UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q/A


(Mark
One)


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





For
the quarterly period ended September 30, 2009





OR




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





For
the transition period
             to





Commission
file number: 814-00672







NGP
Capital Resources Company


(Exact
name of registrant as specified in its charter)







Maryland
            20-1371499(State or other jurisdiction of
              incorporation or organization)
            (I.R.S. Employer
              Identification No.)1221 McKinney Street, Suite 2975
              Houston, Texas
            77010(Address of principal executive offices)
            (Zip Code)





(713)
752-0062


(Registrant’s
telephone number, including area code)





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


Yes 
þ   No
o





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





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





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o   No þ





As
of June 22, 2010, there were 21,628,202 shares of the registrant’s common
stock outstanding.





TABLE OF
CONTENTS





PART
      I - FINANCIAL INFORMATION
                      1Item
      1.  Consolidated Financial Statements
                      1Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                      28Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                      35Item
      4.  Controls and Procedures
                      35PART
      II – OTHER INFORMATION
                      37Item
      1. Legal Proceedings
                      37Item
      1A.  Risk Factors
                      37Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                      37Item
      3. Defaults Upon Senior Securities
                      37Item
      4. Submission of Matters to a Vote of Security Holders
                      37Item
      5. Other Information
                      37Item
      6. Exhibits
                      37





i


Explanatory
Note
 
 We are filing this Amended Quarterly
Report on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2009, which we refer to as the Amended Filing, to restate our
unaudited consolidated financial statements and related disclosures for the
quarter ended September 30, 2009, as discussed in Note 2 to the accompanying
restated unaudited consolidated financial statements.  Our original
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, which we
refer to as the Original Filing, was filed with the Securities and Exchange
Commission on November 6, 2009.
 
 Background
of the Restatement
 
 On March 15, 2010, our Board of
Directors and the members of the Audit Committee of our Board of Directors
concluded that the Company should restate its financial statements for the years
ended December 31, 2007 and December 31, 2008 and for each of the quarters in
2007 and 2008 and the first three quarters in 2009, which we collectively refer
to as the Affected Periods.
 
 The determination to restate the
financial statements for the Affected Periods was made in connection with
management’s assessment of accounting errors it discovered as part of a process
to remediate a material weakness in internal controls previously disclosed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
and the Company’s Quarterly Reports on Form 10-Q in 2009.  While the
Company has taken steps to remediate the previously disclosed material weakness,
the material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet remediated the material
weakness.  The Company anticipates that it will complete its testing
of the additional internal control processes designed to remediate the
previously disclosed material weakness in 2010.
 
 The errors and consequent restatements
described below principally involved non-cash accounting entries related to net
deferred tax assets and liabilities that typically arise as a result of timing
differences in tax and GAAP (book) accounting.  Taxable Net Investment
Income, which is the primary determinant of the Company’s distributable income,
has not been affected in any of the Affected Periods by these
restatements.
 
 The Company’s assessment of certain
identified accounting errors results in the following adjustments to previously
reported periods:
 
 1.      In the
quarter ended March 31, 2007, the Company failed to record a deferred tax
liability with respect to approximately $2.1 million in unrealized appreciation
on an investment in partnerships.  Similarly, in the quarters ended
June 30, 2007 and September 30, 2007, the Company failed to record deferred tax
liabilities with respect to approximately $4.0 million and $2.0 million,
respectively, in unrealized appreciation on an investment.
 
 2.      In the
quarter ended September 30, 2008, the Company realized a $12.34 million pre-tax
gain on this same investment (as compared to the $8.15 million of unrealized
appreciation previously recorded in 2007).  The reversal of the
previously unrecorded deferred tax liability in 2008 resulted in the incorrect
recording of a net tax deferred tax asset of $3.8 million at year end
2008.
 
 Unrelated
to the restatements, we have reclassified certain balance sheet, statement of
operations and statement of cash flows amounts to conform to the presentation in
our most recently-filed Annual Report on Form 10-K. These reclassifications were
primarily related to the disaggregation of investments in portfolio securities,
investment income, net realized capital gain (loss) on investments and net
unrealized gain (loss) on investments into separate classifications according to
level of control.
  ii
  Restatement
of Other Financial Statements
 
 We have
restated our financial statements for the years ended December 31, 2007 and
December 31, 2008 in our Annual Report on Form 10-K for the year ended December
31, 2009, which was filed on March 31, 2010.  We have not amended, and
we do not intend to amend, either of our previously filed Annual Reports on Form
10-K for the years ended December 31, 2007 or December 31, 2008.  We
have previously filed amendments to our Quarterly Reports on Form 10-Q for each
of the quarters ended March 31 in the Affected Periods. With the filing of this
Amended Filing, we are concurrently filing amendments to our Quarterly Reports
on Form 10−Q for the quarters ended June 30 and September 30 in each of the
Affected Periods.  For this reason, readers should no longer rely on
those previously issued financial statements and the related information
contained in such previously filed reports for the Affected
Periods.
 
 For the convenience of the reader, this
Amended Filing sets forth the Original Filing, as modified and superseded where
necessary to reflect the amendment and restatement of our unaudited consolidated
financial statements and related disclosures.  The following items
have been amended principally as a result of, and to reflect, the
restatement:
 
 ·
              Part
      I –Item 1. Consolidated Financial
Statements;
 ·
              Part
      I –Item 2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations;
 ·
              Part
      I – Item 4. Controls and
Procedures;
 ·
              Part
      II –Item 1.A. Risk Factors; and
 ·
              Part
      II –Item 6. Exhibits.
 
 In accordance with applicable rules of
the Securities and Exchange Commission, this Amended Filing includes
certifications from our Chief Executive Officer and Chief Financial Officer
dated as of the date of this filing.
 
 The remaining items contained in this
Amended Filing consist of all other items originally contained in the Original
Filing and are included for the convenience of the reader.  The
sections of the Original Filing which were not amended are unchanged and
continue in full force and effect as originally filed.  This Amended
Filing speaks as of November 6, 2009, the date we filed the Original Filing, and
has not been updated to reflect events occurring subsequent to the date of the
original filing other than those associated with the evaluation of and resulting
restatement of the Company’s consolidated financial
statements.




iii




PART
I - FINANCIAL INFORMATION


Item
1. Consolidated Financial Statements.





NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
BALANCE SHEETS
  (Unaudited)September 30, 2009
                                          
                                          
                                          December 31, 2008(As
      Restated)
                                          
                                          
                                          (As
      Restated)AssetsInvestments
      in portfolio securities at fair valueControl
      investments - majority owned(cost:  $117,352,053
      and $30,570,810, respectively)
                                          
                                          $
                                          74,124,888
                                          
                                          
                                          $
                                          24,570,000Affiliate
      investments(cost:  $30,672,278
      and $46,558,058, respectively)
                                          
                                          
                                          33,636,100
                                          
                                          
                                          
                                          44,416,490Non-affiliate
      investments(cost:  $109,002,291
      and $217,303,347, respectively)
                                          
                                          
                                          85,967,188
                                          
                                          
                                          
                                          175,243,078Investments
      in corporate notes at fair value(cost:  $11,551,596
      and $11,586,899, respectively)
                                          
                                          
                                          8,697,900
                                          
                                          
                                          
                                          6,350,000Investments
      in commodity derivative instruments at fair value(cost:  $140,825
      and $774,095, respectively)
                                          
                                          
                                          616,053
                                          
                                          
                                          
                                          8,212,872Total
      investments
                                          
                                          
                                          203,042,129
                                          
                                          
                                          
                                          258,792,440Cash
      and cash equivalents
                                          
                                          
                                          83,506,819
                                          
                                          
                                          
                                          133,805,575Accounts
      receivable and other current assets
                                          
                                          
                                          150,424
                                          
                                          
                                          
                                          233,549Interest
      receivable
                                          
                                          
                                          1,095,418
                                          
                                          
                                          
                                          2,410,360Prepaid
      assets
                                          
                                          
                                          995,621
                                          
                                          
                                          
                                          1,898,905Deferred
      tax assets
                                          
                                          
                                          4,580,231
                                          
                                          
                                          
                                          1,853,612Total
      current assets
                                          
                                          
                                          90,328,513
                                          
                                          
                                          
                                          140,202,001Total
      assets
                                          
                                          $
                                          293,370,642
                                          
                                          
                                          $
                                          398,994,441Liabilities
      and stockholders' equity (net assets)Current
      liabilitiesAccounts
      payable and accrued expenses
                                          
                                          $
                                          674,190
                                          
                                          
                                          $
                                          512,926Management
      and incentive fees payable
                                          
                                          
                                          1,540,756
                                          
                                          
                                          
                                          2,016,214Dividends
      payable
                                          
                                          
                                          3,244,230
                                          
                                          
                                          
                                          8,867,563Income
      taxes payable
                                          
                                          
                                          93,787
                                          
                                          
                                          
                                          3,529,308Current
      portion of long-term debt
                                          
                                          
                                          40,000,000
                                          
                                          
                                          
                                          75,000,000Total
      current liabilities
                                          
                                          
                                          45,552,963
                                          
                                          
                                          
                                          89,926,011Deferred
      tax liabilities
                                          
                                          
                                          1,622,056
                                          
                                          
                                          
                                          1,231,829Long-term
      debt, less current portion
                                          
                                          
                                          -
                                          
                                          
                                          
                                          45,000,000Total
      liabilities
                                          
                                          
                                          47,175,019
                                          
                                          
                                          
                                          136,157,840Commitments
      and contingencies  (Note 8)Stockholders’
      equity (net assets)Common
      stock, $.001 par value, 250,000,000 shares authorized;21,628,202
      shares issued and outstanding
                                          
                                          
                                          21,628
                                          
                                          
                                          
                                          21,628Paid-in
      capital in excess of par
                                          
                                          
                                          309,648,033
                                          
                                          
                                          
                                          309,648,033Undistributed
      net investment income (loss)
                                          
                                          
                                          (4,480,704
                                          )
                                          
                                          
                                          (3,296,608
                                          )Undistributed
      net realized capital gain (loss)
                                          
                                          
                                          2,103,349
                                          
                                          
                                          
                                          2,038,312Net
      unrealized appreciation (depreciation) of portfolio
      securities,corporate
      notes and commodity derivative instruments
                                          
                                          
                                          (61,096,683
                                          )
                                          
                                          
                                          (45,574,764
                                          )Total
      stockholders’ equity (net assets)
                                          
                                          
                                          246,195,623
                                          
                                          
                                          
                                          262,836,601Total
      liabilities and stockholders' equity (net assets)
                                          
                                          $
                                          293,370,642
                                          
                                          
                                          $
                                          398,994,441Net
      asset value per share
                                          
                                          $
                                          11.38
                                          
                                          
                                          $
                                          12.15
 
 (See
accompanying notes to consolidated financial statements)


1





NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Unaudited)
 
 For
      the Three Months Ended
                                    
                                    
                                    For
      the Nine Months EndedSeptember
      30, 2009
                                    
                                    
                                    September
      30, 2008
                                    
                                    
                                    September
      30, 2009
                                    
                                    
                                    September
      30, 2008(As
      Restated)
                                    
                                    
                                    (As
      Restated)
                                    
                                    
                                    (As
      Restated)
                                    
                                    
                                    (As
      Restated)Investment
      incomeInterest
      income:Control
      investments - majority owned
                                    
                                    $
                                    967,554
                                    
                                    
                                    $
                                    55,215
                                    
                                    
                                    $
                                    967,554
                                    
                                    
                                    $
                                    310,730Affiliate
      investments
                                    
                                    
                                    1,158,016
                                    
                                    
                                    
                                    1,217,558
                                    
                                    
                                    
                                    3,959,181
                                    
                                    
                                    
                                    1,934,959Non-affiliate
      investments
                                    
                                    
                                    3,965,629
                                    
                                    
                                    
                                    6,365,900
                                    
                                    
                                    
                                    13,731,339
                                    
                                    
                                    
                                    21,923,225Royalty
      income (loss), net of amortization:Control
      investments - majority owned
                                    
                                    
                                    828,553
                                    
                                    
                                    
                                    78,869
                                    
                                    
                                    
                                    894,233
                                    
                                    
                                    
                                    127,576Non-affiliate
      investments
                                    
                                    
                                    (1,755,557
                                    )
                                    
                                    
                                    2,373,894
                                    
                                    
                                    
                                    (5,489,340
                                    )
                                    
                                    
                                    3,445,625Commodity
      derivative income, net of expired options
                                    
                                    
                                    829,946
                                    
                                    
                                    
                                    (274,625
                                    )
                                    
                                    
                                    5,884,027
                                    
                                    
                                    
                                    (274,625
                                    )Other
      income
                                    
                                    
                                    27,526
                                    
                                    
                                    
                                    52,877
                                    
                                    
                                    
                                    144,264
                                    
                                    
                                    
                                    137,767Total
      investment income
                                    
                                    
                                    6,021,667
                                    
                                    
                                    
                                    9,869,688
                                    
                                    
                                    
                                    20,091,258
                                    
                                    
                                    
                                    27,605,257Operating
      expensesManagement
      fees
                                    
                                    
                                    1,540,756
                                    
                                    
                                    
                                    1,944,869
                                    
                                    
                                    
                                    5,021,782
                                    
                                    
                                    
                                    5,583,084Incentive
      fees
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,526,011
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    2,526,011Professional
      fees
                                    
                                    
                                    214,591
                                    
                                    
                                    
                                    174,150
                                    
                                    
                                    
                                    701,217
                                    
                                    
                                    
                                    607,519Insurance
      expense
                                    
                                    
                                    199,959
                                    
                                    
                                    
                                    198,812
                                    
                                    
                                    
                                    600,140
                                    
                                    
                                    
                                    596,442Interest
      expense and fees
                                    
                                    
                                    446,600
                                    
                                    
                                    
                                    1,470,091
                                    
                                    
                                    
                                    2,541,151
                                    
                                    
                                    
                                    5,351,738State
      and excise taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    32,712Other
      general and administrative expenses
                                    
                                    
                                    718,585
                                    
                                    
                                    
                                    690,152
                                    
                                    
                                    
                                    2,261,123
                                    
                                    
                                    
                                    2,141,815Total
      operating expenses
                                    
                                    
                                    3,120,491
                                    
                                    
                                    
                                    7,004,085
                                    
                                    
                                    
                                    11,125,413
                                    
                                    
                                    
                                    16,839,321Net
      investment income before income taxes
                                    
                                    
                                    2,901,176
                                    
                                    
                                    
                                    2,865,603
                                    
                                    
                                    
                                    8,965,845
                                    
                                    
                                    
                                    10,765,936Benefit
      (provision) for income taxes
                                    
                                    
                                    2,321
                                    
                                    
                                    
                                    22,135
                                    
                                    
                                    
                                    15,314
                                    
                                    
                                    
                                    76,948Net
      investment income
                                    
                                    
                                    2,903,497
                                    
                                    
                                    
                                    2,887,738
                                    
                                    
                                    
                                    8,981,159
                                    
                                    
                                    
                                    10,842,884Net
      realized capital gain (loss) on investmentsNet
      realized capital gain (loss) on portfolio securities, corporate notes and
      commodity derivative instruments:Control
      investments - majority owned
                                    
                                    
                                    -
                                    
                                    
                                    
                                    12,336,596
                                    
                                    
                                    
                                    (350,000
                                    )
                                    
                                    
                                    12,336,596Non-affiliate
      investments
                                    
                                    
                                    -
                                    
                                    
                                    
                                    5,964,494
                                    
                                    
                                    
                                    296,037
                                    
                                    
                                    
                                    5,964,494Benefit
      (provision) for taxes on capital gain (loss)
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4,194,443
                                    )
                                    
                                    
                                    119,000
                                    
                                    
                                    
                                    (4,194,443
                                    )Total
      net realized capital gain (loss) on investments
                                    
                                    
                                    -
                                    
                                    
                                    
                                    14,106,647
                                    
                                    
                                    
                                    65,037
                                    
                                    
                                    
                                    14,106,647Net
      unrealized gain (loss) on investmentsNet
      increase (decrease) in unrealized appreciation (depreciation) on portfolio
      securities, corporate notes and commodity derivative
      instruments:Control
      investments - majority owned
                                    
                                    
                                    1,688,108
                                    
                                    
                                    
                                    (6,199,148
                                    )
                                    
                                    
                                    (3,056,931
                                    )
                                    
                                    
                                    (6,198,868
                                    )Affiliate
      investments
                                    
                                    
                                    4,511,162
                                    
                                    
                                    
                                    6,054,143
                                    
                                    
                                    
                                    5,105,390
                                    
                                    
                                    
                                    6,054,143Non-affiliate
      investments
                                    
                                    
                                    5,113,957
                                    
                                    
                                    
                                    (3,667,899
                                    )
                                    
                                    
                                    (19,724,604
                                    )
                                    
                                    
                                    (3,803,002
                                    )Benefit
      (provision) for taxes on unrealized gain (loss)
                                    
                                    
                                    513,400
                                    
                                    
                                    
                                    2,142,000
                                    
                                    
                                    
                                    2,154,226
                                    
                                    
                                    
                                    2,142,000Total
      net unrealized gain (loss) on investments
                                    
                                    
                                    11,826,627
                                    
                                    
                                    
                                    (1,670,904
                                    )
                                    
                                    
                                    (15,521,919
                                    )
                                    
                                    
                                    (1,805,727
                                    )Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                                    
                                    $
                                    14,730,124
                                    
                                    
                                    $
                                    15,323,481
                                    
                                    
                                    $
                                    (6,475,723
                                    )
                                    
                                    $
                                    23,143,804Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations per common share
                                    
                                    $
                                    0.68
                                    
                                    
                                    $
                                    0.70
                                    
                                    
                                    $
                                    (0.30
                                    )
                                    
                                    $
                                    1.09
 
 (See
accompanying notes to consolidated financial statements)


2





NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS)
 
 Net
      UnrealizedAppreciation
      (Depreciation)
                        
                        
                        TotalPaid-in
      Capital
                        
                        
                        Undistributed
                        
                        
                        Undistributed
                        
                        
                        of
      Portfolio Securities,
                        
                        
                        Stockholders'Common
      Stock
                        
                        
                        in
      Excess
                        
                        
                        Net
      Investment
                        
                        
                        Net
      Realized
                        
                        
                        Corporate
      Notes and Commodity
                        
                        
                        EquityShares
                        
                        
                        Amount
                        
                        
                        of
      Par
                        
                        
                        Income
      (Loss)
                        
                        
                        Capital
      Gain
      (Loss)
                        
                        
                        Derivative
      Instruments
                        
                        
                        (Net
      Assets)Balance
      at December 31, 2008 (as restated)
                        
                        
                        21,628,202
                        
                        
                        $
                        21,628
                        
                        
                        $
                        309,648,033
                        
                        
                        $
                        (3,296,608
                        )
                        
                        $
                        2,038,312
                        
                        
                        $
                        (45,574,764
                        )
                        
                        $
                        262,836,601Net
      increase (decrease) instockholders'
      equity (net assets)resulting
      from operations
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        8,981,159
                        
                        
                        
                        65,037
                        
                        
                        
                        (15,521,919
                        )
                        
                        
                        (6,475,723
                        )Dividends
      declared
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (10,165,255
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (10,165,255
                        )Balance
      at September 30, 2009 (unaudited and as restated)
                        
                        
                        21,628,202
                        
                        
                        $
                        21,628
                        
                        
                        $
                        309,648,033
                        
                        
                        $
                        (4,480,704
                        )
                        
                        $
                        2,103,349
                        
                        
                        $
                        (61,096,683
                        )
                        
                        $
                        246,195,623
 
 (See
accompanying notes to consolidated financial statements)


3





NGP
CAPITAL RESOURCES COMPANY


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)





For
      The Nine Months EndedSeptember 30, 2009
                            
                            
                            September 30, 2008(As
      Restated)
                            
                            
                            (As
      Restated)Cash
      flows from operating activitiesNet increase (decrease) in stockholders' equity (net assets) resulting
      from operations
                            
                            $
                            (6,475,723
                            )
                            
                            $
                            23,143,804Adjustments
      to reconcile net increase (decrease) in stockholders' equity
      (netassets)
      resulting from operations to net cash used in operating
      activitiesPayment-in-kind
      interest
                            
                            
                            (3,317,164
                            )
                            
                            
                            (2,335,374
                            )Net
      amortization of premiums, discounts and fees
                            
                            
                            10,128,588
                            
                            
                            
                            4,639,765Change
      in unrealized (appreciation) depreciation on portfolio
      securities,corporate
      notes and commodity derivative instruments
                            
                            
                            17,676,145
                            
                            
                            
                            3,947,727Effects
      of changes in operating assets and liabilitiesAccounts
      receivable and other current assets
                            
                            
                            83,125
                            
                            
                            
                            (695,559
                            )Interest
      receivable
                            
                            
                            1,314,942
                            
                            
                            
                            (321,671
                            )Prepaid
      assets
                            
                            
                            903,284
                            
                            
                            
                            542,220Current
      portion of deferred income taxes
                            
                            
                            (2,726,619
                            )
                            
                            
                            (2,770,924
                            )Accounts
      payable and accrued expenses
                            
                            
                            (314,194
                            )
                            
                            
                            5,127,171Income
      taxes payable
                            
                            
                            (3,435,521
                            )
                            
                            
                            628,924Non-current
      deferred income taxes
                            
                            
                            390,227
                            
                            
                            
                            1,895,277Purchase
      of investments in portfolio securities, corporate notesand
      commodity derivative instruments
                            
                            
                            (33,196,662
                            )
                            
                            
                            (100,885,393
                            )Redemption
      of investments in portfolio securities, corporate notesand
      commodity derivative instruments
                            
                            
                            64,459,403
                            
                            
                            
                            76,409,056Net
      sale (purchase) of investments in U.S. Treasury Bills
                            
                            
                            -
                            
                            
                            
                            35,420,333Net
      cash provided by operating activities
                            
                            
                            45,489,831
                            
                            
                            
                            44,745,356Cash
      flows from financing activitiesProceeds
      from the issuance of common stock, net of underwriting
    costs
                            
                            
                            -
                            
                            
                            
                            62,790,416Borrowings
      under revolving credit facility
                            
                            
                            72,000,000
                            
                            
                            
                            151,000,000Repayments
      on revolving credit facility
                            
                            
                            (152,000,000
                            )
                            
                            
                            (188,125,000
                            )Offering
      costs from the issuance of common stock
                            
                            
                            -
                            
                            
                            
                            (780,628
                            )Dividends
      paid
                            
                            
                            (15,788,587
                            )
                            
                            
                            (24,664,085
                            )Net
      cash provided by (used in) financing activities
                            
                            
                            (95,788,587
                            )
                            
                            
                            220,703Net
      increase (decrease) in cash and cash equivalents
                            
                            
                            (50,298,756
                            )
                            
                            
                            44,966,059Cash
      and cash equivalents, beginning of period
                            
                            
                            133,805,575
                            
                            
                            
                            18,437,115Cash
      and cash equivalents, end of period
                            
                            $
                            83,506,819
                            
                            
                            $
                            63,403,174





(See
accompanying notes to consolidated financial statements)


4





NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 September
30, 2009
 (Unaudited)
 
 Portfolio
      Company
                                                                                                                                                                                  
                                                                                                                                                                                  Energy
      Industry Segment
                                                                                                                                                                                  
                                                                                                                                                                                  Investment
      (1) (2) (4)
                                                                                                                                                                                  
                                                                                                                                                                                  Principal
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Cost
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  Fair
      Value (3)TARGETED
      INVESTMENTS (19)Control
      Investments - Majority Owned (50% to 100%
      owned)Alden
      Resources, LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Coal
      Production
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  20,631,213
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  18,575,047
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  18,475,047Multiple-Advance
      Term Loan - Tranche A(The
      greater of 12.00% or LIBOR +9.00
      % cash, 15.00% or LIBOR +12.00%
      PIK, due 1/01/2013)Senior
      Secured
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  20,135,900
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  19,519,841
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  19,519,841Multiple-Advance
      Term Loan - Tranche B(The
      greater of 12.00% or LIBOR +9.00
      % cash, 15.00% or LIBOR +12.00%
      PIK, due 1/01/2013) (7)Class
      E Units (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,800,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,800,000Royalty
      Interest
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  2,530,325
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,330,000DeanLake
      Operator, LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured Term Loan
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3,500,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3,500,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3,500,000Production
      and Development
                                                                                                                                                                                  
                                                                                                                                                                                  (12.00%
      cash, 14.00% PIK,payable
      quarterly, due 6/30/2011)Class
      A Preferred Units (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,400,255
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  6,500,000Overriding
      Royalty Interest
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  18,260
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  100,000Formidable,
      LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  38,771,388
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  38,771,388
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  5,600,000Production
      and Development
                                                                                                                                                                                  
                                                                                                                                                                                  Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, LIBOR + 8.50%default,
      due 5/31/2008) (7) (13)Warrants
      (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  500,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  -Formidable
      Holdings, LLC Units (5) (13)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  -Rubicon
      Energy Partners, LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                  
                                                                                                                                                                                  LLC
      Units (4,000 units) (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  -
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  -Production
      and DevelopmentTierraMar
      Energy LP
                                                                                                                                                                                  
                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                  
                                                                                                                                                                                  Class
      A Preferred LP Units (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  17,710,788
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,000,000Production
      and Development
                                                                                                                                                                                  
                                                                                                                                                                                  Overriding
      Royalty Interest
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  16,149
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  300,000Total
      Control Investments - Majority Owned (50% to 100% owned)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  117,352,053
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  74,124,888Affiliate
      Investments - (5% to 25%
owned)Bionol
      Clearfield, LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Alternative
      Fuels and
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured Tranche C
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  5,000,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  5,000,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  5,000,000Specialty
      Chemicals
                                                                                                                                                                                  
                                                                                                                                                                                  Construction
      Loan(LIBOR
      + 7.00%, due 9/06/2016)BioEnergy
      Holding, LLC
                                                                                                                                                                                  
                                                                                                                                                                                  Alternative
      Fuels and
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured Notes
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  12,255,231
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,822,116
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,822,116Specialty
      Chemicals
                                                                                                                                                                                  
                                                                                                                                                                                  (15.00%,
      due 3/06/2015)BioEnergy
      International Warrants (5) (14)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  34,766
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  34,766BioEnergy
      Holding Units (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  1,296,771
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  1,296,771Myriant
      Technologies Warrants (5) (15)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  49,238
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  49,238Myriant
      Technologies Units (5)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  418,755
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  418,755Resaca
      Exploitation Inc.
                                                                                                                                                                                  
                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                  
                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  10,000,000
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,815,376
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  9,815,376Production
      and Development
                                                                                                                                                                                  
                                                                                                                                                                                  Revolving
      Credit Facility(The
      greater of 8.0% or LIBOR + 5.50%,due
      5/01/2012)Common
      Stock (6,574,216 shares) (5) (17)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  3,235,256
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  6,199,078Total
      Affiliate Investments - (5% to 25% owned)
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  30,672,278
                                                                                                                                                                                  
                                                                                                                                                                                  
                                                                                                                                                                                  $
                                                                                                                                                                                  33,636,100
 
 (See
accompanying notes to consolidated financial statements)


5




NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 September
30, 2009
 (Unaudited)
 (Continued)
 
 Portfolio
      Company
                                                                                                                                  
                                                                                                                                  Energy
      Industry Segment
                                                                                                                                  
                                                                                                                                  Investment
      (1) (2) (4)
                                                                                                                                  
                                                                                                                                  Principal
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Cost
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  Fair
      Value (3)TARGETED
      INVESTMENTS (19) – ContinuedNon-Affiliate
      Investments - (less than 5%
    owned)Anadarko
      Petroleum Corporation
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Multiple-Advance
      Net Profits Interest
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  10,970,082
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  11,049,824
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  11,399,8242007-III
      Drilling Fund
                                                                                                                                  
                                                                                                                                  Production
      and Development
                                                                                                                                  
                                                                                                                                  (Due
      4/23/2032)ATP
      Oil & Gas Corporation
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Limited
      Term Royalty Interest
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  12,820,896
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  6,353,000Production
      and DevelopmentBlack
      Pool Energy
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Senior
      Secured
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  17,000,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  16,707,026
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  16,707,026Partners,
      LLC
                                                                                                                                  
                                                                                                                                  Production
      and Development
                                                                                                                                  
                                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 12.00% or LIBOR +8.00
      % cash, 14.00% or LIBOR +10.00%
      PIK, due 10/24/2011)Overriding
      Royalty Interest
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  9,955
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  100,000Warrants
      (5) (18)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,000BSR
      Loco Bayou, LLC  (8)
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Overriding
      Royalty Interest
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  16,885
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  100,000Production
      and Development
                                                                                                                                  
                                                                                                                                  Warrants
      (5) (10)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  200,000Chroma
      Exploration &
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  10,002
      Shares Series A Participating
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  2,221,710
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Production,
      Inc.
                                                                                                                                  
                                                                                                                                  Production
      and Development
                                                                                                                                  
                                                                                                                                  Convertible
      Preferred Stock (7)9,134
      Shares Series AA Participating
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  2,089,870
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  500,000Convertible
      Preferred Stock (7)8.11
      Shares Common Stock (5)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Warrants
      (5) (9)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Greenleaf
      Investments, LLC
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Senior
      Secured
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  11,352,336
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  11,155,813
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  11,155,813Production
      and Development
                                                                                                                                  
                                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 10.50% or LIBOR + 6.50%,due
      4/30/2011)Overriding
      Royalty Interest
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  61,149
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  400,000Nighthawk
      Transport I, LP
                                                                                                                                  
                                                                                                                                  Energy
      Services
                                                                                                                                  
                                                                                                                                  Second
      Lien
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  13,022,642
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  12,498,495
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Term
      Loan B(The
      greater of 21.0% or LIBOR + 16.50%,w/
      PIK option available up to 6.0%,due
      10/03/2010) (7)LP
      Units (5)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  224
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Warrants
      (5) (12)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  850,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Second
      Lien
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,457,656
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,440,477
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Delayed
      Draw Term Loan B(The
      greater of 21.0% or LIBOR + 16.50%,w/
      PIK option available up to 6.0%,due
      10/03/2010) (7)Sonoran
      Energy, Inc.
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Warrants
      (5) (11)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  10,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  -Production
      and DevelopmentTammany
      Oil & Gas, LLC
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Senior
      Secured
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  26,022,804
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  25,921,525
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  25,921,525Production
      and Development
                                                                                                                                  
                                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 13.0% or LIBOR + 8.00%,due
      3/21/2010)Overriding
      Royalty Interest
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  180,549
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  1,000,000Venoco,
      Inc.
                                                                                                                                  
                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                  
                                                                                                                                  Senior
      Notes (6)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  12,000,000
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  11,947,893
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  12,120,000Production
      and Development
                                                                                                                                  
                                                                                                                                  (8.75%,
      due 12/15/2011)Total
      Non-Affiliate Investments - (less than 5% owned)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  109,002,291
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  85,967,188Subtotal
      Targeted Investments (67.61% of total investments)
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  257,026,622
                                                                                                                                  
                                                                                                                                  
                                                                                                                                  $
                                                                                                                                  193,728,176
 
 (See
accompanying notes to consolidated financial statements)




6





NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 September
30, 2009
 (Unaudited)
 (Continued)
 
 Issuing
      Company
                                                                                                                          
                                                                                                                          Energy
      Industry Segment
                                                                                                                          
                                                                                                                          Investment
      (1) (2) (4)
                                                                                                                          
                                                                                                                          Principal
                                                                                                                          
                                                                                                                          
                                                                                                                          Cost
                                                                                                                          
                                                                                                                          
                                                                                                                          Fair
      Value (3)CORPORATE
      NOTES (19)Pioneer
      Natural Resources Co.
                                                                                                                          
                                                                                                                          Oil
      & Natural Gas
                                                                                                                          
                                                                                                                          Senior
      Notes, 7.2%, due 2028
                                                                                                                          
                                                                                                                          $
                                                                                                                          10,000,000
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          11,551,596
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          8,697,900Production
      and DevelopmentSubtotal
      Corporate Notes ( 3.04% of total investments)
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          11,551,596
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          8,697,900COMMODITY
      DERIVATIVE INSTRUMENTS (19)Put
      Options (16)
                                                                                                                          
                                                                                                                          Put
      Options with BP Corporation North America, Inc. to sell up
    to
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          140,825
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          616,05332,750
      Bbls of crude oil at a strike price of $85.00 per Bbl.  4
      monthlycontracts
      beginning on October 1, 2009 and expiring on January 31,
    2010.Subtotal
      Commodity Derivative Instruments ( 0.21% of total
      investments)
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          140,825
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          616,053CASH
      AND CASH EQUIVALENTSSubtotal
      Cash and Cash Equivalents (29.14% of total investments)
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          83,506,819
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          83,506,819TOTAL
      INVESTMENTS, CASH AND CASH EQUIVALENTS
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          352,225,862
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          286,548,948LIABILITIES
      IN EXCESS OF OTHER ASSETS (20)
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          (40,353,325
                                                                                                                          )NET
      ASSETS (20)
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          
                                                                                                                          $
                                                                                                                          246,195,623
 
 NOTES TO CONSOLIDATED
SCHEDULE OF INVESTMENTS
 
 (1)
              All
      investments are pledged as collateral for obligations uder the Company's
      credit facilities.
 (2)
              Percentages
      represent interest rates in effect at the end of the period and due dates
      represent the contractual maturity
dates.
 (3)
              Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 (4)
              All
      investments are in entities with primary operations in the United States
      of America.
 (5)
              Non-income
      producing securities.
 (6)
              Upon
      the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco
      Inc.'s senior notes became collateralized by second priority
      liens.
 (7)
              Non-accrual
      status.
 (8)
              BSR
      Loco Bayou repaid its term note in full on July 31, 2009.  The
      Company retains ownership of ORRI and Warrants until settlement is
      negotiated and approved.
 (9)
              Chroma
      warrants expire on April 5, 2012 and provide the Company the right to
      purchase 2,462 shares of common stock at a purchase price of $75.00 per
      share.
 (10)
              BSR
      Loco Bayou warrants expire on August 15, 2013 and provide the Company the
      right to purchase 10,000 investor units at the exercise price of $160.00
      per investor unit.
 (11)
              Sonoran
      warrants expire on November 28, 2014 and provide the Company the right to
      purchase shares of common stock up to 2.87 million shares, on a fully
      diluted basis with anti-dilution provisions, at the exercise price of
      $0.20 per share.  Sonoran announced it filed Chapter 11
      bankruptcy on June 19, 2009 and sold all of its assets under Section
      363.  Upon official notification of results of the Section 363
      sale, Sonoron warrants will be written off as a realized
    loss
 (12)
              Nighthawk
      warrants expire on May 13, 2017 and provide the Company the right to
      purchase approximately 7.1% of limited partnership units at the exercise
      price of $0.001 per unit.  On July 10, 2009, Nighthawk filed a
      voluntary petition under Chapter 7 of the United States Bankruptcy
      Code.
 (13)
              Formidable
      senior note was accelerated and the Company foreclosed on the member units
      of Formidable, LLC on September 28,
2009.
 (14)
              BioEnergy
      International, LLC warrants expire on August 15, 2010 and provide the
      Company the right to purchase 140,687 units, representing membership
      interests of BioEnergy International, LLC, at the  purchase
      price of $10.00 per unit.
 (15)
              Myriant
      Technologies, LLC warrants expire on August 15, 2015 and provide the
      Company the right to purchase  32,680 units, representing
      membership interests of Myriant Technologies, LLC, at
      the  purchase price of $10.00 per
  unit.
 (16)
              Put
      Options are related to the limited term royalty interest purchased from
      ATP Oil & Gas Corporation.
 (17)
              Resaca
      stock is listed on the Alternative Investment Market of the London Stock
      Exchange, denominated in British pounds and its reported fair value at
      September 30, 2009 has been converted to U.S. dollars at the exchange rate
      effective on September 30, 2009.
 (18)
              Black
      Pool warrants expire seven years after repayment of principal and interest
      and provide the Company the right to purchase approximately 25% of
      membership interest at the exercise price of $0.01 per
    unit.
 (19)
              All
      investments in portfolio securities, corporate notes and commodity
      derivative instruments are level 3 securities per SFAS No. 157
      hierarchy.
 (20)
              As
      restated.
 
 (See
accompanying notes to consolidated financial statements)
  7




NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
  Portfolio Company
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Energy Industry Segment
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Investment (1) (2) (4)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Principal
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Cost
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Fair Value (3)TARGETED
      INVESTMENTS (22)Control
      Investments - Majority Owned (50% to 100% owned)DeanLake
      Operator, LLC
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Class
      A Preferred Units - 100% of outstanding
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  13,900,255
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  10,000,000Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  units
      representing 100% ownership ofDeanLake
      Operator, LLC until payout,80%
      after payout (5)Overriding
      Royalty Interest
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  18,897
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  20,000Rubicon
      Energy Partners,
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  LLC
      Units (4,000 units) representing
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  -
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  750,000LLC
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  50%
      ownership of the assets ofRubicon
      Energy Partners, LLC (5)TierraMar
      Energy LP
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Class
      A Preferred LP Units - 100% of
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  16,634,830
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  13,500,000Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  outstanding
      units representing 100% ownershipof
      TierraMar Energy LP until payout,67%
      after payout (5)Overriding
      Royalty Interest
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  16,828
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  300,000Total
      Control Investments - Majority Owned (50% to 100% owned)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  30,570,810
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  24,570,000Affiliate
      Investments - (5% to 25% owned)BioEnergy
      Holding, LLC
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Alternative
      Fuels and
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Senior
      Secured Notes
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  10,606,557
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  9,757,613
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  9,757,613Specialty
      Chemicals
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  (15.00%,
      due 3/06/2015)BioEnergy
      International Warrants (5) (15)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  595,845
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  595,845BioEnergy
      Holding Units - 11.54% of outstanding
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  376,687
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  376,687units
      of BioEnergy Holdings, LLC (5)Bionol
      Clearfield, LLC (21)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Alternative
      Fuels and
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Senior
      Secured Tranche C
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  5,000,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  5,000,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  5,000,000Specialty
      Chemicals
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Construction
      Loan(LIBOR
      + 7.00%, due 9/06/2016)Resaca
      Exploitation Inc.
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  28,000,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  27,592,657
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  27,592,657Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 10.0% or LIBOR + 6.00%,due
      5/01/2012)Common
      Stock (6,574,216 shares) - representing
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  3,235,256
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  1,093,6887.13%
      of outstanding common stock ofResaca
      Exploitation Inc. (5) (18)Total
      Affiliate Investments - (5% to 25% owned)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  46,558,058
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  44,416,490Non-affiliate
      Investments - (Less than 5% owned)Alden
      Resources, LLC (19)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Coal
      Production
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  36,285,168
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  33,772,038
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  $
                                                                                                                                                                                                                                                                  28,283,440Multiple-Advance
      Term Loan(LIBOR
      + 8.00% cash, due 1/05/2013)Royalty
      Interest
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  2,565,017
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  7,500,000Warrants
      (5) (13)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  100,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  -Anadarko
      Petroleum Corporation
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Multiple-Advance
      Net Profits Interest
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  37,255,948
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  37,352,982
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  37,352,9822007-III
      Drilling Fund
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  (Due
      4/23/2032)ATP
      Oil & Gas Corporation
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Limited
      Term Royalty Interest
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  24,319,585
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  12,219,000Production
      and DevelopmentBlack
      Pool Energy
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Oil
      & Natural Gas
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Senior
      Secured
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  302,497
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  12,498
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  12,498Partners,
      LLC
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Production
      and Development
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 12.00% or LIBOR +8.00
      % cash, 14.00% or LIBOR +10.00%
      PIK, due 10/24/2011)Overriding
      Royalty Interest (5)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  10,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  10,000Warrants
      (5) (20)
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  10,000
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                  10,000
 (See
accompanying notes to consolidated financial statements)
  8
 
 NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (Continued)
 
 Portfolio Company
                                                                                                                  
                                                                                                                  Energy Industry Segment
                                                                                                                  
                                                                                                                  Investment (1) (2) (4)
                                                                                                                  
                                                                                                                  Principal
                                                                                                                  
                                                                                                                  
                                                                                                                  Cost
                                                                                                                  
                                                                                                                  
                                                                                                                  Fair Value (3)TARGETED
      INVESTMENTS (22) - ContinuedNon-affiliate
      Investments - (Less than 5% owned) - ContinuedBSR
      Loco Bayou, LLC (8)
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  Senior
      Secured
                                                                                                                  
                                                                                                                  $
                                                                                                                  2,888,986
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  2,401,884
                                                                                                                  
                                                                                                                  
                                                                                                                  $
                                                                                                                  1,539,795Production
      and Development
                                                                                                                  
                                                                                                                  Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, LIBOR + 8.50%default,
      due 8/15/2009) (7)Overriding
      Royalty Interest
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  19,372
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  20,000Warrants
      (5) (10)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  10,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Chroma
      Exploration &
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  9,711
      Shares Series A Participating
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2,221,710
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Production,
      Inc.
                                                                                                                  
                                                                                                                  Production
      and Development
                                                                                                                  
                                                                                                                  Convertible
      Preferred Stock (7)8,868
      Shares Series AA Participating
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  2,089,870
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,000,000Convertible
      Preferred Stock (7)8.11
      Shares Common Stock (5)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Warrants
      (5) (9)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Crossroads
      Energy, LP
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  Senior
      Secured
                                                                                                                  
                                                                                                                  
                                                                                                                  4,820,204
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  4,781,487
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  4,781,487Production
      and Development
                                                                                                                  
                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 10.0% or LIBOR + 5.50%,due
      6/29/2009)Overriding
      Royalty Interest
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  5,120
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  250,000Formidable,
      LLC (17)
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  Senior
      Secured
                                                                                                                  
                                                                                                                  
                                                                                                                  37,299,054
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  37,299,054
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  22,500,000Production
      and Development
                                                                                                                  
                                                                                                                  Multiple-Advance
      Term Loan(LIBOR
      + 5.50% cash, LIBOR + 8.50%default,
      due 5/31/2008) (7)Warrants
      (5) (14)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  500,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Greenleaf
      Investments, LLC
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  Senior
      Secured
                                                                                                                  
                                                                                                                  
                                                                                                                  12,229,693
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  11,951,818
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  11,951,818Production
      and Development
                                                                                                                  
                                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 10.50% or LIBOR + 6.50%,due
      4/30/2011)Overriding
      Royalty Interest
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  86,263
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  300,000Nighthawk
      Transport I, LP
                                                                                                                  
                                                                                                                  Energy
      Services
                                                                                                                  
                                                                                                                  Second
      Lien
                                                                                                                  
                                                                                                                  
                                                                                                                  12,895,524
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  12,184,611
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  8,929,131Term
      Loan B(The
      greater of 15.0% or LIBOR + 10.50%,due
      10/03/2010)LP
      Units (5)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  224
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Warrants
      (5) (12)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  850,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Second
      Lien
                                                                                                                  
                                                                                                                  
                                                                                                                  1,443,427
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,420,362
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  1,075,842Delayed
      Draw Term Loan B(The
      greater of 15.0% or LIBOR + 10.50%,due
      10/03/2010)Sonoran
      Energy, Inc.
                                                                                                                  
                                                                                                                  Oil
      & Natural Gas
                                                                                                                  
                                                                                                                  Warrants
      (5) (11)
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  10,000
                                                                                                                  
                                                                                                                  
                                                                                                                  
                                                                                                                  -Production
      and Development
 
 (See
accompanying notes to consolidated financial statements)
  9
 
 NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (Continued)
 
 Issuing Company
                                                                                                  
                                                                                                  Energy Industry Segment
                                                                                                  
                                                                                                  Investment (1) (2) (4)
                                                                                                  
                                                                                                  Principal
                                                                                                  
                                                                                                  
                                                                                                  Cost
                                                                                                  
                                                                                                  
                                                                                                  Fair Value (3)TARGETED
      INVESTMENTS (22) - ContinuedNon-affiliate
      Investments - (Less than 5% owned) - ContinuedTammany
      Oil & Gas, LLC
                                                                                                  
                                                                                                  Oil
      & Natural Gas
                                                                                                  
                                                                                                  Senior
      Secured
                                                                                                  
                                                                                                  $
                                                                                                  31,447,804
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  31,197,085
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  31,197,085Production
      and Development
                                                                                                  
                                                                                                  Multiple-Advance
      Term Loan(The
      greater of 11.0% or LIBOR + 6.00%,due
      3/21/2010)Overriding
      Royalty Interest (5)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  200,000
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  550,000Venoco,
      Inc.
                                                                                                  
                                                                                                  Oil
      & Natural Gas
                                                                                                  
                                                                                                  Senior
      Notes (6)
                                                                                                  
                                                                                                  
                                                                                                  12,000,000
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  11,932,367
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  5,760,000Production
      and Development
                                                                                                  
                                                                                                  (8.75%,
      due 12/15/2011)Total
      Non-affiliate Investments - (Less than 5% owned)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  217,303,347
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  175,243,078Subtotal
      Targeted Investments (58.76% of total investments)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  294,432,215
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  244,229,568CORPORATE
      NOTES (22)Pioneer
      Natural Resources Co.
                                                                                                  
                                                                                                  Oil
      & Natural Gas
                                                                                                  
                                                                                                  Senior
      Notes, 7.2%, due 2028
                                                                                                  
                                                                                                  $
                                                                                                  10,000,000
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  11,586,899
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  6,350,000Production
      and DevelopmentSubtotal
      Corporate Notes ( 1.62% of total investments)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  11,586,899
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  6,350,000COMMODITY
      DERIVATIVE INSTRUMENTS (22)Put
      Options (16)
                                                                                                  
                                                                                                  Put
      Options with BP Corporation North America, Inc. to sell up
    to
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  141,570
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  933,484615,000
      MMBtu of natural gas at a strike price of $10.00 per
MMBtu.12
      monthly contracts beginning on July 1, 2008 and expiring on June 30,
      2009.Put
      Options with BP Corporation North America, Inc. to sell up
    to
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  491,700
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  6,146,906237,750
      Bbls of crude oil at a strike price of $101.00 per Bbl. 15
      monthlycontracts
      beginning on July 1, 2008 and expiring on September 30,
    2009.Put
      Options with BP Corporation North America, Inc. to sell up
    to
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  140,825
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,132,48232,750
      Bbls of crude oil at a strike price of $85.00 per Bbl.  4
      monthlycontracts
      beginning on October 1, 2009 and expiring on January 31,
    2010.Subtotal
      Commodity Derivative Instruments ( 2.1% of total
      investments)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  774,095
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  8,212,872CASH
      AND CASH EQUIVALENTSSubtotal
      Cash and Cash Equivalents (34.08% of total investments)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  133,805,575
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  133,805,575TOTAL
      INVESTMENTS, CASH AND CASH EQUIVALENTS
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  440,598,784
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  392,598,015LIABILITIES
      IN EXCESS OF OTHER ASSETS (23)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  (129,761,414
                                                                                                  )NET
      ASSETS (23)
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  262,836,601
 
 (See
accompanying notes to consolidated financial statements)
  10
 
 NGP CAPITAL RESOURCES COMPANY
 CONSOLIDATED
SCHEDULE OF INVESTMENTS
 December
31, 2008
 (Continued)
 
 NOTES TO CONSOLIDATED
SCHEDULE OF INVESTMENTS
 
 (1)
              All
      investments are pledged as collateral for obligations under the Company's
      credit facility.
 (2)
              Percentages
      represent interest rates in effect at the end of the period and due dates
      represent the contractual maturity
dates.
 (3)
              Fair
      value of targeted investments is determined by or under the direction of
      the Board of Directors.
 (4)
              All
      investments are in entities with primary operations in the United States
      of America.
 (5)
              Non-income
      producing securities.
 (6)
              Upon
      the March 30, 2006 closing of Venoco, Inc.'s TexCal acquisition, Venoco
      Inc.'s senior notes became collateralized by second priority
      liens.
 (7)
              Non-accrual
      status.
 (8)
              Portfolio
      company was issued a written notice of
default.
 (9)
              Chroma
      warrants expire on April 5, 2012 and provide the Company the right to
      purchase 2,462 shares of common stock at a purchase price of $75.00 per
      share.
 (10)
              BSR
      Loco Bayou warrants expire on August 15, 2013 and provide the Company the
      right to purchase 10,000 investor units at the exercise price of $160.00
      per investor unit.
 (11)
              Sonoran
      warrants expire on November 28, 2014 and provide the Company the right to
      purchase shares of common stock up to 2.87 million shares, on a fully
      diluted basis with anti-dilution provisions, at the exercise price of
      $0.20 per share.
 (12)
              Nighthawk
      warrants expire on May 13, 2017 and provide the Company the right to
      purchase approximately 2.5% of limited partnership units at the exercise
      price of $0.001 per unit.
 (13)
              Alden
      warrants provide the Company the right to purchase 23% of class C units at
      an exercise price of $0.739 per unit, expiring in December 2013 and the
      right to purchase 10% of class C units at an exercise price of $0.739 per
      unit, expiring in July 2014.
 (14)
              Formidable
      warrants expire on March 31, 2015 and provide the Company the right to
      purchase membership interest representing 30% of all distributions at an
      exercise price of $1,000 per percentage
point.
 (15)
              BioEnergy
      International, LLC warrants expire on August 15, 2010 and provide the
      Company the right to purchase  648,000 units, representing
      membership interests of BioEnergy International, LLC, at
      the  purchase price of $10.00 per
  unit.
 (16)
              Put
      Options are related to the limited term royalty interest purchased from
      ATP Oil & Gas Corporation.
 (17)
              Portfolio
      company was issued a written notice of default on February 13,
      2009.
 (18)
              Resaca
      stock is listed on the Alternative Investment Market of the London Stock
      Exchange, denominated in British pounds and its reported fair value at
      December 31, 2008 has been converted to U.S. dollars at the exchange rate
      effective on December 31, 2008.
 (19)
              Portfolio
      company was issued a written notice of default on February 5,
      2009.
 (20)
              Black
      Pool warrants expire seven years after repayment of principal and interest
      and provide the Company the right to purchase approximately 25% of
      membership interest at the exercise price of $0.01 per
    unit.
 (21)
              Bionol
      Clearfield, LLC is owned 100% by BioEnergy Holdings,
  LLC.
 (22)
              Level
      3 security.
 (23)
              As
      restated.
 
 (See
accompanying notes to consolidated financial statements)
  11
 
 NGP
CAPITAL RESOURCES COMPANY
 CONSOLIDATED
FINANCIAL HIGHLIGHTS
 (Unaudited)
 
 For the Nine Months EndedSeptember 30, 2009
                  
                  
                  September 30, 2008(As Restated)
                  
                  
                  (As Restated)Per
      Share Data  (1)Net
      asset value, beginning of period
                  
                  $
                  12.15
                  
                  
                  $
                  14.14Increase
      in net assets as a result of secondary public stock
    offering
                  
                  
                  -
                  
                  
                  
                  0.40Underwriting
      discounts and commissions related to secondary public stock
      offering
                  
                  
                  -
                  
                  
                  
                  (0.15
                  )Other
      costs related to secondary public stock offering
                  
                  
                  -
                  
                  
                  
                  (0.03
                  )Net
      increase in net assets from secondary public offering
                  
                  
                  -
                  
                  
                  
                  0.22Net
      asset value after public stock offering
                  
                  
                  12.15
                  
                  
                  
                  14.36Net
      investment income
                  
                  
                  0.42
                  
                  
                  
                  0.50Net
      realized and unrealized gain (loss) on portfolio securities, corporate
      notes and commodity derivative instruments (4)
                  
                  
                  (0.72
                  )
                  
                  
                  0.59Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                  
                  
                  (0.30
                  )
                  
                  
                  1.09Dividends
      declared
                  
                  
                  (0.47
                  )
                  
                  
                  (1.20
                  )Net
      asset value, end of period
                  
                  $
                  11.38
                  
                  
                  $
                  14.25Market
      value, beginning of period
                  
                  $
                  8.37
                  
                  
                  $
                  15.63Market
      value, end of period
                  
                  $
                  7.26
                  
                  
                  $
                  14.57Market
      value return  (2)
                  
                  
                  (6.85
                  )%
                  
                  
                  0.98
                  %Net
      asset value return (2)
                  
                  
                  0.58
                  %
                  
                  
                  9.17
                  %Ratios
      and Supplemental Data($
      and shares in thousands)Net
      assets, end of period
                  
                  $
                  246,196
                  
                  
                  $
                  308,267Average
      net assets
                  
                  $
                  254,516
                  
                  
                  $
                  277,841Common
      shares outstanding at end of period
                  
                  
                  21,628
                  
                  
                  
                  21,628Total
      operating expenses/average net assets (3)
                  
                  
                  5.84
                  %
                  
                  
                  8.10
                  %Total
      operating expenses less management and incentive fees and interest
      expense/average net assets (3)
                  
                  
                  1.87
                  %
                  
                  
                  1.62
                  %Total
      operating expenses less management and incentive fees/average net assets
      (3)
                  
                  
                  3.21
                  %
                  
                  
                  4.20
                  %Net
      investment income/average net assets (3)
                  
                  
                  4.72
                  %
                  
                  
                  5.21
                  %Net
      increase (decrease) in net assets resulting from operations/average net
      assets (3)
                  
                  
                  (3.40
                  )%
                  
                  
                  11.13
                  %Portfolio
      turnover rate
                  
                  
                  25.33
                  %
                  
                  
                  27.50
                  %
 
 (1) Per
Share Data is based on common shares outstanding at end of period.
 (2)
Return calculations assume reinvestment of dividends and are not
annualized.
 (3)
Annualized.
 (4)
Calculated as a balancing amount necessary to reconcile the change in net assets
value per share with the 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 year may not
equal the per share changes of the line items disclosed.
 
 (See
accompanying notes to consolidated financial statements)
  12




NGP
CAPITAL RESOURCES COMPANY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009


(Unaudited)




Note
      1:
            Organization





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





The
Company’s investment objective is to generate both current income and capital
appreciation through debt investments with certain equity
components.





The
Company is managed and advised, subject to the overall supervision of the
Company’s board of directors (the “Board of Directors”), by NGP Investment
Advisor, LP (the “Manager”), a Delaware limited partnership owned by NGP Energy
Capital Management, L.L.C., and NGP Administration, LLC (the “Administrator”),
the Company’s administrator.


Note
      2:
                Restatement
      of Consolidated Financial
Statements
 Background of the
Restatement
 
 On March 15, 2010, our Board of
Directors and the members of the Audit Committee of our Board of Directors
concluded that we should restate our consolidated financial statements for the
years ended December 31, 2007 and December 31, 2008, and for the quarters in
2007 and 2008 and the first three quarters of 2009 (collectively, the “Affected
Periods”).
 
 The determination to restate the
financial statements for the Affected Periods was made in connection with
management’s assessment of accounting errors it discovered as part of a process
to remediate a material weakness in internal controls previously disclosed in
the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
and the Company’s Quarterly Reports on Form 10-Q in 2009. While the Company has
taken steps to remediate the previously disclosed material weakness, the
material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet completed its assessment as to
whether the material weakness had been fully remediated. The Company anticipates
that it will complete its testing of the additional internal control processes
designed to remediate the previously disclosed material weakness in
2010.
 
 The errors and consequent restatements
described below principally involved non-cash accounting entries related to net
deferred tax assets and liabilities that typically arise as a result of timing
differences in tax and GAAP (book) accounting. Taxable Net Investment Income,
which is the primary determinant of the Company’s distributable income, has not
been affected in any of the Affected Periods by these restatements.
 
 The Company’s assessment of certain
identified accounting errors results in the following adjustments to previously
reported periods:
 
 1.           In
the quarter ended March 31, 2007, the Company failed to record a deferred tax
liability with respect to approximately $2.1 million in unrealized appreciation
on an investment in partnerships.  Similarly, in the quarters ended
June 30, 2007 and September 30, 2007, the Company failed to record deferred tax
liabilities with respect to approximately $4.0 million and $2.0 million,
respectively, in unrealized appreciation on an investment.
 
 2.           In
the quarter ended September 30, 2008, the Company realized a $12.34 million
pre-tax gain on this same investment (as compared to the $8.15 million of
unrealized appreciation previously recorded in 2007). The reversal of the
previously unrecorded deferred tax liability in 2008 resulted in the incorrect
recording of a net deferred tax asset of $3.8 million at year end
2008.
 
 Unrelated
to the restatements, we have reclassified certain  balance sheet,
statement of operations and statement of cash flows amounts to conform to the
presentation in our most recently-filed Annual Report on Form 10-K. These
reclassifications were primarily related to the disaggregation of investments in
portfolio securities, investment income, net realized capital gain (loss) on
investments and net unrealized gain (loss) on investments into separate
classifications according to level of control.
 
 Impact of the Restatement
and Reclassification
 
 The
restatement and reclassification adjustments detailed below to our previously
filed consolidated financial statements reflect adjustments which principally
involved non-cash accounting entries related to net deferred tax assets and
liabilities, which impact the consolidated balance sheets, consolidated
statement of operations and consolidated statement of cash flows.
 
 13
  The
effects of the restatement on the unaudited consolidated balance sheet at
September 30, 2009 and consolidated balance sheet at December 31, 2008 are
summarized in the following table:
 
 As PreviouslyReported
                          
                          
                          Reclassifications
                          
                          
                          As Reclassified
                          
                          
                          Restatement
                          
                          
                          As RestatedConsolidated
      Balance Sheets:As
      of September 30, 2009Investments
      in portfolio securities at fair value
                          
                          $
                          193,728,176
                          
                          
                          $
                          (193,728,176
                          )
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -Control
      investments - majority owned
                          
                          
                          -
                          
                          
                          
                          74,124,888
                          
                          
                          
                          74,124,888
                          
                          
                          
                          -
                          
                          
                          
                          74,124,888Affiliate
      investments
                          
                          
                          -
                          
                          
                          
                          33,636,100
                          
                          
                          
                          33,636,100
                          
                          
                          
                          -
                          
                          
                          
                          33,636,100Non-affiliate
      investments
                          
                          
                          -
                          
                          
                          
                          85,967,188
                          
                          
                          
                          85,967,188
                          
                          
                          
                          -
                          
                          
                          
                          85,967,188Accounts
      receivable and other current assets
                          
                          
                          -
                          
                          
                          
                          150,424
                          
                          
                          
                          150,424
                          
                          
                          
                          -
                          
                          
                          
                          150,424Prepaid
      assets
                          
                          
                          1,146,045
                          
                          
                          
                          (150,424
                          )
                          
                          
                          995,621
                          
                          
                          
                          -
                          
                          
                          
                          995,621Deferred
      tax assets - current
                          
                          
                          7,033,472
                          
                          
                          
                          -
                          
                          
                          
                          7,033,472
                          
                          
                          
                          (2,453,241
                          )
                          
                          
                          4,580,231Total
      current assets
                          
                          
                          92,781,754
                          
                          
                          
                          -
                          
                          
                          
                          92,781,754
                          
                          
                          
                          (2,453,241
                          )
                          
                          
                          90,328,513Total
      assets
                          
                          
                          295,823,883
                          
                          
                          
                          -
                          
                          
                          
                          295,823,883
                          
                          
                          
                          (2,453,241
                          )
                          
                          
                          293,370,642Deferred
      tax liabilities - non-current
                          
                          
                          854,605
                          
                          
                          
                          -
                          
                          
                          
                          854,605
                          
                          
                          
                          767,451
                          
                          
                          
                          1,622,056Total
      liabilities
                          
                          
                          46,407,568
                          
                          
                          
                          -
                          
                          
                          
                          46,407,568
                          
                          
                          
                          767,451
                          
                          
                          
                          47,175,019Paid-in
      capital in excess of par
                          
                          
                          315,184,191
                          
                          
                          
                          -
                          
                          
                          
                          315,184,191
                          
                          
                          
                          (5,536,158
                          )
                          
                          
                          309,648,033Undistributed
      net investment income (loss)
                          
                          
                          (2,096,939
                          )
                          
                          
                          -
                          
                          
                          
                          (2,096,939
                          )
                          
                          
                          (2,383,765
                          )
                          
                          
                          (4,480,704
                          )Undistributed
      net realized capital gain (loss)
                          
                          
                          1,984,349
                          
                          
                          
                          -
                          
                          
                          
                          1,984,349
                          
                          
                          
                          119,000
                          
                          
                          
                          2,103,349Net
      unrealized appreciation (depreciation) of portfolio securities, corporate
      notes and commodity derivative instruments
                          
                          
                          (65,676,914
                          )
                          
                          
                          -
                          
                          
                          
                          (65,676,914
                          )
                          
                          
                          4,580,231
                          
                          
                          
                          (61,096,683
                          )Total
      stockholders’ equity (net assets)
                          
                          
                          249,416,315
                          
                          
                          
                          -
                          
                          
                          
                          249,416,315
                          
                          
                          
                          (3,220,692
                          )
                          
                          
                          246,195,623Total
      liabilities and stockholders' equity (net assets)
                          
                          
                          295,823,883
                          
                          
                          
                          -
                          
                          
                          
                          295,823,883
                          
                          
                          
                          (2,453,241
                          )
                          
                          
                          293,370,642Net
      asset value per share
                          
                          
                          11.53
                          
                          
                          
                          -
                          
                          
                          
                          11.53
                          
                          
                          
                          (0.15
                          )
                          
                          
                          11.38As
      of December 31, 2008Investments
      in portfolio securities at fair value
                          
                          $
                          244,229,568
                          
                          
                          $
                          (244,229,568
                          )
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Control
      investments - majority owned
                          
                          
                          -
                          
                          
                          
                          24,570,000
                          
                          
                          
                          24,570,000
                          
                          
                          
                          -
                          
                          
                          
                          24,570,000Affiliate
      investments
                          
                          
                          -
                          
                          
                          
                          44,416,490
                          
                          
                          
                          44,416,490
                          
                          
                          
                          -
                          
                          
                          
                          44,416,490Non-affiliate
      investments
                          
                          
                          -
                          
                          
                          
                          175,243,078
                          
                          
                          
                          175,243,078
                          
                          
                          
                          -
                          
                          
                          
                          175,243,078Accounts
      receivable and other current assets
                          
                          
                          41,377
                          
                          
                          
                          -
                          
                          
                          
                          41,377
                          
                          
                          
                          192,172
                          
                          
                          
                          233,549Deferred
      tax assets - current
                          
                          
                          200,000
                          
                          
                          
                          -
                          
                          
                          
                          200,000
                          
                          
                          
                          1,653,612
                          
                          
                          
                          1,853,612Total
      current assets
                          
                          
                          138,356,217
                          
                          
                          
                          -
                          
                          
                          
                          138,356,217
                          
                          
                          
                          1,845,784
                          
                          
                          
                          140,202,001Deferred
      tax assets - non-current
                          
                          
                          3,600,000
                          
                          
                          
                          -
                          
                          
                          
                          3,600,000
                          
                          
                          
                          (3,600,000
                          )
                          
                          
                          -Total
      assets
                          
                          
                          400,748,657
                          
                          
                          
                          -
                          
                          
                          
                          400,748,657
                          
                          
                          
                          (1,754,216
                          )
                          
                          
                          398,994,441Deferred
      tax liabilities - non-current
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,231,829
                          
                          
                          
                          1,231,829Total
      liabilities
                          
                          
                          134,926,011
                          
                          
                          
                          -
                          
                          
                          
                          134,926,011
                          
                          
                          
                          1,231,829
                          
                          
                          
                          136,157,840Paid-in
      capital in excess of par
                          
                          
                          315,184,191
                          
                          
                          
                          -
                          
                          
                          
                          315,184,191
                          
                          
                          
                          (5,536,158
                          )
                          
                          
                          309,648,033Undistributed
      net investment income (loss)
                          
                          
                          (3,420,716
                          )
                          
                          
                          -
                          
                          
                          
                          (3,420,716
                          )
                          
                          
                          124,108
                          
                          
                          
                          (3,296,608
                          )Net
      unrealized appreciation (depreciation) of portfolio securities, corporate
      notes and commodity derivative instruments
                          
                          
                          (48,000,769
                          )
                          
                          
                          -
                          
                          
                          
                          (48,000,769
                          )
                          
                          
                          2,426,005
                          
                          
                          
                          (45,574,764
                          )Total
      stockholders’ equity (net assets)
                          
                          
                          265,822,646
                          
                          
                          
                          -
                          
                          
                          
                          265,822,646
                          
                          
                          
                          (2,986,045
                          )
                          
                          
                          262,836,601Total
      liabilities and stockholders' equity (net assets)
                          
                          
                          400,748,657
                          
                          
                          
                          -
                          
                          
                          
                          400,748,657
                          
                          
                          
                          (1,754,216
                          )
                          
                          
                          398,994,441Net
      asset value per share
                          
                          
                          12.29
                          
                          
                          
                          -
                          
                          
                          
                          12.29
                          
                          
                          
                          (0.14
                          )
                          
                          
                          12.15
  14
  The
effects of the restatement on the unaudited consolidated statements of
operations for the three and nine-month periods ended September 30, 2009 are
summarized in the following table:
 
 As PreviouslyReported
                        
                        
                        Reclassifications
                        
                        
                        As Reclassified
                        
                        
                        Restatement
                        
                        
                        As RestatedConsolidated
      Statements of Operations:For
      the Three Months Ended September 30, 2009Investment
      incomeInterest
      income:
                        
                        $
                        6,091,199
                        
                        
                        $
                        (6,091,199
                        )
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        967,554
                        
                        
                        
                        967,554
                        
                        
                        
                        -
                        
                        
                        
                        967,554Affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        1,158,016
                        
                        
                        
                        1,158,016
                        
                        
                        
                        -
                        
                        
                        
                        1,158,016Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        3,965,629
                        
                        
                        
                        3,965,629
                        
                        
                        
                        -
                        
                        
                        
                        3,965,629Royalty
      income (loss), net of amortization:
                        
                        
                        (927,004
                        )
                        
                        
                        927,004
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        828,553
                        
                        
                        
                        828,553
                        
                        
                        
                        -
                        
                        
                        
                        828,553Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        (1,755,557
                        )
                        
                        
                        (1,755,557
                        )
                        
                        
                        -
                        
                        
                        
                        (1,755,557
                        )State
      and excise taxes
                        
                        
                        30,047
                        
                        
                        
                        -
                        
                        
                        
                        30,047
                        
                        
                        
                        (30,047
                        )
                        
                        
                        -Total
      operating expenses
                        
                        
                        3,150,538
                        
                        
                        
                        -
                        
                        
                        
                        3,150,538
                        
                        
                        
                        (30,047
                        )
                        
                        
                        3,120,491Net
      investment income before income taxes
                        
                        
                        2,871,129
                        
                        
                        
                        -
                        
                        
                        
                        2,871,129
                        
                        
                        
                        30,047
                        
                        
                        
                        2,901,176Benefit
      (provision) for income taxes
                        
                        
                        847,254
                        
                        
                        
                        -
                        
                        
                        
                        847,254
                        
                        
                        
                        (844,933
                        )
                        
                        
                        2,321Net
      investment income
                        
                        
                        3,718,383
                        
                        
                        
                        -
                        
                        
                        
                        3,718,383
                        
                        
                        
                        (814,886
                        )
                        
                        
                        2,903,497Net
      increase (decrease) in unrealized appreciation (depreciation) on portfolio
      securities, corporate notes and commodity derivative
      instruments:
                        
                        
                        11,313,227
                        
                        
                        
                        (11,313,227
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        1,688,108
                        
                        
                        
                        1,688,108
                        
                        
                        
                        -
                        
                        
                        
                        1,688,108Affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        4,511,162
                        
                        
                        
                        4,511,162
                        
                        
                        
                        -
                        
                        
                        
                        4,511,162Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        5,113,957
                        
                        
                        
                        5,113,957
                        
                        
                        
                        -
                        
                        
                        
                        5,113,957Benefit
      (provision) for taxes on unrealized gain (loss)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        513,400
                        
                        
                        
                        513,400Total
      net unrealized gain (loss) on investments
                        
                        
                        11,313,227
                        
                        
                        
                        -
                        
                        
                        
                        11,313,227
                        
                        
                        
                        513,400
                        
                        
                        
                        11,826,627Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                        
                        
                        15,031,610
                        
                        
                        
                        -
                        
                        
                        
                        15,031,610
                        
                        
                        
                        (301,486
                        )
                        
                        
                        14,730,124Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations per common share
                        
                        
                        0.69
                        
                        
                        
                        -
                        
                        
                        
                        0.69
                        
                        
                        
                        (0.01
                        )
                        
                        
                        0.68For
      the Nine Months Ended September 30, 2009Investment
      incomeInterest
      income:
                        
                        $
                        18,658,074
                        
                        
                        $
                        (18,658,074
                        )
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        967,554
                        
                        
                        
                        967,554
                        
                        
                        
                        -
                        
                        
                        
                        967,554Affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        3,959,181
                        
                        
                        
                        3,959,181
                        
                        
                        
                        -
                        
                        
                        
                        3,959,181Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        13,731,339
                        
                        
                        
                        13,731,339
                        
                        
                        
                        -
                        
                        
                        
                        13,731,339Royalty
      income (loss), net of amortization:
                        
                        
                        (4,595,107
                        )
                        
                        
                        4,595,107
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        894,233
                        
                        
                        
                        894,233
                        
                        
                        
                        -
                        
                        
                        
                        894,233Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        (5,489,340
                        )
                        
                        
                        (5,489,340
                        )
                        
                        
                        -
                        
                        
                        
                        (5,489,340
                        )State
      and excise taxes
                        
                        
                        42,732
                        
                        
                        
                        -
                        
                        
                        
                        42,732
                        
                        
                        
                        (42,732
                        )
                        
                        
                        -Total
      operating expenses
                        
                        
                        11,168,145
                        
                        
                        
                        -
                        
                        
                        
                        11,168,145
                        
                        
                        
                        (42,732
                        )
                        
                        
                        11,125,413Net
      investment income before income taxes
                        
                        
                        8,923,113
                        
                        
                        
                        -
                        
                        
                        
                        8,923,113
                        
                        
                        
                        42,732
                        
                        
                        
                        8,965,845Benefit
      (provision) for income taxes
                        
                        
                        2,565,919
                        
                        
                        
                        -
                        
                        
                        
                        2,565,919
                        
                        
                        
                        (2,550,605
                        )
                        
                        
                        15,314Net
      investment income
                        
                        
                        11,489,032
                        
                        
                        
                        -
                        
                        
                        
                        11,489,032
                        
                        
                        
                        (2,507,873
                        )
                        
                        
                        8,981,159Net
      realized capital gain (loss) on portfolio securities, corporate notes and
      commodity derivative instruments:
                        
                        
                        (53,963
                        )
                        
                        
                        53,963
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        (350,000
                        )
                        
                        
                        (350,000
                        )
                        
                        
                        -
                        
                        
                        
                        (350,000
                        )Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        296,037
                        
                        
                        
                        296,037
                        
                        
                        
                        -
                        
                        
                        
                        296,037Benefit
      (provision) for taxes on capital gain (loss)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        119,000
                        
                        
                        
                        119,000Total
      net realized gain (loss) on investments
                        
                        
                        (53,963
                        )
                        
                        
                        -
                        
                        
                        
                        (53,963
                        )
                        
                        
                        119,000
                        
                        
                        
                        65,037Net
      increase (decrease) in unrealized appreciation (depreciation) on portfolio
      securities, corporate notes and commodity derivative
      instruments:
                        
                        
                        (17,676,145
                        )
                        
                        
                        17,676,145
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Control
      investments - majority owned
                        
                        
                        -
                        
                        
                        
                        (3,056,931
                        )
                        
                        
                        (3,056,931
                        )
                        
                        
                        -
                        
                        
                        
                        (3,056,931
                        )Affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        5,105,390
                        
                        
                        
                        5,105,390
                        
                        
                        
                        -
                        
                        
                        
                        5,105,390Non-affiliate
      investments
                        
                        
                        -
                        
                        
                        
                        (19,724,604
                        )
                        
                        
                        (19,724,604
                        )
                        
                        
                        -
                        
                        
                        
                        (19,724,604
                        )Benefit
      (provision) for taxes on unrealized gain (loss)
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        2,154,226
                        
                        
                        
                        2,154,226Total
      net unrealized gain (loss) on investments
                        
                        
                        (17,676,145
                        )
                        
                        
                        -
                        
                        
                        
                        (17,676,145
                        )
                        
                        
                        2,154,226
                        
                        
                        
                        (15,521,919
                        )Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                        
                        
                        (6,241,076
                        )
                        
                        
                        -
                        
                        
                        
                        (6,241,076
                        )
                        
                        
                        (234,647
                        )
                        
                        
                        (6,475,723
                        )Net
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations per common share
                        
                        
                        (0.29
                        )
                        
                        
                        -
                        
                        
                        
                        (0.29
                        )
                        
                        
                        (0.01
                        )
                        
                        
                        (0.30
                        )
  15
  The
effects of the restatement on the unaudited consolidated statements of cash
flows for the nine-month period ended September 30, 2009 are summarized in the
following table:
 
 As PreviouslyReported
                    
                    
                    Reclassifications
                    
                    
                    As Reclassified
                    
                    
                    Restatement
                    
                    
                    As RestatedConsolidated
      Statement of Cash Flows:For
      the Nine Months Ended September 30, 2009Cash
      flows from operating activitiesNet
      increase (decrease) in stockholders' equity (net assets) resulting from
      operations
                    
                    $
                    (6,241,076
                    )
                    
                    $
                    -
                    
                    
                    $
                    (6,241,076
                    )
                    
                    $
                    (234,647
                    )
                    
                    $
                    (6,475,723
                    )Effects
      of changes in operating assets and liabilitiesAccounts
      receivable and other current assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    83,125
                    
                    
                    
                    83,125Prepaid
      assets
                    
                    
                    794,237
                    
                    
                    
                    -
                    
                    
                    
                    794,237
                    
                    
                    
                    109,047
                    
                    
                    
                    903,284Current
      portion of deferred income taxes
                    
                    
                    (6,833,472
                    )
                    
                    
                    -
                    
                    
                    
                    (6,833,472
                    )
                    
                    
                    4,106,853
                    
                    
                    
                    (2,726,619
                    )Non-current
      portion of deferred income taxes
                    
                    
                    4,454,605
                    
                    
                    
                    -
                    
                    
                    
                    4,454,605
                    
                    
                    
                    (4,064,378
                    )
                    
                    
                    390,227




Note
      3:
            Significant
      Accounting Policies





The
interim unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries.  All significant intercompany accounts and
transactions have been eliminated in consolidation. The management of the
Company prepares the interim consolidated financial statements, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the “SEC”).  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) have been
omitted pursuant to such rules and regulations, although the Company believes
the disclosures included herein are adequate to make the information presented
not misleading.  In the opinion of management, all adjustments, which
are of a normal recurring nature considered necessary for presentation of the
information, have been included.  These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008.  Interim results
are not necessarily indicative of results for a full year. Subsequent events
have been evaluated through November 6, 2009, which is the date the financial
statements were issued. See Subsequent Events in Note 13.





The
following is a summary of the significant accounting policies consistently
applied by the Company in the preparation of its consolidated financial
statements:





Use
of Estimates





The
interim consolidated financial statements have been prepared in accordance with
GAAP that require management to make estimates and assumptions that affect the
amounts reported in the interim consolidated financial statements and the
accompanying notes to the interim consolidated financial
statements.  Actual results could differ from these
estimates.


16





Cash
and Cash Equivalents





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





Prepaid
Assets





Prepaid
assets consist of premiums paid for directors’ and officers’ insurance and
fidelity bonds with a policy term of one year and fees associated with the
establishment of the policy or credit facility.  Such premiums and
fees are amortized monthly on a straight-line basis over the term of the policy
or credit facility.





Concentration
of Credit Risk





The
Company places its cash and cash equivalents with financial institutions and, at
times, cash held in checking accounts may exceed the Federal Deposit Insurance
Corporation insured limit.  On September 15, 2008, Lehman Brothers
Holdings Inc. (“Lehman Holdings”) filed for protection under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court in the
Southern District of New York.  Subsidiaries of Lehman Holdings were
not included in the filing.  The business of Lehman Brothers Private
Investment Management (“PIM”), including the Company’s money market and bond
holdings, was transferred during September 2008 to Barclays Wealth, the wealth
management division of Barclays Bank PLC (“Barclays”), which operates in the
United States as Barclays Capital Inc.  As of September 30, 2009, the
Company’s Barclays money market account balance was $945,877 and the fair market
value of our senior notes and corporate notes were $12.12 million and $8.70
million, respectively.  The Company currently believes that the
transfer of its Lehman Brothers account to Barclays will not have a material
adverse effect on its financial position, results of operations or cash
flows.





Valuation
of Investments





Investments
are carried at fair value, as determined in good faith by the Company’s Board of
Directors.  On a quarterly basis, the investment team of the Manager
prepares valuations for all of the assets in the Company’s portfolio and
presents the valuations to the Company’s valuation committee (the “Valuation
Committee”) and Board of Directors.  The Valuation Committee
determines and recommends the valuations to the Board of Directors, which
reviews and ratifies the final portfolio valuations.





Investments
in securities for which market quotations are readily available are recorded in
the financial statements at such market quotations as of the valuation
date.  For investments in securities for which market quotations are
unavailable, or which have various degrees of trading restrictions, the
investment team of the Manager prepares valuation analyses, as generally
described below.





Using the
most recently available financial statements, forecasts and, when applicable,
comparable transaction data, the investment team of the Manager prepares
valuation analyses for the various securities in the Company’s investment
portfolio.  The investment team prepares the valuation analyses using
traditional valuation methodologies, which rely on estimates of the asset values
and enterprise values of portfolio companies issuing securities.





The
methodologies for determining asset valuations include estimates based
on:  the liquidation or sale value of a portfolio company’s assets,
the discounted value of expected future net cash flows from the assets and third
party valuations of the portfolio company’s assets, such as engineering reserve
reports of oil and natural gas properties.  The investment team of the
Manager considers some or all of the above valuation methods to determine the
estimated asset value of a portfolio company.





The
methodologies for determining enterprise valuations include estimates based
on:  valuations of comparable public companies, recent sales of
comparable companies, the value of recent investments in the equity securities
of a portfolio company and the methodologies used for asset
valuations.  The investment team of the Manager considers some or all
of the above valuation methods to determine the estimated enterprise value of a
portfolio company.





The
methodologies for determining estimated current market values of comparable
securities include estimates based on: recent initial offerings of comparable
securities of public and private companies; recent secondary market sales of
comparable securities of public and private companies; current market implied
interest rates for comparable securities in general; and current market implied
interest rates for non-comparable securities in general, with adjustments for
such things as size of issue and tenor. The investment team of the Manager
considers some or all of the above valuation methods to determine the estimated
current market value of a comparable security.


17





Debt Securities: The Company
records its investments in non-convertible debt securities at fair value which
generally approximates cost  plus amortized original issue discount
(“OID”) to the extent that the estimated asset or enterprise value of the
portfolio company exceeds the outstanding debt of the portfolio company, subject
to comparison to the estimated current market values of comparable
securities.  The Company records its investment in convertible debt
securities at fair value which generally approximates the higher of: 1) cost
plus amortized OID, to the extent that the estimated asset or enterprise value
of the portfolio company equals or exceeds the outstanding debt of the portfolio
company; and 2) the Company’s pro rata share, upon conversion, of the residual
equity value of the portfolio company available after deducting all outstanding
debt from its estimated enterprise value, both subject to comparison to the
estimated current market values of comparable securities. If the estimated asset
or enterprise value is less than the sum of the value of the Company’s debt
investment and all other debt securities of the portfolio company pari passu or senior to the
Company’s debt investment, the Company reduces the value of the debt investment
beginning with the junior-most debt investment such that the asset or enterprise
value less the value of the outstanding pari passu or senior debt is
zero, subject to comparison to the estimated current market values of comparable
securities.  The Company records investments in debt securities for
which market quotations are readily available at such market quotations as of
the valuation date.





Equity Securities: The
Company records its  investments in preferred and common equity
securities (including warrants or options to acquire equity securities) at fair
value based on its pro rata share of the residual equity value available after
deducting all outstanding debt from the estimated enterprise value, subject to
comparison to the estimated current market values of comparable
securities.





Property-Based Equity Participation
Rights: The Company records its investments in overriding royalty and net
profits 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.
Appropriate cash flow multiples are derived from the review of comparable
transactions involving similar assets. The Company derives 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.





Due to
the uncertainty inherent in the valuation process, such estimates of fair value
may differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be
material.  Additionally, changes in the market environment and other
events that may occur over the life of the investments may cause the gains or
losses ultimately realized on these investments to be different from the
valuations currently assigned.





Valuation
of Commodity Derivative Instruments





All
derivative instruments, other than those that meet specific exclusions, are
recorded at fair value according to current accounting rules.  Quoted
market prices are the best evidence of fair value.  If quotations are
not available, management bases its best estimate of fair value on the quoted
market price of derivatives with similar characteristics or on valuation
techniques.  The Company’s derivative instruments are either exchange
traded or transacted in an over-the-counter market.  Valuation is
determined by reference to readily available public data.  Management
bases the option fair values for the natural gas option transactions on the
Black-Scholes pricing model and bases the crude oil transactions on the
Turnbull-Wakeman pricing model.  Fair value results are verified
against the applicable counterparty’s fair values.





Securities
Transactions, Interest and Dividend Income Recognition





All
securities transactions are accounted for on a trade-date basis. Interest income
is recorded on the accrual basis to the extent that such amounts are expected to
be collected.  Premiums and discounts are accreted into interest
income using the effective interest method. Detachable warrants, other equity
securities or property interests such as overriding royalty interests obtained
in conjunction with the acquisition of debt securities are recorded separately
from the debt securities at their initial fair value, with a corresponding
amount recorded as a discount to the associated debt security.  Income
from overriding royalty interests is recognized as received and the recorded
assets are charged amortization using the units of production
method.  The portion of the loan origination fees paid that represent
additional yield or discount on a loan are deferred and accreted into interest
income over the life of the loan using the effective interest
method.  Upon the prepayment of a loan or debt security, any
unamortized loan origination fees are recorded as interest income and any
unamortized premium or discount is recorded as a realized gain or
loss.  Market premiums or discounts on acquired loans or fixed income
investments are accreted into interest income using the effective interest
method.  Dividend income is recognized on the ex-dividend
date.  Accruing interest or dividends on investments is deferred when
it is determined that the interest or dividend is not
collectible.  Collectability of the interest and dividends is
assessed, based on many factors including the portfolio company’s ability to
service its loan based on current and projected cash flows as well as the
current valuation of the portfolio company’s assets.


18





Payment-in-Kind
Interest and Dividends





The
Company may have investments in its portfolio that contain payment-in-kind
(“PIK”) provisions.  The Company computes PIK interest or dividends at
the contractual rate specified in each investment agreement, adds it to the
principal balance of the investment and records it as interest or dividend
income.  For investments with PIK interest or dividends, the Company
bases income accruals on the principal balance including any PIK.  To
maintain the Company’s RIC status, this non-cash source of income must be paid
out to stockholders in the form of dividends, even though the Company has not
yet collected the cash.  For the quarter ended September 30, 2009, PIK
interest income was $2,067,416, net of a $32,693 reserve.  For the
quarter ended September 30, 2008 PIK interest income was $606,557, net of a
$77,884 reserve.  There was no PIK dividend income for the quarter
ended September 30, 2009 or September 30, 2008.  If the portfolio
company’s asset valuation is not sufficient to cover the contractual interest,
the Company will not accrue PIK interest income or PIK dividend income on the
investment.





Net
Realized Gains or Losses and Net Change in Unrealized Appreciation or
Depreciation





Realized
gains or losses are measured by the difference between the net proceeds from the
repayment or sale and the amortized cost basis of the investment, considering
unamortized fees and prepayment premiums, and without regard to unrealized
appreciation or depreciation previously recognized, and include investments
charged off during the year, net of recoveries.  Net unrealized
appreciation or depreciation reflects the change in portfolio investment values
during the reporting period including the reversal of previously recorded
unrealized appreciation or depreciation, when capital gains or losses are
realized.





Derivative
accounting rules require that fair value changes of derivative instruments that
do not qualify for hedge accounting be reported in the current period, rather
than in the period the derivatives are settled and/or the hedged transaction is
settled. This can result in significant earnings volatility.  The
Company has decided not to designate these instruments as hedging instruments
for financial accounting purposes. Net unrealized appreciation or
depreciation reflects the change in derivative values during the reporting
period including the reversal of previously-recorded unrealized appreciation or
depreciation, when settled gains or losses are realized.





Fee
Income Recognition





Fees
primarily include financial advisory, transaction structuring, loan
administration, commitment and prepayment fees. Financial advisory fees
represent amounts received for providing advice and analysis to companies and
are recognized as earned when such services are performed, provided collection
is probable.  Transaction structuring fees represent amounts received
for structuring, financing and executing transactions and are generally payable
only if the transaction closes. Such fees are deferred and accreted into
interest income over the life of the loan using the effective interest
method.  Commitment fees represent amounts received for committed
funding and are generally payable whether or not the transaction
closes.  On transactions that close within the commitment period,
commitment fees are deferred and accreted into interest income over the life of
the loan using the effective interest method.  Commitment fees on
transactions that do not close are generally recognized over the period the
commitment is outstanding.  Prepayment and loan administration fees
are recognized as they are received.  For the quarter ended September
30, 2009 the Company accreted approximately $0.6 million of fee income into
interest income, compared to approximately $0.5 million of fee income for the
quarter ended September 30, 2008.





Dividends





Dividends
to stockholders are recorded on the ex-dividend date.  The Company
currently intends that its distributions each year will be sufficient to
maintain the Company’s status as a RIC for federal income tax purposes and to
eliminate excise tax liability.  The Company currently intends to make
distributions to stockholders on a quarterly basis of substantially all of its
net taxable income.  The Company also intends to make distributions of
net realized capital gains, if any, at least annually.  However, the
Company may in the future decide to retain such capital gains for investment and
designate such retained amount as a deemed distribution.  The
Company’s Board of Directors determines the amount to be paid out as a dividend,
if any, each quarter, based on the annual taxable earnings estimated by the
Manager.  Based on that estimate, the Company declares the dividend
each quarter and pays such dividend shortly thereafter.


19





The
following table summarizes the Company’s dividends for the year 2008 and for the
first, second and third quarters of 2009:





Dividend
History





Declaration Date
                          
                          Amount
                          
                          Record Date
                          
                          Payment DateMarch
      19, 2008
                          
                          $
                          0.400
                          
                          March
      31, 2008
                          
                          April
      11, 2008June
      9, 2008
                          
                          $
                          0.400
                          
                          June
      30, 2008
                          
                          July
      11, 2008September
      10, 2008
                          
                          $
                          0.400
                          
                          September
      30, 2008
                          
                          October
      10, 2008December
      19, 2008
                          
                          $
                          0.410
                          
                          December
      29, 2008
                          
                          January
      5, 2009March
      10, 2009
                          
                          $
                          0.200
                          
                          March
      31, 2009
                          
                          April
      10, 2009June
      11, 2009
                          
                          $
                          0.120
                          
                          June
      30, 2009
                          
                          July
      10, 2009September
      10, 2009
                          
                          $
                          0.150
                          
                          September
      30, 2009
                          
                          October
      9,
2009





The
Company has established an “opt out” dividend reinvestment plan for its common
stockholders.  As a result, if the Company declares a dividend, then a
stockholder’s cash dividend will be automatically reinvested in additional
shares of the Company’s common stock unless the stockholder, or his or her
broker, specifically “opts out” of the dividend reinvestment plan and elects to
receive cash dividends. It is customary practice for many brokers to “opt out”
of dividend reinvestment plans on behalf of their clients unless specifically
instructed otherwise.  As of October 9, 2009, the date of the most
recent dividend payment, holders of 2,306,518 shares, or approximately 10.7% of
the 21,628,202 outstanding common shares, participated in the Company’s dividend
reinvestment plan.





The
Company’s dividend reinvestment plan provides for the plan agent to purchase
shares in the open market for credit to the accounts of plan participants unless
the average of the closing sales prices for the shares for the five days
immediately preceding the payment date exceeds 110% of the most recently
reported net asset value per share.





The table
below summarizes participation in the Company’s dividend reinvestment plan for
the year 2008 and for the first, second and third quarters of 2009:





Dividend
Reinvestment Plan Participation


Percentage
      of
                    
                    
                    
                    
                    
                    
                    
                    
                    Common
      Stock DividendsParticipating
                    
                    
                    Outstanding
                    
                    
                    Total
                    
                    
                    
                    
                    
                    Purchased
      in
                    
                    
                    Purchase
                    
                    
                    Newly
      Issued SharesDividend
                    
                    Shares
                    
                    
                    Shares
                    
                    
                    Distribution
                    
                    
                    Cash
      Dividends
                    
                    
                    Open
      Market
                    
                    
                    Price
                    
                    
                    Amount
                    
                    
                    SharesMarch
      2008
                    
                    
                    1,693,284
                    
                    
                    
                    9.7
                    %
                    
                    $
                    7,000,133
                    
                    
                    $
                    6,322,815
                    
                    
                    $
                    -
                    
                    
                    $
                    16.33
                    
                    
                    $
                    677,318
                    
                    
                    
                    41,482June
      2008
                    
                    
                    1,655,552
                    
                    
                    
                    9.4
                    %
                    
                    $
                    8,651,281
                    
                    
                    $
                    7,989,060
                    
                    
                    $
                    662,221
                    
                    
                    $
                    15.69
                    
                    
                    $
                    -
                    
                    
                    
                    -September
      2008
                    
                    
                    1,739,829
                    
                    
                    
                    8.0
                    %
                    
                    $
                    8,651,281
                    
                    
                    $
                    7,955,350
                    
                    
                    $
                    695,931
                    
                    
                    $
                    11.45
                    
                    
                    $
                    -
                    
                    
                    
                    -December
      2008
                    
                    
                    1,749,954
                    
                    
                    
                    8.1
                    %
                    
                    $
                    8,867,563
                    
                    
                    $
                    8,150,082
                    
                    
                    $
                    717,481
                    
                    
                    $
                    9.50
                    
                    
                    $
                    -
                    
                    
                    
                    -March
      2009
                    
                    
                    2,179,204
                    
                    
                    
                    10.1
                    %
                    
                    $
                    4,325,640
                    
                    
                    $
                    3,889,799
                    
                    
                    $
                    435,841
                    
                    
                    $
                    6.43
                    
                    
                    $
                    -
                    
                    
                    
                    -June
      2009
                    
                    
                    1,889,207
                    
                    
                    
                    8.7
                    %
                    
                    $
                    2,595,384
                    
                    
                    $
                    2,368,679
                    
                    
                    $
                    226,705
                    
                    
                    $
                    5.78
                    
                    
                    $
                    -
                    
                    
                    
                    -September
      2009
                    
                    
                    2,306,518
                    
                    
                    
                    10.7
                    %
                    
                    $
                    3,244,230
                    
                    
                    $
                    2,898,252
                    
                    
                    $
                    345,978
                    (1)
                    
                    $
                    7.62
                    
                    
                    $
                    -
                    
                    
                    
                    -





(1)  Shares
were purchased on October 9, 2009 for the September 2009
dividend.  See above and Note 5 for further detail.




Note 4:
            Credit Facilities and
      Borrowings





On July
16, 2009, the Company repaid the entire $75 million balance on its Treasury
Secured Revolving Credit Agreement (as amended, the “Treasury
Facility”).  The Treasury Facility had a three-year term, maturing
August 31, 2009, and bore interest, at the Company’s option, at either (i) LIBOR
plus 25 basis points or (ii) the base rate.  The Company did not renew
or extend the Treasury Credit Facility at its maturity on August 31,
2009.


20





Under the
terms of the Company’s Amended and Restated Revolving Credit Agreement (as
amended, the “Investment Facility”), the lenders have agreed to extend revolving
credit to the Company in an amount not to exceed $87.5 million, with the ability
to increase the credit available to an amount not to exceed $175 million by
obtaining additional commitments from existing lenders or new
lenders.  The total amount committed was $87.5 million and $40.0
million was outstanding under the Investment Facility as of September 30,
2009.  By comparison, as of December 31, 2008, the total amount
committed was $87.5 million and $45.0 million was outstanding under the
Investment Facility.  The Investment Facility has a four-year term,
maturing on August 31, 2010, and bears interest, at the Company’s option, at
either (i) LIBOR plus 150 to 250 basis points, based on the degree of leverage
of the Company or (ii) the base rate plus 0 to 75 basis points, based on the
degree of leverage of the Company.  Proceeds from the Investment
Facility are used to supplement the Company’s equity capital to make portfolio
investments.  As of September 30, 2009, the interest rate was 3.25% on
$40.0 million (prime rate).  See Subsequent Events in Note
13.





The
obligations under the Investment Facility are collateralized by substantially
all of the Company’s assets and are guaranteed by the Company’s existing and
future subsidiaries, other than special purpose subsidiaries and certain other
subsidiaries.  The Investment Facility contains affirmative and
reporting covenants and certain financial ratio and restrictive covenants,
including: (a) maintaining a ratio of net asset value to consolidated total
indebtedness (excluding net hedging liabilities) of the Company and its
subsidiaries, of not less than 2.25:1.0, (b) maintaining a ratio of net asset
value to consolidated total indebtedness (including net hedging liabilities) of
the Company and its subsidiaries, of not less than 2.0:1.0, (c) maintaining a
ratio of EBITDA (excluding revenue from collateral under the Treasury Facility)
to interest expense (excluding interest on loans under the Treasury Facility) of
the Company and its subsidiaries of not less than 3.0:1.0, (d) limitations on
additional indebtedness, (e) limitations on liens, (f) limitations on mergers
and other fundamental changes, (g) limitations on dividends, (h) limitations on
disposition of assets other than in the normal course of business, (i)
limitations on transactions with affiliates, (j) limitations on agreements that
prohibit liens on properties of the Company and its subsidiary guarantors, (k)
limitations on sale and leaseback transactions, (l) limitations on speculative
hedging transactions and (m) limitations on the aggregate amount of unfunded
commitments. From time to time, certain of the lenders may provide customary
commercial and investment banking services to the Company.





In
addition to the Company’s Investment Facility, the Company may also fund a
portion of its investments with issuances of equity or senior debt
securities.  The Company may also securitize a portion of its
investments in mezzanine or senior secured loans or other assets.  The
Company expects its primary use of funds to be investments in portfolio
companies, cash distributions to holders of its common stock and payment of fees
and other operating expenses.




Note 5:
            Issuance
      of Common Stock





On August
6, 2004, the Company, in its initial capitalization transaction, sold 100 shares
of common stock to NGP Energy Capital Management, L.L.C. (formerly known as
Natural Gas Partners, L.L.C.) for $15.00 per share.  On November 9,
2004, the Company’s Registration Statement on Form N-2 (Registration No.
333-118279) was declared effective by the SEC in connection with the public
offering of 16,000,000 shares of common stock (plus up to 2,400,000 additional
shares of common stock upon the exercise of the underwriters’ over-allotment
option), which commenced on November 10, 2004.  The number of
securities covered by the registration statement, including the shares of common
stock subject to the underwriters’ over-allotment option, was 18,400,000, of
which 17,400,000 were sold to the public at a price of $15.00 per
share.  The net proceeds from this offering, after deducting expenses
of approximately $2,308,000 and underwriting discounts and commissions of $0.825
per share, were approximately $244,337,000.





On
February 6, 2008, the Company’s shelf registration statement on Form N-2
(Registration No. 333-146715) registering the offering, from time to time, of up
to $250,000,000 in aggregate offering price of the Company’s common stock was
declared effective by the SEC.  On April 10, 2008, the Company
commenced a public offering of 3,700,000 shares of common stock (plus up to
550,000 additional shares of common stock subject to the underwriters’
over-allotment option) of which 4,086,388 shares were sold to the public at a
price of $16.00 per share.  The net proceeds from this offering, after
deducting expenses of approximately $781,000 and underwriting discounts and
commissions of $0.80 per share, were approximately $61,330,000.





The
Company has established a dividend reinvestment plan for the Company’s common
stockholders, which provides for reinvestment of distributions paid by the
Company, on behalf of each plan participant, by the Company’s transfer agent, in
accordance with the plan terms.  The purpose of the plan is to provide
stockholders of record of the Company’s common stock, par value $.001 per share,
with a method of investing cash dividends and distributions in additional shares
at the current market price, without charges for record-keeping, custodial, and
reporting services.  However, the plan is an “opt-out”
plan.  This means, if the Company declares a cash dividend, a
stockholder’s cash dividend will be automatically reinvested in additional
shares of its common stock unless the stockholder specifically “opts out” of the
dividend reinvestment plan in writing, and elects to receive cash
dividends.  Any stockholder of record may elect to partially
participate in the plan, or begin or resume participation at any time, by
providing the plan agent with written notice.  It is customary
practice for many brokers to “opt out” of dividend reinvestment plans on behalf
of their clients unless specifically instructed otherwise.





The
Company has issued 141,714 shares of common stock to participants in the
dividend reinvestment plan since the inception of the plan.  See
Dividends in Note 3.


21





Note 6:
            Investment
      Management





Investment
Advisory Agreement





The
Company has entered into an investment advisory agreement with the Manager (the
“Investment Advisory Agreement”).  Under the Investment Advisory
Agreement, the Manager provides investment advisory services to, and manages the
day-to-day operations of, the Company, subject to the overall supervision of the
Company’s Board of Directors.





For
providing these services, the Manager receives a fee from the Company,
consisting of two components — a base management fee and an incentive
fee.





Under the
Investment Advisory Agreement, the base management fee is calculated quarterly
as 0.45% of the average of total assets of the Company as of the end of the two
previous quarters, and is payable quarterly in arrears.  The Manager
has agreed to waive permanently, subsequent to September 30, 2007, that portion
of the management fee attributable to U.S. Treasury securities or other short
term investments acquired with borrowings under the Company’s credit facilities
to the extent the amount of such securities exceeds $100 million.  All
of the $1,540,756 management and incentive fees payable to the Manager as of
September 30, 2009 was attributable to the base management fee for the quarter
ended September 30, 2009.  The base management fee for the quarter
ended September 30, 2008 was $1,944,869.





The
incentive fee under the Investment Advisory Agreement consists of two parts. The
first part, which is calculated and payable quarterly in arrears, equals 20% of
the excess, if any, of the Company’s net investment income for the quarter that
exceeds a quarterly hurdle rate equal to 2% (8% annualized) of the Company’s net
assets.





For this
purpose, net investment income means interest income, dividend income, and any
other income (including any other fees, such as commitment, origination,
syndication, structuring, diligence, managerial assistance, monitoring, and
consulting fees or other fees that the Company receives from portfolio
companies) accrued during the fiscal quarter, minus the Company’s operating
expenses for the quarter (including the base management fee, expenses payable
under the administration agreement, any interest expense and dividends paid on
issued and outstanding preferred stock, if any, but excluding the incentive
fee).   Accordingly, the Company 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, debt
instruments with payment-in-kind interest and zero coupon securities), accrued
income that the Company has not yet received in cash.  Net investment
income does not include any realized capital gains or losses, or unrealized
capital appreciation or depreciation.




The
incentive fees due in any fiscal quarter will be calculated as
follows:




·
            No
      incentive fee in any fiscal quarter in which the Company’s net investment
      income does not exceed the hurdle
rate.


·
            20%
      of the amount of the Company’s net investment income, if any, that exceeds
      the hurdle rate in any fiscal
quarter.




There
were no investment income incentive fees earned for the third quarters of 2009
and 2008.


As a
result of the accounting errors that necessitated the restatement of our
financial statements for the fiscal years ended December 31, 2007 and 2008,
between 2007 and 2009, the Company overpaid the Manager’s management and
incentive fees by approximately $34,600. The Company overpaid the base
management fee to the Manager in 2008 and 2009 by approximately $33,400 as
detailed by quarter below. These errors resulted principally from the incorrect
reporting of Total Assets and Net Assets. In the quarters ended June 30, 2007
and December 31, 2007, the Company underpaid the Manager’s investment income
incentive fee by approximately $4,400 and $9,100, respectively and overpaid the
capital gains fee as of December 31, 2007 by approximately $14,700. The
approximate $34,600 net overpayment to the Manager was settled in the first
quarter of 2010.
  Summary
of (Over)/ Under Payment of Management Fee by Quarter
 
 AverageTotal Assets
                    
                    
                    Change from
                    
                    
                    0.45% Fee
                    
                    
                    FeeAs Reported
                    
                    
                    As Restated
                    
                    
                    Change
                    
                    
                    Prior Quarter
                    
                    
                    Correction
                    
                    
                    Quarter3Q
      2007
                    
                    $
                    413,597,732
                    
                    
                    $
                    413,597,732
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -4Q
      2007
                    
                    
                    478,232,876
                    
                    
                    
                    478,276,626
                    
                    
                    
                    43,750
                    
                    
                    
                    21,875
                    
                    
                    
                    100
                    
                    
                    
                    1Q
      20081Q
      2008
                    
                    
                    446,563,953
                    
                    
                    
                    446,607,703
                    
                    
                    
                    43,750
                    
                    
                    
                    43,750
                    
                    
                    
                    200
                    
                    
                    
                    2Q
      20082Q
      2008
                    
                    
                    539,759,446
                    
                    
                    
                    539,803,196
                    
                    
                    
                    43,750
                    
                    
                    
                    43,750
                    
                    
                    
                    200
                    
                    
                    
                    3Q
      20083Q
      2008
                    
                    
                    505,800,049
                    
                    
                    
                    506,521,583
                    
                    
                    
                    721,534
                    
                    
                    
                    382,642
                    
                    
                    
                    1,700
                    
                    
                    
                    4Q
      20084Q
      2008
                    
                    
                    400,748,657
                    
                    
                    
                    398,994,441
                    
                    
                    
                    (1,754,216
                    )
                    
                    
                    (516,341
                    )
                    
                    
                    (2,300
                    )
                    
                    
                    1Q
      20091Q
      2009
                    
                    
                    353,330,559
                    
                    
                    
                    350,284,110
                    
                    
                    
                    (3,046,449
                    )
                    
                    
                    (2,400,333
                    )
                    
                    
                    (10,800
                    )
                    
                    
                    2Q
      20092Q
      2009
                    
                    
                    333,449,837
                    
                    
                    
                    331,199,409
                    
                    
                    
                    (2,250,428
                    )
                    
                    
                    (2,648,439
                    )
                    
                    
                    (11,900
                    )
                    
                    
                    3Q
      20093Q
      2009
                    
                    
                    295,823,883
                    
                    
                    
                    293,370,642
                    
                    
                    
                    (2,453,241
                    )
                    
                    
                    (2,351,835
                    )
                    
                    
                    (10,600
                    )
                    
                    
                    4Q
      2009$
                    (7,424,931
                    )
                    
                    $
                    (33,400
                    )




The
second part of the incentive fee (the “Capital Gains Fee”) is determined and
payable in arrears as of the end of each fiscal year (or upon termination of the
Investment Advisory Agreement, as of the termination date).  The
Capital Gains Fee equals (1) 20% of (a) the Company’s net realized capital gain
(realized capital gains less realized capital losses) on a cumulative basis from
the closing date of the Company’s 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 the
Manager in prior fiscal years.  The Company did not earn Capital Gains
Fees for the third quarter of 2009 compared to $2.5 million accrued for the
third quarter of 2008.





Realized
capital gains on a security are the amounts in excess of the net amount realized
from the sale or other disposition of such security over the amortized cost for
the security.  Realized capital losses on a security are the amounts
by which the net amount realized from the sale or other disposition of such
security is less than the amortized cost of such security.  Unrealized
capital depreciation on a security is the amount by which the original cost of
such security exceeds the fair value of such security at the reporting date or
period end.  The Company determines all period-end valuations in
accordance with GAAP and the 1940 Act.


22





The
Manager has agreed that, to the extent permissible under federal securities laws
and regulations, including Regulation M, it will utilize 30% of the fees it
receives from the capital gains portion of the incentive fee (up to a maximum of
$5 million of fees received in the aggregate) to purchase shares of the
Company’s common stock in open market purchases through an independent trustee
or agent.  Pursuant to this voluntary agreement, with respect to the
capital gains incentive fees earned for 2007, the Manager previously purchased
approximately $105,000 of the Company’s stock.  Any sales of such
stock will comply with any applicable six-month holding period under Section
16(b) of the Securities Act of 1933 and all other restrictions contained in any
law or regulation, to the fullest extent applicable to any such
sale.  Any change in this voluntary agreement will not be implemented
without at least 90 days prior notice to stockholders and compliance with all
applicable laws and regulations.





The
Investment Advisory Agreement was originally approved by the Company’s Board of
Directors on November 9, 2004.  The investment advisory agreement
provides that unless terminated earlier as described below, the agreement shall
remain in effect from year-to-year after November 9, 2006, provided continuation
is approved at least annually by the Company’s Board of Directors or by the
affirmative vote of the holders of a majority of the Company’s outstanding
voting securities, including, in either case, approval by a majority of the
Company’s Board of Directors who are not interested persons.  On
October 30, 2008, the Company’s Board of Directors, including all of the
independent directors, approved an extension of the investment advisory
agreement through November 9, 2009.





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





The
Investment Advisory Agreement provides that, absent willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its duties and obligations, the Manager and its officers, manager,
agents, employees, controlling persons, members and any other person or entity
affiliated with it are entitled to indemnification from the Company for any
damages, liabilities, costs and expenses (including reasonable attorneys’ fees
and amounts reasonably paid in settlement) arising from the rendering of the
Manager’s services under the Investment Advisory Agreement or otherwise as the
Company’s Manager.





Pursuant
to the Investment Advisory Agreement, the Manager will pay for the compensation
and routine overhead expenses of the investment professionals of the Company’s
management team and their respective staffs, when and to the extent engaged in
providing management and investment advisory services to the Company.  The
Company will bear all other costs and expenses of its operations and
transactions.





The
Manager, NGP Investment Advisor, LP, was formed in 2004 and maintains an office
at 1221 McKinney Street, Suite 2975, Houston, Texas 77010.  The
Manager’s sole activity is to perform management and investment advisory
services for the Company.  The Manager is a registered investment
adviser under the Investment Advisers Act of 1940.





The
foregoing description of the Investment Advisory Agreement is qualified in its
entirety by reference to the full text of the document, a copy of which was
filed as Exhibit 10.1 to the Company’s Form 10-K for the year ended
December 31, 2004, and is incorporated herein by reference.





Administration Agreement





The
Company has entered into an administration agreement with the Administrator (the
“Administration Agreement”), under which the Administrator furnishes the Company
with office facilities, equipment and clerical, bookkeeping and record keeping
services at such facilities.  Under the Administration Agreement, the
Administrator also performs, or oversees the performance by third parties of,
the Company’s required administrative services, which include being responsible
for the financial records that the Company is required to maintain and preparing
reports to the Company’s stockholders and reports filed with the
SEC.  In addition, the Administrator assists in determining and
publishing the Company’s net asset value, oversees the preparation and filing of
the Company’s tax returns and the printing and dissemination of reports to the
Company’s stockholders and generally oversees the payment of the Company’s
expenses and the performance of administrative and professional services
rendered to the Company by others.  To the extent permitted under the
1940 Act, the Administrator may also provide on the Company’s behalf,
significant managerial assistance to the Company’s portfolio
companies.  Payments under the agreement are equal to amounts based
upon the allocable portion of the Administrator’s costs and expenses incurred in
connection with administering the Company’s business.  The
Administrator bills the Company for charges under the Administration Agreement
monthly in arrears.  Either party may terminate the Administration
Agreement without penalty upon 60 days written notice to the other
party.  The Administration Agreement will automatically terminate in
the event of its “assignment” (as defined in the 1940 Act).


23





Of the
$674,190 in accounts payable as of September 30, 2009, $251,872 was due to the
Administrator for expenses incurred on the Company’s behalf for the month of
September 2009.  By comparison, $210,362 was due to the Administrator
for expenses incurred on the Company’s behalf for the month of September
2008.





The
Company’s Board of Directors originally approved the Administration Agreement on
November 9, 2004.  The Administration Agreement provides that unless
terminated earlier, the agreement will continue in effect until November 9,
2006, and from year-to-year thereafter provided such continuance is approved at
least annually by (i) the Company’s Board of Directors and (ii) a
majority of the members of the Company’s Board of Directors who are not parties
to the Administration Agreement or “interested persons” of any such
party.  On October 30, 2008, the Company’s Board of Directors,
including a majority of the independent directors, approved the continuation of
the Administration Agreement through November 9, 2009.





The
foregoing description of the Administration Agreement is qualified in its
entirety by reference to the full text of the document, a copy of which was
filed as Exhibit 10.2 to the Company’s Form 10-K for the year ended
December 31, 2004, and is incorporated herein by reference.





Note 7:
            FederalIncome
      Taxes





The
Company intends to qualify for tax purposes as a RIC under Subchapter M of
Chapter 1 of the Internal Revenue Code of 1986, as amended.  As a RIC,
the Company generally will not be subject to federal income tax on the portion
of its 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, the Company is
required, among other things, to distribute to its stockholders at least 90% of
investment company taxable income, as defined by the Code, and to meet certain
asset diversification requirements.





The
Company met all RIC requirements and distributed substantially all of its
investment company taxable income for the years ended December 31, 2006, 2007
and 2008.  Thus, the Company did not incur any federal income tax
liability for any of these periods.




The
following Company consolidated subsidiaries are subject to federal income taxes
for the period ended September 30, 2009: NGPC Asset Holdings, LP, NGPC Asset
Holdings II, LP, NGPC Asset Holdings III, LP, NGPC Asset Holdings V, LP and NGPC
Asset Holdings VI, LP.  The difference between the effective income tax
rate of 26.11% and the statutory federal tax rate of 34% for the nine months
ended September 30, 2009 is primarily attributable to RIC investment company
taxable income that generally will not be subject to federal income tax, and
federal income tax refunds.  The difference between the effective income
tax rate of (3.63%) and the statutory federal tax rate of 34% for the three
months ended September 30, 2009 is attributable to RIC investment company
taxable income that generally will not be subject to federal income tax, and
federal income tax refunds.


Note 8:
              Commitments and
      Contingencies
  As of
September 30, 2009, the Company had investments in or commitments to fund
investments to eighteen portfolio companies totaling $262.3 million, on which
$257.0 million was drawn.  In addition, the Company has continuing
obligations under the investment advisory agreement with the Manager and the
administration agreement with the Administrator.  The agreements
provide that, absent willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of the reckless disregard of its duties
and obligations, the Manager, the Administrator and its officers, managers,
agents, employees, controlling persons, members and any other person or entity affiliated
with them will be entitled to indemnification from the Company for any damages,
liabilities, costs and expenses (including reasonable attorneys’ fees and
amounts reasonably paid in settlement) arising from the rendering of the
Manager’s or Administrator’s services under the agreements or otherwise as the
Company’s investment adviser or administrator. The agreements also provide that
the Manager, the Administrator and their affiliates will not be liable to the
Company or any stockholder for any error of judgment, mistake of law, any loss
or damage with respect to any of the Company’s investments or any action taken
or omitted to be taken by the Manager or the Administrator in connection with
the performance of any of their duties or obligations under the agreements or
otherwise as investment adviser or administrator to the Company, except to the
extent specified in Section 36(b) of the 1940 Act concerning loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services. In the normal course of business, the Company enters into a variety of
undertakings containing a variety of representations that may expose the Company
to some risk of loss.  The amount of future loss, if any, arising from
such undertakings, while not quantifiable, is not expected to be
significant.




Note 9:
            Reclassifications




GAAP
requires adjustments to certain components of net assets to reflect permanent
differences between financial and tax reporting. These reclassifications have no
effect on total net assets or net asset value per share. The table below
summarizes the reclassifications from undistributed net investment income
(loss), undistributed net realized capital gain (loss), and paid-in capital in
excess of par for the year ended December 31, 2008, as restated. These
reclassifications are primarily due to non-deductible meal expenses,
non-deductible excise taxes and income and expenses from wholly owned
subsidiaries.


Unrelated
to the restatement, the Company has also reclassified certain balance sheet,
statement of operations and statement of cash flows amounts to conform to the
current year presentation.  These reclassifications were primarily
related to the disaggregation of investments in portfolio securities, investment
income, net realized capital gain (loss) on investments and net unrealized gain
(loss) on investments into separate classifications according to level of
control.  See Note 2 for a summary of these reclassified
amounts.
  Year
                                  
                                  Undistributed
                                    Net
      Investment
                                    Income (Loss)
                                  
                                  
                                  Undistributed
                                    Net
      Realized
                                    Capital Gain (Loss)
                                  
                                  
                                  Paid-in
      Capital
                                    in
      Excess
                                    of Par2008,
      as restated
                                  
                                  $
                                  5,457,699
                                  
                                  
                                  $
                                  (7,415,573
                                  )
                                  
                                  $
                                  1,957,874




24





Note 10:
            Fair
  Value





The
following three broad categories comprise the hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value:




·
            Level 1— Quoted unadjusted prices
      for identical instruments in active markets to which the Company has
      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 the
      Company’s own assumptions that market participants would use to price the
      asset or liability based on the best available
      information.





The
following table sets forth by level within the fair value hierarchy the
Company's financial assets that were accounted for at fair value on a
recurring basis as of September 30, 2009.  Fair value accounting
classifies financial assets and liabilities in their entirety based on the
lowest level of input that is significant to the fair value
measurement.  The Company's assessment of the significance of a
particular input to the fair value measurement requires judgment, and may affect
the valuation of fair value assets and liabilities and their placement within
the fair value hierarchy levels.  The Company estimates the fair value of
the crude oil options using a combined income and market-based valuation
methodology based upon forward commodity price and volatility
curves.  Independent pricing services provide the curves, which
reflect broker market quotes.





The
following table presents the Company’s assets measured at fair value on a
recurring basis at September 30, 2009:





Prices
      withQuoted
      Prices
                  
                  
                  Observablein
      Active
                  
                  
                  Market
                  
                  
                  UnobservableMarkets
                  
                  
                  Inputs
                  
                  
                  InputsAssets at Fair Value
                  
                  Total
                  
                  
                  (Level 1)
                  
                  
                  (Level 2)
                  
                  
                  (Level 3)Long
      Term Investments
                  
                  $
                  202,426,076
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  202,426,076Crude
      Oil Put Options
                  
                  
                  616,053
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  616,053Total
      Assets at Fair Value
                  
                  $
                  203,042,129
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  203,042,129





The
Company did not have any liabilities measured at fair value on a recurring basis
at September 30, 2009.


25





The
following table presents a roll forward of the Company’s assets measured at fair
value on a recurring basis using significant unobservable inputs
(Level 3) from December 31, 2008 to September 30, 2009.





Long
      TermAssets at Fair Value Using Unobservable Inputs
      (Level 3)
                      
                      InvestmentsBalance
      as of December 31, 2008
                      
                      $
                      258,792,440Transfers
      in (out) of Level 3
                      
                      
                      -Net
      amortization of premiums, discounts and fees
                      
                      
                      (10,128,588
                      )Net
      realized gains (losses)
                      
                      
                      (53,963
                      )Net
      unrealized gains (losses)
                      
                      
                      (17,676,145
                      )Purchases,
      sales and  redemptions
                      
                      
                      (27,891,615
                      )Balance
      as of September 30, 2009
                      
                      $
                      203,042,129





Of the
$17,676,145 in net unrealized losses presented in the table above, $6,963,549
relates to reversals of unrealized gains on commodity derivative instruments
recognized in 2008 and offset by commodity derivative income during
2009.  The remaining balance of $10,712,596 relates to unrealized
losses on investments held at September 30, 2009.  The Company
presents net unrealized losses on the Consolidated Statement of Operations as
“Net increase (decrease) in unrealized appreciation (depreciation) on portfolio
securities, corporate notes and commodity derivative instruments.”





Note 11:
            Commodity Derivative
      Instruments





The
Company may periodically enter into commodity derivative instruments to manage
our exposure to commodity price fluctuations.  The Company uses all of
its derivatives for risk management purposes and does not hold any for
speculative or trading purposes.  These contracts generally consist of
options contracts on underlying commodities.





The
Company acquired a limited term royalty interest from ATP Oil & Gas
Corporation (“ATP”) and will receive royalty payments from this investment that
are based on crude oil and natural gas production and prices.  As a
result, the Company is exposed to fluctuations in crude oil and natural gas
prices.  On June 4, 2008, the Company entered into option contracts to
manage the price risk associated with these royalty payments.  The
Company accounts for these contracts in accordance with derivative instruments
and hedging accounting rules.  The Company has decided not to
designate these instruments as hedging instruments for financial accounting
purposes.  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 portfolio
securities, corporate notes and commodity derivative instruments.”





Investments
in derivative instruments represent future commitments or options to purchase or
sell other financial instruments or commodities at specific prices at specified
future dates, which expose the Company to market risk if the market value of the
contract is higher or lower than the contract price at the maturity
date.  Additionally, these derivative instruments expose the Company
to credit risk arising from the potential inability of counterparties to perform
under the terms of the contracts.





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





For the Nine Months EndedSeptember 30, 2009
                      
                      
                      September 30, 2008Unrealized
      gains (losses) on commodity derivatives
                      
                      $
                      (6,963,549
                      )
                      
                      $
                      2,181,494Commodity
      derivative income, net of expired options
                      
                      
                      5,884,027
                      
                      
                      
                      (274,625
                      )Net
      gains (losses) on commodity derivative instruments
                      
                      $
                      (1,079,522
                      )
                      
                      $
                      1,906,869




The
Company records unrealized gains (losses) on commodity derivatives on the
Consolidated Statement of Operations as “Net increase (decrease) in unrealized
appreciation (depreciation) on portfolio securities, corporate notes and
commodity derivative instruments.”




26





The
realized gains (losses) on commodity derivatives consist of revenues received on
favorable expired options less the cost of the related expired positions
and are included in total investment income.





Below is
a summary of the Company’s commodity derivative instruments as of September 30,
2009.





WeightedVolumes
      (Bbls) at
                  
                  
                  average
      strike
                  
                  
                  Fair
      Value atSeptember 30, 2009
                  
                  
                  price per Bbl
                  
                  
                  September 30, 2009Oil:Put
      Options:2009
                  
                  
                  25,750
                  
                  
                  $
                  85.00
                  
                  
                  
                  480,9372010
                  
                  
                  7,000
                  
                  
                  $
                  85.00
                  
                  
                  
                  135,116Total
      Oil Put Options
                  
                  
                  32,750
                  
                  
                  
                  
                  
                  
                  $
                  616,053





Note 12:
            Recent Accounting
      Pronouncements





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued an
accounting standards update which established a framework for measuring fair
value and required additional disclosures about fair value
measurements.  As of January 1, 2009, the Company has considered
the new guidance and there is no impact to our consolidated financial
statements, as we do not have non-financial assets or liabilities.





In
March 2008, the FASB issued an accounting standards update on disclosures
about derivative instruments and hedging activities.  The new
accounting guidance does not change the accounting for derivatives but requires
enhanced disclosures about derivative strategies and accounting
practices.  The Company adopted the new guidance as of January 1,
2009.





In May
2008, the FASB issued an accounting standards update which identified a
consistent framework for selecting accounting principles to be used in preparing
financial statements for non-governmental entities that are presented in
conformity with United States GAAP.  The accounting standards update
was effective July 1, 2009.  The Company does not believe that the
adoption of this standard will have an impact on its consolidated financial
statements.





In April
2009, the FASB issued three new accounting standards relating to certain aspects
of fair value measurement and related disclosures.  The accounting
standards update was effective April 1, 2009.  The Company does not
believe that the adoption of these standards will have an impact on its
consolidated financial statements.





In April
2009, the FASB issued an accounting standards update to provide additional
guidance for estimating the fair value of assets or liabilities with low levels
of activity.  The new guidance was effective prospectively for interim
and annual reporting periods ending after June 15, 2009.  The Company
adopted the new guidance in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009.  The adoption of this new accounting guidance is
not expected to have a material effect on the Company’s consolidated financial
statements or disclosures.





In May
2009, the FASB issued an accounting standards update on subsequent
events.  The new accounting guidance establishes reporting and
disclosure requirements based on the existence of conditions at the date of the
balance sheet for events or transactions that occur after the balance sheet date
but before the financial statements are issued or are available to be
issued.  The accounting guidance includes a new required disclosure of
the date through which an entity has evaluated subsequent events and whether
that date is the date the financial statements were issued or were available to
be issued.  The Company adopted the new guidance in its Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009.  See
Significant Accounting Policies in Note 3.





In June
2009, the FASB issued an accounting standards update which identified the FASB
Accounting Standards Codification as the source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities.  The
new accounting guidance is effective for financial statements issued for interim
and annual periods ending after September 15, 2009.  The Company
adopted the new guidance in its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2009.


27





Note
      13:
            Subsequent
      Events





On
October 2, 2009, the Company entered into a Fourth Amendment to Amended and
Restated Revolving Credit Agreement (the “Fourth Amendment’), among the Company,
the lender parties thereto and SunTrust Bank, as administrative agent for the
lenders.  The Fourth Amendment extended the maturity of the Company’s
Investment Facility from August 31, 2010 to August 31, 2012.  The
Investment Facility is priced at LIBOR plus 425 to 575 basis points, depending
on the amount drawn.  The Company paid a 100 basis point fee in
conjunction with the extension of the maturity.  Three of the four
banks in the syndicate reduced their commitments, resulting in the reduction of
the current commitments under the Investment Facility from $87.5 million to
$67.5 million.





On
October 9, 2009, the Company sold its entire investment in Venoco Inc. Senior
Notes for approximately $12.3 million, resulting in a realized capital gain of
approximately $307,000.





On
October 14, 2009, the Company closed an investment with ATP.  The
Company acquired a limited term overriding royalty interest in certain oil and
gas producing properties operated by ATP for $15.0 million.  The
investment will be accounted for as a dollar denominated production
payment.





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




The following analysis of our
financial condition and results of operations should be read in conjunction with
our financial statements and the notes thereto contained elsewhere in this
report.
  As
discussed in the Explanatory Note to this Amended Filing, the Company is
amending and restating its Original Filing of its Quarterly Report on Form 10−Q
for the quarter ended September 30, 2009.  For a discussion of the
significant restatement adjustments and the background leading to the
adjustments, see Note 2, Restatement of Consolidated Financial Statements, in
Notes to Consolidated Financial Statements.  All amounts in this
Amended Filing affected by the restatement adjustments reflect such amounts as
restated.


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;


·
            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, such as the events that have
      occurred since the third quarter of
2008;


·
            the
      future operating results of our portfolio companies and their ability to
      achieve their objectives;


·
            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
SEC.





We may
use words such as “anticipates,” “believes,” “expects,” “intends,” “will,”
“should,” “may” and similar expressions to identify forward-looking
statements.  Such statements are based on currently available
operating, financial and competitive information and are subject to various
risks and uncertainties that could cause actual results to differ materially
from our historical experience and present expectations.  Undue
reliance should not be placed on such forward-looking statements, as such
statements speak only as of the date on which they are
made.  Additional information regarding these and other risks and
uncertainties is contained in our periodic filings with the
SEC.


28





Overview





We are a
financial services company created to invest primarily in debt securities of
small and mid-size private energy companies.  We have elected to be
regulated as a BDC under 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 RIC under the Code.  Pursuant to these
elections, we generally will not have to pay corporate-level taxes on any income
and capital gains we distribute to our stockholders.  The Company has
several subsidiaries that are single member limited liability companies and
wholly owned limited partnerships established to hold certain portfolio
investments or provide services to the Company in accordance with specific rules
prescribed for a company operating as a RIC.  The Company consolidates
the results of its subsidiaries for financial reporting purposes. The Company
does not consolidate the financial results of its 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 targeted 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, electricity, energy services and alternative
energy.  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 targeted
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 on a stand-alone
basis.





We
generate revenue in the form of interest income on the debt securities that we
own, dividend income on any common or preferred stock that we own and capital
gains or losses on any debt or equity securities that we acquire in portfolio
companies and subsequently sell. Our investments, if in the form of debt
securities, typically have a term of three to seven years and bear interest at a
fixed or floating rate. To the extent achievable, we seek to collateralize our
investments by obtaining security interests in our portfolio companies'
assets.  We also may acquire minority or majority equity interests in
our portfolio companies, which may pay cash or in-kind dividends on a recurring
or otherwise negotiated basis.  In addition, we may generate revenue
in other forms including commitment, origination, structuring, administration or
due diligence fees; fees for providing managerial assistance; and possibly
consultation fees.  We recognize any such fees generated in connection
with our investments as earned.





Our level
of investment activity can and does vary substantially from period to period
depending on many factors.  Among 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 and competitive environment for the types
of investments we make, and our own ability to raise capital, both through
issuance of debt and equity securities, to fund our investments.  We
believe that the recent dislocation in the credit markets and decline in energy
commodity prices should favorably impact the competitive environment, in that it
has reduced the debt capital available to energy companies from other
sources.  While we currently have capital available to invest, our
capital is not unlimited.  We remain committed to our underwriting and
investment disciplines in selectively investing in appropriate risk-reward
opportunities within the energy sector.





Accounting
Policies




Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
GAAP.  The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses.  Changes in the economic
environment, financial markets and any other parameters used in determining such
estimates could cause actual results to differ materially.  In
addition to the discussion below, our significant accounting policies are
further described in Note 3 of our consolidated financial statements included in
this Quarterly Report on Form 10-Q/A.





Valuation
of Investments





Investments
are carried at fair value, as determined in good faith by the Company’s Board of
Directors.  On a quarterly basis, the investment team of the Manager
prepares valuations for all of the assets in the Company’s portfolio and
presents the valuations to the Company’s Valuation Committee and Board of
Directors.  The Valuation Committee determines and recommends the
valuations to the Board of Directors, which reviews and ratifies the final
portfolio valuations.


29





Investments
in securities for which market quotations are readily available are recorded in
the financial statements at such market quotations as of the valuation
date.  For investments in securities for which market quotations are
unavailable, or which have various degrees of trading restrictions, the
investment team of the Manager prepares valuation analyses.





Using the
most recently available financial statements, forecasts and, when applicable,
comparable transaction data, the investment team of the Manager prepares
valuation analyses for the various securities in the Company’s investment
portfolio.  The investment team prepares the valuation analyses using
traditional valuation methodologies, which rely on estimates of the asset values
and enterprise values of portfolio companies issuing securities.





The
following three broad categories comprise the hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value:





·
            Level 1— Quoted unadjusted prices
      for identical instruments in active markets to which the Company has
      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 the
      Company’s 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 fair value
measurement.  The Company's assessment of the significance of a
particular input to the fair value measurement requires judgment, and may affect
the valuation of fair value assets and liabilities and their placement within
the fair value hierarchy levels.  The Company estimates the fair value of
the crude oil options using a combined income and market-based valuation
methodology based upon forward commodity price and volatility
curves.  Independent pricing services provide the curves, which
reflect broker market quotes.





Portfolio
and Investment Activity





In May
2009, Nighthawk Transport I, LP and its subsidiaries (collectively, “Nighthawk”)
defaulted under the terms of its senior credit facility.  Nighthawk was
unable to restructure its obligations under the senior credit facility, and on
July 10, 2009 filed a voluntary petition under Chapter 7 of the United States
Bankruptcy Code.  The Company holds a 16.98% participation in a $109
million senior secured, second lien facility for Nighthawk.  As of
September 30, 2009, the outstanding balance due to the Company under this
facility was $14.5 million, and we have recorded our investment in Nighthawk at
a fair value of zero.  Although we are pursuing our claims, because of
Nighthawk’s forced liquidation and the continuing surplus of assets in the
oilfield services industry, we do not expect a substantial recovery of our
invested capital.





On July
16, 2009, BioEnergy Holding, LLC (“BioEnergy”) completed the reorganization of
its specialty chemicals business, whereby a new entity, Myriant Technologies,
LLC (“Myriant”), was formed to continue the activities (research, development,
and commercialization) of the specialty chemicals business.  In a
cashless exchange for its original 648,000 BioEnergy warrants, NGPC received
140,687 BioEnergy warrants, 131,741 Myriant units and 32,680 Myriant
warrants.





On July
20, 2009, the Company closed a recapitalization transaction with Alden
Resources, LLC (“Alden”), a Kentucky-based specialty coal
producer.  As part of the recapitalization, NGPC Asset Holdings II,
LP, a wholly owned subsidiary of the Company, purchased $5.8 million of
preferred units representing substantially all of the equity in
Alden.  The proceeds of the preferred equity issuance are being used
for capital expenditures, working capital and general corporate
purposes.  In addition to acquiring a majority ownership position, we
hold a majority of the seats on the board of directors of Alden.  We
also restructured our existing $36.5 million Senior Secured Credit Facility with
Alden into an amended and restated $60 million two tranche Senior Secured Credit
Facility with initial funded amounts of $20 million in Tranche A Notes and $19.5
million in Tranche B Notes.  The Tranche A and Tranche B Notes bear
interest at LIBOR plus 9%, with a LIBOR floor of 3%.  Both the Tranche
A Notes and the Tranche B Notes have the option to pay interest-in-kind (PIK) at
a coupon rate of LIBOR plus 12%, with a LIBOR floor of 3%.


30


On July
31, 2009, BSR Loco Bayou, LLC (“BSR”) repaid in its entirety its $2.72 million
Senior Secured Multiple Advance Term Loan and accrued interest of $0.27
million.  The Company continues to hold an overriding royalty interest
and warrants in BSR.





In total
for the quarter ended September 30, 2009, we funded $12.1 million to existing
portfolio companies and received $24.9 million in cash repayments.  We
did not add any new companies to our portfolio during the third quarter of
2009.





Following
these transactions our investment portfolio consisted of eighteen portfolio
companies and was invested as follows based on their fair values as of September
30, 2009: 47.2% in senior secured term loans, 4.2% in senior subordinated
secured notes, 0.2% in participating convertible preferred stock, 2.1% in common
stock, 3.0% in corporate notes, 7.4% in membership and partnership units, 4.0%
in net profits interests, 2.2% in limited term royalty interests, and 0.5% in
other investments.  The balance of our investment portfolio (as a
percentage of the whole portfolio) was comprised 29.2% of cash and cash
equivalents.





Results
of Operations




Investment
Income





Investment
income for the quarter ended September 30, 2009 was $6.0 million, with $5.9
million attributable to interest from targeted investments in ten portfolio
companies, $0.8 million attributable to income from commodity derivative
instruments, a $0.9 million net loss attributable to royalty income, net of
amortization, and $0.2 million from corporate notes, investments in cash and
cash equivalents and fee income from third parties and
affiliates.  This compares to investment income for the quarter ended
September 30, 2008 of $9.9 million with $9.0 million attributable to targeted
investments in eighteen portfolio companies, $0.9 million from corporate notes,
investments in cash and cash equivalents and fee income from third parties and
affiliates.





Investment
income for the nine months ended September 30, 2009, was $20.1 million,
primarily from $18.1 million in interest from targeted investments in portfolio
companies.  Additional investment income included $5.9 million
attributable to income from commodity derivative instruments, a $4.6 million net
loss attributable to royalty income, net of amortization, and $0.7 million from
corporate notes, investments in cash and cash equivalents and fee income from
third parties and affiliates.  This compares to investment income
of $27.6 million for the quarter ended September 30, 2008 with $21.4
million attributable to targeted investments in portfolio companies, a $0.3
million net loss from commodity derivative instruments, $3.6 million
attributable to royalty income, net of amortization and $2.9 million from
corporate notes, investments in cash and cash equivalents and fee income from
third parties and affiliates.




Our total
targeted portfolio balance decreased on a cost basis by approximately $42.0
million from $299.0 million on September 30, 2008 to $257.0 million on September
30, 2009.  The balance of non-accruing and non-income producing
investments on a cost basis increased from approximately $80.5 million at
September 30, 2008 to approximately $116.9 million at September 30,
2009.  The balance of non-accruing and non-income producing
investments on a fair value basis decreased from approximately $85.1 million at
September 30, 2008 to approximately $55.2 million at September 30,
2009.  Although LIBOR rates dropped significantly from the third
quarter of 2008 compared to the third quarter of 2009, this had a minimal effect
on our targeted investment income because of LIBOR floors established for new
portfolio companies and certain other existing portfolio companies during
2008.  Additionally, the continued downward pressure on U.S. Treasury
Bill interest rates during 2008 and 2009 reduced interest from cash and cash
equivalents.





At
September 30, 2009, the weighted average yield on targeted portfolio
investments, exclusive of capital gains, was 3.63%.  The weighted
average yield of our corporate notes was 5.82%.  The weighted average
yield of our cash and cash equivalents was 0.64%.  The weighted
average yield on our total capital invested at September 30, 2009 was
3.16%.  Further, four investments totaling $76.5 million on a cost
basis (Nighthawk, $13.9 million; Formidable, LLC (“Formidable”), $38.8 million;
Alden Tranche B, $19.5 million; and Chroma Exploration & Production, Inc.,
$4.3 million) are currently on non-accrual status.  Investments
totaling $40.3 million on a cost basis are non-income producing and include
equity investments in TierraMar Energy LP preferred units, DeanLake Operator,
LLC preferred units, Resaca Exploitation, Inc. (“Resaca”) common stock, Alden
Resources, LLC class E units and warrants and units associated with our
investment in BioEnergy.





At
September 30, 2008, the weighted average yield on targeted portfolio
investments, exclusive of capital gains, was 12.41%.  The weighted
average yield of our corporate notes was 5.82%.  The weighted average
yield of our U.S. Treasury Bills and cash equivalents was 1.71%.  The
weighted average yield on our total capital invested at September 30, 2008 was
8.16%.  These yields did not include income from four investments on
non-accrual status.





Weighted
average yields on investments are computed as of a specific date using interest
rates as of the balance sheet date and include amortization of loan discount
points, original issue discount and market premium or discount, royalty interest
income, net profits income and other similar investment income, weighted by
their respective costs when averaged.  Additionally, these yields do
not include income from any investments on non-accrual status.  Such
weighted average yields are not necessarily indicative of expected total returns
on a portfolio.





31





Operating
Expenses





For the
quarter ended September 30, 2009, as restated, operating expenses were $3.1
million compared to $7.0 million for the quarter ended September 30,
2008.  The 2009 amount consisted of investment advisory and management
fees of $1.5 million, insurance expenses, administrative services fees,
professional fees, directors’ fees and other general and administrative expenses
of $1.1 million and credit facility interest and fees of $0.5
million.  In comparison, for the quarter ended September 30, 2008,
investment advisory and management fees were $4.5 million, insurance expenses,
administrative services fees, professional fees, directors’ fees and other
general and administrative expenses totalled $1.0 million and credit facility
interest and fees were $1.5 million.  The third quarter of 2008
included approximately $2.5 million of incentive fees accrued with respect to
the net realized gains associated with our investments in Rubicon Energy
Partners, LLC (“Rubicon”) ($12.3 million) and Resaca ($6.0
million).





For the
nine months ended September 30, 2009, as restated, operating expenses were $11.1
million compared to $16.8 million for the same period of 2008.  The
2009 amount consisted of investment advisory and management and incentive fees
of $5.0 million, insurance expenses, administrative services fees, professional
fees, directors’ fees, organization costs and other general and administrative
expenses of $3.6 million and credit facility interest and fees of $2.5
million.  This compares to investment advisory and management fees of
$8.1 million, insurance expenses, administrative services fees, professional
fees, directors’ fees, organization costs and other general and administrative
expenses of $3.3 million and credit facility interest and fees of $5.4 million
for the nine months ended September 30, 2008.





Operating
expenses for the three and nine month periods include our allocable portion of
the total organizational and operating expenses incurred by us, the Manager and
the Administrator, as determined by our Board of Directors and representatives
of the Manager and the 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 allocated
share of employee, facilities and stockholder services and marketing
costs.





Net
Investment Income before Income Taxes





For the
quarter ended September 30, 2009, as restated, net investment income before
income taxes was $2.9 million and $2.9 million for the quarter ended September
30, 2008.  The year to year change was flat primarily due to lower
interest income on overall lower principal balances, the increase in the balance
of non-accruing investments and the effect of lower commodity prices on royalty
income, net of amortization, offset by lower incentive fee accruals, interest
expense and management fees.





For the
nine months ended September 30, 2009, as restated, net investment income before
income taxes was $9.0 million compared to $10.8 million for the nine months
ended September 30, 2008.  The 16.7% decrease was primarily due to
lower interest income on overall lower principal balances and an increase in the
balance of non-accruing and non-income producing investments, offset by lower
incentive fee accruals and credit facility interest expense and fees on our
reduced debt balance.





Net
Realized Gains





There
were no realized capital gains or losses for the quarter ended September 30,
2009.  Realized capital gains for the quarter and nine months ended
September 30, 2008, as restated, were $18.3 million, before taxes of $4.2
million, on the sale of $4.8 million of portfolio investments in Resaca and
Rubicon.





For the
nine months ended September 30, 2009, as restated, realized capital losses were
$0.05 million before income tax benefit of $0.12 million.





Unrealized
Appreciation or Depreciation on Investments





For the
quarter ended September 30, 2009, as restated, the decrease in net unrealized
depreciation before tax benefit of $0.5 million was $11.3 million, comprised of
an $11.1 million increase in targeted portfolio fair value and an increase of
$0.9 million in the fair value of our corporate notes, offset by a decrease of
$0.7 million in the fair value of commodity derivative
instruments.  The increase in targeted portfolio fair value was
largely a result of changes in the estimated current market values of underlying
assets.  The decrease in the fair value of commodity derivative
instruments was a result of the reversal of prior period unrealized appreciation
due to realizations in the third quarter of 2009.





For the
quarter ended September 30, 2008, as restated, the increase in net unrealized
depreciation before tax benefit of $2.1 million was $3.8 million, comprised of a
$5.6 million decrease in targeted portfolio fair value, a $0.6 million decrease
in the fair value of corporate notes and a $2.4 million increase in the fair
value of commodity derivative instruments.  The decrease in targeted
portfolio fair value was largely a result of the realization and reversal of
$7.7 million of unrealized gains reported in previous quarters, through the sale
of the assets associated with our ownership of Rubicon and the sale of our
Resaca overriding royalty interests.





32





For the
nine months ended September 30, 2009, as restated, the increase in net
unrealized depreciation before tax benefit of $2.2 million was $17.7 million,
comprised of a decrease in targeted portfolio fair value of $13.1 million and a
$7.0 million decrease in the fair value of commodity derivative instruments,
offset by a $2.4 million increase in the fair value of our corporate
notes.  This compares to an increase in net unrealized depreciation
before tax benefit of $2.1 million of $3.9 million for the nine months ended
September 30, 2008, as restated, comprised of a $5.4 million decrease in
targeted portfolio fair values, a $0.7 million decrease in the fair value of
corporate notes and a $2.2 million increase in the fair value of commodity
derivative instruments.





Thus far
this year, disruption in the credit and equity capital markets and the
volatility of energy commodity prices, have made it more difficult to predict
the timing and amount of future realized capital gains.  In addition,
capital markets volatility has impacted our unrealized appreciation and
depreciation.  While, in general, current capital and commodity
markets are more stable than during the earlier part of this year, conditions
remain such that it remains difficult to predict capital gains or losses or
fluctuations in our portfolio values.





Net
Increase or Decrease in Stockholders’ Equity from Operations





For the
quarter ended September 30, 2009, as restated, we had a net increase in
stockholders’ equity (net assets) resulting from operations of $14.7 million, or
$0.68 per share, compared to a net increase of $15.3 million, or $0.70 per share
for the quarter ended September 30, 2008, as restated.  The $0.6
million, or $0.02 per share net decrease is attributable to a $15.1 million
decrease in unrealized depreciation on portfolio securities and a $1.6 million
decrease in income tax benefits, offset by a decrease in net realized (after
tax) capital gain on portfolio securities of $14.1 million during the third
quarter of 2009, compared to the third quarter of 2008, as
restated.





For the
nine months ended September 30, 2009, as restated, the net decrease in
stockholders’ equity (net assets), resulting from operations was $6.5 million,
or $0.30 per share, compared to an increase of $23.1 million, or $1.09 per
share, for the nine months ended September 30, 2008, as restated.  The
$29.6 million, or $1.39 per share net decrease is attributable to a decrease in
net investment income before income taxes of  $1.9 million due to
lower overall investment income offset by lower management fees and interest
expense, $13.7 million increase in unrealized depreciation on portfolio
securities and a decrease in net realized (after tax) capital gain on portfolio
securities of $14.0 million, compared to the third quarter of 2008, as
restated.





Financial
Condition, Liquidity and Capital Resources





During
the quarter ended September 30, 2009, we generated cash from operations,
including interest earned on our portfolio securities, as well as our
investments in corporate notes and U.S. government securities.  We
received cash redemptions of investments in portfolio securities and commodity
derivative instruments of $24.9 million.  At September 30, 2009, we
had cash and cash equivalents of $83.5 million and investments in corporate
notes of $8.7 million.  Our Investment Facility, with an outstanding
balance of $40 million at September 30, 2009, will mature on August 31,
2010.  We repaid the entire $75 million balance of our Treasury
Facility on July 16, 2009.  We did not renew the Treasury Facility on
its August 31, 2009 maturity date, and we have no plans to do so.  As
of September 30, 2009, we had investments in or commitments to fund loan
facilities to eighteen portfolio companies totaling $262.3 million, of which
$257.0 million was drawn.  We expect to fund our investments in 2009
from available cash, income earned on our portfolio and temporary investments,
repayments or realizations of existing investments and from borrowings under our
Investment Facility.  In the future, we may also fund a portion of our
investments with issuances of equity or senior debt securities.  We
may also securitize a portion of our investments in mezzanine or senior secured
loans or other assets.  We expect our primary use of funds to be
investments in portfolio companies, cash distributions to holders of our common
stock and payment of fees and other operating expenses.





Commodity
Derivative Instruments





We use
commodity derivative instruments to manage our exposure to commodity price
fluctuations.  We do not designate these instruments as hedging instruments
for financial accounting purposes.  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 portfolio securities, corporate notes and commodity derivative
instruments.”





We
acquired a limited term royalty interest from ATP, and the royalty payments
associated with this investment are subject to fluctuations in natural gas and
oil prices.  To manage this risk, we purchased oil and natural gas put
options on approximately 93% of our royalty interest.  These
transactions limit exposure to declines in oil and natural gas
prices.  See “Note 11: Commodity Derivative Instruments” in the
accompanying notes to the consolidated financial statements for further
description of our put options.





33





Contractual
Obligations




A summary
of our contractual payment obligations at September 30, 2009 is as
follows:





Less
      than
                  
                  
                  
                  
                  
                  
                  
                  
                  More
      thanContractual Obligations
                  
                  Total
                  
                  
                  1 Year
                  
                  
                  1-3 Years
                  
                  
                  3-5 Years
                  
                  
                  5 YearsSeptember
      30, 2009:Long-term
      debt obligations— revolving credit facilities (1)
                  
                  $
                  40,000,000
                  
                  
                  $
                  40,000,000
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
                  
                  $
                  40,000,000
                  
                  
                  $
                  40,000,000
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -





(1)
Excludes accrued interest amounts.





Off-Balance
Sheet Arrangements





Currently,
we do not engage in any off-balance sheet arrangements, including any risk
management of commodity pricing or other hedging practices.





Dividends





We have
elected to operate our business so as to be taxed as a RIC under Subchapter M of
the Code.  To maintain our RIC status, we must distribute at least 90%
of our “investment company taxable income” (which generally consists of ordinary
income and realized net short-term 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
will be required to distribute at least 98% of our ordinary income and net
capital gains, and 100% of any income realized, but not distributed or deemed
distributed, in preceding years.  We currently intend to make
sufficient distributions to satisfy the annual distribution requirement and to
avoid the excise taxes.





We may
not be able to achieve operating results that will allow us to make
distributions at a specific level or to increase the amount of these
distributions from time to time. In addition, we may be limited in our ability
to make distributions due to the asset coverage test for borrowings when
applicable to us as a BDC under the 1940 Act and due to provisions in our credit
facilities. If we do not distribute a certain percentage of our income annually,
we will suffer adverse tax consequences, including possible loss of our status
as a RIC. We cannot assure stockholders that they will receive any distributions
or distributions at a particular level.





Portfolio
Credit Quality





Virtually
all of our portfolio investments are in negotiated, and often illiquid,
securities of energy companies. 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. As a consequence of the
general economic downturn and associated weakness in the energy markets, two of
our investments, Nighthawk and Formidable, have experienced significant
degradation in value that may not be recoverable. However, we believe that our
other assets which may be experiencing stress in the near term generally have
cost structures that should tolerate it. Of the twenty-four rated investments in
eighteen portfolio companies, compared to the prior quarter end, one improved in
rating, zero declined in rating, nineteen retained the same rating and four
investments were added during the quarter.  Thirteen investments
totaling approximately $144.8 million (including $13.9 million for Nighthawk and
$38.8 million for Formidable), or approximately 56% of the $257.2 million in
targeted investments and commodity derivative instruments, on a cost basis, are
carried on our watch list due to deterioration in asset coverage, slower than
expected development of the assets supporting the investments, or the downturn
in general economic and energy market conditions.  While restructuring
of some of these watch list investments has been and may be required, subject to
general economic and commodity market conditions in the long term, other than
the investments in Nighthawk and Formidable, we do not currently foresee
significant permanent long-term deterioration in the existing
portfolio.





34





For the
third quarter of 2009, the combined increase in unrealized appreciation of our
portfolio securities, corporate notes and commodity derivative instruments of
$11.3 million was largely due to changes in the estimated market values of
underlying assets totaling $12.0 million. This $12.0 million was offset by $0.7
million in reversals of prior year unrealized appreciation of commodity
derivative instruments due to third quarter 2009 realizations.  The
$12.0 million net increase in fair value was comprised of increases of
unrealized appreciation totaling $13.6 million offset by increases in unrealized
depreciation of $1.6 million. The $13.6 million increase in unrealized
appreciation consisted primarily of higher market values for Resaca common
stock, $4.5 million; Alden term notes and royalty, $3.4 million; ATP Oil &
Gas Corp. limited term royalty, $2.4 million and Venoco, Inc. senior notes, $1.3
million. The $1.6 million increase in unrealized depreciation consisted
primarily of a decrease in market value for our investment in TierraMar Energy
LP preferred units of $1.5 million.





Recently
Issued Accounting Pronouncements





See
“Note 12: Recent Accounting Pronouncements” in the accompanying notes to
consolidated financial statements for details of recently issued accounting
pronouncements and their expected impact on our financial
statements.





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, 2008.






Item
      4.
              Controls
      and Procedures.
  Disclosure
Controls and Procedures
 
 We
maintain disclosure controls and procedures (as defined in 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended, which we refer to
as the Exchange Act), designed to ensure that information required to be
disclosed in our reports under the Exchange Act is recorded, processed,
summarized and reported on a timely basis and accumulated and made known to
management, including 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/A, as of
the end of the fiscal period covered by this Quarterly Report on Form 10-Q/A
(September 30, 2009), the Company performed an evaluation, under the supervision
and with the participation of the Company’s management, including our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures
pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act.
 
 After
giving effect to the restatement referred to below and based on an evaluation of
our disclosure controls and procedures as of the end of the period covered by
this Form 10-Q/A conducted by our management, with the participation of our
Chief Executive Officer and our Chief Financial Officer, our Chief Executive
Officer and our Chief Financial Officer concluded that our disclosure controls
and procedures were ineffective in providing reasonable assurance that
information required to be disclosed in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported when required and
that such information is accumulated and communicated to management in a manner
that allows timely decisions regarding required disclosure.  In light
of this material weakness, the Company performed additional analysis and
post-closing procedures to ensure the Company’s financial statements were
prepared in accordance with generally accepted accounting
principles.  After giving effect to the restatements referred to
below, and subject to the statements below regarding our inability to maintain
effective controls over the determination and reporting of the provision for
income taxes, the Company’s management has concluded that the financial
statements included in this Form 10-Q/A present fairly in all material respects
the Company’s financial condition, results of operations and cash flows for the
periods presented.
 
 The
certifications of our Chief Executive Officer and our Chief Financial Officer
required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are
attached as exhibits to this Form 10-Q/A. The disclosures set forth in this Item
4 contain information concerning (i) the evaluation of our disclosure controls
and procedures referred to in paragraph 4 of the certifications, and (ii)
material weaknesses in the design or operation of our internal control over
financial reporting referred to in paragraph 5 of those certifications. Those
certifications should be read in conjunction with this Item 4 for a more
complete understanding of the matters covered by the
certifications.
 
 Discussion
of Material Weakness
 
 Management’s
assessment identified a material weakness in the Company’s internal control over
financial reporting.  As of September 30, 2009, the Company did not
maintain effective controls over the determination and reporting of the
provision for income taxes. This material weakness was initially disclosed in
Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2008.
As of December 31, 2009, our management concluded that we had not yet remediated
this previously disclosed material weakness in our internal control over
financial reporting. Specifically, management did not perform a sufficiently
precise review of the 2007, 2008 and 2009 financial statements to ensure the
completeness and accuracy of the Company’s calculation of its income tax
provision and deferred income tax assets and liabilities. This deficiency
resulted in the restatement of the Company’s consolidated financial statements
for the years ended December 31, 2007 and 2008 (and the unaudited selected
quarterly data for each of the quarters in 2007 and 2008 and the first three
quarters in 2009), and results in a reasonable possibility that a material
misstatement of the Company’s annual or interim financial statements would not
be prevented or detected on a timely basis.
 
 Remediation
Efforts
 
 The
remediation efforts, as outlined below, are designed to address the material
weakness identified by management and to strengthen the Company’s internal
control over financial reporting.
 
 35
  Beginning
in the first quarter of 2009, the Company implemented the following remediation
steps to address this material weakness discussed above and to improve its
internal controls over financial reporting:
 
 ·
              improved
      procedures for the calculation and reconciliation process of our deferred
      income tax assets and liabilities, including validation of underlying
      supporting data;
 ·
              engaged
      external tax experts to support the Company’s financial closing and
      reporting process; and
 ·
              enhanced
      quarterly management review of the calculation of the deferred income tax
      assets and liabilities and underlying supporting
  data.
 
 We
believe that these remediation actions will represent ongoing improvement
measures. While we have taken steps to remediate the material weakness,
additional measures may be required. The Company anticipates that it will
complete its testing of the additional internal control processes designed to
remediate the previously disclosed material weakness in 2010.  We will
continue to assess the effectiveness of our remediation efforts in connection
with our management’s tests of internal control over financial reporting in
conjunction with our annual and quarterly reports.
 
 Changes
in Internal Control Over Financial Reporting
 
 There
were no changes in internal control over financial reporting during the quarter
ended September 30, 2009 that have materially affected or are reasonably likely
to materially affect, the Company’s internal control over financial
reporting.





36





PART
II – OTHER INFORMATION




Item 1.
            Legal
      Proceedings.





Neither
the Company nor any of its subsidiaries is currently a party to, and no property
of the Company or any of its subsidiaries is the subject of, any material legal
proceeding, nor to our knowledge, is any material legal proceeding threatened
against the Company, any of its subsidiaries or any of their
property.


Item 1A.
                Risk
      Factors
 Except as
provided below, 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, 2008.
 
 We
reported a material weakness in our internal control over financial reporting,
which resulted in material misstatements in our financial statements for the
years ended December 31, 2007 and December 31, 2008 and each of the quarters in
2007 and 2008 and the first three quarters of 2009  that required us
to restate certain of our historical financial statements. If we fail to improve
our internal control over financial reporting, we may not be able to accurately
report our financial results, which could have a material adverse effect on our
operations, investor confidence in our reported financial information and the
trading price of our securities.
 
 Our Board
of Directors, and the members of our Audit Committee, upon management’s
recommendation, determined to restate certain of our historical financial
statements, including the financial statements for the period of this report.
Our management concluded that the accounting errors that necessitated the
restatement resulted from a control deficiency in our internal control over
financial reporting constituting a material weakness. Specifically, our
management concluded that we did not maintain effective controls over the
determination and provision for income taxes. See Note 2, Restatement of
Consolidated Financial Statements in “Part I – Item 1. Consolidated Financial
Statements” and “Part I – Item 4. Controls and Procedures.”
 
 Management’s
assessment of our internal control over financial reporting as of December 31,
2008 identified a material weakness in our internal control over financial
reporting. As described in “Part I – Item 4. Controls and Procedures,” while the
Company has taken steps to remediate the previously disclosed material weakness,
the material weakness existed throughout the quarterly periods of 2009, and at
December 31, 2009, the Company had not yet completed its assessment as to
whether the material weakness had been fully remediated. The Company anticipates
that it will complete its testing of the additional internal control processes
designed to remediate the previously disclosed material weakness in 2010. Until
it is fully remediated, this material weakness could lead to errors in our
reported financial results and could have a material adverse effect on our
operations, investor confidence in our reported financial information and the
trading price of our securities.
 
 Further,
we cannot assure you that additional significant deficiencies or material
weaknesses in our internal control over financial reporting will not be
identified in the future. Any failure to maintain or implement required new or
improved controls, or any difficulties we encounter in their implementation,
could result in additional significant deficiencies or material weaknesses, and
cause us to fail to meet our periodic reporting obligations or result in
material misstatements in our financial statements. Any such failure could also
adversely affect the results of periodic management evaluations and annual
auditor attestation reports regarding the effectiveness of our internal control
over financial reporting required under Section 404 of the Sarbanes-Oxley Act of
2002 and the rules promulgated thereunder. The existence of a material weakness
could result in errors in our financial statements that could result in a
restatement of financial statements, cause us to fail to meet our reporting
obligations and cause investors to lose confidence in our reported financial
information, leading to a decline in our stock price.


Item 2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds.





Not
applicable.






Item 3.
            Defaults
      Upon Senior Securities.





Not
applicable.






Item 4.
            Submission
      of Matters to a Vote of Security
Holders.





Not
applicable.





Item 5.
            Other
      Information.





Not
applicable.




Item 6.
            Exhibits.





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





37





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




NGP
      CAPITAL RESOURCES COMPANYDate:
      June 24, 2010
                    
                    By:
                    /s/
      John H. HomierJohn
      H. HomierPresident
      and Chief Executive
Officer





Date:
      June 24, 2010
                
                By:
                /s/
      Stephen K. GardnerStephen
      K. GardnerChief
      Financial Officer, Treasurer and
Secretary










Index
to Exhibits





Exhibits
      No.
                
                Exhibit3.1
                
                Articles
      of Amendment and Restatement (filed as Exhibit 3.2 to the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2004, and incorporated
      herein by reference)3.2
                
                Bylaws
      (filed as Exhibit (b) to the Company’s 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 the Company’s 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 the Company’s Registration
      Statement on Form N-2 filed on August 16, 2004 (Registration No.
      333-118279), and incorporated herein by reference)10.1
                
                Investment
      Advisory Agreement between the Company and NGP Investment Advisor, LP
      (filed as Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the
      year ended December 31, 2004, and incorporated herein by
      reference)10.2
                
                Administration
      Agreement between the Company and NGP Administration, LLC (filed asExhibit
      10.2 to the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2004, and incorporated herein by
reference)10.3
                
                Trademark
      License Agreement between the Company and NGP Energy Capital Management,
      L.L.C. (formerly known as Natural Gas Partners, L.L.C.) (filed as Exhibit
      10.3 to the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2004, and incorporated herein by
reference)10.4
                
                Form
      of Indemnity Agreement (filed as Exhibit 10.5 to the Company’s Annual
      Report on Form 10-K for the year ended December 31, 2004, and incorporated
      herein by reference)10.5
                
                Amended
      and Restated Revolving Credit Agreement, dated as of August 31, 2006,
      among the Company, the lenders from time to time party thereto and
      SunTrust Bank, as administrative agent for the lenders (filed as Exhibit
      10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
      September 30, 2006, and incorporated herein by
  reference)10.6
                
                Treasury
      Secured Revolving Credit Agreement, dated as of August 31, 2006, among the
      Company, the lenders from time to time party thereto and SunTrust Bank as
      administrative agent for the lenders (filed as Exhibit 10.7 to the
      Company’s Quarterly Report on Form 10-Q for the quarter ended September
      30, 2006, and incorporated herein by reference)10.7
                
                Custody
      Agreement between the Company and Wells Fargo Bank, N.A. (filed as Exhibit
      (j)(1) to the Company’s Registration Statement on Form N-2 filed October
      15, 2007 (Registration No. 333-146715), and incorporated herein by
      reference)10.8
                
                Amendment
      No. 1 to Custody Agreement between the Company and Wells Fargo Bank, N.A.
      (filed as Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the
      year ended December 31,  2007, and incorporated herein by
      reference)10.9
                
                Amendment
      No. 2 to Custody Agreement between the Company and Wells Fargo Bank, N.A.
      (filed as Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the
      year ended December 31, 2007, and incorporated herein by
      reference)10.10
                
                First
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of August 31, 2006, among the Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.7 to the Company’s
      Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,
      and incorporated herein by reference)10.11
                
                First
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      August 31, 2006, among the Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.9 to the Company’s
      Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,
      and incorporated herein by reference)10.12
                
                Second
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      October 18, 2007, among the Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.1 to the Company’s Current
      Report on Form 8-K on October 24, 2007, and incorporated herein by
      reference)10.13
                
                Second
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of March 13, 2008, among the Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.11 to the Company’s
      Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and
      incorporated herein by
reference)








Exhibits
      No.
                  
                  Exhibit10.14
                  
                  Third
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      March 13, 2008, among the Company, the lenders from time to time party
      thereto and SunTrust Bank (filed as Exhibit 10.12 to the Company’s
      Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and
      incorporated herein by reference)10.15
                  
                  Third
      Amendment to Amended and Restated Revolving Credit Agreement effective as
      of September 29, 2008, among the Company, the lenders from time to time
      party thereto and SunTrust Bank (filed as Exhibit 10.13 to the Company’s
      Quarterly Report on Form 10-Q for the quarter ended September 30, 2008,
      and incorporated herein by reference)10.16
                  
                  Fourth
      Amendment to Treasury Secured Revolving Credit Agreement effective as of
      September 29, 2008, among the Company, the lenders from time to time party
      thereto and SunTrust (filed as Exhibit 10.14 to the Company’s Quarterly
      Report on Form 10-Q for the quarter ended September 30, 2008, and
      incorporated herein by reference)31.1*
                  
                  Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Executive
      Officer31.2*
                  
                  Certification
      required by Rule 13a-14(a)/15d-14(a) by the Chief Financial
      Officer32.1*
                  
                  Section
      1350 Certification by the Chief Executive Officer32.2*
                  
                  Section
      1350 Certification by the Chief Financial
  Officer