UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q

(Mark One)

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



For the quarterly period ended March 31, 2013



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



(713) 752-0062

(Registrant’s telephone number,
including area code)



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.  YesTNo£



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 filerT | 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£NoT



As of May 8, 2013, there were 21,020,077
shares of the registrant’s common stock outstanding.













TABLE OF CONTENTS



|PART I - FINANCIAL INFORMATION | 1                                                                                     
|------------------------------ | --------------------------------------------------------------------------------------
|Item 1.                        | Financial Statements.                                                                 
|Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk.                           
|Item 4.                        | Controls and Procedures.                                                              
|PART II – OTHER INFORMATION    | 30                                                                                    
|Item 1.                        | Legal Proceedings.                                                                    
|Item 1A.                       | Risk Factors.                                                                         
|Item 6.                        | Exhibits.                                                                             











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, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | - | ------------ | -
|                                                                                                                                                                                                                |  | 2013        |         |   | 2012         |  
|                                                                                                                                                                                                                |  | (Unaudited) |         |   |              |  
|Assets                                                                                                                                                                                                          |  |             |         |   |              |  
|Investments in portfolio securities at fair value
                                                                                Control investments - majority owned (cost: $24,516 and $8,140, respectively) |  | $           | 23,141  |   |              | $
|Affiliate investments (cost: $33,996 and $16,280, respectively)                                                                                                                                                 |  |             | 31,127  |   |              |  
|Non-affiliate investments (cost: $186,491 and $193,332, respectively)                                                                                                                                           |  |             | 176,899 |   |              |  
|Total portfolio investments                                                                                                                                                                                     |  |             | 231,167 |   |              |  
|Investments in U.S. Treasury Bills at fair value (cost: $45,999 and $45,996, respectively)                                                                                                                      |  |             | 45,999  |   |              |  
|Total investments                                                                                                                                                                                               |  |             | 277,166 |   |              |  
|Cash and cash equivalents                                                                                                                                                                                       |  |             | 30,310  |   |              |  
|Accounts receivable and other current assets                                                                                                                                                                    |  |             | 1,788   |   |              |  
|Interest receivable                                                                                                                                                                                             |  |             | 2,538   |   |              |  
|Prepaid assets                                                                                                                                                                                                  |  |             | 2,100   |   |              |  
|Total current assets                                                                                                                                                                                            |  |             | 36,736  |   |              |  
|Total assets                                                                                                                                                                                                    |  | $           | 313,902 |   |              | $
|                                                                                                                                                                                                                |  |             |         |   |              |  
|Liabilities and net assets                                                                                                                                                                                      |  |             |         |   |              |  
|Current liabilities                                                                                                                                                                                             |  |             |         |   |              |  
|Accounts payable and accrued expenses                                                                                                                                                                           |  | $           | 1,807   |   |              | $
|Management and incentive fees payable                                                                                                                                                                           |  |             | 1,367   |   |              |  
|Dividends payable                                                                                                                                                                                               |  |             | 3,363   |   |              |  
|Income taxes payable                                                                                                                                                                                            |  |             | 69      |   |              |  
|Short-term debt                                                                                                                                                                                                 |  |             | 45,000  |   |              |  
|Total current liabilities                                                                                                                                                                                       |  |             | 51,606  |   |              |  
|Deferred tax liabilities                                                                                                                                                                                        |  |             | -       |   |              |  
|Long-term debt                                                                                                                                                                                                  |  |             | 72,000  |   |              |  
|Total liabilities                                                                                                                                                                                               |  |             | 123,606 |   |              |  
|Commitments and contingencies  (Note 6)                                                                                                                                                                         |  |             |         |   |              |  
|Net assets                                                                                                                                                                                                      |  |             |         |   |              |  
|Common stock, $.001 par value, 250,000,000 shares authorized; 21,020,077 shares issued and outstanding                                                                                                          |  |             | 21      |   |              |  
|Paid-in capital in excess of par                                                                                                                                                                                |  |             | 251,088 |   |              |  
|Undistributed net investment income (loss)                                                                                                                                                                      |  |             | (2,716  | ) |              |  
|Undistributed net realized capital gain (loss)                                                                                                                                                                  |  |             | (47,376 | ) |              |  
|Net unrealized appreciation (depreciation) on investments                                                                                                                                                       |  |             | (10,721 | ) |              |  
|Total net assets                                                                                                                                                                                                |  |             | 190,296 |   |              |  
|Total liabilities and net assets                                                                                                                                                                                |  | $           | 313,902 |   |              | $
|Net asset value per share                                                                                                                                                                                       |  | $           | 9.05    |   |              | $



(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, |       
|----------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------
|                                                                                                      |  | 2013                                 |       
|Investment income                                                                                     |  |                                      |       
|Interest income:                                                                                      |  |                                      |       
|Control investments - majority owned                                                                  |  | $                                    | 401   
|Affiliate investments                                                                                 |  |                                      | 720   
|Non-affiliate investments                                                                             |  |                                      | 3,633 
|Dividend income:                                                                                      |  |                                      |       
|Non-affiliate investments                                                                             |  |                                      | 983   
|Royalty income, net of amortization:                                                                  |  |                                      |       
|Non-affiliate investments                                                                             |  |                                      | -     
|Other income                                                                                          |  |                                      | 66    
|Total investment income                                                                               |  |                                      | 5,803 
|Operating expenses                                                                                    |  |                                      |       
|Interest expense and bank fees                                                                        |  |                                      | 815   
|Management and incentive fees                                                                         |  |                                      | 1,367 
|Professional fees, net of legal fees of $1,698 in 2013 related to the ATP
    bankruptcy (See Note 6) |  |                                      | 298   
|Insurance expense                                                                                     |  |                                      | 179   
|Other general and administrative expenses                                                             |  |                                      | 809   
|Total operating expenses                                                                              |  |                                      | 3,468 
|Income tax provision (benefit), net                                                                   |  |                                      | 16    
|Net investment income                                                                                 |  |                                      | 2,319 
|Net realized capital gain (loss) on investments                                                       |  |                                      |       
|Control investments - majority owned                                                                  |  |                                      | -     
|Non-affiliate investments                                                                             |  |                                      | (228  
|Total net realized capital gain (loss) on investments                                                 |  |                                      | (228  
|Net unrealized appreciation (depreciation) on investments                                             |  |                                      |       
|Control investments - majority owned                                                                  |  |                                      | (1,843
|Affiliate investments                                                                                 |  |                                      | 257   
|Non-affiliate investments                                                                             |  |                                      | (8,113
|Benefit (provision) for taxes on unrealized
    appreciation (depreciation) on investments            |  |                                      | 1     
|Total net unrealized appreciation (depreciation) on
    investments                                   |  |                                      | (9,698
|Net increase (decrease) in net assets resulting from
    operations                                   |  | $                                    | (7,607
|Net increase (decrease) in net assets resulting from operations per
    common share                  |  | $                                    | (0.36 
|                                                                                                      |  |                                      |       
|Dividends declared per common share                                                                   |  | $                                    | 0.16  
|Weighted average shares outstanding - basic and diluted                                               |  |                                      | 21,020



(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, 2012                                        |  |              | 21,020 |  |           | $ | 21 |                |  | $ | 251,088       |  |  | $              | (1,672 | ) |                | $ | (47,148 | )          | 
|Net increase (decrease) in net assets resulting from
    operations |  |              | -      |  |           |   | -  |                |  |   | -             |  |  |                | 2,319  |   |                |   | (228    | )          | 
|Dividends declared                                                  |  |              | -      |  |           |   | -  |                |  |   | -             |  |  |                | (3,363 | ) |                |   | -       |            | 
|Balance at March 31, 2013                                           |  |              | 21,020 |  |           | $ | 21 |                |  | $ | 251,088       |  |  | $              | (2,716 | ) |                | $ | (47,376 | )          | 



(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, |        
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | -------
|                                                                                                                                                     |  | 2013                                 |        
|Cash flows from operating activities                                                                                                                 |  |                                      |        
|Net increase (decrease) in net assets resulting from operations                                                                                      |  | $                                    | (7,607 
|Adjustments to reconcile net increase (decrease) in net assets resulting
    from operations to net cash provided by (used in) operating activities: |  |                                      |        
|Payment-in-kind interest                                                                                                                             |  |                                      | (529   
|Net amortization of premiums, discounts and fees                                                                                                     |  |                                      | 4      
|Net realized capital loss on investments                                                                                                             |  |                                      | 228    
|Net unrealized depreciation (appreciation) on investments                                                                                            |  |                                      | 9,699  
|Net deferred income tax provision (benefit)                                                                                                          |  |                                      | (1     
|Effects of changes in operating assets and liabilities:                                                                                              |  |                                      |        
|Accounts receivable and other current assets                                                                                                         |  |                                      | (1,056 
|Interest receivable                                                                                                                                  |  |                                      | (662   
|Prepaid assets                                                                                                                                       |  |                                      | 349    
|Payables and accrued expenses                                                                                                                        |  |                                      | 51     
|Purchase of investments in portfolio securities                                                                                                      |  |                                      | (53,847
|Proceeds from redemption of investments in portfolio securities                                                                                      |  |                                      | 26,888 
|Purchase of investments in U.S. Treasury Bills                                                                                                       |  |                                      | (45,999
|Proceeds from redemption of investments in U.S. Treasury Bills                                                                                       |  |                                      | 46,000 
|Net cash provided by (used in) operating activities                                                                                                  |  |                                      | (26,482
|Cash flows from financing activities                                                                                                                 |  |                                      |        
|Borrowings under revolving credit facilities                                                                                                         |  |                                      | 72,000 
|Repayments on revolving credit facilities                                                                                                            |  |                                      | (59,500
|Dividends paid                                                                                                                                       |  |                                      | (3,363 
|Net cash provided by (used in) financing activities                                                                                                  |  |                                      | 9,137  
|Net increase (decrease) in cash and cash equivalents                                                                                                 |  |                                      | (17,345
|Cash and cash equivalents, beginning of period                                                                                                       |  |                                      | 47,655 
|Cash and cash equivalents, end of period                                                                                                             |  | $                                    | 30,310 



(See accompanying notes to consolidated
financial statements)



4







NGP CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2013

(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)              |  |                            |  |                                                   |   |           |        |  |      |        |       
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |       
|Pallas
    Contour Mining, LLC                                        |  | Coal
    Mining            |  | Senior
    Secured Term Loan                      |   | $         | 9,614  |  |      | $      | 9,662  |                    | 
|                                                                      |  |                            |  | (12%, due
    10/14/2015)                         |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | 800 Membership
    Units representing             |   |           |        |  |      |        | -      |                    | 
|                                                                      |  |                            |  | 80% of the
    common equity (15)                 |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Rubicon Energy Partners,                                              |  | Oil & Natural Gas          |  | 4,000 LLC Units -                                 |   |           |        |  |      |        | -      |                    | 
|LLC (9)                                                               |  | Production and Development |  | 50% ownership of the assets                       |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Spirit Resources, LLC                                                 |  | Oil & Natural Gas          |  | Tranche A - Senior Secured Term Loan              |   |           | 5,500  |  |      |        | 5,358  |                    | 
|                                                                      |  | Production and Development |  | (The greater of 8% or LIBOR + 4%,                 |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | due 4/28/2015)                                    |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | Tranche B - Senior Secured Term Loan              |   |           | 1,486  |  |      |        | 1,486  |                    | 
|                                                                      |  |                            |  | (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) |  |                            |  |                                                   | $ | 24,516    |        |  | $    | 23,141 |       
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Affiliate Investments - (5% to 25% owned)                             |  |                            |  |                                                   |   |           |        |  |      |        |       
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |       
|OCI Holdings, LLC                                                     |  | Home Health Services       |  | Subordinated Note                                 |   | $         | 15,035 |  |      | $      | 14,743 |                    | 
|                                                                      |  |                            |  | (The greater of 11% or LIBOR + 10%                |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | cash plus 2% PIK, due 8/15/2018)                  |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | NGP/OCI Investments, LLC Class A                  |   |           |        |  |      |        | 2,500  |                    | 
|                                                                      |  |                            |  | Units representing 24.07% ownership               |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | of OCI Holdings, LLC                              |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Resaca Exploitation, Inc.                                             |  | Oil & Natural Gas          |  | Senior Unsecured Term Loan                        |   |           | 13,391 |  |      |        | 13,268 |                    | 
|                                                                      |  | Production and Development |  | (9.5% cash, 12% PIK or 14%                        |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | default, due 12/31/2014) (13)                     |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | Common Stock (1,360,972 shares) -                 |   |           |        |  |      |        | 3,235  |                    | 
|                                                                      |  |                            |  | representing 6.56% of the outstanding             |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | common stock (3) (8)                              |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | Warrants (10)                                     |   |           |        |  |      |        | 250    |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Subtotal Affiliate Investments
    - (5% to 25% owned)                |  |                            |  |                                                   | $ | 33,996    |        |  | $    | 31,127 |       
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Non-affiliate Investments - (Less than 5% owned)                      |  |                            |  |                                                   |   |           |        |  |      |        |       
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |       
|ATP Oil & Gas Corporation                                             |  | Oil & Natural Gas          |  | Limited Term Royalty Interest                     |   |           |        |  |      | $      | 31,685 |                    | 
|                                                                      |  | Production and Development |  | (Notional rate of 13.2%) (5)                      |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|BP Corporation North America,                                         |  | Oil & Natural Gas          |  | Put options to sell up to 54,849 Bbls of          |   |           |        |  |      |        | 151    |                    | 
|Inc.                                                                  |  | Production and Development |  | crude oil at a strike price of $65.00 per Bbl.    |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | 6 monthly contracts expiring through              |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | September 30, 2013 (3) (5)                        |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Castex Energy Development                                             |  | Oil & Natural Gas          |  | Senior Secured Term Loan                          |   |           | 27,500 |  |      |        | 27,179 |                    | 
|Fund, LP                                                              |  | Production and Development |  | (The greater of 11.5% or LIBOR +                  |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | 10.5%, due 12/31/2014)                            |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | Class B LP Units - 5% (12)                        |   |           |        |  |      |        | 0      |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Castex Energy 2005, LP                                                |  | Oil & Natural Gas          |  | Redeemable Preferred LP Units                     |   |           | 50,000 |  |      |        | 50,043 |                    | 
|                                                                      |  | Production and Development |  | (current pay 8% cash, due 7/1/2016) (14)          |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Chroma Exploration &                                                  |  | Oil & Natural Gas          |  | 12,301 Shares Series A Participating              |   |           |        |  |      |        | 2,222  |                    | 
|Production, Inc.                                                      |  | Production and Development |  | Convertible Preferred Stock (6)                   |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | 11,234 Shares Series AA Participating             |   |           |        |  |      |        | 2,090  |                    | 
|                                                                      |  |                            |  | Convertible Preferred Stock (6)                   |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  | 8.11 Shares Common Stock                          |   |           |        |  |      |        | -      |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|Globe BG, LLC                                                         |  | Coal Production            |  | Contingent earn-out related to July 2011 sale     |   |           |        |  |      |        | -      |                    | 
|                                                                      |  |                            |  | of royalty interests in Alden Resources, LLC (11) |   |           |        |  |      |        |        |                    | 
|                                                                      |  |                            |  |                                                   |   |           |        |  |      |        |        |                    | 
|GMX Resources, Inc.                                                   |  | Oil & Natural Gas          |  | Senior Secured Second-Priority Notes              |   |           | 12,661 |  |      |        | 9,452  |                    | 
|                                                                      |  | Production and Development |  | (9%, due 3/2/2018) (6)                            |   |           |        |  |      |        |        |                    | 



(See accompanying notes to consolidated
financial statements)



5







NGP CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2013

(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 |  |                                |  |                                              |   |           |        |  |      |         |        
|Huff Energy Holdings, Inc.                                   |  | Oil & Natural Gas              |  | Senior Secured Term Loan                     |   | $         | 15,100 |  |      | $       | 15,100  |                | 
|                                                             |  | Production and Development     |  | (The greater of 11% or LIBOR +               |   |           |        |  |      |         |         |                | 
|                                                             |  |                                |  | 7% , due 4/15/2013) (16)                     |   |           |        |  |      |         |         |                | 
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|KOVA International, Inc.                                     |  | Medical Supplies               |  | Senior Subordinated Notes                    |   |           | 9,000  |  |      |         | 8,823   |                | 
|                                                             |  | Manufacturing and Distribution |  | (12.75%, due 8/15/2018)                      |   |           |        |  |      |         |         |                | 
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|Midstates Petroleum Company                                  |  | Oil & Natural Gas              |  | Senior Unsecured Notes                       |   |           | 14,000 |  |      |         | 14,426  |                | 
|                                                             |  | Production and Development     |  | (10.75%, due 10/1/2020) (3) (5)              |   |           |        |  |      |         |         |                | 
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|Myriant Corporation                                          |  | Alternative Fuels and          |  | 131,741 shares of common stock, representing |   |           |        |  |      |         | 419     |                | 
|                                                             |  | Specialty Chemicals            |  | 0.56% of the outstanding common shares       |   |           |        |  |      |         |         |                | 
|                                                             |  |                                |  | Warrants (7)                                 |   |           |        |  |      |         | 49      |                | 
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|Talos Production, LLC                                        |  | Oil & Natural Gas              |  | Senior Unsecured Notes                       |   |           |        |  |      |         |         |                | 
|                                                             |  | Production and Development     |  | (9.75%, due 2/15/2018) (3)                   |   |           | 25,000 |  |      |         | 24,852  |                | 
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|Subtotal Non-affiliate Investments - (Less than 5% owned)    |  |                                |  |                                              | $ | 186,491   |        |  | $    | 176,899 |        
|Subtotal Portfolio Investments (83.4% of total investments)  |  |                                |  |                                              | $ | 245,003   |        |  | $    | 231,167 |        
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|GOVERNMENT SECURITIES                                        |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|U.S. Treasury Bills (4)                                      |  |                                |  |                                              |   | $         | 46,000 |  |      | $       | 45,999  |                | 
|Subtotal Government Securities (16.6% of total investments)  |  |                                |  |                                              | $ | 45,999    |        |  | $    | 45,999  |        
|                                                             |  |                                |  |                                              |   |           |        |  |      |         |         |                | 
|TOTAL INVESTMENTS                                            |  |                                |  |                                              |   |           |        |  |      | $       | 291,002 |                | 



(See accompanying notes to consolidated
financial statements)



6









NGP
CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2013

(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, commodity derivative instruments 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) | Resaca Exploitation, Inc., or Resaca, stock is listed on the Alternative Investment Market of the London Stock Exchange, denominated
in British pounds and its reported fair value at March 31, 2013 has been converted to U.S. dollars.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | Assets of this portfolio company have been sold. The legal entity, in which we retain an equity interest, is in the process
of dissolution.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------

| | (10) | Resaca warrants expire 10 business days following termination of the credit agreement and entitle us to purchase up to 2,420,000
shares of Resaca common stock at a purchase price of $1.92 per share.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (11) | 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.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (12) | Lenders were granted 10% (5% net to us) of the LP interest in Castex Energy Development Fund, or Castex EDF, via Class B LP
units that will become effective at the earlier of maturity or a liquidity event in which the Castex EDF assets are sold.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (13) | In March 2012, Resaca received a default notice from the agent for its Senior Unsecured Term Loan, regarding the violation
of two financial covenants. Beginning March 2, 2012, the applicable interest rate under this loan is 14% as long as the covenant
violation persists.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (14) | 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 2005 LP (0.67% net to us).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (15) | The fair value of our Pallas Contour Mining, LLC membership units also includes the value attributable to our ownership of
800 membership units in Pallas Augering Mining, LLC. The assets and equity interests of Pallas Augering Mining, LLC are in the
process of being merged into Pallas Contour Mining, LLC.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (16) | In April 2013, we agreed to extend the maturity date of this term loan  to July 10, 2013 in exchange for a $0.1 million fee
and principal repayment of $0.5 million.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



(See accompanying notes to consolidated
financial statements)





7









NGP CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2012

(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)          |  |                            |  |                                                   |   |           |        |  |      |        |       
|Pallas Contour Mining, LLC                                        |  | Coal Mining                |  | Senior Secured Term Loan                          |   | $         | 8,108  |  |      | $      | 8,140  |                | 
|                                                                  |  |                            |  | (12%, due 10/14/2015)                             |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 800 Membership Units representing                 |   |           |        |  |      |        | -      |                | 
|                                                                  |  |                            |  | 80% of the common equity                          |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Rubicon Energy Partners,                                          |  | Oil & Natural Gas          |  | 4,000 LLC Units -                                 |   |           |        |  |      |        |        |                | 
|LLC (10)                                                          |  | Production and Development |  | 50% ownership of the assets                       |   |           |        |  |      |        | -      |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Subtotal Control Investments - Majority Owned (50% or more owned) |  |                            |  |                                                   | $ | 8,140     |        |  | $    | 8,608  |       
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Affiliate Investments - (5% to 25% owned)                         |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Resaca Exploitation, Inc.                                         |  | Oil & Natural Gas          |  | Senior Unsecured Term Loan                        |   | $         | 12,933 |  |      | $      | 12,795 |                | 
|                                                                  |  | Production and Development |  | (9.5% cash, 12% PIK or 14%                        |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | default, due 12/31/2014) (15)                     |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | Common Stock (1,360,972 shares) -                 |   |           |        |  |      |        | 3,235  |                | 
|                                                                  |  |                            |  | representing 6.56% of the outstanding             |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | common stock (3) (8)                              |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | Warrants (11)                                     |   |           |        |  |      |        | 250    |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Subtotal Affiliate Investments - (5% to 25% owned)                |  |                            |  |                                                   | $ | 16,280    |        |  | $    | 13,153 |       
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Non-affiliate Investments - (Less than 5% owned)                  |  |                            |  |                                                   |   |           |        |  |      |        |       
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|ATP Oil & Gas Corporation                                         |  | Oil & Natural Gas          |  | Limited Term Royalty Interest                     |   |           |        |  |      | $      | 36,614 |                | 
|                                                                  |  | Production and Development |  | (Notional rate of 13.2%) (5)                      |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|BP Corporation North America,                                     |  | Oil & Natural Gas          |  | Put options to sell up to 83,048 Bbls of          |   |           |        |  |      |        | 245    |                | 
|Inc.                                                              |  | Production and Development |  | crude oil at a strike price of $65.00 per Bbl.    |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 9 monthly contracts expiring through              |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | September 30, 2013 (3) (5)                        |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Castex Energy Development                                         |  | Oil & Natural Gas          |  | Senior Secured Term Loan                          |   |           | 27,500 |  |      |        | 27,141 |                | 
|Fund, LP                                                          |  | Production and Development |  | (The greater of 11.5% or LIBOR +                  |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 10.5%, due 12/31/2014)                            |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | Castex Class B Units - 5% (14)                    |   |           |        |  |      |        | 0      |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Castex Energy 2005, LP                                            |  | Oil & Natural Gas          |  | Redeemable Preferred LP Units                     |   |           | 50,000 |  |      |        | 50,046 |                | 
|                                                                  |  | Production and Development |  | (current pay 8% cash, due 7/1/2016) (16)          |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Chroma Exploration &                                              |  | Oil & Natural Gas          |  | 12,301 Shares Series A Participating              |   |           |        |  |      |        | 2,222  |                | 
|Production, Inc.                                                  |  | Production and Development |  | Convertible Preferred Stock (6)                   |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 11,234 Shares Series AA Participating             |   |           |        |  |      |        | 2,090  |                | 
|                                                                  |  |                            |  | Convertible Preferred Stock (6)                   |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 8.11 Shares Common Stock                          |   |           |        |  |      |        | -      |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|EP Energy, LLC                                                    |  | Oil & Natural Gas          |  | Senior Unsecured Notes                            |   |           | 10,000 |  |      |        | 10,000 |                | 
|                                                                  |  | Production and Development |  | (9.375%, due 5/1/2020) (3)                        |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|Globe BG, LLC                                                     |  | Coal Production            |  | Contingent earn-out related to July 2011 sale     |   |           |        |  |      |        | -      |                | 
|                                                                  |  |                            |  | of royalty interests in Alden Resources, LLC (13) |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  |                                                   |   |           |        |  |      |        |        |                | 
|GMX Resources, Inc.                                               |  | Oil & Natural Gas          |  | Senior Secured Second-Priority Notes              |   |           | 12,661 |  |      |        | 9,452  |                | 
|                                                                  |  | Production and Development |  | (9%, due 3/2/2018)                                |   |           |        |  |      |        |        |                | 
|                                                                  |  |                            |  | 2,975,098 Shares Common Stock (4)                 |   |           |        |  |      |        | 2,317  |                | 



(See accompanying notes to consolidated
financial statements)



8







NGP CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2012

(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 |  |                            |  |                                              |   |           |        |  |      |         |        
|Huff Energy Holdings, Inc.                                   |  | Oil & Natural Gas          |  | Senior Secured Term Loan                     |   | $         | 15,100 |  |      | $       | 15,100  |                | 
|                                                             |  | Production and Development |  | (The greater of 11% or LIBOR +               |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | 7% , due 4/15/2013) (9)                      |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|Midstates Petroleum Company, Inc.                            |  | Oil & Natural Gas          |  | Senior Subordinated Notes                    |   |           | 14,000 |  |      |         | 14,435  |                | 
|                                                             |  | Production and Development |  | (10.75%, due 10/1/2020) (3) (5)              |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|Myriant Corporation                                          |  | Alternative Fuels and      |  | 131,741 shares of common stock, representing |   |           |        |  |      |         | 419     |                | 
|                                                             |  | Specialty Chemicals        |  | 0.56% of the outstanding common shares       |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | Warrants (7)                                 |   |           |        |  |      |         | 49      |                | 
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|Southern Pacific Resource Corp.                              |  | Oil & Natural Gas          |  | Second Lien Term Loan                        |   |           | 9,740  |  |      |         | 9,850   |                | 
|                                                             |  | Production and Development |  | (The greater of 10.5% or LIBOR + 8.5% or     |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | the greater of 10.5% or Prime + 7.5%,        |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | due 1/07/2016) (5)                           |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|Spirit Resources, LLC                                        |  | Oil & Natural Gas          |  | Senior Secured Term Loan                     |   |           | 13,500 |  |      |         | 13,327  |                | 
|                                                             |  | Production and Development |  | (The greater of 12% or LIBOR + 8%,           |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | due 4/27/2015)                               |   |           |        |  |      |         |         |                | 
|                                                             |  |                            |  | Warrants (12)                                |   |           |        |  |      |         | 25      |                | 
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|Subtotal Non-affiliate Investments - (Less than 5% owned)    |  |                            |  |                                              | $ | 193,332   |        |  | $    | 191,853 |        
|Subtotal Portfolio Investments (82.27% of total investments) |  |                            |  |                                              | $ | 217,752   |        |  | $    | 213,614 |        
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|GOVERNMENT SECURITIES                                        |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|U.S. Treasury Bills (4)                                      |  |                            |  |                                              |   | $         | 46,000 |  |      | $       | 45,996  |                | 
|Subtotal Government Securities (17.73% of total investments) |  |                            |  |                                              | $ | 45,996    |        |  | $    | 45,996  |        
|                                                             |  |                            |  |                                              |   |           |        |  |      |         |         |                | 
|TOTAL INVESTMENTS                                            |  |                            |  |                                              |   |           |        |  |      | $       | 263,748 |                | 



(See accompanying notes to consolidated
financial statements)





9







NGP CAPITAL RESOURCES COMPANY

CONSOLIDATED SCHEDULE OF INVESTMENTS

December 31, 2012

(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, commodity derivative instruments 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) | Resaca Exploitation, Inc., or Resaca, stock is listed on the Alternative Investment Market of the London Stock Exchange, denominated
in British pounds and its reported fair value at December 31, 2012 has been converted to U.S. dollars.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) | The Black Pool Energy Partners, LLC, or Black Pool, Term Loan originally matured on October 24, 2011 without repayment. On
September 21, 2012, we, Black Pool and Huff Energy Holdings, Inc., or HEH, executed an amendment (effective July 31, 2012) whereby
HEH unconditionally assumed the Black Pool Term Loan and became the new borrower.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (10) | Assets of this portfolio company have been sold. The legal entity, in which we retain an equity interest, is in the process
of dissolution.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------

| | (11) | Resaca warrants expire 10 business days following termination of the credit agreement and entitle us to purchase up to 2,420,000
shares of Resaca common stock at a purchase price of $1.92 per share.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (12) | Spirit Resources, LLC penny warrants expire five years after repayment of principal and interest and entitle us to acquire
33% of the Units of Membership Interest.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (13) | 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.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (14) | Lenders were granted 10% (5% net to us) of the LP interest in Castex Energy Development Fund, or Castex EDF, via Class B LP
units that will become effective at the earlier of maturity or a liquidity event in which the Castex EDF assets are sold.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (15) | In March 2012, Resaca received a default notice from the agent for its Senior Unsecured Term Loan, regarding the violation
of two financial covenants. Beginning March 2, 2012, the applicable interest rate under this loan is 14% as long as the covenant
violation persists.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (16) | 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 2005 LP (0.67% net to us).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(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)                                                                        |  | 2013                                 |        
|Net asset value, beginning of period                                                       |  | $                                    | 9.57   
|Net investment income                                                                      |  |                                      | 0.11   
|Net realized and unrealized gain (loss) on investments (2)                                 |  |                                      | (0.47  
|Net increase (decrease) in net assets resulting from operations                            |  |                                      | (0.36  
|Dividends declared                                                                         |  |                                      | (0.16  
|Net asset value, end of period                                                             |  | $                                    | 9.05   
|                                                                                           |  |                                      |        
|Market value, beginning of period                                                          |  | $                                    | 7.22   
|Market value, end of period                                                                |  | $                                    | 7.11   
|Market value return  (3)                                                                   |  |                                      | 0.7    
|Net asset value return (3)                                                                 |  |                                      | (3.3   
|                                                                                           |  |                                      |        
|Ratios and Supplemental Data                                                               |  |                                      |        
|($ and shares in thousands)                                                                |  |                                      |        
|Net assets, end of period                                                                  |  | $                                    | 190,296
|Average net assets                                                                         |  | $                                    | 199,103
|Common shares outstanding end of period                                                    |  |                                      | 21,020 
|Net investment income/average net assets (4)                                               |  |                                      | 4.7    
|Portfolio turnover rate (5)                                                                |  |                                      | 12.3   
|Total operating expenses/average net assets (4) (6)                                        |  |                                      | 7.1    
|Net increase (decrease) in net assets resulting from operations/average net assets
    (4) |  |                                      | (15.5  
|                                                                                           |  |                                      |        
|Expense Ratios (as a percentage of average net assets) (4)                                 |  |                                      |        
|Interest expense and bank fees                                                             |  |                                      | 1.7    
|Management and incentive fees                                                              |  |                                      | 2.8    
|Other operating expenses (6)                                                               |  |                                      | 2.6    
|Total operating expenses (6)                                                               |  |                                      | 7.1    



| | (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) | Portfolio turnover rate for the quarter ended March 31, 2012 has been corrected from 11.6%.                                                                                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | Net of legal fee reimbursements of $1.7 million in 2013. Excluding these legal fee reimbursements, other operating
                     expense ratio and total operating expense ratios would have been 6.1% and 10.5%, respectively, for the three months ended
                     March 31, 2013.



11











NGP CAPITAL RESOURCES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

(Unaudited)



Note 1:  Organization



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 early 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.



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, 2012.



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.



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 19, 2012     |  |           | $0.12 |  |             | April 2, 2012      |             
|June 12, 2012      |  |           | 0.13  |  |             | June 29, 2012      |             
|September 11, 2012 |  |           | 0.16  |  |             | September 28, 2012 |             
|December 11, 2012  |  |           | 0.16  |  |             | December 28, 2012  |             
|March 18, 2013     |  |           | 0.16  |  |             | March 29, 2013     |             



12







Note 3:  Credit Facilities and Borrowings



On December 6, 2011, we entered into a
$72.0 million Amended and Restated Revolving Credit Agreement, or the Investment Facility.  The total amount outstanding
under the Investment Facility was $72.0 million and $59.5 million, as of March 31, 2013 and December 31, 2012, 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 August 31, 2014, 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, 2013, the weighted average interest rate on our outstanding balance of $72.0 million was 4.6%.  We repaid $23.5
million of this balance in April 2013.  As of March 31, 2013, there was no additional amount available for borrowing under
the Investment Facility.



On March 31, 2011, we entered into a $30.0
million Treasury Secured Revolving Credit Agreement, or the Treasury Facility, which 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 25, 2012, we entered into a second amendment to the Treasury Facility which increased
the aggregate commitment amount from $30.0 million to $45.0 million. As amended, the Treasury Facility matures on September 25,
2013 and bears interest, at our option, at either (i) LIBOR plus 100 basis points or (ii) the base rate.  We have the right
at any time to prepay the loans, in whole or in part, without premium or penalty.  As of March 31, 2013, 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 1.24% (LIBOR plus 100 basis points).



The Investment Facility and Treasury Facility
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, 2013 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, 2013 and 2012, 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, 2013, we had cumulative net capital losses of $73.9 million and cumulative net unrealized capital depreciation of $10.7 million.  We
did not incur or pay any Capital Gains Fees for the three-month periods ended March 31, 2013 and 2012.



13







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, 2012, our Board of Directors,
including all of the independent directors, approved an extension of the Investment Advisory Agreement through November 9, 2013.



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.



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 $236,000 and $299,000 to our Administrator
as of March 31, 2013 and December 31, 2012, 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, 2012, our Board of Directors,
including all of the independent directors, approved an extension of the Administration Agreement through November 9, 2013.



14







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, 2013, we had investments
in or commitments to fund investments in 15 portfolio companies totaling $254.5 million.  Of this total, $250.1 million was
outstanding and $4.4 million remained committed and available to fund. Generally, these commitments have fixed expiration dates,
and we may not fund the entire $4.4 million of commitments before they expire.  We do not report the unused 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.  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.



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, and received
authorization to incur debtor-in-possession financing of approximately $600 million. We own limited term overriding royalty interests,
or ORRIs, in certain offshore oil and gas producing properties operated by ATP.  On August 23, 2012, the bankruptcy judge
presiding over ATP’s case signed an order (Docket No. 191) allowing ATP to pay amounts received after August 17, 2012 to
those parties entitled to receive them, including the ORRI holders, provided that the owners of the ORRIs execute the 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, 2013, our unrecovered investment was $32.1
million, and we had received aggregate production payments of $15.1 million subject to the Disgorgement Agreement. In addition,
as of March 31, 2013, we had incurred legal and consulting fees totaling $1.7 million in connection with the enforcement of our
rights under the ORRIs, which will ultimately be added to the unrecovered investment balance under the terms of the ORRI agreements.
These legal and consulting fees, totaling $1.7 million and $0.6 million as of March 31, 2013 and December 31, 2012, 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 in the U.S. Bankruptcy Court, seeking a declaration that the ORRIs are valid, fully enforceable, and not voidable. 
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.  This lawsuit is currently pending and trial is scheduled for July 25, 2013. 
We intend to vigorously defend our position that the ORRIs constitute real property interests and are fully valid and enforceable
pursuant to their terms.



Separately, the Official Committee of Unsecured
Creditors of ATP (the “Committee”) filed a motion (the “Motion”) requesting authority from the U.S. Bankruptcy
Court to be allowed to bring a fraudulent transfer action against us, in which the Committee seeks to 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.  The Company vigorously denies these
allegations and opposes the Motion.  The Motion has been abated until further notice.



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. As a result of the shut-in of the Gomez wells, our cash flows attributable to the ORRIs will be negatively
affected.



15







GMX Resources, Inc.On April 1,
2013, GMX Resources, or GMX, and certain of its affiliates filed petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code. In connection with its bankruptcy filing, GMX announced that it is pursuing an asset purchase agreement with certain senior
first-lien creditors to acquire substantially all of GMX’s operating assets and undeveloped acreage. Once the contemplated
asset purchase agreement with such senior creditors is finalized, the sale would then be subject to a public auction, pursuant
to procedures to be approved by the Bankruptcy Court. We hold $12.7 million face amount of GMX’s Senior Secured Second-Priority
Notes due 2018 (the “GMX 2018 Notes”), which are subordinate to the debt held by the senior creditors mentioned above.
As a result of these proceedings, we reduced the estimated fair value of our investment in the GMX 2018 Notes from $7.4 million
as of December 31, 2012 to zero as of March 31, 2013.



Note 7:  Fair Value



Investments consisted of the following as of March
31, 2013 and December 31, 2012:



|                                     |  | March
    31, 2013 |         |  | December
    31, 2012 | 
|------------------------------------ |  | ------------------ | ------- |  | --------------------- | 
|                                     |  |                    |         |  | %
    of              | 
|(Dollar
    amounts in thousands)    |  | Cost               |         |  | Total                 | 
|Portfolio investments                |  |                    |         |  |                       | 
|Senior
    secured debt              |  | $                  | 58,785  |  |                       | 
|Subordinated
    debt                |  |                    | 85,564  |  |                       | 
|Limited
    term royalties           |  |                    | 31,685  |  |                       | 
|Contingent
    earn-out              |  |                    | -       |  |                       | 
|Commodity
    derivative instruments |  |                    | 151     |  |                       | 
|Royalty
    interests                |  |                    | 10      |  |                       | 
|Redeemable
    preferred units       |  |                    | 50,043  |  |                       | 
|Equity
    securities                |  |                    |         |  |                       | 
|Membership
    and partnership units |  |                    | 10,919  |  |                       | 
|Participating
    preferred stock    |  |                    | 4,312   |  |                       | 
|Common
    stock                     |  |                    | 3,235   |  |                       | 
|Warrants                             |  |                    | 299     |  |                       | 
|Total
    equity securities          |  |                    | 18,765  |  |                       | 
|Total
    portfolio investments      |  |                    | 245,003 |  |                       | 
|Government securities                |  |                    |         |  |                       | 
|U.S.
    Treasury Bills              |  |                    | 45,999  |  |                       | 
|Total
    investments                |  | $                  | 291,002 |  |                       | 



We account for all of the assets in our
portfolio at fair value, following the provisions of the FASB 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.



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 has not retained an independent valuation firm in
                                                                    connection with any fair value estimates during the three
                                                                    months ended March 31, 2013 or the year ended December 31,
                                                                    2012.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16







| | • | 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.



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 energy 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 in energy 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.



17







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.



Contingent Earn-Out: Our contingent
earn-out investment resulted from the sale of our investment in Alden Resources, LLC to Globe BG, LLC (“Globe”) 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 may 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 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, 2013 or December 31, 2012. 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, 2013 and December 31, 2012.



18







|                                           |  | Fair Value Measurements as of March 31, 2013 |        
|------------------------------------------ |  | -------------------------------------------- | -------
|                                           |  | (In Thousands)                               |        
|                                           |  |                                              |        
|                                           |  |                                              |        
|                                           |  |                                              |        
|                                           |  |                                              |        
|                                           |  | Total                                        |        
|Portfolio investments                      |  |                                              |        
|Control investments - majority owned       |  |                                              |        
|Senior secured debt                        |  | $                                            | 16,600 
|Royalty interests                          |  |                                              | 475    
|Equity securities                          |  |                                              | 6,066  
|Total control investments - majority owned |  |                                              | 23,141 
|Affiliate investments                      |  |                                              |        
|Subordinated debt                          |  |                                              | 28,426 
|Equity securities                          |  |                                              | 2,701  
|Total affiliate investments                |  |                                              | 31,127 
|Non-affiliate investments                  |  |                                              |        
|Senior secured debt                        |  |                                              | 42,600 
|Subordinated debt                          |  |                                              | 49,290 
|Limited term royalties                     |  |                                              | 32,062 
|Contingent earn-out                        |  |                                              | 60     
|Commodity derivative instruments           |  |                                              | -      
|Redeemable preferred units                 |  |                                              | 51,290 
|Equity securities                          |  |                                              | 1,597  
|Total non-affiliate investments            |  |                                              | 176,899
|Total portfolio investments                |  |                                              | 231,167
|Government securities                      |  |                                              |        
|U.S. Treasury Bills                        |  |                                              | 45,999 
|Total investments                          |  | $                                            | 277,166



|                                           |  | Fair Value Measurements as of December 31, 2012 |        
|------------------------------------------ |  | ----------------------------------------------- | -------
|                                           |  | (In Thousands)                                  |        
|                                           |  |                                                 |        
|                                           |  |                                                 |        
|                                           |  |                                                 |        
|                                           |  |                                                 |        
|                                           |  | Total                                           |        
|Portfolio investments                      |  |                                                 |        
|Control investments - majority owned       |  |                                                 |        
|Senior secured debt                        |  | $                                               | 8,108  
|Equity securities                          |  |                                                 | 500    
|Total control investments - majority owned |  |                                                 | 8,608  
|Affiliate investments                      |  |                                                 |        
|Subordinated debt                          |  |                                                 | 12,933 
|Equity securities                          |  |                                                 | 220    
|Total affiliate investments                |  |                                                 | 13,153 
|Non-affiliate investments                  |  |                                                 |        
|Senior secured debt                        |  |                                                 | 56,100 
|Subordinated debt                          |  |                                                 | 43,457 
|Limited term royalties                     |  |                                                 | 37,026 
|Contingent earn-out                        |  |                                                 | 240    
|Commodity derivative instruments           |  |                                                 | 9      
|Redeemable preferred units                 |  |                                                 | 51,180 
|Equity securities                          |  |                                                 | 3,841  
|Total non-affiliate investments            |  |                                                 | 191,853
|Total portfolio investments                |  |                                                 | 213,614
|Government securities                      |  |                                                 |        
|U.S. Treasury Bills                        |  |                                                 | 45,996 
|Total investments                          |  | $                                               | 259,610



19







The following tables present roll-forwards
of the changes in the estimated fair value during the three-month periods ended March 31, 2013 and 2012 for all investments for
which we determine estimated fair value using unobservable (Level 3) factors.  During the three-month period ended March
31, 2013, our investment in Spirit Resources, LLC changed from a Non-Affiliate investment to a Control-Majority Owned investment.
During the three-month period ended March 31, 2012, none of the investments in portfolio companies changed between the categories
of Control Investments – 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, 2013 and 2012.



Fair Value Measurements For The Three
Months Ended March 31, 2013, Using Unobservable Inputs (Level 3)

(Dollar Amounts in Thousands)



|                                                  |  |                |         |   |                 |   |        | 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 |     
|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. We present net unrealized gains
(losses) on our consolidated statements of operations as “Net unrealized appreciation (depreciation) on investments.”



Fair Value Measurements For
The Three Months Ended March 31, 2012, Using Unobservable Inputs (Level 3)

(Dollar Amounts in Thousands)



|                                                  |  |                |         |   |                 |   |        | 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 |      
|Fair value at December 31, 2011                   |  | $              | 113,511 |   |                 | $ | 11,265 |                    |  | $ | 7,294      |   |  | $           | 3,270
|Total gains, (losses) and amortization:           |  |                |         |   |                 |   |        |                    |  |   |            |   |  |             |      
|Net realized gains (losses)                       |  |                | -       |   |                 |   | -      |                    |  |   | (30        | ) |  |             | -    
|Net unrealized gains (losses)                     |  |                | (522    | ) |                 |   | (105   | )                  |  |   | 1,483      |   |  |             | 100  
|Net amortization of premiums, discounts and fees  |  |                | 199     |   |                 |   | 11     |                    |  |   | (22        | ) |  |             | -    
|New investments, repayments and settlements, net: |  |                |         |   |                 |   |        |                    |  |   |            |   |  |             |      
|New investments                                   |  |                | 800     |   |                 |   | 7,227  |                    |  |   | -          |   |  |             | -    
|Payment-in-kind                                   |  |                | -       |   |                 |   | 364    |                    |  |   | -          |   |  |             | -    
|Repayments and settlements                        |  |                | (20,145 | ) |                 |   | (18    | )                  |  |   | (3,152     | ) |  |             | -    
|Fair value at March 31, 2012                      |  | $              | 93,843  |   |                 | $ | 18,744 |                    |  | $ | 5,573      |   |  | $           | 3,370



All of the $1.0 million in net unrealized
gains presented in the table above was attributable to assets we held at March 31, 2012.



20







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, 2013.





|                                   |  | Fair
    Value     |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|---------------------------------- |  | ------------------ | ------- |  | --------- | ------------------------ | ------------ | ---------------------------------------- | ------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | 
|                                   |  | as
    of          |         |  |           |                          | Significant  |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  | March
    31, 2013 |         |  | Valuation |                          | Unobservable |                                          | Range
    of |  |                                                                                                                                                                                                                                                                                    | Weighted | 
|Type
    of Investment             |  | (in
    thousands) |         |  | Technique |                          | Inputs       |                                          | Inputs       |  |                                                                                                                                                                                                                                                                                    | Average  | 
|Senior
    debt securities and     |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|limited
    term royalties         |  | $                  | 91,262  |  |           | Discounted
    cash flow |              | Discount
    rate                        |              |  | 8.0%
                                                                                                                                   -
                                                                                                                                   15.0% |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|Subordinated
    debt securities   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|and
    redeemable preferred units |  |                    | 88,716  |  |           | Discounted
    cash flow |              | Discount
    rate                        |              |  | 10%
                                                                                                   - 20%                                                                                                                                                                       |          | 
|                                   |  |                    |         |  |           | Market
    comparables   |              | Reserve
    multiples (1)                |              |  | $9.00
                                                                                                   - $15.00                                                                                                                                                                  |          | 
|                                   |  |                    |         |  |           |                          |              | Production
    multiples (2)             |              |  | $24.00
                                                                                                   - $83.00                                                                                                                                                                 |          | 
|                                   |  |                    |         |  |           |                          |              | EBITDA
    multiples                     |              |  | 3.0x
                                                                                                                        - 9.0x                                                                                                                                                |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  |                    | 88,716  |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|Royalty
    interests and equity   |  |                    | 9,443   |  |           | Discounted
    cash flow |              | Discount
    rate                        |              |  | 10%
                                                                                                   - 20%                                                                                                                                                                       |          | 
|securities                         |  |                    |         |  |           | Market
    comparables   |              | Reserve
    multiples (1)                |              |  | $6.00
                                                                                                   - $15.00                                                                                                                                                                  |          | 
|                                   |  |                    |         |  |           |                          |              | Discount
    for lack of marketability   |              |  | 20%
                                                                                                   - 40%                                                                                                                                                                       |          | 
|                                   |  |                    |         |  |           |                          |              | EBITDA
    multiples                     |              |  | 3.0x
                                                                                                   - 8.0x                                                                                                                                                                     |          | 
|                                   |  |                    | 831     |  |           | Option
    pricing model |              | Implied
    volatility                   |              |  | 69%
                                                                                                   - 88%                                                                                                                                                                       |          | 
|                                   |  |                    |         |  |           |                          |              | Discount
    for lack of marketability   |              |  | 40%                                                                                                                                                                                                                                                                                |          | 
|                                   |  |                    |         |  |           |                          |              | Discount
    for potential dilution      |              |  | 30%                                                                                                                                                                                                                                                                                |          | 
|                                   |  |                    | 475     |  |           | Market
    comparables   |              | Cash
    flow multiples                  |              |  | 6.0x
                                                                                                   - 8.0x                                                                                                                                                                     |          | 
|                                   |  |                    |         |  |           |                          |              | Discount
    rate                        |              |  | 10%
                                                                                                                        - 20%                                                                                                                                                  |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  |                    | 10,749  |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|Contingent
    earn-out            |  |                    | 60      |  |           | Discounted
    cash flow |              | Estimated
    annual coal production (3) |              |  | 414
                                                                                                   - 632                                                                                                                                                                       |          | 
|                                   |  |                    |         |  |           |                          |              | Cost
    of production per ton           |              |  | $88
                                                                                                   - $130                                                                                                                                                                      |          | 
|                                   |  |                    |         |  |           |                          |              | Discount
    rate                        |              |  | 20%                                                                                                                                                                                                                                                                                |          | 
|                                   |  |                    |         |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 
|                                   |  | $                  | 190,787 |  |           |                          |              |                                          |              |  |                                                                                                                                                                                                                                                                                    |          | 



| | (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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | In thousands of tons.
| | --- | ---------------------



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. As shown on our consolidated schedule of investments at March
31, 2013, we had oil put options expiring from April 2013 through September 2013 with an aggregate cost and fair value of $151,000
and $0, respectively.





|                                                      |  | For the Three Months Ended March 31, |    
|----------------------------------------------------- |  | ------------------------------------ | ---
|(In thousands)                                        |  | 2013                                 |    
|                                                      |  |                                      |    
|Unrealized gains (losses) on commodity derivatives    |  | $                                    | 84 
|Realized gains (losses) on commodity derivatives      |  |                                      | (94
|                                                      |  |                                      |    
|Net gain (losses) on commodity derivative instruments |  | $                                    | (10



21







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 2012 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 early 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.



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.



22







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.



Portfolio and Investment Activity



On April 22, 2013, we provided $17.5 million
of financing to Nekoosa Coated Products, or NEK, a private manufacturer of carbonless sheets and specialty products used in the
commercial printing industry, in the form of a Second Lien Term Loan, to facilitate the acquisition of IGI Corp., a leading manufacturer
of specialty pressure sensitive graphic arts materials used in the signage and visual communications industry. The Second Lien
Term Loan earns interest payable in cash at an annual rate of 13% plus paid-in-kind interest of 2% per annum and matures on October
19, 2018.



In 2011 and 2012, we purchased from ATP
Oil & Gas Corporation, or ATP, limited-term ORRIs in certain offshore oil and gas producing properties operated by ATP in
the Gulf of Mexico, including $25.0 million advanced on July 3, 2012. Under this arrangement, we own 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 ORRI in ATP’s
Gomez and Telemark properties. The terms of the ORRI provide that it will terminate after we receive payments that equal our investment
in the ORRI plus a time-value factor that is calculated 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, and received authorization to incur debtor-in-possession financing of approximately
$600 million. ATP failed or refused to deliver our proportionate share of production proceeds for the production months of May
and June 2012, which proceeds were due to be distributed on July 31, 2012 and August 31, 2012, respectively. On August 23, 2012,
the bankruptcy judgepresiding over ATP’s case signed an order allowing ATP to pay amounts received after August
17, 2012 to those parties entitled to receive them, including the ORRI holders, provided that the owners of the ORRIs execute
the 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. On October 17, 2012, we filed a lawsuit against
ATP in the U.S. Bankruptcy Court, seeking a declaration that the ORRIs are valid, fully enforceable, and not voidable. ATP has
responded by seeking a determination that the ORRIs are not enforceable as a conveyance, but rather are in the nature of a debt
instrument. In that connection, ATP seeks disgorgement of amounts paid to us in accordance with the Disgorgement Agreement. This
lawsuit is currently pending and trial is scheduled for July 25, 2013. We intend to vigorously defend our position that the ORRIs
constitute real property interests and are fully valid and enforceable pursuant to their terms. Our unrecovered investment as
of March 31, 2013 was $32.1 million, and we had received aggregate production payments of $15.1 million subject to the Disgorgement
Agreement. In addition, as of March 31, 2013, we had incurred legal and consulting fees totaling $1.7 million in connection with
the enforcement of our rights under the ORRIs, which will ultimately be added to the unrecovered investment balance under the
terms of the ORRI agreements. These legal and consulting fees, totaling $1.7 million and $0.6 million as of March 31, 2013 and
December 31, 2012, respectively, are included in accounts receivable and other current assets on our consolidated balance sheets.



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. As a result of the shut-in of the Gomez wells, our cash flows attributable to the ORRIs will be negatively
affected, but we should continue to receive our share of monthly production payments attributable to the Telemark properties, subject
to the Disgorgement Agreement referred to above. Of the $6.2 million of ORRI distribution we received in the first quarter of
2013, $2.8 million was attributable to Gomez production and $3.4 million was attributable to Telemark production.



On April 1, 2013, GMX Resources, or GMX,
and certain of its affiliates filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. In connection with its
bankruptcy filing, GMX announced that it is pursuing an asset purchase agreement with certain senior first-lien creditors to acquire
substantially all of GMX’s operating assets and undeveloped acreage. Once the contemplated asset purchase agreement with
such senior creditors is finalized, the sale would then be subject to a public auction, pursuant to procedures to be approved
by the Bankruptcy Court. We hold $12.7 million face amount of GMX’s Senior Secured Second-Priority Notes due 2018, or the
GMX 2018 Notes, which are subordinate to the debt held by the senior creditors mentioned above. As a result of these proceedings,
we reduced the estimated fair value of our investment in the GMX 2018 Notes to zero as of March 31, 2013, resulting in an unrealized
loss of $7.4 million, or $0.35 per share.



On February 15, 2013, we closed a $17.5
million investment in OCI Holdings, LLC, or OCI. Our investment in OCI includes a $15.0 million Subordinated Note and a $2.5 million
direct equity co-investment. OCI is a home health provider of physical, occupational and speech therapy services to pediatric
patients in the state of Texas. Proceeds from the investment were used to refinance OCI and to finance OCI’s strategic acquisition
of a provider of similar services. The OCI Subordinated Note matures August 15, 2018 and earns interest payable in cash at a rate
of 11% per annum (LIBOR + 10%) plus paid-in-kind interest of 2% per annum.



23







On February 15, 2013, we provided $9.0
million of financing to KOVA International, Inc., or KOVA, in the form of Senior Subordinated Notes, to facilitate the acquisition
of the urinalysis division of Hycor Biomedical, Inc. by a group of private equity sponsors. Since 1974, the KOVA product lines
have been among the leading disposable plastics and liquid controls products used in the urinalysis testing market. The KOVA Senior
Subordinated Notes earn interest payable in cash at an annual rate of 12.75% and mature on August 15, 2018.



On February 6, 2013, we purchased $20.0
million of the $300 million 9.75% Senior Notes offering issued by Talos Production LLC and Talos Production Finance Inc., collectively,
Talos, to partially fund Talos’s acquisition of Energy Resource Technology GOM, Inc., the oil and gas subsidiary of Helix
Energy Solutions Group, Inc. On February 15, 2013, we purchased an additional $5.0 million face value of the Talos Senior Notes
in the secondary market. Talos is headquartered in Houston, Texas, and its parent company is a portfolio company of funds affiliated
with Apollo Global Management, LLC and Riverstone Holdings LLC, which committed up to $600 million in equity to Talos’s
parent company in February 2012. The Talos Senior Notes mature February 15, 2018, and were issued at 99.025 for an effective yield
of 10.0% per annum.



On January 25, 2013, we restructured our
$13.5 million Senior Secured Term Loan, or the Original Term Loan, with Spirit Resources, LLC, or Spirit. Under the terms of the
restructuring, (i) $8.0 million of the Original Term Loan was converted into Preferred Units, with the remaining $5.5 million
structured as a Senior Secured Tranche A Term Loan; (ii) we provided $4.5 million of additional borrowing capacity in the form
of a Senior Secured Tranche B Term Loan; (iii) we received a 3% overriding royalty interest in Spirit’s oil and gas properties;
and (iv) we conveyed our 33% penny warrants back to Spirit. The Tranche A Term Loan matures April 28, 2015 and earns interest
payable monthly in cash at an annual rate of the greater of 8% or LIBOR + 4%. The Tranche B Term Loan matures October 28, 2015
and initially earns interest payable-in-kind at an annual rate of the greater of 15% or LIBOR + 11%. Beginning in January 2015,
interest on the Tranche B Term Loan is payable monthly in cash at an annual rate of the greater of 13% or LIBOR + 9%. Borrowings
under the Tranche B Term Loan will be used to execute relatively low-risk, high return development plans at Spirit’s oil
and gas properties and to provide additional working capital. The Preferred Units represent a preferred interest on 100% of any
equity distributions from Spirit until certain hurdles are met, after which Spirit management would participate in 25% of any
such distributions.



On January 25, 2013,
Southern Pacific Resource Corp., or STP, repaid its debt obligations under its $272.2 million Second Lien Term Loan, including
the $9.8 million face amount that we held, with a 1% call premium. Our investment in the STP Second Lien Term Loan, which was
initially funded in the first quarter of 2012, generated an internal rate of return of 10.7% with a return on investment of 1.09x.



Also in January 2013,
we sold our remaining $10.0 million face amount of EP Energy, LLC Senior Unsecured Notes at a price of 113.375 resulting in a
realized capital gain of $1.3 million, or $0.06 per common share. Our total investment in EP Energy, LLC Senior Unsecured Notes,
which began as a $25 million participation in their original issuance in April 2012, generated an internal rate of return of 36.5%
with a return on investment of 1.16x.



From commencement of investment operations
in November 2004 through March 31, 2013, we have invested $1.1 billion in 45 portfolio companies and received principal repayments,
realizations and settlements of $813.9 million. The following table summarizes our investment activity for the three months ended
March 31, 2013 and 2012 (dollars in millions):



|                                                   |  | 2013 |       |   | 2012 |  
|-------------------------------------------------- |  | ---- | ----- | - | ---- | -
|Investment portfolio, beginning of period          |  | $    | 219.9 |   |      | $
|New investments                                    |  |      | 51.5  |   |      |  
|Additional investments in existing clients         |  |      | 3.5   |   |      |  
|Principal repayments, realizations and settlements |  |      | (24.8 | ) |      |  
|Investment portfolio, end of period                |  | $    | 250.1 |   |      | $
|                                                   |  |      |       |   |      |  
|Number of portfolio clients at end of period       |  |      | 15    |   |      |  



The table below shows our portfolio investments
by type as of March 31, 2013 and December 31, 2012. 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.



24













|                                 |  | March 31, 2013 |      |   | December 31, 2012       | 
|-------------------------------- |  | -------------- | ---- | - | ----------------------- | 
|                                 |  | Weighted       |      |   |                         | 
|                                 |  | Average        |      |   | Percentage of Portfolio | 
|                                 |  | Yields         |      |   | Cost                    | 
|Senior secured debt              |  |                | 11.7 | % |                         | 
|Subordinated debt                |  |                | 10.6 | % |                         | 
|Limited term royalties           |  |                | 13.7 | % |                         | 
|Contingent earn-out              |  |                | 0.0  | % |                         | 
|Commodity derivative instruments |  |                | 0.0  | % |                         | 
|Royalty interests                |  |                | 0.0  | % |                         | 
|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      |  |                | 9.9  | % |                         | 





As of March 31, 2013 and December 31, 2012,
the total fair value of our portfolio investments was $231.2 million and $213.6 million, respectively. Of those fair value totals,
approximately $190.8 million, or 83%, as of March 31, 2013, and $185.7 million, or 87%, as of December 31, 2012, are measured using
significant unobservable (i.e., Level 3) inputs.



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



|                                                                |  | March 31, 2013 |        |  | December 31, 2012 |  
|--------------------------------------------------------------- |  | -------------- | ------ |  | ----------------- | -
|(Dollars in thousands)                                          |  | Cost           |        |  | Fair Value        |  
|Non-accruing investments                                        |  |                |        |  |                   |  
|Chroma
    Exploration & Production, Inc.                       |  | $              | 4,312  |  |                   | $
|GMX
    Resources, Inc. subordinated notes (non-accrual 1/1/13) |  |                | 9,452  |  |                   |  
|Total
    non-accruing investments                              |  |                | 13,764 |  |                   |  
|Non-income producing investments                                |  |                |        |  |                   |  
|BP Corporation
    NA, Inc. put options                         |  |                | 151    |  |                   |  
|Castex
    Energy Development Fund, LP units                    |  |                | 0      |  |                   |  
|Globe
    BG, LLC (contingent Alden Resources royalty earn-out) |  |                | -      |  |                   |  
|GMX
    Resources, Inc. common stock (sold 3/01/13)             |  |                | -      |  |                   |  
|Myriant
    Corporation common stock and warrants               |  |                | 468    |  |                   |  
|NGP/OCI
    Investments, LLC Class A Units                      |  |                | 2,500  |  |                   |  
|Pallas
    Contour Mining, LLC units                            |  |                | -      |  |                   |  
|Resaca
    Exploitation, Inc. common stock and warrants         |  |                | 3,485  |  |                   |  
|Spirit Resources, LLC preferred
    units (acquired on 1/25/13) |  |                | 8,000  |  |                   |  
|Spirit
    Resources, LLC warrants (relinquished 1/25/13)       |  |                | -      |  |                   |  
|Total
    non-income producing investments                      |  |                | 14,604 |  |                   |  
|Total
    non-accruing and non-income producing investments     |  | $              | 28,368 |  |                   | $





Results of Operations



Investment Income



During the threemonths ended March 31, 2013, our total investment income was $5.8 million, increasing $0.2 million, or 3%, compared to the
corresponding period of 2012. The small increase in 2013 was primarily attributable to higher overall portfolio balances offset
by lower weighted average yields. Our portfolio balance, on a cost basis, increased from $158.1 million at March 31, 2012 to $245.0
million at March 31, 2013, primarily as a result of new investments in excess of net redemptions and settlements. Our weighted
average yields decreased from 12.1% at March 31, 2012 to 9.9% at March 31, 2013, primarily as a result of new investments in the
portfolio with improved credit quality and lower risk, and as a result of the GMX 2018 Notes being placed on non-accrual status
in 2013.



25









Operating Expenses



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



|                                                    |  | For The Three Months Ended |      
|--------------------------------------------------- |  | -------------------------- | -----
|                                                    |  | March 31,                  |      
|                                                    |  | 2013                       |      
|Interest expense and bank fees                      |  | $                          | 815  
|Management and incentive fees                       |  |                            | 1,367
|Professional fees, insurance expenses and other G&A |  |                            | 1,286
|Total operating expenses                            |  | $                          | 3,468





For the three months ended March 31, 2013,
operating expenses were $3.5 million, increasing $0.8 million, or 31%, compared to the quarter ended March 31, 2012. Interest
expense and fees on our credit facilities were $0.8 million for the three months ended March 31, 2013 compared to $0.3 million
for the three months ended March 31, 2012, as a result of increased average borrowing levels supporting our larger investment portfolio.
Management and incentive fees were higher in the quarter ended March 31, 2013 at $1.4 million compared to $1.1 million for the
quarter ended March 31, 2012, primarily as a result of higher average total asset balances, which are the basis for the base management
fee computation. Professional fees, insurance expense and other general and administrative expenses for the quarter ended March
31, 2013 increased $0.1 million, or 5%, to $1.3 million, compared to $1.2 million for the quarter ended March 31, 2012, primarily
as a result of higher professional fees.



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.



Net Investment Income



For the three months ended March 31, 2013,
net investment income was $2.3 million, or $0.11 per common share, compared to $3.0 million, or $0.14 per common share, for the
three months ended March 31, 2012.  The $0.6 million, or 22%, decrease was attributable to the $0.8 million increase
in operating expenses, partially offset by the $0.2 million increase in investment income, both of which are described above.



Net Realized Gains (Losses)



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 Senior Unsecured Notes at an average price of 113.375.



Unrealized Appreciation or Depreciation on Investments



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. By comparison, for the three months ended March
31, 2012, net unrealized appreciation was $1.3 million, largely due to increases the estimated fair value of our investments in
GMX Senior Convertible Notes of $1.0 million, Spirit warrants of $0.6 million and Castex Energy Development Fund, LLC, or Castex,
units of $0.6 million, partially offset by the decrease in the value of our investment in Resaca Exploitation Inc.’s common
stock and warrants of $0.6 million and a $0.4 million decrease in the fair value of our commodity derivative instruments.





Net Increase (Decrease) in Net Assets Resulting from
Operations



For the three months ended March 31, 2013,
we recorded a net decrease in net assets resulting from operations of $7.6 million, or $0.36 per share, compared to a net increase
in net assets resulting from operations of $4.2 million, or $0.19 per share, for the three months ended March 31, 2012. The $11.8
million, or $0.55 per share, net change between the two periods was primarily attributable to the $11.2 million increase in net
realized and unrealized losses on our investments and a $0.6 million decrease in net investment income.



Financial Condition, Liquidity and Capital Resources



During the three months ended March 31,
2013, we generated cash from operations of $0.5 million, excluding net purchases of investments, compared to $3.5 million during
the comparable period of 2012. The lower amount of cash generated from operations in 2013 was primarily attributable to lower net
investment income and a higher balance of interest and other accounts receivable in 2013. Net collections of interest and income
tax refunds receivable generated cash of $1.5 million in the first quarter of 2012, compared to using cash of $1.7 million in the
first quarter of 2013.



26









Our net cash used in operating activities
for the three months ended March 31, 2013 was $26.5 million, compared to $18.4 million provided by operating activities for the
same period of 2012. This increase in net cash used in 2013 was primarily due to higher net purchases of investments in portfolio
securities in 2013. Purchases of portfolio securities during the first three months of 2013 totaled $53.8 million, compared to
$8.4 million during the first three months of 2012. Purchases in 2013 primarily included the Talos Senior Notes of $24.8 million,
OCI Holdings Subordinated Notes and direct equity co-investment totaling $17.2 million, KOVA Senior Notes of $8.8 million, and
additional investments in existing portfolio companies totaling $3.0 million. Purchases in the first three months of 2012 primarily
included the STP Term Loan of $7.2 million and additional investments in existing portfolio companies totaling $1.2 million. Proceeds
from the redemption of investments totaled $26.9 million during the first three months of 2013, compared to $23.3 million during
the first three months of 2012. Redemptions in 2013 included EP Energy Senior Unsecured Notes, $11.3 million; STP Term Loan, $9.7
million; ATP, $5.0 million and other redemptions totaling $0.9 million. Redemptions in 2012 included Crestwood Holdings, LLC Senior
Secured Term Loan, $8.3 million; Anadarko Petroleum Corporation net profits interest, $3.2 million; ATP, $5.9 million; Tammany
Oil & Gas, LLC, $5.2 million and other redemptions totaling $0.7 million.



At March 31, 2013, we had cash and cash
equivalents totaling $30.3 million. At March 31, 2013, the amount outstanding under our $72.0 million Amended and Restated Revolving
Credit Agreement, or the Investment Facility, was $72.0 million and there was no additional amount available for borrowing. We
repaid $23.5 million of the $72.0 million balance outstanding under the Investment Facility in April 2013. As of March 31, 2013,
the amount outstanding under our $45.0 million Treasury Secured Revolving Credit Agreement, or the Treasury Facility, was $45.0
million and there was no additional amount available for borrowing.



During the three months ended March 31,
2013, we paid cash dividends totaling $3.4 million, or $0.16 per share, to our common stockholders.  In March 2013, we
declared a first quarter dividend totaling $3.4 million, or $0.16 per share, which was paid in April 2013. 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, we repurchased an aggregate of 608,125 shares of our common stock in the open market at an average price of $6.89 per share,
totaling $4.2 million. Under the terms of the stock repurchase plan, we are authorized to repurchase up to an additional $5.8 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. We did not repurchase any shares of our common
stock during the first quarter of 2013.



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. 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 statements of operations as net increase (decrease) in unrealized appreciation (depreciation) on investments.
In December 2011, in connection with our purchase of a limited term royalty interest from ATP, we purchased a series of oil put
options to provide insurance against downside price movements. See Note 8 of Notes to Consolidated Financial Statements included
elsewhere herein for further description of our put options.



Credit Facilities and Borrowings



On December 6, 2011, we entered into the
Investment Facility.  The total amount outstanding under the Investment Facility was $72.0 million and $59.5 million,
as of March 31, 2013 and December 31, 2012, 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
August 31, 2014, 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, 2013, the weighted average interest rate on
our outstanding balance was 4.6% and there was no additional amount available for borrowing.  We repaid $23.5 million of the
$72.0 million balance in April 2013.



On March 31, 2011, we entered into the Treasury
Facility, which 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 25, 2012,
we entered into a second amendment to the Treasury Facility which increased the aggregate commitment amount from $30.0 million
to $45.0 million. As amended, the Treasury Facility matures on September 25, 2013 and bears interest, at our option, at either
(i) LIBOR plus 100 basis points or (ii) the base rate.  We have the right at any time to prepay the loans, in whole or in
part, without premium or penalty.  As of March 31, 2013, the total amount outstanding under the Treasury Facility was $45.0
million and the interest rate on our outstanding balance was 1.24% (LIBOR plus 100 basis points). There was no additional amount
available for borrowing under the Treasury Facility as of March 31, 2013.



The Investment Facility and Treasury Facility
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, 2013 and had no existing defaults or events of default under either
facility.  The most restrictive covenants are:





27







| | • | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------



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, 2013 are in negotiated, and often illiquid, securities of energy-related 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, 2013, our average portfolio rating on a dollar-weighted fair market value basis was 4.2, compared to 4.1 as of December 31,
2012. Of the 23 rated investments in 15 portfolio companies as of March 31, 2013, 14 investments retained the same rating as of
December 31, 2012, 1 investment improved in rating, 2 investments declined and we added 6 investments to our portfolio during the
first three months of 2013. As of March 31, 2013, on a fair value basis, approximately 21% of our portfolio investments were in
the form of senior secured debt securities. As of March 31, 2013, we had 2 investments on non-accrual status with an aggregate
cost and fair value of $13.8 million and less than $0.1 million, respectively. Our portfolio investments at fair value were approximately
94% and 98% of the related cost basis as of March 31, 2013 and December 31, 2012, respectively.



Contractual Obligations and Off-Balance Sheet Arrangements



The following table summarizes our contractual
payment obligations at March 31, 2013 (in thousands):



|                                  |  |       |         |  | Less than |   |        |           |  |   |           |  |  | More than |  
|--------------------------------- |  | ----- | ------- |  | --------- | - | ------ | --------- |  | - | --------- |  |  | --------- | -
|Revolving credit facilities (1) : |  | Total |         |  | 1 Year    |   |        | 1-3 Years |  |   | 3-5 Years |  |  | 5 Years   |  
|Investment Facility               |  | $     | 72,000  |  |           | $ | -      |           |  | $ | 72,000    |  |  | $         | -
|Treasury Facility                 |  |       | 45,000  |  |           |   | 45,000 |           |  |   | -         |  |  |           | -
|Total                             |  | $     | 117,000 |  |           | $ | 45,000 |           |  | $ | 72,000    |  |  | $         | -








(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.  In
February 2010, we arranged for a letter of credit issued under the Investment Facility with respect to our investment in one of
our portfolio companies.  This letter of credit expired in February 2013.  We do not report the unused portions
of these commitments on our consolidated balance sheets. The following table shows our unused credit commitments and letter of
credit as of March 31, 2013 and December 31, 2012 (in thousands):



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|                          |  | March 31, 2013 |       |  | December 31, 2012 |  
|------------------------- |  | -------------- | ----- |  | ----------------- | -
|Unused credit commitments |  | $              | 4,400 |  |                   | $
|Letter of credit          |  |                | -     |  |                   |  



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, 2012.



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, 2013),
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, 2013, 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, 2013 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).





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PART II – OTHER INFORMATION





Item
1.       Legal Proceedings.



On August 17, 2012, 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. We own
limited term ORRIs in certain offshore oil and gas producing properties operated by ATP. On August 23, 2012, the bankruptcy judge
presiding over ATP’s case signed an order (Docket No. 191) (the “ORRI Order”) allowing ATP to pay proceeds of
production received after August 17, 2012 to those parties entitled to receive them, including the ORRI holders, provided that
the owners of the ORRIs execute an agreement providing for the repayment to ATP of any amounts that the bankruptcy court later
finds to have been inappropriately paid (the “Disgorgement Agreement”). 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, 2013, our unrecovered investment was $32.1 million, and we had received aggregate production payments
of $15.1 million subject to the Disgorgement Agreement, of which $6.2 million was received in the first quarter of 2013. As of
April 30, 2013, our unrecovered investment was $30.6 million, and we had received aggregate production payments of $16.9 million
subject to the Disgorgement Agreement. In addition, as of March 31, 2013, we had incurred legal and consulting fees totaling $1.7
million in connection with the enforcement of our rights under the ORRIs, which will ultimately be added to the unrecovered investment
balance under the terms of the ORRI agreements.



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 valid, fully enforceable, and not
voidable. 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 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 and 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. The lawsuit is currently pending, and an initial trial
is scheduled to commence July 25, 2013. We intend to vigorously prosecute our position that the ORRIs constitute real property
interests and are fully valid and enforceable pursuant to their terms.



Separately, the Official Committee of Unsecured
Creditors of ATP (the “Committee”) filed a motion (the “Motion”) requesting authority from the U.S. Bankruptcy
Court to be allowed to bring a fraudulent transfer action against us, in which the Committee seeks to allege (a) that 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. The Company vigorously denies these allegations and opposes
the Motion. The Motion has been abated until further notice.



On January 22, 2013, ATP filed a motion
in its bankruptcy case [Docket No. 1252] to approve certain bid procedures and authorize the sale of its “Deepwater Assets,”
which include the properties burdened by the ORRIs (the Gomez and Telemark Properties). On February 14, 2013, the Court entered
an order approving bidding procedures and granting related relief [Docket No. 1419] (the “Bid Procedures Order”). The
approved bid procedures state that the Deepwater Assets being sold are subject to and limited by all valid ORRIs or similar interests.
An auction is scheduled for May 7, 2013, and a hearing to approve a sale to the winning bidder is scheduled for May 9, 2013.



On February 24, 2013, ATP filed an emergency
motion with the Bankruptcy Court seeking an order approving the shut-in of the Debtor’s Gomez Properties and granting related
relief [Docket No. 1494] (the “Shut-In Motion”). As more fully set forth in the Shut-In Motion, ATP asserts that the
Gomez Properties should be shut-in because their continued operation negatively affects ATP’s cash flow. The Gomez Properties
are burdened by the ORRIs, and we receive distributions of production proceeds attributable to our interests in the Gomez Properties,
subject to the terms of the ORRI Order. On February 27, 2013, we filed an objection to the Shut-In Motion (Docket No. 1520). An
emergency hearing was conducted by the Court on February 28, 2013, and on that date the Court entered an initial Order Regarding
Shut In of Gomez Wells [Docket No. 1531] (the “Gomez Order”). A final hearing on the Shut-In Motion commenced on March
28, 2013, and on March 29, 2013, the proceedings were temporarily suspended in order to allow ATP and the participating parties
to engage in settlement negotiations. Subsequently, the parties announced a temporary resolution of the Shut-In Motion to be memorialized
in the form of a proposed order, which has not been finalized.





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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 beginning April 30, 2013 (and continuing thereafter) until the Bureau of Ocean
Energy Management (the “BOEM”) determines that the supplemental bonding requirements necessary to cover the estimated
costs of plugging, abandonment and site restoration with respect to the wells on ATP’s Gomez properties (which requirements
were set out in the Incidence of Noncompliance notice dated December 12, 2012, as amended January 18, 2013) have been addressed
in a manner acceptable to the BOEM. Operations and production ceased on the Gomez properties on April 30, 2013. As a result of
the shut-in of the Gomez wells, the cash flows attributable to the ORRIs will be negatively affected.



On April 1, 2013, GMX Resources (“GMX”)
and certain of its affiliates filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. In connection with its bankruptcy
filing, GMX announced that it is pursuing an asset purchase agreement with certain senior first-lien creditors to acquire substantially
all of GMX’s operating assets and undeveloped acreage. Once the contemplated asset purchase agreement with such senior creditors
is finalized, the sale would then be subject to a public auction, pursuant to procedures to be approved by the Bankruptcy Court.
We hold $12.7 million face amount of GMX’s Senior Secured Second-Priority Notes due 2018, or the GMX 2018 Notes, which are
subordinate to the debt held by the senior creditors mentioned above.



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 above, individually or in the
aggregate, would be material to our business, financial condition or cash flows.



Item
1A.       Risk Factors.



Other than as provided below, during the
three months ended March 31, 2013, 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, 2012.



Payments of our limited term ORRI
granted by ATP were delayed for as a result of bankruptcy proceedings. There is a risk that the consequences of any additional
delays or future adverse rulings by the bankruptcy court would prevent us from recovering our full investment in the ORRI.



In 2011 and 2012, we purchased from ATP
limited-term ORRIs in certain offshore oil and gas producing properties operated by ATP in the Gulf of Mexico. Under this arrangement,
we own the right to our proportionate share (ranging from 5.0% to 10.8%) of the monthly production proceeds from the various oil
and gas properties subject to the ORRI in ATP’s Gomez and Telemark properties. On August 17, 2012, ATP filed for protection
under Chapter 11 of the U.S. Bankruptcy Code and received authorization to incur debtor-in-possession financing of approximately
$600 million. ATP failed or refused to deliver our proportionate share of production proceeds for the production months of May
and June 2012, which proceeds were due to be distributed on July 31, 2012 and August 31, 2012, respectively. On August 23, 2012,
the bankruptcy judge presiding over ATP’s case signed an order allowing ATP to pay proceeds of production received after
August 17, 2012 to those parties it believes are entitled to receive the same, including the ORRI holders, provided that the owners
of the ORRIs execute an agreement providing for the repayment to ATP of any amounts that the bankruptcy court later finds to have
been inappropriately paid. Each ORRI provides that it will terminate after we receive payments that equal our investment in the
ORRI plus a time-value factor that is calculated at a rate of 13.2% per annum.



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. As
a result of the shut-in of the Gomez wells, our cash flows attributable to the ORRIs will be negatively affected. As of March 31,
2013, our unrecovered investment was $32.1 million. As of April 30, 2013, our unrecovered investment was $30.6 million. In addition,
as of March 31, 2013, we had incurred legal and consulting fees totaling $1.7 million in connection with the enforcement of our
rights under the ORRIs, which will ultimately be added to the unrecovered investment balance under the terms of the ORRI agreements.



Payments not made on the ORRIs for pre-petition
production have been delayed, thus extending the time for termination of the ORRI, and may never be made in full. It is also possible
that our rights to payments for post-petition production, as well as post-petition payments actually received, could be delayed
or otherwise adversely affected in ATP’s bankruptcy proceedings, resulting in our inability to recover our investment in
full and our expected return. If we do not receive payments for post-petition production from the wells subject to the ORRIs in
amounts sufficient to provide for termination of the ORRIs prior to the wells being shut in, then we would fail to recover, in
full, our investment plus the associated time-value factor. In the interim, if production declines significantly, the fair value
of our ORRIs could decline accordingly.



31









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.





32









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, 2013 |                              
|                   |                              
|                   |                              
|                   |                              
|Date:  May 9, 2013 |                              
|                   |                              
|                   |                              



33









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          |  | Bylaws (filed as Exhibit (b) to our Registration Statement on Form N-2 filed on August 16, 2004 (Registration No. 333-118279) 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.



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