



The table below summarizes the components
of our operating expenses (in thousands):



|                                                    |  | For The Three Months Ended |      
|--------------------------------------------------- |  | -------------------------- | -----
|                                                    |  | March 31,                  |      
|                                                    |  | 2014                       |      
|Interest expense and bank fees                      |  | $                          | 613  
|Management and incentive fees                       |  |                            | 1,346
|Professional fees, insurance expenses and other G&A |  |                            | 1,966
|Total operating expenses                            |  | $                          | 3,925



For the three months ended March 31, 2014,
operating expenses were $3.9 million, increasing $0.4 million, or 11%, compared to $3.5 million for the quarter ended March 31,
2013. Interest expense and fees on our credit facilities were $0.6 million for the three months ended March 31, 2014, compared
to $0.8 million for the three months ended March 31, 2013, as a result of decreased borrowing levels supporting our smaller investment
portfolio. Management and incentive fees were slightly lower in the quarter ended March 31, 2014 at $1.3 million compared to $1.4
million for the quarter ended March 31, 2013, primarily as a result of lower average total asset balances, which are the basis
for the base management fee computation. Professional fees, insurance expenses and other general and administrative expenses for
the quarter ended March 31, 2014 increased $0.7 million, or 53%, to $2.0 million, compared to $1.3 million for the quarter ended
March 31, 2013, primarily as a result of higher legal and professional fees, including $0.5 million, or $0.02 per share, of third
party costs associated with our process of evaluating strategic alternatives to enhance stockholder value.



Operating expenses include 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. According to the terms of the Investment Advisory
Agreement, we calculate the base management fee quarterly as 0.45% of the average of our total assets as of the end of the two
previous quarters. Other general and administrative expenses include our allocated share of employee, facilities, stockholder services
and marketing costs incurred by our Administrator.



28







Net Investment Income



For the three months ended March 31, 2014,
net investment income was $1.9 million, or $0.09 per common share, compared to $2.3 million, or $0.11 per common share, for the
three months ended March 31, 2013. The $0.4 million, or 17%, decrease was primarily attributable to the increase in operating expenses
described above.



Net Realized Gains (Losses)



For the three months ended March 31, 2014,
we realized net losses of $9.6 million, or $0.47 per common share, primarily as the result of a loss of $9.4 million on the disposition
of our GMX 2018 Notes. For the three months ended March 31, 2013, we recognized net realized capital losses of $0.2 million resulting
from a $1.6 million loss from the sale of our 228,853 shares of GMX common stock at an average price of $3.28, partially offset
by a $1.3 million gain from the sale of $10.0 million face amount of EP Energy, LLC, or EP Energy, Senior Unsecured Notes at an
average price of 113.375.



Unrealized Appreciation or Depreciation on Investments



For the three months ended March 31, 2014,
net unrealized appreciation on portfolio investments was $1.3 million, or $0.06 per share, primarily due to the reversal of previously
recorded unrealized depreciation, due to realization, associated with our investment in GMX 2018 Notes of $9.4 million, partially
offset by decreases in the estimated fair value of our investments in Spirit Resources, LLC, or Spirit, Preferred Units of $3.4
million, ATP limited-term ORRIs of $2.4 million, OCI Holdings, LLC, or OCI, Subordinated Notes and Preferred Units of $1.9 million,
and net decreases in the value of remaining investments of $0.4 million. By comparison, for the three months ended March 31, 2013,
net unrealized depreciation on portfolio investments was $9.7 million, or $0.46 per share, primarily due to decreases in the estimated
fair value of our investments in GMX 2018 Notes of $7.4 million and Spirit Preferred Units of $2.8 million and the reversal of
unrealized appreciation, due to realization of the gain, on our EP Energy Senior Unsecured Notes of $1.3 million, partially offset
by net increases in the fair value of our remaining investments of $1.8 million.



Net Increase (Decrease) in Net Assets Resulting
from Operations



For the three months ended March 31, 2014,
we recorded a net decrease in net assets resulting from operations of $6.4 million, or $0.31 per share, compared to a net decrease
in net assets resulting from operations of $7.6 million, or $0.36 per share, for the three months ended March 31, 2013. The $1.2
million, or $0.05 per share, reduced net loss between the two periods was primarily attributable to the $1.6 million reduction
in net realized and unrealized losses on our investments, partially offset by the $0.4 million decrease in net investment income,
both of which are described above.



Financial Condition, Liquidity and Capital Resources



During the three months ended March 31,
2014, we generated cash from operations of $3.0 million, excluding net purchases of investments, compared to $0.5 million during
the comparable period of 2013. The higher amount of cash generated from operations in 2014 was primarily attributable to net changes
in working capital account balances between the two periods.



Our net cash provided by operating activities
for the three months ended March 31, 2014 was $3.1 million, compared to $26.5 million of net cash used in operating activities
for the same period of 2013. This increase in net cash provided in 2014 was primarily due to lower net purchases of investments
in portfolio securities in 2014. Purchases of portfolio securities during the first three months of 2014 totaled $1.1 million,
compared to $53.8 million during the first three months of 2013. Purchases in 2014 consisted of additional investments in existing
portfolio companies. Purchases in 2013 primarily included the Talos Production Co., LLC Senior Notes of $24.8 million, OCI Subordinated
Notes and direct equity co-investment totaling $17.2 million, KOVA International, Inc. Senior Notes of $8.8 million, and additional
investments in existing portfolio companies totaling $3.0 million. Proceeds from the redemption of investments totaled $1.3 million
during the first three months of 2014, compared to $26.9 million during the first three months of 2013. Redemptions in 2014 included
ATP limited-term ORRI of $1.1 million and other redemptions totaling $0.2 million. Redemptions in 2013 included EP Energy Senior
Unsecured Notes, $11.3 million; Southern Pacific Resources Corp. Term Loan, $9.7 million; ATP limited-term ORRI, $5.0 million and
other redemptions totaling $0.9 million.



29







At March 31, 2014, we had cash and cash
equivalents totaling $33.1 million. At March 31, 2014, the amount outstanding under our $72.0 million Third Amended and Restated
Revolving Credit Agreement, or the Investment Facility, was $57.0 million and $15.0 million was available for borrowing. We repaid
$44.0 million of the $57.0 million balance outstanding under the Investment Facility in April and May 2014 with cash on hand and
proceeds from the sale of our Midstates Senior Subordinated Notes. As of March 31, 2014, the amount outstanding under our $45.0
million Treasury Facility was $45.0 million and there was no additional amount available for borrowing. We repaid the entire balance
outstanding under the Treasury Facility in April 2014 with proceeds from the sale of U.S. Treasury Bills.



During the three months ended March 31,
2014, we paid cash dividends totaling $3.3 million, or $0.16 per share, to our common stockholders. In March 2014, we declared
a first quarter dividend totaling $3.3 million, or $0.16 per share, which was paid in April 2014. We currently intend to continue
to distribute, in the form of quarterly dividends, a minimum of 90% of our annual investment company taxable income to our stockholders.



On October 31, 2011, our Board of Directors
approved a stock repurchase plan, pursuant to which we may, from time to time, repurchase up to $10.0 million of our common stock
in the open market at prices not to exceed net asset value during our open trading periods. Our Board of Directors authorized this
plan, because it believes that general market trading activity may cause our common stock to be undervalued from time to time.
The repurchase program does not obligate us to purchase any shares and may be discontinued at any time. Pursuant to this plan,
during 2012 and 2013, we repurchased an aggregate of 1,129,014 shares of our common stock in the open market at an average price
of $6.71 per share, totaling $7.6 million. We did not make any repurchases pursuant to the stock repurchase plan during the three
months ended March 31, 2014. Under the terms of the stock repurchase plan, we are authorized to repurchase up to an additional
$2.4 million of our common stock. Any future repurchases will be made in accordance with applicable securities laws and regulations
that set certain restrictions on the method, timing, price and volume of stock repurchases.



Credit Facilities and Borrowings



On May 23, 2013, we entered into a $72.0
million Investment Facility, which replaced our previous credit facility. The total amounts outstanding under the Investment Facility
were $57.0 million and $53.0 million as of March 31, 2014 and December 31, 2013, respectively. Substantially all of our assets
except our investments in U.S. Treasury Bills are collateral for the obligations under the Investment Facility. The Investment
Facility matures on May 23, 2016, and bears interest, at our option, at either (i) LIBOR plus 325 to 475 basis points, or (ii)
the base rate plus 225 to 375 basis points, both based on our amounts outstanding. As of March 31, 2014, the average interest rate
on our outstanding balance of $57.0 million was 3.9%, and an additional $15.0 million was available for borrowing under the Investment
Facility. We repaid $44.0 million of the outstanding balance in April and May 2014.



On March 31, 2011, we entered into a $30.0
million Treasury Facility, which was later increased to $45.0 million, that can only be used to purchase U.S. Treasury Bills. Proceeds
from the Treasury Facility facilitate the growth of our investment portfolio and provide flexibility in the sizing of our portfolio
investments. On September 24, 2013, we entered into a fourth amendment to the Treasury Facility which extended the expiration date
to September 24, 2014 and increased the applicable margins to either (i) LIBOR plus 150 basis points or (ii) the base rate plus
50 basis points. We have the right at any time to prepay the loans, in whole or in part, without premium or penalty. As of March
31, 2014, we had $45.0 million outstanding and no additional amount available for borrowing under the Treasury Facility, and the
interest rate on our outstanding balance was 1.7% (LIBOR plus 150 basis points). We repaid the entire balance outstanding under
the Treasury Facility in April 2014 with proceeds from the sale of U.S. Treasury Bills.



The Investment and Treasury Facilities contain
affirmative and reporting covenants and certain financial ratio and restrictive covenants that apply to our subsidiaries and us.
We complied with these covenants as of March 31, 2014 and had no existing defaults or events of default under either facility.
The most restrictive covenants are:



| | · | maintaining a ratio of net asset value to consolidated total indebtedness (excluding net hedging
liabilities) of not less than 2.25:1.0
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | · | maintaining a ratio of net asset value to consolidated total indebtedness (including net hedging
liabilities) of not less than 2.0:1.0,
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



30







| | · | maintaining a ratio of EBITDA (excluding revenue from cash collateral) to interest expense (excluding
interest on loans under the Treasury Facility) of not less than 3.0:1.0, and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | maintaining a ratio of collateral to the aggregate principal amount of loans under the Treasury
Facility of not less than 1.02:1.0.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



In addition to proceeds from borrowings
under our Investment Facility, we may also fund a portion of our investments with issuances of equity or senior debt securities.
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 have elected to operate our business
to be taxed as a RIC for federal income tax purposes. As a RIC, we generally may not pay corporate-level federal income taxes on
any ordinary income or capital gains that we distribute to our stockholders as dividends. To maintain our RIC status, we must meet
specific source-of-income and asset diversification requirements and distribute annually an amount equal to at least 90% of our
“investment company taxable income” (which generally consists of ordinary income and realized net short-term capital
gains in excess of realized net long-term capital losses, if any, reduced by deductible expenses) and net tax-exempt interest.
In order to avoid certain excise taxes imposed on RICs, we must distribute during each calendar year an amount at least equal to
the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gain net income (i.e., realized capital
gains in excess of realized capital losses) for the one-year period ended on October 31 of that calendar year, and (3) 100% of
any ordinary income or capital gain net income not distributed in prior years. We currently intend to make sufficient distributions
to satisfy the annual distribution requirement and to avoid the excise taxes.



We may not 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 BDC under the 1940 Act and due to provisions in our Investment Facility. 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 RIC. We cannot assure
stockholders that they will receive any distributions or distributions at any specific level.



Portfolio Credit Quality



Most of our portfolio investments at March
31, 2014 are in negotiated, and often illiquid, securities of energy-related and middle market businesses. We maintain a system
to evaluate the credit quality of these investments. While incorporating quantitative analysis, this system is a qualitative assessment.
This system is intended to reflect the overall, long-term performance of a portfolio company’s business, the collateral coverage
of an investment, and other relevant factors. Our rating scale ranges from 1 to 7, with 1 being the highest credit quality. As
of March 31, 2014, our average portfolio rating on a dollar-weighted fair market value basis was 3.4, compared to 3.7 as of December
31, 2013. Of the 25 rated investments in 15 portfolio companies as of March 31, 2014, compared to December 31, 2013, 1 investment
improved in rating, 21 investments retained the same rating and 3 investments declined in rating during the first three months
of 2014. As of March 31, 2014, on a fair value basis, approximately 18% of our portfolio investments were in the form of senior
secured debt securities. As of March 31, 2014, we had 2 investments on non-accrual status with an aggregate cost and fair value
of $8.6 million and $4.3 million, respectively. Our portfolio investments at fair value were approximately 96% and 95% of the related
cost basis as of March 31, 2014 and December 31, 2013, respectively.



Contractual Obligations and Off-Balance Sheet Arrangements



The following table summarizes our contractual
payment obligations at March 31, 2014 (in thousands):



31







|                                 |  |       |         |  | Less than |   |        |           |  |   |           |  |  | More than |  
|-------------------------------- |  | ----- | ------- |  | --------- | - | ------ | --------- |  | - | --------- |  |  | --------- | -
|Revolving credit facilities(1) : |  | Total |         |  | 1 Year    |   |        | 1-3 Years |  |   | 3-5 Years |  |  | 5 Years   |  
|Investment Facility              |  | $     | 57,000  |  |           | $ | -      |           |  | $ | 57,000    |  |  | $         | -
|Treasury Facility                |  |       | 45,000  |  |           |   | 45,000 |           |  |   | -         |  |  |           | -
|Total                            |  | $     | 102,000 |  |           | $ | 45,000 |           |  | $ | 57,000    |  |  | $         | -

________________________

(1) Excludes accrued interest amounts.



We have certain unused commitments to extend
credit to our portfolio companies. Generally, these commitments have fixed expiration dates, and we do not expect to fund the entire
amounts before they expire. Therefore, these commitment amounts do not necessarily represent future cash requirements. We do not
report the unused portions of these commitments on our consolidated balance sheets. Our unused credit commitments totaled $2.5
million and $3.3 million as of March 31, 2014 and December 31, 2013, respectively.



Item 3. Quantitative and Qualitative Disclosures About
Market Risk.



There have been no material changes from
the information provided in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2013.



Item 4. Controls and Procedures.



Disclosure Controls and Procedures



We maintain disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act), designed
to ensure that information required to be disclosed in our reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and
accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely
decisions regarding required disclosures.



In connection with the preparation of this
Quarterly Report on Form 10-Q, as of the end of the fiscal period covered by this Quarterly Report on Form 10-Q (March 31, 2014),
we performed an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant
to Rules 13a-15(b) and 15d-15(b) of the Exchange Act. Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that, as of March 31, 2014, our disclosure controls and procedures were effective in providing reasonable assurance
(i) that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC and (ii) that such information is accumulated
and communicated to management in a manner that allows timely decisions regarding required disclosure.



Changes in Internal Control over Financial Reporting



No changes in internal control over financial
reporting occurred during the quarter ended March 31, 2014 that have materially affected or are reasonably likely to materially
affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).



32







PART II – OTHER INFORMATION



Item 1. Legal Proceedings.



The information set forth under the heading
“Legal Proceedings” in Note 6, “Commitments and Contingencies,” to Notes to Consolidated Financial Statements
included in Item 1 of Part I of this Quarterly Report on Form 10-Q is incorporated herein by reference.



Item 1A. Risk Factors.



During the three months ended March 31,
2014, there have been no material changes to the risk factors disclosed under Part I, Item 1A, “Risk Factors” in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2013.



Item 6. Exhibits.



See “Index to Exhibits” following
the signature page for a description of the exhibits furnished as part of this Quarterly Report on Form 10-Q.



33







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
|------------------ |  | -----------------------------
|                   |  |                              
|Date:  May 9, 2014 |  | By:                          
|                   |  |                              
|                   |  |                              
|                   |  |                              
|Date:  May 9, 2014 |  | By:                          
|                   |  |                              
|                   |  |                              



34







Index to Exhibits



|Exhibits No. |  | Exhibit                                                                                                                                                                                                                
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1          |  | Articles of Incorporation (filed as Exhibit (a)(1) to our Registration Statement on Form N-2 filed on August 16, 2004 (Registration No. 333-118279) and incorporated herein by reference)                              
|3.2          |  | Articles of Amendment and Restatement (filed as Exhibit 3.2 our Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference)                                                  
|3.3          |  | Second Amended and Restated Bylaws (filed as Exhibit 3.1 to our Current Report on Form 8-K filed on April 22, 2014 and incorporated herein by reference)                                                               
|4.1          |  | Form of Stock Certificate (filed as Exhibit (d) to our Pre-Effective Amendment No. 2 to Registration Statement on Form N-2 filed on October 7, 2004 (Registration No. 333-118279) and incorporated herein by reference)
|4.2          |  | Dividend Reinvestment Plan (filed as Exhibit (e) to our Registration Statement on Form N-2 filed on August 16, 2004 (Registration No. 333-118279) and incorporated herein by reference)                                
|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**       |  | Section 1350 Certification by the Chief Executive Officer                                                                                                                                                              
|32.2**       |  | Section 1350 Certification by the Chief Financial Officer                                                                                                                                                              

____________

*Filed herewith.

**Furnished herewith.





35